JBT Corporation (NYSE: JBT) has reported a modest revenue increase in the first quarter of 2024, with a positive outlook for the year following a definitive transaction agreement with Marel. The company has seen a 1% rise in revenue to $392 million and an improvement in adjusted EBITDA margins. Looking ahead, JBT anticipates organic revenue growth and strong earnings per share, alongside a merger that promises cost synergies and an enhanced value proposition for customers.
Key Takeaways
- JBT Corporation's revenue increased by 1% year-over-year to $392 million in Q1 2024.
- Adjusted EBITDA margins grew by 60 basis points compared to the previous year.
- A definitive transaction agreement with Marel has been announced, with a voluntary takeover offer expected soon.
- Full-year 2024 outlook includes adjusted EBITDA guidance of $295 million to $310 million and adjusted EPS guidance of $5.05 to $5.45.
- The company expects organic revenue growth of 4% to 6% and a free cash flow conversion rate over 100%.
- Recovery in the poultry market is anticipated, which constitutes 25% of the general market.
- JBT experienced a decline in aftermarket sales but predicts equipment sales will outpace aftermarket sales for the remainder of the year.
- Cost savings from restructuring are projected to reach $18 million by end of Q2.
- Synergy opportunities with Marel will be detailed in a joint shareholder call post-offer completion.
Company Outlook
- JBT projects an 11% to 28% year-over-year growth in adjusted EPS.
- Free cash flow conversion rate is expected to exceed 100% for the full year.
- Orders in the poultry industry are expected to increase in Q2 with a strong sales pipeline.
Bearish Highlights
- The company noted a decline in aftermarket sales compared to the previous year.
Bullish Highlights
- Anticipated organic revenue growth of 4% to 6%.
- Equipment sales are expected to outpace aftermarket sales throughout the year.
- Sequential margin increase expected each quarter due to restructuring and supply chain improvements.
Misses
- Despite overall growth, the company faced a downturn in aftermarket sales.
Q&A Highlights
- Brian Deck discussed the expected sequential increase in margins due to restructuring and synergy potential with Marel.
- The focus on sales synergies aims to enhance the value proposition through full-line solutions.
- More details on the synergies with Marel will be provided in an upcoming joint shareholder call.
In summary, JBT Corporation is positioning itself for a year of growth, underpinned by strategic restructuring and an impending merger with Marel that promises to unlock new value for stakeholders. The company remains focused on capitalizing on the recovering poultry market and achieving cost savings, while also enhancing its product and service offerings through the anticipated merger. JBT's leadership is optimistic about the future and plans to share more information on the benefits of the Marel transaction in the near term.
InvestingPro Insights
JBT Corporation's recent performance and strategic initiatives have attracted attention from analysts and investors alike. The company's commitment to growth and value creation is underscored by its definitive transaction agreement with Marel and its positive financial outlook for the year.
InvestingPro Data metrics provide a deeper understanding of JBT's financial health and market position. The company's Market Cap stands at $2.9 billion, indicating its substantial size within its industry. Despite a year-over-year Revenue Growth of -24.11%, the company managed a modest quarterly increase of 0.98% in Q1 2024, aligning with the revenue uptick reported in the article. This resilience is further reflected in JBT's Price / Book ratio of 1.95, suggesting a reasonable valuation relative to its net assets.
InvestingPro Tips highlight several key strengths of JBT Corporation that are pertinent to investors' decision-making. The company's high shareholder yield and the fact that 3 analysts have revised their earnings upwards for the upcoming period suggest confidence in JBT's financial prospects. Additionally, JBT's consistent dividend payments over the past 17 years and its ability to cover short-term obligations with liquid assets provide a sense of stability and reliability, which may be particularly appealing to income-focused investors.
For those considering deeper analysis or seeking additional insights, there are 6 more InvestingPro Tips available for JBT Corporation, which can be accessed by visiting https://www.investing.com/pro/JBT. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
In summary, JBT's strategic moves and solid financial metrics position it as a company worth watching, especially for those interested in the industrial sector's growth and stability.
