• Revenue: 2024 revenue declined modestly to around $3.9 billion.
• Adjusted EBITDA: $866 million at a 22.4% margin for 2024; Q4 adjusted EBITDA over $251 million at a 24.8% margin.
• GAAP Earnings Per Share (EPS): $7.90 for 2024; Q4 GAAP EPS was $2.07.
• Adjusted EPS: $9.49 for 2024; Q4 adjusted EPS was $2.88.
• Free Cash Flow: $229 million in Q4; over $640 million for 2024.
• Food Processing Segment: Q4 organic revenue growth of 4.7%, revenues over $219 million, adjusted EBITDA margin of 29.6%.
• Residential Segment: Q4 revenue of $185 million, adjusted EBITDA margin of 13%.
• Commercial Segment: Q4 revenue over $609 million, margins over 28%.
• Operating Cash Flow: $687 million for 2024.
• Leverage Ratio: Year-end leverage ratio of 2 times.
• Share Repurchases: $16 million in Q4; additional $20 million in Q1 2025.

• Warning! GuruFocus has detected 3 Warning Signs with YSG.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Middleby Corp (NASDAQ:MIDD) announced the separation of its Food Processing business into a stand-alone public company, which is expected to unlock further value and growth opportunities.
• The company delivered its strongest margins of the year in Q4 2024, with all three business segments posting strong results.
• Free cash flows reached a record $640 million for the year, demonstrating strong cash generation capabilities.
• The Middleby Corp (NASDAQ:MIDD) is well-positioned to benefit from accelerating demand for automation, ventless kitchens, electrification, digital technologies, and IoT connectivity.
• The addition of two new Board members, Julie Bowerman and Ed Garden, is expected to bring valuable operating and director experience to support the company's growth strategies.

Negative Points

• Revenues in 2024 declined modestly to around $3.9 billion, indicating challenges in maintaining growth.
• The Commercial and Residential business segments faced challenging macro conditions, although there are signs of gradual improvement.
• The Food Processing segment's margins may fall below last year's levels due to the integration of recent acquisitions.
• The company expects modest revenue growth in 2025, with some segments starting the year slowly due to timing of orders and project completions.
• The Residential business is currently at a cyclical trough, facing challenges from the housing market and operational disruptions.

Q & A Highlights

Q: Could you walk us through the decision to separate the Food Processing segment and the benefits of having it operate separately? A: Timothy Fitzgerald, CEO: We've been considering this for a while. The Board continuously reviews our portfolio to maximize shareholder value. The Food Processing platform has grown significantly over the last decade, and we now feel it's ready to stand alone. As a separate company, it will have greater focus and potentially accelerate growth through M&A, which will be more impactful financially.

Q: Should we think about the free cash flow conversion of both separate businesses as being 100% or greater? A: Bryan Mittelman, CFO: While we haven't provided specific long-range guidance for the Food Processing company, it's fair to assume that all our businesses have similar cash flow generating characteristics.

Q: How are you thinking about the recovery in the Residential segment, and what are the incremental margins given recent investments? A: Timothy Fitzgerald, CEO: We're at a long-term cyclical trough, but there are significant opportunities ahead. We expect gradual recovery through 2025, with stronger performance in subsequent years. The business is fundamentally stronger today, and we anticipate higher profitability due to operational improvements and strategic investments.

Q: Can you discuss the potential dis-synergies and tax benefits of the Food Processing spin-off? A: Timothy Fitzgerald, CEO: The spin-off is tax-free, avoiding taxes that would arise from other options. The operations are largely decentralized, so there aren't significant dis-synergies. We believe the separation will allow the Food Processing business to trade in line with higher-margin industrial companies.

Q: What are your expectations for the M&A landscape within the Commercial segment post-spin-off? A: Timothy Fitzgerald, CEO: M&A remains a core strategy. With larger cash flow, we can balance M&A with shareholder returns through stock repurchases. We see significant opportunities, particularly in the ice and beverage platform, and aim to maintain our leadership in automation and IoT.

Q: Is the strategic review process complete, and is the Residential segment being evaluated for strategic alternatives? A: Timothy Fitzgerald, CEO: We continuously review our portfolio. The Food Processing spin-off is part of this ongoing process. The Residential segment is a strong platform with significant margin expansion potential, and we will consider the best opportunities for its growth and shareholder value.

Q: What are your price and volume expectations for the Commercial Foodservice segment in 2025? A: Bryan Mittelman, CFO: Pricing benefits for 2025 are modest, and we expect growth to be more volume-driven than price-driven. We anticipate sequential improvement throughout the year, with easier comps in the back half.

Q: How do you plan to increase the mix of parts and services in both the RemainCo and SpinCo businesses? A: Timothy Fitzgerald, CEO: We have initiatives to enhance service offerings, leveraging IoT and data for efficiency. Our goal is to increase the percentage of parts and services in both businesses over time, improving customer experience and driving growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.