Middleby Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Walt Liptak - Seaport Global Securities LLC - Analyst : Hi, thanks. Good morning, everyone. I wanted to ask about the 2025 sales guidance. You were previously at low single digit, and you just provide segment guidance. I wonder what you're thinking about for the company in total. And then within the three segments, where you're seeing the biggest change? Is it food processing where the outlook has changed the most? Or is it in the CFS segment.

Question: Walt Liptak - Seaport Global Securities LLC - Analyst : Okay. Great. And when you roll it all up, what are you thinking about for the revenue for 2025, especially in the back here (technical difficulty)

Question: Walt Liptak - Seaport Global Securities LLC - Analyst : Okay. Got it. Okay, thanks so much.

Question: Jeff Hammond - KeyBanc Capital Markets - Analyst : Hey, good morning. Just wanted to start with the buyback decision. Just what informed that -- is it recognition like M&A is fewer and farther between or it's difficult or recognition on where the valuation of your company is versus deals or focus on ROC? Just more color there. Thanks.

Question: Jeff Hammond - KeyBanc Capital Markets - Analyst : No, that's helpful. And then I guess with respect to tariffs and the tariff, I wanted to better understand, one, given your our US-centric footprint, where do you think there are the biggest opportunities for share gains and how quickly those can come through? And then conversely, I think the grills business has been a challenge, and I think most of that is sourced out of China. So what's kind of the risk in the short term and the long term strategy to kind of right the ship on the grill side?

Question: Jeff Hammond - KeyBanc Capital Markets - Analyst : Okay. Appreciate the call, Tim.

Question: Mig Dobre - Robert W. Baird & Co. Incorporated - Analyst : Thanks, good morning. Maybe just some clarification around this tariffs figure, the $175 million at the midpoint. Is there a way to help us understand the allocation at segment level? What would the breakdown be between the three segments? And you talked about being able to offset these costs by year-end. So I'm kind of understanding this that into 2026, you expect this to be offset. But how do we think about these costs flowing through in Q2, Q3, Q4? Presumably, it takes a little bit of time before you can actually get to where you fully offset these costs.

Question: Mig Dobre - Robert W. Baird & Co. Incorporated - Analyst : That's helpful. And maybe this is parsing things too finely, but in CSS specifically, you've got, call it, 4%, I guess the cost headwind would be about 4% of sales, right? So as you think about these the things that you have to do to offset that -- what we how much that do you think is pricing versus all these other cost actions that you've sort of talked about. And I'm asking the question because you did talk about the fact that you were able to put through pricing in prior years, and that was very clear, but the industry was in a very different spot, right? We've been reeling here with destocking weak demand this is not a great environment to be able to put through price increases. So how reliant are you specifically on pricing? And how confident are you that you're going to be able to actually get that.

Question: Mig Dobre - Robert W. Baird & Co. Incorporated - Analyst : That's helpful. And if I may squeeze one last one. When we're thinking about the revenue outlook based on what you know today, I know that in Q2 typically, we see a little seasonal bump relative to Q1 for the revenue, and I'm wondering if that's still reasonable to expect? And then relative to the second half, in your slides, you talk about the fact that new store openings for your customers are weighted to the second half of 2025. How reliant is your revenue on these new store openings? Or maybe put differently, how much risk do we have from store openings potentially getting pushed out into 2026 or some later date? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 3:00PM, MIDD.OQ - Q1 2025 Middleby Corp Earnings Call

Question: Mig Dobre - Robert W. Baird & Co. Incorporated - Analyst : Great. Thank you so much.

Question: Tim Thein - Raymond James - Analyst : Thank you. I'll try and keep this tight here. I have two questions on commercial. The first being the mix benefit that you called out helping to support margins. I'm curious if that was a channel or product mix, obviously, the product mix can swing around on a quarter-to-quarter basis. But just curious if that's something that -- I guess the question is kind of the element of sustainability on that. And then I guess, Steve, just continuing on that last thread that you're talking about in terms of the new store openings. My sense is, at least from -- and obviously, I don't have the lens that you do in terms of the number of operation or operators, but it seems like more of that mix maybe is kind of oriented towards international markets. I'm curious if that is a, if you're seeing that, B does that -- how Middleby is positioned to the extent that, that REIT is accurate that, i.e., more of the new store growth being outside North America? Thank you.

Question: Tim Thein - Raymond James - Analyst : Excellent. Thank you, Steve.

Question: Tami Zakaria - JP Morgan - Analyst : Hey, good morning. Thank you so much. So my first question is on the $150 million to $200 million impact you mentioned from tariffs, half of which is from China. Is that number based on the current 145% tariff rate. What I'm trying to understand is what the benefit or reversal could look like if that rate comes down to a more manageable level in the coming months.

Question: Tami Zakaria - JP Morgan - Analyst : Understood. Very helpful. And my second question is on the buyback. Are you expecting most of the free cash flow you're going to generate this year to go for buyback.

Question: Tami Zakaria - JP Morgan - Analyst : Got it. Super helpful. Thank you.

Question: Brian McNamara - Canaccord Genuity - Analyst : Hey, good morning, guys. Thanks for taking the questions. In commercial foodservice, I'm curious what competitive price increases that you have observed already in the marketplace in response to tariffs thus far and how those would compare to kind of the mid, high single digit that you're planning on taking July 1. I think you said you expect ours to be below, but I'm curious what you've observed already, if anything.

Question: Brian McNamara - Canaccord Genuity - Analyst : Yeah, sorry, on tariffs -- thank you for that, Steve. I'm curious, is there any nuance as it relates to China tariffs specifically. We've heard that like this the Section 232 steel tariffs, super seed or reciprocal tariffs from other companies. I know it sounds like your exposure is only on the component side. But is there anything investors should be kind of mindful of us as it relates to the nuances associated with the stack ability of kind of the reciprocals versus the steel as it relates to the componentry. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 07, 2025 / 3:00PM, MIDD.OQ - Q1 2025 Middleby Corp Earnings Call

Question: Brian McNamara - Canaccord Genuity - Analyst : Great. And then finally, I was just wondering if you could provide an update on any new Open Kitchen rollout and maybe some of the new products featured at NAFEM that are gaining traction and that you're most excited about. I think a lot of the conversation focuses on tariffs when some of you got some exciting stuff going on in the base business. Unidentified Company Representative Yeah. So we continue to have good momentum on Open Kitchen. We do have a lot of good pipeline activity with Open Kitchen with some large chain customers. Obviously, I don't want to name names today, but we've got some good velocity behind us with activity, especially around really what I'll call the entire enterprise platform Open Kitchen, that's connectivity at the front of the house, the middle of the house and with the back of the house connectivity with the connected products. Additionally, we are seeing a second order benefit, and we saw this in 2024, where we are winning rollouts because of connectivity. And so we had tens of million dollars of rollouts in '24 because our products were connected to Open Kitchen and that ultimately tipped us over the competition relative to winning that change. So a lot of great momentum with Open Kitchen in the marketplace. And remind me your second question?

Question: Brian McNamara - Canaccord Genuity - Analyst : Very helpful. Thanks guys.