Middleby Corporation Aktie

Good day, and welcome to The Middleby Corporation's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] On today's call are Tim FitzGerald, CEO; Steven Spittle, President; Brittany Cerwin, CFO; and James Pool, Chief Technology and Operations Officer. [Operator Instructions] Please note that today's event is being recorded.

I would now like to turn the conference over to Tim FitzGerald. Please go ahead, sir.

Good morning, everyone. Thank you for joining us. Before we get to the quarter, I want to begin with the leadership announcement we made this morning. I'm excited to announce that Steven Spittle has been named to be my successor as Middleby's CEO on April 1 of next year. I will remain CEO through March 31, 2027, and fully engaged as we deliver on our 2026 commitments and to ensure a seamless transition.

Steve will immediately be elevated to serve as President, and he will become CEO on April 1, at which point he will also join the Board. The timing is right as the company embarks on an exciting next chapter as a pure-play Commercial Foodservice business. This year, we completed the most significant transformation in Middleby's history as we separated our 3 businesses into independent companies with the sale of a controlling stake in our residential business to 26North, followed by the third quarter public spin-off of Midera Food Processing.

This succession was planned deliberately and thoughtfully. Steve has the full confidence and support of the Board, myself and our entire organization and no doubt is best equipped to lead Middleby into the next chapter. Within the Middleby team and across the foodservice industry, it will be no surprise that Steve has been selected as the next Middleby CEO. He has earned the utmost trust and respect of the people who buy from us, our partners across the industry and the people who work here.

Steve brings a strong customer focus and deep relationships with chains, dealers and operators. He sees the business from the customer side because he began his career as a representative selling many of our brands. In his 16 years at Middleby, Steve has run some of our larger brands and worked across nearly every part of our commercial business. We elevated Steve to Chief Commercial Officer in 2021 for these reasons, and he has been instrumental in reshaping the organization these past several years as we have implemented the organic growth initiatives that are delivering the results we see today.

I am very proud that Steve will be the one to follow me as CEO. He is an exceptional leader, and I am confident Steve will take Middleby to even greater heights. I'm committed to ensuring a successful transition and a great start to 2027 as he and I continue to partner together over the months ahead. Turning to the quarter. We delivered a strong third quarter. Revenue was $652.6 million, the largest quarter in the history of our Commercial Foodservice business.

Organic sales growth was 7.7%, our third consecutive quarter of high single-digit organic growth. Adjusted EBITDA was $156 million. Revenue, adjusted EBITDA and EPS all finished above the high end of our guidance and margins stepped up sequentially, also ahead of our guidance. Britt will take you through the details shortly. These results reflect the hard work of this team, and I have confidence the strategic initiatives we laid out at our Investor Day in May are driving sustainable results and growing our competitive advantage in the marketplace. I know Steve will only further elevate the bar and bring greater focus to the business as we enter the next chapter. Steve, congratulations. I am excited for you, the Middleby team and what the future holds.

With that, I'll turn the call over to you.

Thank you, Tim, and good morning, everyone. I'm honored by the Board's confidence and deeply grateful to you, Tim, for your leadership, the foundation you have built and your support through this transition. I also want to thank the people who have helped influence my career here at Middleby.

First to Paul Angrick, a former Middleby Executive and President of Pitco, who brought me to the company in 2010 and has been a mentor throughout my entire career. And second, to Dave Brewer, our former COO, who named me President of Pitco in 2015 and taught me to build a business focused on the customer. And to my fellow officers, Brittany Cerwin and James Pool and to my Middleby colleagues worldwide, whom I respect greatly. This company runs on your work, and I am proud to stand with you.

I started in this industry as an independent manufacturers representative in Ohio, selling many of the brands that make up Middleby today. That experience taught me what an operator needs for a manufacturer, innovative equipment that works, arrives when promised and is supported after the sale. I have carried the view of the customer across my 16 years at Middleby, and it will shape how I now listen and learn in the months ahead.

First, I want to be clear on where we stand, starting with what is not changing. The strategy and targets we set at Investor Day in May remain firmly in place. These 3-year targets are net organic sales growth of 3% to 6%, adjusted EBITDA growth of 6% to 9%, adjusted EPS growth of 10% to 15% and 200 to 400 basis points of margin expansion. Our commitment to customers, go-to-market strategies and capital allocation framework also hold. We will build on this foundation as a customer-focused, innovation-led and sales-driven organization, bringing the same focus and intensity to operational excellence, turning our top line momentum into the margins our business is capable of delivering.

