Welcome to JBT Marel's Earnings Conference Call for the First Quarter of 2025. My name is Bailey, and I will be your conference operator today. As a reminder, today's call is being recorded at this time. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I'll now turn the call over to JBT Marel's Senior Director of Investor Relations, Marlee Spangler, to begin today's conference.

Thank you, Bailey. Welcome, everyone, and thank you for joining our conference call. With me on the call today is our Chief Executive Officer, Brian Deck; President, Arni Sigurdsson; 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 today's Press release and 8-K filing. JBT Marel'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 measures can be found in the Investor Relations section of our website. With that, I'll turn the call over to Brian.

Thanks, Marlee. We are very pleased with JBT Marel's performance in the first quarter, highlighted by better-than-anticipated revenue, adjusted EBITDA, and margins versus our guidance. We also enjoyed strong year-over-year improvement in margins and orders. Our top line benefited from strength in recurring revenue as well as solid operational execution on the equipment. In terms of our margin performance, we enjoyed the flow through from the higher volume and good expense control. We were equally pleased with the order flow. With another solid quarter of demand up 12% year over year, following record fourth quarter levels. We experienced increased demand from the Poultry industry, continuing a recovery we enjoyed over the last few quarters as we benefit from the industry's robust fundamentals. We also benefited from our diversified end market participation with healthy orders in meat, beverage, pharma, and pet food. In terms of geography, we saw fairly broad-based strength across global regions. While we are excited about the financial performance and the continued order strength, we are even more enthused about the company we have created as JBT Marel, highlighted by our more comprehensive product offerings, enhanced service capabilities, increased scale, and even greater value proposition in our customer partnerships. On the integration front, we are making excellent progress. Arni will provide some color on that in a few moments. We understand that the impact of US tariff policy and the macroeconomic uncertainty it has created is top of mind for investors. While the situation is fluid, we believe in the short term JBT Marel is at least as well-positioned to manage the near-term impacts as our peers. On an intermediate to longer term basis, we believe that we are better positioned given our global footprint and available capacity in the US, Europe, Brazil, that provides the flexibility to…

Thanks, Brian. As Brian said, we are excited about the progress we are making uniting our two organizations. First and foremost, our team has delivered continuity for customers as demonstrated by our first quarter results. As of early April, we reached a major milestone in the implementation of JBT Marel's new organization. The new organizational structure includes a go-to-market strategy that adopts an end-market focus. We believe this customer-centric approach enables our commercial organization to bring deeper process and industry-specific knowledge to our customers and enhances JBT Marel's ability to sell the full breadth of our product offerings. To that end, we have continued to secure orders that combine our complementary capabilities, serving the poultry industry as well as other end markets. Speaking of the Poultry industry, one of JBT Marel's largest and most attractive end markets, not only are we benefiting from the current ongoing recovery in the Poultry industry, but we believe it is the protein with the strongest long-term growth outlook. As for JBT Marel, we are excited about the advantages created by the combination as we now bring the most comprehensive portfolio of solutions, services, and software covering primary, secondary, and further processing, uniquely positioning us to support customers across the entire production value chain. Beyond our ability to cross-sell our existing products, we are integrating full-line solutions that address critical customer needs. For example, we can enable seamless traceability across the poultry value chain from primary and secondary processing steps such as evisceration, chilling, cut-up and deboning, bone detection and intelligent portioning, continuing to subsequent value-added further processing. All of this is supported by real-time analytics and actionable software insights that enhance food safety and production efficiency. This is an example of what makes JBT Marel the leading partner in solutions for a sustainable food industry. As I said, our combined organization is working together, leveraging our combined strengths to deliver value for customers. That can be seen in the continued strength of our first quarter orders, with combined orders of $916 million reflecting healthy year-over-year growth for the JBT segment and record orders for the Marel segment. While it's been just four months since completing our business combination, we are very pleased with the progress we've made already. As Matt will elaborate on, we are on track to achieve our stated cost synergies and the commercial benefits of the merger. With that, let me turn the call over to Matt.