Full transcript - John Bean Technologies Corp (NYSE:JBT) Q1 2024:
Operator: Good morning, and welcome to JBT Corporation's First Quarter 2024 earnings conference call. My name is Marcelo, and I will be your conference operator today. As a reminder, today's call is being recorded. [Operator Instructions] I will now turn the call over to JBT's Vice President of Corporate Development and Investor Relations, Mary Dave, to begin today's conference schedule. Kedric, you may begin.
Kedric Meredith (NYSE:MDP): Thank you, Marcelo. Good morning, everyone, and welcome to our first quarter 2024 conference call. With me on the call is our Chief Executive Officer, Brian Deck, and 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 eight K filing. JBT'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. Now I'll turn the call over to Brian.
Brian Deck: Thanks, Kedric, and good morning, everyone. JBT's first quarter our seasonally lightest period came in largely as expected. Consistent with previously outlined commentary, we continued to capture margin expansion with a 60 basis point increase in adjusted EBITDA margins compared with the prior year period. As announced at our April 5th press release, we signed a definitive transaction agreement with for the agreement, which was approved by both companies' Board of Directors reflects extensive collaboration between the teams. Based on our diligence, it confirms our belief in the industrial logic of the combination and value creation opportunities for customers, shareholders and other stakeholders. The agreement also represents a significant step forward in anticipation of the submittal of a voluntary takeover offer. With that, I'll turn the call over to Matt, who will walk you through our first quarter performance. Then I'll speak about the anticipated recovery in the poultry market and provide greater detail about the progress we've made on the proposed merger with Marel. Matt?
Matthew Meister: Thanks, Brian, and good morning. For the first quarter, our revenue was $392 million, an increase of 1% year-over-year. Our gross margin in the quarter of 35.8%, an improvement of 160 basis points was driven primarily by the cost saving benefits of restructuring actions and continued progress on our supply chain initiatives. Adjusted EBITDA of $57 million increased 6% year-over-year, and adjusted EBITDA margin increased 60 basis points to 14.6% as increases in incentive compensation and in labor inflation partially offset the gross profit improvements we realized in the quarter. From an operating perspective, we are pleased with our continued margin expansion. As we have discussed, we believe that JBT's greatest opportunity for margin improvement is from our supply chain initiatives. In the first quarter alone, we realized savings of approximately $5 million in terms of direct, indirect and logistics spend additionally, we have seen a significant and steady improvement in supplier on-time delivery, driven by our actions to consolidate procurement activity with key suppliers as this has had a meaningful and positive effect on JBT's production efficiency, allowing our businesses to further shift their resources to additional supply chain and manufacturing productivity projects. First quarter adjusted EPS was $0.85 versus $0.61 in the prior year. EPS was positively impacted by our operational improvements, which added about $0.07 per share, as well as $9 million of net interest expense improvement, which contributed about $0.22 per share. This was partially offset by a higher effective tax rate for the quarter, which included a discrete item of approximately $0.03 per share. First quarter is generally our seasonally slowest free cash flow quarter and our results in the first quarter reflect our preparation for revenue growth through the remainder of the year. While we still have work to do on working capital management. We remain confident in our ability to achieve a free cash flow conversion rate in excess of 100% for the full year. As of the end of the first quarter of 2024, we completed our multiyear restructuring program, recording total charges of $18 million. All-in, cumulative annual run rate savings are on track to be $18 million as we exit the second quarter of 2024. Regarding our full year 2024 outlook, we are reiterating our guidance for adjusted EBITDA at $295 million to $310 million and adjusted EPS at $5.05 to $5.45, which at the midpoint represents 11% and 28% year-over-year growth, respectively. We continue to expect organic revenue growth of 4% to 6%. However, we did adjust the total revenue range to account for current expectations for foreign exchange translation. Additionally, we have updated guidance for GAAP EPS to a range of $4.40 to $4.80 from the following items. First, we revised our expectations for M&A costs, which are now estimated to be $30 million to $35 million for the full year, excluding any transaction contingent fees. Additionally, our updated forecast for net interest income of $2 million includes the impact of our new bridge credit facility secured as part of the expected tender offer from Marel . Finally, in the second quarter, we are forecasting a discrete tax benefit of between $8 million to $9 million related to the successful implementation of internal tax planning actions. With that, let me turn the call back to Brian on for things map.