My first 100 days begin now, and I will spend them visiting our plants and our customers around the world. This is familiar ground as I've spent much of my time at Middleby on the shop floor with our employees and customers. That focus will extend well beyond 100 days because our plants are where we earn customer trust through reliability, on-time delivery and quality. Sharpening that focus extends our commitment to customers while also creating value for our shareholders. We have strong momentum with our customers, having delivered exceptionally strong organic growth this year in a challenging market, including a record top line this quarter.

Our innovations help customers lower costs, improve efficiency and reliability and open up new dayparts. We have also made intentional go-to-market investments. We consolidated our independent sales representatives in the U.S. from 156 groups to 15 today, focused on our top dealers who are now selling more of our product portfolio and built 4 innovation kitchens in the U.S. and Europe to showcase our complete portfolio of products and solutions. Our holistic beverage solution for a global restaurant chain shows this model at work. It unites 5 Middleby companies in 1 platform, now live in the U.K., Canada and Australia with expansion to additional markets underway.

It is one of several such programs and with beverage and hot side contributing equally to organic growth this year, the commercial model is clearly working broadly. We see the same opportunity beyond the U.S. where international can become a bigger share of our growth, and we've invested accordingly, strengthening our teams, adding sales and distribution offices worldwide and opening Middleby, Germany last year. Nowhere is that clearer than in Asia, where we have kept investing through a difficult period. Our 2 world-class plants in Qingdao and Zhuhai build Middleby brands for the local market and are beginning to support customers throughout Asia and beyond in select markets.

Their capabilities have taken a big step forward, and I'm encouraged that these investments are starting to deliver. The international opportunity is twofold. The first is market share. Historically, we have sold a narrow part of our portfolio abroad, mostly fryers and ovens to large global chains. But today, we sell the complete portfolio, including ice and beverage and are reaching emerging chains and local customers. The most room to grow is in markets such as China, India, Brazil and Germany. The second is recovery in the hardest hit markets like Asia.

We believe Asia will rebound and our local plants and teams are ready to grow with it when it does. That is why my plant visits are global. I want to walk those factories myself to see where we can do more. Turning to operations. The work is still in early innings. We have spent the past year laying the foundation for a lean journey and culture that is just beginning and will rapidly accelerate throughout the organization in the year ahead. Pitco, our first true lean application, shows what is possible. Daily output is up about 25%, lead times are down 30% and inventory is down roughly 25 days on hand.

Rather than build a new facility as planned, lean manufacturing principles helped us optimize facility flow, allowing us to run the business from 2 buildings instead of 3 and further improve efficiency. We will apply the same approach across our 35 manufacturing sites, starting with Taylor, one of our largest brands, where top line performance is strong and operational upside is significant. Facility rationalization, 80/20 analysis, supply chain and lean initiatives are all levers to better serve customers and shareholders, and we will pull all of them with urgency while adding deep operational expertise to our team.

An elite industrial compounder pairs strong top line growth with world-class margins, and I intend to hold us to that standard. Operating discipline is the lever most within our control, and that is where I will focus much of my time. We will also continue applying that discipline to our portfolio as we did with brewing. Our path is clear, deliver innovative solutions that help our customers succeed, matched by a culture of operational excellence that unlocks our company's full margin potential. Thank you for your time this morning.

And with that, I will turn the call over to Britt to take you through the third quarter in detail.

Thank you, Steve, and good morning, everyone. This is our first quarter reporting Food Processing as discontinued operations. Everything discussed today is on a continuing basis and prior year comparisons are restated on the same basis.

Third quarter revenue was $652.6 million, the highest quarterly revenue in the history of our Commercial Foodservice business and above our guidance range of $620 million to $640 million. Organic revenue growth was 7.7% against our guidance of about 4%. Revenue rose about $47 million from the $606 million we reported a year ago. We are proud of our teams achieving this milestone and building the momentum to execute on our targets. Adjusted EBITDA was $156 million against our guidance of $143 million to $150 million and $142 million last year. Adjusted EBITDA margin was 23.9%, which is 40 basis points higher than the 23.5% a year ago and about 60 basis points above the midpoint of our guidance.

