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John Bean Technologies Corporation (JBT) Q4 2022 Earnings Call Transcript

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John Bean Technologies Corporation (NYSE:JBT) Q4 2022 Earnings Conference Call February 21, 2023 11:00 AM ET

Company Participants

Kedric Meredith - Vice President of Corporate Development and Investor Relations

Brian Deck - Chief Executive Officer

Matt Meister - Chief Financial Officer

Conference Call Participants

Walt Liptak - Seaport Research

Lawrence De Maria - William Blair

Operator

Good morning, and invited to JBT Corporation's Fourth Quarter and Full-Year 2022 Earnings Conference Call. My sanction is Chris, and I'll beryllium your convention usability today. As a reminder, today's telephone is being recorded. [Operator Instructions] After nan speakers’ remarks location will beryllium a question-and-answer session. [Operator Instructions]

I'll now move nan telephone complete to JBT's Vice President of Corporate Development and Investor Relations, Kedric Meredith to statesman today's conference.

Kedric Meredith

Thank you, Chris. Good morning, everyone, and invited to our 4th fourth and year-end 2022 convention call. With maine connected nan telephone is our Chief Executive Officer, Brian Deck and Chief Financial Officer, Matt Meister.

In today's call, we will usage forward-looking statements that are taxable to nan safe harbor connection successful today's property merchandise and 8-K filing. JBT's periodic SEC filings besides incorporate accusation regarding consequence factors that whitethorn person an effect connected our results. These documents are disposable successful nan Investor Relations conception of our website.

Also, our chat coming includes references to definite non-GAAP measures. A reconciliation of these measures to nan astir comparable GAAP measurement tin beryllium recovered successful nan Investor Relations conception of our website.

Now I'll move nan telephone complete to Brian.

Brian Deck

Thanks, Kedric, and bully morning, everyone. JBT captured double-digit maturation connected nan apical and bottommost statement for 2022, notwithstanding nan much-discussed challenges associated pinch accelerated ostentation and proviso concatenation disruptions.

In each quarter, we realized sequential separator betterment astatine some FoodTech and AeroTech. And we ended nan twelvemonth connected a beardown note, particularly arsenic it relates to profitability and orders astatine FoodTech. While location remains a level of be aware among our nutrient customers, it is clear they request to put successful capacity, automation, optimization of output and uptime and sustainability.

During 2022, we completed 2 strategical acquisitions. As I'll talk astir later, they are highly complementary to our FoodTech solutions and are quickly adding value. At AeroTech, separator betterment continued to progress, albeit astatine a slower gait than primitively planned. At nan aforesaid time, nan request broadside remains robust, positioning nan business for a awesome 2023.

As demonstrated by our 2022 performance, JBT enjoys a highly resilient model. Nearly half of FoodTech represents recurring gross from parts and aftermarket services. The nutrient and beverage extremity markets bask a higher level of stableness passim nan business cycle. And moreover, JBT's highly divers merchandise statement and wide information crossed extremity markets enhances nan stableness of our business.

With that, I'll move nan telephone complete to Matt to supply specifications astir nan year. We'll besides coming our first guidance for 2023, different twelvemonth successful which we expect further maturation and separator description .

Matt Meister

Thanks, Brian. JBT delivered coagulated double-digit gross and net maturation successful 2022. Total gross accrued 16% and adjusted EBITDA grew 11% year-over-year. Earnings per stock and adjusted net per stock accrued 10% and 18%, respectively.

In FoodTech, 2022 gross accrued 14% pinch maturation of 12% integrated and 7% from acquisitions, partially offset by a 5% antagonistic overseas speech impact. For nan year, FoodTech generated adjusted EBITDA of $290 cardinal pinch margins of 18.2%. FoodTech margins improved each 4th sequentially, adjusted EBITDA margins of 19.7% successful nan 4th fourth arsenic we proceed to adjacent nan spread connected value costs and use from higher volume.

In AeroTech, 2022 revenues accrued 23%. Full-year adjusted EBITDA margins were 8.4% and 10.3% successful Q4, continuing their sequential separator recovery. And arsenic I'll talk successful nan guidance, we expect that momentum to proceed into 2023.

With that, we posted net per stock of $4.07, compared pinch $3.59 successful 2021. 2022 results included a $0.25 per stock antagonistic effect from overseas speech translation, offset by $0.26 per stock of discrete taxation benefits. Adjusted EPS, which excludes LIFO expense, M&A and restructuring costs, was $4.77, compared pinch $4.04 successful nan anterior year.

During nan year, we took restructuring charges of $7 million, including $4.2 cardinal successful nan 4th fourth arsenic we implemented further actions to trim our costs building successful Europe. In 2023, we expect to incur different $3 cardinal to $4 cardinal of charges and expect nan full effect of these actions to make tally complaint costs savings of astir $9 cardinal to $12 cardinal successful 2024.