Thanks, Arni. I will begin with a quick recap of our first quarterly report for the combined company. Consolidated JBT Marel revenue exceeded the midpoint of our guidance by $19 million, which was primarily driven by better-than-expected equipment shipments and strong recurring revenue. Additionally, the negative effect from foreign exchange translation was about $6 million less than our expectation. Our consolidated adjusted EBITDA margin of 13.1% outperformed the midpoint of our guidance by 60 basis points, driven by volume flow through favorable mix and good expense control. Since we accounted for Marel as an acquisition, prior year period reflects only the JBT legacy results. We provided supplemental disclosures in the press release and earnings presentation to show comparisons for the combined company as well as the individual segments. The JBT segment revenue increased 4% year-over-year or 5.6% growth on a constant currency basis. JBT segment adjusted EBITDA of $61 million, increased 6%, and segment adjusted EBITDA margin improved 30 basis points to 14.9%. Marel segment revenue was flat versus prior year, but on a constant currency basis, grew 2%. Segment adjusted EBITDA of $51 million, increased 19% year-over-year. Segment margin improved 190 basis points to 11.5%, benefiting from favorable mix with higher aftermarket and pet food revenue, along with savings from the restructuring actions the company implemented in 2024 and initial benefits from synergy actions. Our first quarter free cash flow was $18 million, which included approximately $42 million in one-time M&A related payments. In the quarter, we incurred $11 million in restructuring costs and anticipate full-year restructuring costs of about $25 million to $30 million. We expect our restructuring actions to generate savings of approximately $20 million to $25 million in the year and annual run rate savings of $50 million to $60 million as we exit the year.…

Thanks, Matt. Given our high-level recurring revenue along with the global footprint and diversified supply chain enjoyed by JBT Marel, we believe we are well-positioned to withstand the pressures of the current economic environment. Beyond the short-term impacts of tariffs, we believe we are in an enviable position of serving attractive markets with the most comprehensive and compelling portfolio of solutions. Let me close by extending my sincere thanks to the entire JBT Marel team for their commitment and customer focus as we work to deliver the benefits of our business combination. I'm proud of what we've accomplished so far and even more excited about what's to come. Now, let's open the call to questions. Operator?

[Operator Instructions] Your first question comes from the line of Mirc Dobre with R.W. Baird. Your line is open.

Thank you for taking the questions. Good morning, everyone. Brian -- good morning. Brian, maybe we can start with just some updated thoughts around how you thought about the guidance. You've obviously pulled it for the full year, but I'm curious if this is just a function of sort of being conservative relative to what clearly is an uncertain environment, or if you've actually seen customer behaviors change through the month of April. Maybe you can comment on that specifically. And I'm also curious as to what you're seeing globally, right? US customers versus folks in Europe or other parts of the world.

Sure. Thanks for the question. So it's more the former. We feel with the lack of clarity, we'd like to see how this environment shakes out a little bit. Obviously, there's more shoes to drop with the Trump administration, and we just don't know precisely how that's going to unfold. And frankly, we debated whether to pull guidance or not. And we've seen what other companies have done, and you've seen a mix where people don't change guidance, but they say it doesn't include tariffs. You've seen people put very wide, very wide ranges, which is not particularly helpful either. So to me, it's kind of half a dozen here, six of the others. So at the end of the day, that's the choice we made. We have not seen any meaningful change in customer behavior. We have seen a handful of lost orders or deferred orders, or delayed orders. I can count them on one hand, frankly. And frankly, the Poultry industry in particular, I would describe as robust. And -- but that said, we wanted to be a little bit conservative, making sure we understand how things play out from here. But in the meantime, we're very proud of the performance in the first quarter. We're pleased at how the second quarter is looking as well, and we'll see how it plays out from here.