Adjusted EPS was $2.07 compared with our guidance of $1.67 to $1.83 and $1.74 last year, reflecting growth of 19% year-over-year. Adjusted EPS is where our model comes together. Organic growth drives our earnings and disciplined capital allocation compounds that growth on a per share basis. Revenue growth was broad-based across customer sales channels and markets. Sales in both our Ice and beverage and our cooking and warming side grew during the quarter. Chains and quick service restaurants were the biggest contributors to growth, similar to the first half, mainly through the adoption of new products and replacement activity. Replacement spending was stable relative to the increased activity we saw in the second quarter.

The dealer channel was roughly flat against double-digit growth in the third quarter last year. International grew 14% and represented 30% of our revenue, reflecting our move to solution selling across the portfolio and leveraging the global strength of our sales and distribution network. International growth was achieved despite challenging near-term market conditions impacting the general market in both Asia and the Middle East. Now to margin. I will speak to total company adjusted EBITDA margin. Margin was 23.9%, up 40 basis points from 23.5% in the third quarter last year.

On a sequential basis, margins were up 90 basis points from 23% in the second quarter. Compared to the third quarter of last year, the current year margin includes a benefit from record sales volume, operating initiatives and pricing due to the realization of the January 2026 price and the $5 million benefit of IEEPA tariff refunds. Consistent with what we communicated in August, the August general market price increase had no benefit in the third quarter. It begins to flow through in the fourth quarter. Mix and geopolitically driven inflation were headwinds that offset the ability to realize further margin expansion. Supply chain initiatives, combined with the realization of the August 2026 price increase are expected to reduce the impact of inflation starting in the fourth quarter.

We also expect to realize savings from several ongoing facility consolidations, including the ice businesses, which will provide initial benefits in the fourth quarter. Our manufacturing excellence initiatives are in flight and are focused at larger divisions such as Taylor and Pitco as we reduce operational complexity and implement a culture of lean manufacturing. These activities are progressing as planned and will provide initial benefit in the fourth quarter and continue to build into 2027.

Additionally, on September 9, we announced our exit of the brewing businesses, which is on track to be complete by year-end. In 2025, brewing generated about $24 million of sales, and an adjusted EBITDA loss of about $9 million. Exiting adds roughly 60 basis points to 2025 for total company margin and 220 basis points to the 2025 ice and beverage margins presented at Investor Day. We will finalize the exit in the fourth quarter, providing a margin uplift starting in Q1 of next year. Please refer to Slide 10 of the presentation we have posted online at our Investor Relations website for full details.

As it relates to our Q3 guidance, margin came in 60 basis points ahead of the midpoint of our third quarter guidance. We want to begin with what we told you on our second quarter call to expect $10 million to $15 million of incremental inflationary costs in the second half. In the third quarter, that headwind was lighter than we expected because inflation has flowed through more slowly, and we realized greater absorption on a record top line. We did realize productivity gains from operational initiatives, offset in part by mix with larger growth in sales at lower-margin divisions, including Taylor. On IEEPA tariff refunds, as we mentioned on the second quarter call, there was an expected $5 million benefit in the second half, of which we were successful in collecting within the third quarter. We expect an immaterial amount of IEEPA tariff refunds in the fourth quarter.

Against our 2028 margin bridge, we remain highly confident in our target of 25% to 27% total company adjusted EBITDA margin by 2028 and the 200 to 400 basis points of net margin expansion. The exit of brewing adds 40 basis points relative to 2026 beginning in the first quarter of 2027. Operational initiatives will layer in next year, including approximately 100 basis points identified at Taylor and Pitco that are underway and will begin to take hold in 2027 with expansion to further divisions expected.

In addition, we continue to execute on our facility consolidation initiatives with the recently completed consolidation of Counterline businesses, ongoing ice business consolidation and recent actions to begin consolidation of 2 oven businesses. The investment in beverage innovation is running at approximately 100 basis point impact to current total company margins on both a quarter and year-to-date basis, which as we scale production to support the launch of these products into 2027 with incremental top line growth over the next several years, that headwind becomes a tailwind.

Operating cash flow was $123 million and free cash flow was $117 million for the quarter. Net leverage was 2.8x, firmly within our comfortable range of leverage. We have been consistent that we will be opportunistic when the market gives us the chance to deploy capital at extremely attractive returns while staying mindful of our leverage. That is what we did this quarter. We repurchased approximately $106 million of shares or 2% of our shares outstanding in the third quarter and $76 million of shares so far here in the fourth quarter. Year-to-date, we have purchased 5.5 million shares or 11% of shares outstanding. Since the beginning of 2025, we have purchased approximately 19% of shares outstanding.

