Middleby Corp Q3 2024 Earnings Call Transcript

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

Question: Saree Boroditsky - Jefferies - Analyst : Thanks for taking the question. Just starting with commercial obviously came in weaker than expected in the quarter, you highlighted some challenges you're seeing in the restaurant space. Could you just talk about what you need to see to have a pickup in growth in this segment and then maybe just comment on the overall visibility and order trends as you went through the quarter.

Question: Saree Boroditsky - Jefferies - Analyst : Appreciate that.

Question: Saree Boroditsky - Jefferies - Analyst : Thanks. Then maybe switching to residential, the margins came in better than expectations, I believe despite the lower sales. So how do you think about margin improvement there as you go through 2025? And what we see from an incremental margin perspective?

Question: Saree Boroditsky - Jefferies - Analyst : Appreciate the color, thank you.

Question: Mig Dobre - Baird - Analyst : Yes, good morning everyone. I want to start with commercial food as well. I mean, your, your implied outlook here in the fourth-quarter or for flat revenues, that diverges a bit from normal seasonality, right? I mean, typically you do see several percentage point increases into year end. And you're clear about the fact that there's been some push outs on new store additions. But I'm wondering, what, what you're seeing as far as your distributors, the normal kind of year end demand or stocking that these guys do. And what that implies for where the channel inventory lies and really kind of how that might progress into '25.

Question: Mig Dobre - Baird - Analyst : Does, does the stocking sort of extend or the headwinds that you kind of talked about? Does that extend into 2025?

Question: Mig Dobre - Baird - Analyst : Okay. You mentioned that there's not going to be a price increase for '25. How do you think about the, the costs that are embedded in this segment? There's obviously materials but a whole host of other items as well, freight wages that where I presume you do have some inflation. And given the fact that we are in the environment that we're in today, I guess one of the things that I find a little bit surprising is that we haven't seen some kind of a formal either restructuring or cost savings initiative that investors can sort of consider as they think about next year.

Question: Mig Dobre - Baird - Analyst : If I may one final question. It pertains to the SG&A line item. A more notable decline, almost 9% this quarter. Can you comment at all as to how you see that in the fourth-quarter? And as we think about next year is there room to continue to work on this line item particularly if volumes remain relatively weak. Thank you.

Question: Mig Dobre - Baird - Analyst : Thank you.

Question: Brian McNamara - Canaccord Genuity - Analyst : Good morning guys. Thanks for taking the questions. Hate to beat a dead horse on commercial here, but I'm curious if you could drill down on what restaurant concepts are driving this dynamic on closures. Is it contained to independence I believe they're like low double digit percent of segment sales. And what gives you confidence the market will return to unit growth next year out of some openings, being pushed out. Is that just change strength?

Question: Brian McNamara - Canaccord Genuity - Analyst : Great, and then just secondly, on the lack of a [Jan] one price increase in commercial, I don't think you break out pricing versus volumes in that segment. But is it safe to assume volumes have been materially down the last couple of years? We've heard, we've heard for some franchisees in the market opine that some of the bigger players have taken too much pricing and we're wondering if that's factoring into some of the weakness you're experiencing. Thanks.

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

Question: Jeff Hammond - Keybanc Capital Markets - Analyst : Hey, good morning guys. Hey, just back on the store opening, you know, kind of deferral delay. Yeah, I'm just trying to get a better sense of, you know, how much of this is kind of permitting delays versus just, you know, uncertainty freeze and, and what gives you the confidence, you know, they just don't keep pushing to the right versus kind of this catch up, you know, thesis in 2025.

Question: Jeff Hammond - Keybanc Capital Markets - Analyst : Okay. And then couple you know, cash flow balance sheet items, just your working capital, turn that kind of extended free cash flow seems to be a little bit better, but just maybe talk about what you're doing to kind of bring working capital turns, you know, back into check and, and maybe what the opportunity is for, you know, working capital is a source of cash and then just talk about your plans for the convert that come due next year.

Question: Jeff Hammond - Keybanc Capital Markets - Analyst : Okay, 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. OCTOBER 31, 2024 / 3:00PM, MIDD.OQ - Q3 2024 Middleby Corp Earnings Call

Question: Tami Zakaria - JP Morgan - Analyst : Hi, good morning. Thanks so much for taking my questions. My first question is on the services side of the commercial food segment. What are you seeing there? And do you have any plans to shore up capacity for services? We've heard some of your comp compare or peers talk about increasing the technician fleet. So curious how you're thinking about that going into next year?

Question: Tami Zakaria - JP Morgan - Analyst : Got it. Thank you. That was my question.

Question: Walt Liptak - Seaport Global - Analyst : Hi, thanks. It could work on the margin and it sounds like you've got things in place to continue to improve the margins. You know, in the past, you talked about getting to a 30% commercial margin over the next couple of years. Is that still -- you know, the target?

Question: Walt Liptak - Seaport Global - Analyst : Okay. Makes sense. Thanks. And just a couple more one. Most of the discussion sounds like it's sort of global. I wonder if there's any, you know, delineation you can make between like, you know, North America US sales versus international.

Question: Walt Liptak - Seaport Global - Analyst : Okay, great. Thanks for that color. And then the last one for me, Chipotle has been, you know, testing out that double sided grill and it sounds like they might be moving forward with the roll out in 2025. I wonder if you could make any comments on that.

Question: Walt Liptak - Seaport Global - Analyst : Okay, great. Thank you.

Question: Mig Dobre - Baird - Analyst : Yeah, thanks. I just wanted to follow up on Jeff's balance sheet question. So, you know, your cash balance has been building north of $600 million now and obviously you've got this call it $750 million bond maturing next year. Are we to sort of infer here that you're allowing this cash balance to build, to potentially kind of pay down that, that, that bond? Is that idea? Because I suspect that just purely refinancing that generates another $0.50 of EPS drag give or take. And then also related to this, how do you think about capital deployment going forward? Because look, I mean, your stock multiple has continued compressing. So the valuation is looking different than it looked a few years ago. And obviously, we're kind of going through a cyclically more difficult time period. Is it fair to say that at this point, share buybacks are actually a pretty decent alternative for capital deployment relative to other things that you might do? Thank you.

Question: Mig Dobre - Baird - Analyst : All right. Appreciate it.