I see. And is there any color on behavior, say US customers versus international, anything to sort of parse out there?

There's a little bit. So, you've got kind of two situations. You have, obviously, globally, you do have some concerns as to the price of the equipment, right. And what either the US Tariffs or any reciprocal tariffs have on that. So I just think there's a general more conversations on cost, et cetera. There's obviously, given the US Tariffs, there's more conversations there. But there's also on the non-US customers some of our non-US customers import food into the US. So then the question is, should they build that equipment? Should they build that factory or add that equipment in the US, or should they add it, let's say Mexico, right. If there's going to be food tariffs, are they better off just building it in the US. So, there's just a lot of back and forth on those conversations. I think the good news generally is all these conversations are continuing. The demand profile is there. We just don't know exactly how this will outplay and is it defer some decisions for a month or two as the smoke clears a little bit? We really just need some clarity on tariffs, both on the particular US side, but also any reciprocal tariffs.

Understood. On your recurring revenue, I mean, it's pretty clear that the CapEx component of your business or new equipment is where you would see some kind of an impact, if there would be one. But I'm curious, when you look at the recurring component of your business, is there a potential headwind there as well from these tariffs? How do you think about that?

I think that's less likely. I think first of all, we enjoyed very good strength in orders on parts in the first quarter, and that was before there was any visibility in tariffs, which came out in early April. So there's really -- we didn't see any pull-through, and no meaningful change in February versus March. So that was good. It's just a good, strong quarter. We would expect that to continue here. Obviously, there will be some conversations about parts pricing and how we think about that in terms of selectively trying to capture any of our increased costs for any of the parts that we import, which is about a third to half of the parts. So most of our parts are -- more than half are manufactured in the US from US suppliers, but we do have some stuff that's outside the US. So there are some cost impacts that we are considering, but those are moderate in the grand scheme of things. And given the high level of food production that we're seeing right now, we still feel good about that entire environment on our parts.

Okay. Lastly, for me, and I'll let somebody else ask the cost mitigation question. I want to ask you on your comments about repricing backlog, maybe talk us through the mechanism of that -- how that would work and, of the existing backlog, the $1.3 billion of backlog, how much of that is related to US orders or US customers? I'll leave it there. Thank you.

Right. So for JBT Marel, about 40% of our revenue is US-based, and now obviously quite a bit of that is manufactured in the US, and then about 15% or so of our backlog would be in parts and refurbishments, which would be less applicable. So it is a portion of a portion, so to speak. And then specific to how you go about repricing backlog, that is -- that's a customer-by-customer and frankly a contract-by-contract negotiation, depending on what the -- how the contract was originally negotiated, whether or not we have the ability to pass through or not. So it is a mix. We're going through that as we speak. So we will have some ability, but not on every order. More importantly, we have the ability on existing quotes on our pipeline to certainly re-effect what those prices look like for orders that go out from here.

Thank you.

Okay. Thanks.

Your next question comes from the line of Ross Sparenblek with William Blair. Your line is open.

Hey, good morning, gentlemen.

Good morning.

Hey. Maybe just starting with the backlog. I know you guys called out some order delays, but was there a definitional change of that because based on our estimates, I think we're around $1.45 billion for the backlog, which is a little bit higher than what you guys reported. I know FX was a bit of a headwind, moving to a tailwind. Just anything else to think through there on why there could be $140 million kind of differential?

Not really, Ross. I think there was certainly some FX in there. I think also, just as we tried to align the two businesses together, there may be some adjustments that are made to the closing backlog and opening backlog for the acquisition. So I think it's probably just a little bit of noise in how we characterize some of the backlog as we tried to align the policies of the two companies.

Okay, that's reassuring. So no cancellations don't really get the sense based off customer conversations that they need an option.

No.