Maintaining prudent leverage levels remains a priority, but the deciding factor is always where we earn the best return on our capital. This quarter, that was repurchasing our own stock. We also expect net leverage to decline naturally as EBITDA grows with our momentum going into 2027, which gives us flexibility in how we deploy cash along the way. Our long-term framework has not changed. We expect to return the vast majority of our free cash flow to shareholders through share repurchases.

Another step in securing the ability to execute on our capital allocation strategy and priorities was the refinance of our existing credit facility. We entered into a 5-year $3 billion multicurrency senior secured credit agreement consisting of a $1 billion term loan facility and a $2 billion revolving multicurrency credit facility. Debt outstanding following the refinance will remain consistent. Covenant calculations as of the third quarter will be reported for the first time, excluding food processing at higher leverage levels. We reaffirm our 2028 target, and we are raising our 2026 guidance.

For the full year, we now expect revenue of $2.519 billion to $2.534 billion compared with our prior range of $2.48 billion to $2.53 billion. We expect adjusted EBITDA of $589 million to $593 million compared with $572 million to $588 million. and adjusted EPS of $7.13 to $7.29 compared with $6.73 to $6.89. We continue to expect sequential margin improvement in the fourth quarter, supported by our ongoing operating initiatives and the realization of pricing.

Looking to 2027, the brewing exit alone gives us roughly 40 basis points of margin tailwind and our plant level operating initiatives, scaling of operations for beverage innovation, ongoing plant consolidations and the full year benefit of pricing all build on top of that. Execution on our 2028 targets is not back-end loaded. Measurable actions are being taken and focus is set on ensuring the portfolio is positioned for long-term growth and margin expansion to deliver on our goals. We are also not done shaping the portfolio. Brewing is one example of the discipline we will continue to apply brands that are dilutive to our margin or growth profile and are not strategic to the core.

With that, I will open the call to questions.

[Operator Instructions] And today's first question comes from Jeff Hammond with KeyBanc.

Just wanted to congratulate Steve on the announcement. And Tim, certainly, congrats to you as you move on to the next phase. Certainly appreciate all the time and the dialogue. Just on -- I guess, the growth has been really impressive versus a pretty choppy end market. And I'm just wondering, as you kind of go into fourth quarter and '27, do we see that kind of building, sustaining? Do we have to worry about maybe some of these big program wins hitting comps? Just how sustainable do you feel that outgrowth is?

Jeff, this is Steve. First of all, thank you for the kind comments to start. I think the way I would think about it is that we continue to see strength across all channels, and we don't view what we've delivered this year as being one-off or having one specific project or rollout drive the growth. I think if you're listening to what customers are saying publicly, especially with some of their calls this quarter, they're continuing to talk a lot about beverage programs, which we've talked a lot about and remodels as a central part of their next phase of growth, certainly into '27 and in particular, actually into '28.

So there's multiple examples that we've referenced before of the customers that are adopting the new beverage platforms that we are driving. In some cases, they are in several thousand locations and continuing to grow into 2027 and beyond. I think the other thing that you're starting to hear from our chain customers more and more is the emphasis on going back and remodeling locations, which has a replacement benefit to us as well.

So to me, Jeff, when you see and hear our largest operators in the industry building growth plans around beverage and back-of-house investments, it is a true multiyear tailwind and not necessarily a single year 2026 event. And again, I think that's where categories with ice and beverage and cooking platforms for us have us very well positioned, and that's why we're confident in sustained organic growth through -- to finish certainly this year, but into '27 and then into '28 as well.

Okay. Great. And then, Brittany, a lot of good color on kind of the margin bridge and margin improvement opportunities into '27. So I just want to unpack that a little bit. So you get 40 basis points from exit of brewing. And then I guess I'm wondering, as you transition into '27, how much do you think of this 100 basis points from Taylor and Pitco and how much of this kind of 100 basis point beverage headwind becomes less negative or neutral or positive? And maybe just to think about it holistically, like in a flat environment, how much margin improvement do you think you can get into '27?

Thanks, Jeff. Yes, I think as we look at it, I think on the beverage side, we continue to make those investments this year. But as we scale the production and as the top line expected growth comes in, we expect to see that start to ramp in 2027 and become a tailwind instead of a headwind that we're currently seeing. We haven't been specific about the exact amount between 2027 and 2028, but it is something that we have built into our projections as we look to the 2028 targets.