Free rate travel was $59 cardinal for nan year, represented a conversion complaint of 45%. As we've discussed successful 2022, we invested successful our integer strategy, expanding superior expenditure finance by astir $40 million. Additionally, nan alteration successful nan U.S. taxation rule that require nan capitalization of R&D costs resulted successful an acceleration of rate taxation payments of astir $25 million.

Finally, we are carrying a higher-than-normal level of inventory and arsenic nan proviso concatenation business improves and vendors drawback up pinch demand, we expect amended inventory turns successful 2023. We are pleased, however, pinch nan advancement we made connected nett indebtedness leverage, achieving our target of 3 times by year-end 2022, down from 3.4 times astatine nan extremity of nan 3rd quarter. This demonstrates our expertise to deploy superior and delever quickly to our target leverage ratio of 2 times to 3 times adjusted EBITDA.

Moving to 2023. We expect full-year full JBT gross maturation of 6% to 10%. That's comprised of 5% to 9% maturation successful FoodTech, including 1% to 4% integrated and 10% to 13% maturation successful AeroTech. We expect FoodTech's adjusted EBITDA margins to beryllium wrong nan scope of 18.5% to 19.5% which includes OmniBlu disbursal associated pinch nan motorboat and ongoing customer support efforts. These expenses should beryllium mostly offset by anticipated OmniBlu revenue.

All this considered, that represents an adjusted EBITDA scope of $310 cardinal to $335 cardinal from FoodTech successful 2023, a year-over-year summation of 11% astatine nan midpoint. In AeroTech, we expect important betterment successful profitability pinch adjusted EBITDA margins of 12% to 12.5%. We are forecasting firm disbursal of astir 2.7% of gross excluding immoderate LIFO, M&A and restructuring expense. Included successful firm expense, though astatine a overmuch little magnitude than past year, will beryllium ongoing improvement costs related to OmniBlu arsenic we grow to further merchandise lines.

Interest disbursal is forecasted to beryllium betwixt $26 cardinal to $27 million, and we are projecting an yearly taxation complaint of 22% to 23%. That gets america to projected 2023 net per stock of $4.50 to $5 and adjusted EPS of $5 to $5.50. We are forecasting adjusted EBITDA of $330 cardinal to $350 million, which represents a year-over-year summation of 21% astatine nan midpoint. We expect free rate travel to return to much humanities capacity levels pinch a conversion complaint of greater than 100% for nan full-year.

Regarding nan first quarter, which is typically our slowest, we expect year-over-year gross maturation of 7% to 10%. This is comprised of 4% to 7% maturation astatine FoodTech and 15% to 20% astatine AeroTech. We expect FoodTech adjusted EBITDA margins of 16.5% to 17% and AeroTech margins of 10% to 11%.

The firm disbursal of 3.2% of sales, excluding immoderate LIFO M&A and restructuring charges, arsenic good arsenic liking disbursal of $7 cardinal to $7.5 million, we are projecting GAAP net per stock of $0.50 to $0.60 and adjusted EPS of $0.65 to $0.75.

With that, fto maine move nan telephone backmost to Brian.

Brian Deck

Thanks, Matt. As I stated astatine nan apical of nan call, we were encouraged by nan gait of 4th fourth orders. FoodTech orders of $432 cardinal were up 24% sequentially, exceeding our expectations pinch improvements successful Europe and Asia. And contempt value weakness and unit affecting our customers successful nan poultry industry, we besides knowledgeable immoderate bid betterment successful North America arsenic a consequence of JBT's highly divers merchandise portfolio.

That is -- JBT had a bully wins successful nan play successful nan pet food, nutrient and vegetable, babe look and pharmaceutical extremity markets. While nan backdrop of economical uncertainty, including higher liking rates and operating costs, whitethorn effect nan gait of customers' finance decision-making, we stay pleased pinch our robust pipeline and precocious level of customer engagement.

We precocious attended nan International Production and Processing Expo, different known arsenic IPPE, nan largest arena for nan poultry and nutrient manufacture successful nan U.S. It is bully to spot immoderate of you there. We introduced respective caller products astatine nan show, including a little cost, much compact DSI portioner, this product, which leverages JBT's beardown DSI franchise, addresses nan needs of smaller nutrient processors pinch a highly effective compact plug-and-play waterjet cutting system.

We besides introduced a chickenhearted bosom deboning solution that specifically targets what is known arsenic a ample vertebrate market. This is simply a spread successful nan marketplace coming wherever our existing automation solutions underperformed connected output comparative to manual labor. Our solution known arsenic Yield King, addresses this situation and arsenic a result, is generating a batch of liking successful nan market.

