MIDDLEBY Corp Q1 2026 earnings call

Good morning, and thank you for joining today's call. I'm excited for the next few months and what it holds for Middleby. That starts today with sharing the excellent results achieved across both segments of the business and raising our guidance for the year. It continues next Tuesday during our Investor Day in New York, as we lay out our visions for the exciting future of both segments, and it culminates with the separation of the segments into two pure-play standalone public companies. The separation of the business is not the end. In fact, it's only the beginning of a new and exciting chapter for both companies. Following this transaction, Middleby will operate as a focused commercial foodservice leader with a scaled portfolio of best-in-class brands, accelerating innovation and industry-leading 26% segment-level EBITDA margins.

While Food Processing becomes an independent growth platform with segment-level EBITDA margins over 20% and significant expansion opportunities through both organic and acquisition growth initiatives. The separation will allow for focused execution across both companies with significant growth opportunities ahead. While we're only discussing the near-term outlook on today's call, we look forward to showcasing our long-term vision next week. Turning to our first quarter results, our total revenue of approximately $840 million for Commercial Foodservice and Food Processing exceeded our expectations. This strong top-line performance drove adjusted EBITDA of approximately $181 million. Through a combination of these operational results and substantial share repurchases over the past 12 months, this translated to adjusted EPS from continuing operations of $2.16.

Same as last quarter, for today's discussion on segment-level results and trends, I will be discussing the Commercial Foodservice results and outlook, and I've asked Mark Salman, the CEO of Food Processing upon completion of the spin-off, to discuss the Food Processing segment performance. Starting with Commercial Foodservice, we generated revenue of approximately $616 million, which exceeded our expectations during the first quarter. The outperformance was driven primarily by the general market with our dealer partners, which again had double-digit growth during the quarter, maintaining the strength we saw to end 2025. We continue to gain share with our dealer partners as a result of efforts to strategically align those relationships and broaden the solutions we now sell through our channel partners. The broad-based strength we saw in the general market was complemented by better-than-expected growth with the chains.

Replacement activity is improving given deferrals in the prior years, and more importantly, we have a strong pipeline of new opportunities which are converting. We are particularly optimistic about the momentum we are experiencing across the industry on beverages, where chain customers are seeking to refresh their menus with new beverage offerings. The investment we have made in the past several years is allowing us to capitalize on this momentum and industry trend. All that said, while the quarter came in better than expected for chains, industry conditions remain challenging, especially as consumer wallets became increasingly strained in March and April. As we look ahead, we're remaining prudently cautious, though we are well positioned for the environment to hopefully improve as we move through the year.

Brit will provide additional color. Our guidance assumes a relatively consistent environment to what we are currently experiencing as we await larger chain customers to firm up their plans for the year, particularly in the second half, and adapt to the current macroeconomic environment. As we think longer term, the investments we have made positioned us with unmatched competitive advantages, both now and into the future. With the industry's broadest portfolio of leading brands, the strongest innovation pipeline, including IoT, automation, and beverage technologies, and investments in go-to-market and service initiatives that will accelerate growth and drive market share gains for years to come. The foundation of the commercial foodservice business is stronger than ever. And the strategic investments that we have made over the past several years position us for growth and an exciting next chapter.

Before I turn the call over to Mark, I would like to take a moment to welcome Brittany Cerwin as our new CFO. Brit has been an invaluable member of the Middleby leadership team and has been integral to the company's growth since joining 15 years ago. She has quickly and seamlessly stepped into this new role. I'm very excited to work with Brit as we transform the company into a pure-play commercial foodservice equipment leader. I would like to now turn over the call to Mark to discuss Food Processing.

Thanks, Tim. Food Processing delivered our best first quarter ever, delivering record results across key top-line metrics with organic revenue growth of 25%, record order intake, and our fifth consecutive quarter of book-to-bill above one. Turning to specifics, in the first quarter, the Food Processing segment generated revenue of approximately $224 million, with order of $231 million, resulting in a backlog of $416 million, a further increase versus the end of the year. The strength we saw across the business in the first quarter puts us on a solid foundation and builds confidence for the remainder of the year.

In terms of drivers, we are realizing growth in the international markets thanks to the investment we have made over the past several years in our international footprint, as our brand can now reach a broader global audience with food processing trends that are evolving around the world. We saw these investments and strategy play out during the quarter with two new bakery projects in Kenya, secured through our expansion of international offices in recent years and representing our first meaningful order in the country. This is yet another example of how we are uniquely positioned with our total line solutions to deliver value to our customer globally, and that strategy is proving to be a key driver of our organic growth. We are in the early innings of executing our growth strategy with significant market opportunities ahead.

What sets Middleby Food Processing apart is this comprehensive approach to serve industrial protein, bakery, and snack processors. We have created a portfolio designed to deliver complete end-to-end total line solution offerings that optimize our customers' entire production lines and are committed to delivering the lowest total cost of ownership. This targeted approach has also guided our acquisition strategy. We've built the food processing business by adding brands and products specific to target food applications, which complement our total line solutions. This formula works. Our recent acquisition of Gorreri from Italy is a great example. Since the acquisition 18 months ago, we have unlocked multiple total line solution opportunities in the cake category, not only elevating Gorreri, but growing the order pipeline for our existing brands and providing our customers an unmatched solution only Middleby Food Processing can deliver.

We have consistently executed our strategic and disciplined approach to acquisition for 20 years. Now, as we separate into our own public company with a strong balance sheet at just 1.25x net leverage, we have significant capacity to accelerate this proven growth strategy. Beyond top-line growth, we have clear visibility to improve profitability driven by three key factors: Lapping tariff-related headwinds from Q3 2025, favorable mix in our backlog, and continued margin maturation of recent acquisition. In summary, we're well-positioned to deliver both strong top-line growth and margin expansion for the remainder of the year. Finally, as you saw in our Form 10 filed on Monday, we have completed the build-out of our management with a highly experienced set of executives prepared to execute on the extensive growth opportunities ahead of us.