And then just maybe take it through kind of some of the strength there. Can you give us a sense of like the lead times in the first quarter, knowing that Marel is a little bit longer cycle? Last quarter seemed to be more of kind of mid-stream, implying delivery in 2025, or anything that's large, lumpy to call out.

Sure. So, yes, so you're right. It is all over the board and it is product by product line. And just to give you a feel for it, it's anywhere as short as 45 days and as long as, 12 months, 15 months, it is quite a broad range. You are correct in that the morale on their large projects, particularly in poultry and meat, those do tend to be in that ballpark, in that longer ballpark of the 12-month to 15-month range. We did see some nice order strength on that in the first quarter. So I'd say slight elongation, and we are clearly already quoting into 2026. That said, still, the vast majority of our backlog will be shipped in the current year as we sit here. So I can't give you like a great answer because it's just all over the board. But that said, our lead times are not extending at this point. We still have the capacity to meet the demand that's out there. As poultry gets stronger and stronger, we have to make sure we work on that closely. But all in all, from operations, manufacturing operations perspective, we're well situated

Perfect. Thank you, Brian. And just one last one, if I could. Marel's margin is pretty strong in the quarter. I do believe the first quarter is a seasonal low for aftermarket mix. So, just trying to understand some of the strength there, and maybe if you could help us quantify some of the benefits from early synergy capture, if there were some.

Yes, Ross, I mean this is Arni here. I mean some of the strength that we saw was clearly due to some of the actions that we have been taking on the business, which explains it. And I think it's also helpful that you're seeing that kind of like-for-like on a GAAP basis now, because we have been taking actions on lowering capitalization of innovation and stuff like that that is now fully on a like-for-like basis. But we also saw some kind of good strength in some of the business, such as on pet food, where we saw both growth and margin enhancement. So I think kind of overall just very pleased with the progress and also just considering that we're seeing continued strength on the order side and kind of the driver in Q1 was kind of poultry, we saw a lot of strength on the other end markets in Q4, but they were still kind of at a healthy level in Q1.

Yes, Ross. Just to add to that, I think already touched on the volume strength and the order strength we saw in the legacy Marel business. But we are definitely seeing flow through in benefits from the restructuring actions that the business took at the end of last year in anticipation of the consolidation, as well as some early benefits on the synergy actions that we took. That's primarily on the Marel side as well.

Yes. Arni, just on the question around the -- or the comment around the lower capitalization R&D, is that purely translational, or does that imply you guys are kind of optimizing the R&D spend already?

Yes, so we have been taking actions all kind of prior to the transaction. We were looking at that even kind of in second half 2023. So you kind of saw that in 2024. But we are as the two companies are coming together, what we're doing is really kind of combining the full innovation portfolio, aligning how we kind of measure it. And in the past, Marel has been more kind of talking about a specific percentage that we invest in innovation. But I think we're moving more towards just kind of measuring the output and figuring out kind of that way, what is the right level. So we also have some overlap between the two businesses that we're looking at. So yes, we had been taking actions, but we're still kind of working through finding the optimal investment in the right places, because now we also have a bigger company with a bigger portfolio, and we need to evaluate kind of where do we get the best return on investment.

Awesome. Very helpful guys. Congrats on the quarter. Thank you.

Thank you.

Your next question comes from the line of Justin Ages with CJS Securities. Your line is open.

Hi. Good morning all.

Good morning.

You gave some good color on poultry demand, containing recovery. We're just hoping you could give us an update on something from last quarter, which is the weakness seen in the fish and whitefish, in particular. So, just any thoughts around that end market would be helpful.