We besides featured our integer solution OmniBlu. Since our past call, we person signed galore further contracts connected our first activity of merchandise introductions. OmniBlu represents a caller measurement of doing business for our customers pinch a digitally-enabled solution that optimizes instrumentality capacity and attraction management, provides frictionless parts and work and enhances uptime capacity utilization, output and quality.

We are encouraged by customers' consequence to OmniBlu arsenic they recognize its tangible and measurable benefits. We expect our finance successful OmniBlu to make semipermanent advantages for JBT arsenic we proceed to commercialize complete nan adjacent fewer years. Its gross watercourse from subscription fees and incremental aftermarket gross will grow our increasing gross -- recurring gross base. More importantly, our integer relationship further solidifies our business pinch customers.

Regarding nan deployment of capital, we are pleased pinch nan worth we person already captured from nan acquisitions of Alco and BevCorp. Specifically, we are generating proviso concatenation synergies pinch nan halfway of JBT. And we are enjoying commercialized synergies specified arsenic a caller full-line rootlike processing solution, which combines capabilities from our Alco, Edison and Frigoscandia brands.

At AeroTech, 4th fourth orders picked up arsenic expected pinch a 42% sequential summation and continued beardown request from nan infrastructure and commercialized hose markets. AeroTech's grounds year-end backlog and nan expectations of further bid spot successful nan first 4th positions nan business for a awesome to 2023.

Regarding our intent to go a pure-play nutrient and banker solutions company, arsenic you know, we've been exploring a scope of options for AeroTech pinch nan extremity of identifying nan champion worth creation for shareholders. While we are keeping a scope of options connected nan array and an oculus connected nan indebtedness markets, our existent position is that a separation is much apt to beryllium realized done a waste of AeroTech. We stay connected way to denote a defined way successful nan first half of 2023, pinch transaction execution targeted for nan backmost half.

Before I unfastened nan telephone to questions, I'd for illustration to talk astir JBT's firm work and sustainability initiatives, issues that are astatine nan halfway of our taste DNA. We position JBT's work and sustainability model done nan lens of customer solutions, responsible operations and group and communities.

Last quarter, we outlined nan galore ways we had customers connected their sustainability journey. From an environmentally friends packaging solutions and little emanation technologies to systems that combat done discarded and little power and h2o depletion and helping our customers trim discarded to much efficiently usage precious resources, we are besides enhancing our worth proposition and competitory strength.

At nan aforesaid time, we are taking steps to trim nan biology effect of our planted agency operations astir nan world and are embedding these efforts into our continuous betterment program. For example, we're collecting, analyzing and auditing world inferior usage to way costs and depletion for nan full endeavor to springiness america a level for processing and reporting against emanation simplification targets.

In position of group and communities, we promoted worker volunteerism, charitable publication and enhanced matching programs and engagement initiatives astir nan world. Most importantly, we person maintained an unwavering committedness to each labor to create a safe, engaging and inclusive workplace. On that note, I'd for illustration to convey everyone astatine JBT. They are nan logic for our maturation and success.

With that, let's return your questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first mobility is from Walt Liptak pinch Seaport Research. Your statement is open.

Walt Liptak

Thanks. Good morning, guys.

Brian Deck

Good morning.

Walt Liptak

Thanks for nan explanation astir AeroTech and nan timing. I conscionable wanted to make judge I understood it that it sounds for illustration it's a waste is much likely? Is that an all-in-one transaction? And I deliberation you said that nan timing mightiness beryllium successful nan 2nd half. So does that mean an announcement successful nan first half and closing nan woody successful nan 2nd half aliases thing different?

Brian Deck

Essentially, yes. It's much apt it's going to beryllium a sale. And of course, ideally, it would beryllium successful full, right? That would beryllium -- we deliberation that nan level worth of AeroTech is much than nan sum of its parts. Therefore, we do consciousness that that's surely nan amended path. And successful position of timing, you fundamentally person it. We'll supply much item present successful nan 2nd 4th -- successful nan 2nd 4th and past thereafter, look to execute and transact successful nan backmost half.

Walt Liptak

Okay. All right. Great. Thanks for nan clarification. And I wonderment if you could conscionable supply a small spot much item astir what you're seeing from nan poultry market. And primarily, it looks for illustration nan CapEx plans are still connected track. But conscionable what you're seeing, is location a hold that's happening aliases is it conscionable a timing issue?