These include Mark Bowie, who has more than 25 years of manufacturing expertise and proven leadership as COO. Matt Fuchsen has more than 15 years of experience across a variety of roles at Middleby, has been my M&A partner for the past 10 years, and will be joining Middleby Food Processing as Chief Strategy Officer. And most recently, Amy Campbell, who has 29 years of industrial manufacturing and public company experience as CFO. I, along with the rest of the team, are excited to share our vision for the future at the Investor Day next Tuesday. Although we have been executing our strategy for many years, I can assure you that we are only getting started on what's possible as we separate into an independent company with a balance sheet and necessary liquidity to support our ambitious growth strategy. With that, I'll now turn the call back over to Tim.

Thanks, Mark. As you've heard from Mark and myself, both segments had a great first quarter, and we're optimistic about what each business will be able to accomplish for the rest of the year. On top of the excellent segment-level results, at a corporate level, our capital allocation strategy remains aggressive and focused. We have continued our share repurchase program, having allocated over $520 million so far in 2026, reducing shares outstanding by approximately 7%. This is on top of the 9% reduction we achieved in 2025. We continue to plan to allocate the substantial portion of our free cash flow to repurchases this year. But most importantly, we have a world-class team around the globe and across both segments whose commitment and execution continue to drive our success.

With that, now I'll turn it over to Brit to discuss our financial performance in greater detail and guidance for the second quarter and 2026 full year.

Thanks, Tim. I'm honored to be the CFO of The Middleby Corporation and excited to partner with you on the exciting opportunities ahead. Turning to the results, our first quarter results showcase the strength of our execution, the quality of our business model, and the realization of the investments we have made over many years to best position ourselves to capture these opportunities. Let me walk you through the key financial highlights and our outlook. For Commercial Foodservice, first quarter revenues were approximately $616 million, driven by organic revenue growth of 8.1%. Positive impacts were seen from general market, institutional, and emerging customer segments with our chain business better than expected. Organic adjusted EBITDA margins were 25.8%. At Food Processing, first quarter revenues were approximately $224 million, driven by organic revenue growth of 25%.

Positive impacts were seen from improvement in international markets. Organic adjusted EBITDA margins were 19.5%, including a modest headwind from the timing of a new product introduction that we do not expect to recur in future quarters. Q1 orders reached $231 million, and backlog grew to $416 million. Overall, in terms of tariff costs, during the first quarter, we successfully offset the dollar impact of tariffs to our P&L. That said, from a percentage margin basis, tariffs remained a headwind in the first quarter, and we expect that to continue in the second quarter before we lap the impact of the execution of prior year second half pricing and tariff mitigation strategies.

We are proactively working to get ahead of new inflationary pressures, particularly around shipping costs and electronic controls through operating initiatives, along with targeted and strategic price increases of approximately low single digits that we have already announced for the third quarter. On a consolidated basis, total company adjusted EBITDA for the first quarter was approximately $181 million, and adjusted EPS from continuing operations was $2.16. Adjusted EPS expansion was achieved through organic EPS growth, share repurchases utilizing the proceeds from the residential transaction, and carryover from the 2025 share repurchase activity, offset by increased interest costs associated with the maturity of our convertible notes and higher stock compensation costs as compared to the prior year. Please refer to slide 10 of the presentation we have posted online for a complete adjusted EPS bridge.

First quarter operating cash flow was approximately $88 million, and free cash flow was approximately $80 million. Our leverage ratio for our credit agreement at quarter's end was 2.3x. As stated in the Form 10 we filed on Monday, following the Food Processing spin, we expect the new company to have a net leverage ratio of approximately 1.25x, which we believe will position them well to pursue the organic and M&A growth opportunities ahead for the company. We expect Middleby RemainCo to have a net leverage ratio of approximately 2.8x at the time of the spin and delever to approximately 2.5x by the end of 2026.

Regarding capital allocation, during the first quarter, we repurchased 2.4 million shares or approximately 5% of our outstanding equity for $366 million, or an average purchase price of approximately $153.38 per share. To start the second quarter, we have repurchased an additional 1.1 million shares or approximately 2% of our outstanding equity for approximately $154 million, or an average purchase price of approximately $142 per share. Turning to our outlook for 2026, for ease of communication and continuing the same methodology from our guidance last quarter, we provide this outlook on a current company basis, assuming that both Commercial Foodservice and Food Processing remain together for the full year.

Let me walk you through our second quarter and full-year outlook, starting with the second quarter. For the second quarter, we expect to achieve the following: Total company revenue of $815 million-$850 million, which is comprised of Commercial Foodservice at $600 million-$620 million and Food Processing at $215 million-$230 million. Adjusted EBITDA is forecasted to be between $180 million and $192 million, which is comprised of Commercial Foodservice at $154 million-$164 million and Food Processing at $45 million-$49 million. Adjusted EPS is projected to be in the range of $2.27-$2.39, assuming approximately 45.8 million weighted average shares outstanding.

For the full year, we expect to achieve the following: Total revenues of $3.36 billion-$3.44 billion, which is comprised of Commercial Foodservice at $2.44 billion-$2.49 billion and Food Processing at $915 million-$945 million. Adjusted EBITDA of $758 million-$790 million, which is comprised of Commercial Foodservice at $645 million-$668 million and Food Processing at $186 million-$208 million. Adjusted EPS is projected to be in the range of $9.54-$9.70. Please refer to slide 15 and 16 of the presentation we have posted online at our Investor Relations website for full details.

That concludes our prepared remarks, and we are now ready to take your questions.