Yes. So on the fish side, I mean, whitefish continues to be a challenged market. So, just to give you a data point, the quota in the Barents Sea is kind of being reduced by 25% in 2025. So we are kind of seeing a challenge there. But what is exciting though is due to that there is more investment going into farming on the whitefish side, for example, on cod, for example, in Norway, which is more kind of a very attractive business for four players, such as JBT Marel. But I think the real bright spot is the salmon industry. That has been improving over the last few quarters. You see that the challenges on the biological side has been improving. So there's been basically challenges in salmon farming, which has lowered the quality of the fish and creates certain restrictions on whether you can export, but that has been improving. So actually salmon prices have been coming down, which helps with demand, and that is feeding into production growth that we -- as expected in the low to mid-single-digits for 2025 and even slightly higher in 2026. So I think that is kind of promising. And we see a bit more activity as we look at kind of at the pipeline. But we're not out of the woods, and we want to kind of see a little bit more strength coming into the numbers. But I would say, overall, the salmon industry is moving in the right direction.

All right. That's helpful, thanks. And then just on the recurring versus non-recurring split, I know, some strength there, but just wondering how much of recurring kind of ticking past that 50% mark is related to the new digital offerings that were kind of touted at the combined entity versus just shifting of equipment orders.

The primary reason why we're above 50% in the quarter is just because of the seasonality on the equipment revenue recognition. So from a dollar perspective, when you look at our 10-Q, which is coming out today, you can kind of see the difference between equipment and parts that'll moderate over the course of the year as equipment shipments increase. That said, on the software side, so obviously, both sides of the business, their revenues in both of our businesses. So it didn't have a material change from one quarter to the next. But that said, I will say our software and digital folks are pretty excited about bringing the two products together. Marel has a mix of what we call line software solutions, which really brings the pieces together across multiple products to get overall equipment efficiency of the line. And then JBT has been quite strongly focused on the optimization of the individual pieces of equipment itself, with visibility from our OmniBlu software. And Marel has made some good strides on the same as well. So we're bringing that optimization -- that equipment optimization software together. So it's still early days. There's a lot of obviously programming and whatnot that comes in. So we haven't seen much of an impact so far on revenue synergies there. But more to come with that.

That's helpful. Thanks for taking the questions.

Thank you.

[Operator Instructions] Your next question comes from the line of Mirc Dobre with R.W Baird. Your line is open.

All right. I got back in queue. Since we didn't talk about cost mitigation, I guess I'm going to have to bring that up.

No problem.

Yes, thanks for taking a follow-up. So Slide 7, very helpful. Appreciate all the detail there. So I guess two questions. It sounds to me like you're saying Q2 is really not going to experience a lot of these negative cost drags because you have inventory and so on. And the guidance certainly looks that way. How do we think about the second half here? Because it sounds like you're saying you think you have tools to be able to offset maybe half of these costs. But I don't know if that's immediate, if that happens as soon as Q3, if it takes a little bit longer, maybe talk us through that.

Sure. So we will get impacted by -- in the second quarter. It's included in the guidance. It's about $3 million, or so is our estimate, because we're writing checks for tariffs already. So it is happening. That said, some of it gets capitalized into inventory then, and as you sell, it gets recorded, but it will accelerate in the back half as you work through your inventory and whatnot. So you see the numbers on Slide 7 in terms of that $12 million to $15 million per quarter. I think one of the concerns, obviously, is where the tariff rates go, which is why we provide the detail where we're doing the purchasing. So you could do a little bit of your own math. If European tariffs come down or come up, that will affect the number. But overall, we do feel we have a good path to mitigating the costs, which is why we suggest that we can cut that impact by more than half, in the -- particularly, in the back half, as some of these efforts get going. And specifically bunch of things in our tool chest here. Obviously, we're in just simply push back on price increases, and then keep in mind we are rarely single-sourced on a part -- on parts of purchases. So we can either reallocate that demand to a domestic supplier and just take the better cost there. We can certainly find new US Suppliers and reallocate that wallet share there. And then, we also are working on kind of the make versus buy decision ourselves. We do have parts capacity in the US at a couple of our facilities as well as Brazil, and perhaps even India. So we're looking to resource some of those parts. That takes a little bit more time, obviously, than just shifting vendors around or shifting the wallet around, but we do have that in our tool chest and we're thinking about those. And then on the equipment side, again, that takes a little bit longer. We do ship a fair amount of equipment, particularly from the Netherlands. And -- but again, we do have production capacity in the US and a few facilities again as well as Brazil, that we're thinking about moving this stuff around. So there's lots of moving pieces. Obviously, you've got just all the uncertainty of the tariffs, what's the dollar amount? But we're well underway in trying to mitigate this. But I do feel confident that we can mitigate it by at least half, especially when you consider combining the cost actions with the pricing actions.