Brian Deck: Thanks Matt. Orders booked in this first quarter of 2024 reflected So select market softness in North America. Separately, we experienced some order timing issues in our AGV business. But as we have been saying, that market remains quite robust while orders from the poultry industry in North America didn't recover in the first quarter, the economics of that market have continued to improve. Corn input price costs have remained stable while wholesale poultry pricing has increased due to more favorable supply demand dynamics. For example, the benchmark large bird deboned breast meat is now hovering around $2 per pound versus less than $1 just five months ago. We are optimistic that the improved poultry industry, the economics will translate to orders during the second quarter. We are very encouraged by the expanding level of quote activity. Specifically, we are seeing demand for midstream and downstream equipment, which we call secondary and further processing producers are looking to increase output and efficiency of their value added processes to capture more margin dollars and address deferred investments. Geographically, while orders softened year-over-year in North America. As discussed, inbound remained solid in Europe and Middle East posted a record quarter in terms of end markets, we enjoyed particular strength in fruit, juice processing and convenience meals. Let me switch gears and provide updates on the proposed merger with Marel. As I mentioned earlier, the execution of the definitive transaction agreement was a major milestone in combining our two companies as outlined in the agreement, preserving Marel's heritage and culture is important to advancing the combined business and having the opportunity to work closer with Marel since the execution of the transaction agreement, I am as confident as ever on the compelling industrial logic of the transaction, including meaningful value creation opportunities. We expect substantial revenue synergies such as cross-selling, enhanced service and improved and an improved overall value proposition, which we continue to analyze and intend to communicate in connection with the offer launch. Regarding the cost synergies, we expect annual run rate benefits of more than $125 million within three years of transaction close and continue to explore for upside as we refine our work. We anticipate approximately 45% of cost synergies will come from cost of goods sold and approximately 55% from operating expenses. In terms of cost of goods sold, we expect to generate meaningful supply chain savings as the combined company consolidates and optimizes procurement standardizes components through value, add value engineering processes and expand best cost country sourcing. We also expect to leverage the combined production capacity and gain efficiencies across a broader footprint. As it relates to OpEx, we expect to realize savings from cost overlaps, including IT systems, public company costs, third party contracts and certain back office resources. Additionally, we will leverage the combined company's R&D and selling of service resources to have a greater collective impact for the customer. Since the announcement of the transaction agreement JV team and Marel have made considerable progress on the conditions required to launch the offer. In mid-April, we initiated the review process of offer document and prospectus with the Financial Supervisory Authority of Iceland or the FSA in May, we expect to file the registration on Form S-4 with the SEC, which will contain a preliminary proxy statement and prospectus. Subject to the approval of the required documents by the FSA, we expect to promptly launch the voluntary takeover offer. At that point, we plan to host a joint transaction-specific investor call. We have secured a fully committed bridge financing facility to guarantee funds for the takeover offer as required, and we'll pursue a conventional long-term financing structure in connection with the closing of the transaction. In terms of other workstreams, we have filed antitrust notification documents in the U.S. and started comparable regulatory clearance work in other filing various jurisdictions. In early summer, we expect to commence the formal application for the secondary NASDAQ Iceland listing and pending approval of the final S-4 by the SEC expect to hold JBT's shareholder vote later in the summer. While the overall transaction timetable remains primarily dependent on the regulatory clearance process. We continue to plan for a year and close of the transaction. As always, let me extend my sincere thanks to our teams around the globe that deliver exceptional service and solutions to our customers every day. I would also like to extend my appreciation to our partners at Marel as we work together to advance the value-creating combination of our two great businesses. With that, let's take your questions. Operator?
Operator: [Operator Instructions] And your first question comes from the line of Mig Dobre with Robert W. Baird and Co.