Brian Deck

Yes. As you've seen astir apt from nan poultry industry, it's a spot of a challenging clip correct now successful position of profitability. We are heavy engaged pinch them. So orders were a small spot little successful nan 4th fourth from them, but we were capable to offset that pinch our divers merchandise offering. So that was bully news. But what we do perceive from them is that nan request for automation, sustainability, productivity and moreover measurement remains precocious connected their database and nan pipeline remains rather beardown pinch them. So -- and arsenic you stated, their wide intentions connected CapEx remains solid. So we do expect that to commencement converting present arsenic we participate nan spring.

Walt Liptak

Okay, great. Thank you.

Brian Deck

Thank you.

Operator

The adjacent mobility is from John Joyner pinch BMO Capital Markets.

Unidentified Participant

Hi, there, guys. Thank you for taking my questions. Hi there, it’s [Indiscernible] connected for John Joyner. Thank you for taking my question.

Brian Deck

Thank you.

Unidentified Participant

So my mobility chiefly relates to nan FoodTech and of nan statement solutions which benignant of seems for illustration a ample marketplace opportunity for maturation for JBT. Can you talk astir immoderate of nan achromatic abstraction present and possibly areas that JBT tin capable retired done its capabilities. Thank you.

Brian Deck

Yes, absolutely. The extremity of statement is so a very ample opportunity. As you know, we invested successful 2019 successful our Proseal acquisition arsenic good arsenic our ACS, Auto Coating Solutions connected that broadside arsenic well. When you deliberation astir packaging successful general, everything ends up being packaged, right, successful much way, style aliases form, whether it's going to unit aliases if it's going to nutrient service. So it is simply a very ample market. We do -- it is simply a meaningful portion of our M&A strategy arsenic we spell guardant from here. So we do look guardant arsenic we proceed to deploy superior arsenic portion of our strategical scheme that we introduced successful 2022 arsenic we look to meet our 2025 targets. That is simply a bully abstraction to beryllium in.

Unidentified Participant

That’s great. Thank you for that color.

Brian Deck

Thank you.

Operator

The adjacent mobility is from Lawrence De Maria pinch William Blair. Your statement is open.

Lawrence De Maria

Hey, thanks. Good morning. Two questions. First question, obviously, 1Q is looking a small lighter than expected, which implies different large ramp passim nan year. Can you possibly conscionable thief america understand first half, 2nd half split? Or possibly a small spot much astir conscionable immoderate of nan modeling to thief america understand really large of a ramp we should expect into -- passim nan twelvemonth of stocking stick?

Matt Meister

Sure, Larry. I deliberation nan first quarter, arsenic you noted, is surely a small spot lighter chiefly because benignant of seasonality that typically happens astatine JBT. As good arsenic we had, arsenic you tin recall, a small lighter bid measurement successful Q3 that impacted backlog for nan first quarter. But certainly, I deliberation our backlog arsenic we participate into nan twelvemonth is really beautiful patient for nan remainder of nan year. And we person visibility betwixt backlog for nan year, arsenic good arsenic our very dependable recurring gross streams to betwixt 70% to 75% of nan gross for 2023.

So I deliberation we consciousness beautiful assured successful nan backmost half -- successful nan mediate portion successful nan backmost half of nan year. Certainly, there's immoderate book-to-bill we person to get but nan margins will proceed to amended sequentially arsenic we spell done nan twelvemonth and use not only from nan higher volume, but besides conscionable continued productivity successful nan FoodTech business.

Lawrence De Maria

Okay. And past moving complete to nan AeroTech. I mean, tin you springiness america immoderate benignant of colour connected first thoughts connected multiples, value talk? And what would station waste firm look like?

Brian Deck

Sure. In position of multiples, Larry, we're going to fto nan marketplace speak arsenic to what nan worth is of that. Certainly, again, arsenic I mentioned, it is an charismatic plus arsenic a whole. It's a level business. So I deliberation successful position of some -- it's going to make liking from some strategical of -- strategical liking arsenic good arsenic nan financial purchaser space. So again, we're going to fto nan marketplace speak for that.

In position of nan firm overhang, location is -- essentially, we allocate rather a spot of our firm expenses arsenic of today. The percent of income will spell up a small spot erstwhile it comes to FoodTech, but because AeroTech has little margins arsenic a full ex AeroTech, nan margins really increase.

Lawrence De Maria

Okay, convey you.

Operator

[Operator Instructions] And it appears that we person nary further questions. I'll move it complete to Brian Deck for immoderate closing remarks.

Brian Deck

Great. Thank you. Yes. We understand it's a engaged play for net announcement. So Kedric and Marley are disposable for nan remainder of nan time aliases for nan week to return questions. Thanks very much, everybody. Appreciate it.

Operator

Ladies and gentlemen, this concludes today's convention call. Thank you for participating. You whitethorn now disconnect.

Editor: Naga



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