That's very helpful. And then, as I think about 2026, and let's assume that the assumptions that you have on Slide 7 remain in place, the tariffs remain as they are. When we get to 2026, do you think you'll be able to get to the point where the effect of these tariffs would be fully mitigated? Can you do that with pricing for your 2026 product? Or should we sort of think about this -- drag this, call it $6 million to $7 million quarterly drag is something that gets applied to 2026 as well.

I think, generally speaking, our thoughts are that this just becomes a cost of doing business for us and our customers that gets embedded into the business model. Obviously, that always makes our customers make sure that they still get the ROI on their investment. So, I think that's an ongoing conversation. But I just do think this is going to be embedded into our respective cost structures and some of the -- if we have to move manufacturing around, that could go into early 2026, but certainly by maybe the second quarter or certainly the back half of 2026, we would be realigned as presuming we have some transparency and visibility on what the actual tariff rates are.

And Mirc, maybe just to add, what we've also talked about is just how do we see this as an opportunity, because a lot of our peers in the market are situated kind of similarly to JBT Marel. So if you look on the legacy model side, a lot of the competitors are based in Europe when we're in Europe, but with the scale and the global reach and just the fact that we have kind of two supply chains that we are now bringing together, we haven't brought them together fully already. So kind of as we kind of can think about, I think we have more flexibility and more opportunity to adapt to the changing environment. So, I think that's something that we're also kind of looking towards as we think further ahead

And just to actually further the point. And I know [indiscernible] did ask a little bit, but on Arni's last point, we have a tremendous business in Brazil. The combined business we have three large factories and one smaller manufacturing factory. And then we have a large distribution center for parts as well as a customer innovation center there. So we do have the ability to again as Arni said, move some global supply chains around. And Brazil could be a really nice answer for us if we think Europe is just simply going to be too expensive, and we need to alleviate if we have any constraints in the US or higher costs in the US

Understood. Last question is really on integration. It sounds like things are going well. I'm curious if, say, for instance, there is an adverse effect on demand either in the back half or maybe even stretching into 2026. What does that mean for your integration effort? Do you get to maybe pull forward some synergies? Do you have that ability? Or maybe it's the opposite, where if you are dealing with lower volumes, and you do have to make changes to your manufacturing footprint, as previously discussed, then that actually makes the integration process more complicated and maybe raises the risks to you being able to deliver on those synergies that you outlined. Curious your thoughts on this.

It is a bit mixed. So certainly on the cost side, on the SG&A, et cetera, logistics, whatnot, we can continue those. And if the demand environment changes, we have a history from a -- from our cost side of being able to -- our continuous improvement side of being able to react appropriately for the demand environment. So we feel that we have that in our tool chest, and we can manage that appropriately. The potential offset that obviously would be not so much on the manufacturing side because I think we can get that utilization one way or another, and get that efficiency one way. If we move stuff around, the risk would be more so on how much materials you buy, right? So what's the -- just the pure volume of raw materials, parts, et cetera, and getting the synergy savings on that combined purchase. So that would be more of the risk in a lower-demand environment.

All right. Appreciate it. Good luck.

Thank you.

And there are no further questions at this time. Mr. Brian Deck, I turn the call back over to you for closing remarks.

Thank you all for joining us this morning. As always, Marlee will be available if you have any additional questions.

Thank you. This concludes today's conference. You may now disconnect.