Joe Grabowski: Hey, good morning, guys. It's Joe Grabowski on for Mig this morning. So I wanted to start with your guidance. Your organic sales guidance based on the 47%, 53% first half second half split. That would seem to imply organic sales of about 1% in the first half and about paid 9% in the second half and correct me if I'm not right on that, but with orders down a little bit each of the last two quarters, I guess what gives you that confidence, but you'll see the that level of sales lift in the second half?
Brian Deck: Sure. I'll speak to that. This is Brian. So first and foremost, we have a strong backlog going into the yearend. And as we sit here today, so we do have visibility as to already what's in the backlog and the delivery schedule for that. Secondly, I'd also say that as I mentioned on our call, we do expect some improved improvements over the course of the next few quarters with respect to the poultry industry, as you know, that's about 25% of our general market. So we do expect that to improve as we progress through the course of the year here. So everything really played out as expected in Q1. So no need for us to changing gears or everything is playing out as we expected with the slight modification of the of the FX translation.
Joe Grabowski: Okay, great. Thanks. And then maybe just drilling down on the North American poultry end market, you on the slide deck and the prepared remarks, you said you expected some orders to start flowing in the second quarter, I guess maybe the level of visibility into those orders. And is there any risk that maybe they're going to kind of slip into the second half of the year and maybe some of that revenue doesn't get recognized till next year?
Brian Deck: Well, there's certainly always a risk, but as I sit here today, we did we looked at it over the last couple of quarters, we were talking about a strong pipeline. Now we're talking about strong quotes, right. So it's really about those quotes converting to orders as we go through the next couple of quarters, we always can, it seems things always slip from one quarter to the next. Generally speaking, our lead times are three to six months. So you can even go into the third quarter and still have opportunity to meet your numbers. And what's really encouraging is just again because of the fundamentals of the business. Our customers are making money, which is good. There's they've opened up. The conversations are accepting quotes. Honestly, we're quoting like crazy right now. So it's really a matter of getting those quotes converted to orders. And I don't think we'll be at full run rate in the second quarter, frankly. But we do expect to see that beginning of that activity and then flow into the third quarter from there.
Operator: And your next question comes from the line of Walter Liptak with Seaport Global.
Walter Liptak: Hey, thanks. Good morning, guys. I wanted to ask about maybe just a follow-on to the last one with some with the orders. Can you tell us anything about how April went like come with AGV, to the timing of those orders, did they come in April? Are those still some that comes in later in the quarter? And then same thing for poultry. Are you starting to see any lift into April?
Brian Deck: Sure. We typically don't give individual guidance on a month within the quarter, but what I will tell you is a couple of things. One, as we went through the first quarter, every subsequent month got better than the prior. So the trend is generally good. And we do have confidence in the second quarter as a whole. On AGV specifically, the shift from or I say miss, if you will, in Q1 was somewhere between $10 million and $15 million for AGV, actually closer to $15 million. We certainly expect that in the second quarter. And generally speaking, we expect a strong quarter from AGV here in the second quarter. So again, everything is essentially laying out as expected with the one exception of the AGV slip of that almost $15 million or so.
Walter Liptak: Okay, great. And then just maybe another follow-on, you mentioned that the second quarter orders would be better, but maybe not full. I wonder if you could, if that means that it looked like when I look back at last year, it looks like it's a tough comp for orders that was a good order period. Could you get to say $445 million, which would be flat orders in the second quarters? Is that we should be thinking about?
Brian Deck: Well, without giving specific numbers, I do certainly expect a better quarter in the second quarter without question, the comp versus last year is tough because if you recall, we had those very large pharma orders. So it's a little bit tough. I tend to not focus on any one individual quarter. I just look at the trends and I look at; do we have the backlog? Do we have the backlog, do we have the momentum to continue to support our guidance on revenue? And we feel we do. So I feel good about it and then we'll see how things turn out. But certainly I do expect improvement sequentially.
Walter Liptak: Okay, thanks. Yes, I think the data point about quotes is great. And we get a certain pickup for poultry. I wonder if I could ask one last one on aftermarket sales, they shifted down a little bit in the quarter from last year. I wonder if you can talk about that and maybe talk about the aftermarket and other growth rate you could tell us about.
Brian Deck: Sure. And yes, so we, it was interesting quarter for sure. And I would say somewhat reversion to the mean. So we actually had, if you happen to recall, first quarter last year, we had really high aftermarket. It was at 56% of our revenue mix and relatively lower equipment. This quarter, we actually grew equipment by about 10% on the revenue line and declined about 8% on the aftermarket. But again, last year, if you recall, first quarter had a tremendous amount of aftermarket and specifically refurbishments as customers start to sweating the assets more than they otherwise would. So at 52% mix, we're basically back to the mean and actually 52% is quite a strong number for us. But I do generally expect the growth rates for the rest of the year. Actually, I expect equipment to slightly outpace aftermarket for the rest of the year, again as the recovery and delivery of the backlog. So but generally speaking, aftermarket remains probably our best kind of resource, if you will, as stability within our financial statements. So I feel super good about it. And if we hover in this 50% range. We're really well set.
Operator: And we have Walter Liptak again on the queue.
Walter Liptak: Okay, great. Thanks guys. So maybe, Matt, one for you. What's the cadence on the cost savings in the second quarter and for the second half, is it pretty evenly split? How should we think about that?
Matthew Meister: Well, we would -- we will hit the run rate of $18 million in savings by the end of Q2. So I would expect there to be a little bit more that that filters into Q3. But for the majority of the savings that we expect to achieve from our restructuring program. That would pretty much play out by the end of Q2.
Walter Liptak: Okay. All right. Great color.
Brian Deck: And just to give a little more color on that. Sorry, Wal. I'll just give you a little more color on it. If generally speaking, if you look at our margins, I would say, given the restructuring given the supply chain activity, we expect margins to increase sequentially every quarter in 2024 and every quarter will be better than 2023 from a margin perspective.
Walter Liptak: Okay, great. Okay. Thanks for that color, Brian. And if I could try one on the Marel synergies, thanks for all the info on the cost related synergies. Is there and I realize you're not putting any numbers on the sales synergies, but could you provide any idea of like how you will or may provide us with future guidance? Is it going to be as a percentage of revenue growth or even to be able to put a dollar amount on sales synergies, is your plans for synergies come through to fruition?
Brian Deck: Yes, more likely we would not say we would give you a target dollar amount, but we may convert that to basis points. We'll see. We're working on it pretty intensely as we speak. But just in terms of the synergy potential itself, there's three or four buckets, and I would say certainly the biggest opportunity is really this better value proposition of full line solutions to the customer and pull through of equipment that we can leverage one another's portfolio. And just to give you a couple of examples, right, the JBT is really well known for waterjet portioning, right? And certainly, we believe we're the leaders in the market. We feel that given real strength on the primary side and into the secondary side, there could certainly be some pull through that wouldn't otherwise exist or the customers would have to figure out a solution on their own. So from a from an engineering perspective, from a value perspective, pulling that full line solution makes it really helpful. Similarly on the kind of opposite on the FP side, the further processing side, Marel is particularly strong in forming where we have some exposure in some products, but they're the leaders, right. So but we're overall very strong in the FP side, but that's just a hole in our portfolio. So we would expect to be able to pull through thing there. So those are just a couple of examples on the product side, also, I'd say on the service side. And this is what we hear from our customers. They really want to see improved service. And you think about the tremendous opportunity of bringing our very large service capabilities combined with there's large service capabilities throughout the globe, right in every continent, bringing those two organizations together to help our customers with their uptime with their efficiency and just helping overall making them a better company. We think that's a tremendous opportunity. So those two are the largest. We'll give more color on some of the other buckets as we get into the joint shareholder call here once we do the offer by, we feel very good about opportunities on the commercial side.
Operator: That concludes our Q&A session. I will turn the call over to Mr. Brian Deck for closing remarks.
Brian Deck: Thank you all for joining us this morning. As always, Patrick and Marley will be available, if you have any follow-up questions.
Operator: This concludes today's conference call. You may now disconnect.
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