As it relates to Taylor and Pitco, again, we're starting to see some of those initial benefits on the productivity from the lean manufacturing. But again, the flow-through to the bottom line as we start to see some more of that margin expansion will start to build in 2028 as we gain more traction there and continue to reduce complexity and continue to flesh that out also across other divisions throughout the platform.

So I do believe what we've called out is Taylor and Pitco, and we will continue on a periodic basis to update everyone as we're executing to those. Right now, we believe those are on track as we've planned, and we will report out on a consistent basis. But we do see further benefits as we roll that through the platform and execute on those 2028 goals.

Our next question comes from Mig Dobre with Baird.

Right, Steve, congratulations. I just want to pick up where Jeff left it here. Maybe, Britt, you can comment a little bit on price cost and almost a reminder, if you would, as to how all of this impacted 2026. And based on everything that you know in terms of your cost base materials, freight and the pricing that you're putting through, what does that look into 2027? Are we caught up relative to 2026? Is that headwind or maybe a tailwind? How do you think about that at this point?

Yes. Thanks, Mig. So I think the first thing to comment about is in the third quarter, obviously, we had the realization from the low single-digit price increase that we put in, in January 2026. And really, that's consistent with what we said in August is that the pricing that we announced in August for the general market price increase, we will start to realize in the fourth quarter. I think we still had those inflation headwinds, and we will continue.

But as that kind of went through a little slower in the third quarter, that timing really benefits us as we continue to ramp on some of these additional operational initiatives and facility consolidations. As we look to 2027, we have not announced anything in terms of pricing to date, but I think we will continue to be mindful and watch the inflation that impacts our business while being strategic about pricing with our large chain customers and adjusting as appropriate.

All right. Maybe to press you a little more on this issue. If I sort of take the IEEPA benefit that you had in the third quarter and I adjust for that and then I kind of look at your fourth quarter guidance, the incremental margins kind of go from somewhere in the low to mid-20s to something north of 30%, which that looks pretty good to me. I'm curious as to exactly what gets us there sequentially.

Maybe it's pricing, as you said, maybe it's something else. But can we underwrite this type of incremental margin into 2027 based on all the comments you've provided thus far?

Yes. I think that's -- your observation is spot on. I think that's where we do expect that our incrementals will start to grow as some of these operational initiatives at our larger divisions, such as the Taylor where they have strong top line growth, and we continue to execute on these lean manufacturing and initiatives. Also the facility consolidations that we have is an ongoing initiative for us that will continue to provide benefit not only in the fourth quarter, but carry us into 2027 as well.

So I do believe that along with also the beverage investment starting to turn into more of a tailwind in 2027, give us the confidence that those incrementals will start to become stronger as we move into 2027.

Mig, this is Steve. If I could just add on to that and echo what Britt said. But back to some of the prepared comments at the beginning of the call, and this is why so much of my own focus going into next year is going to be on the operational side of our business. It's great, as I highlighted, that we're seeing the early wins from a Pitco where they're the earliest and probably furthest along in their lean manufacturing journey. But it's how do we continue to build upon that. It's building a culture around lean. And it's great when you have very tangible wins at Pitco that we can then carry across the rest of the organization.

So as we think about margins, pricing is always a lever that we have been, I think, effective with over the years. but it's not the only tool in the tool belt, if you will, but really controlling our own destiny from a manufacturing standpoint and operational excellence standpoint will really be the primary focus of how we're driving margins in the next couple of years.

And the next question is from Tami Zakaria with JPMorgan.

My first question is, I remember you were going to lap a very strong restocking tailwinds in your distribution channel from last year, which was part of the reason the way you guided your organic growth. So as you lapped those strong growth rates in 3Q, can you comment how your channel did year-over-year in terms of volume?

Tami, this is Steve. You're correct. The back half of last year is where we started to see an increase -- a substantial increase in growth within our dealer channel, primarily in the U.S. It wasn't really from a stocking or restocking position, right? It's not loading up the channel with inventory. It really was a function of a lot of time and investment that we've made in driving behavior within the dealer segment.

It comes back to a lot of project work that was pent up that started to flow through, but really is the dealer channel selling a broader portion of our brands. I've talked about before that if you go back over the last 5 to 10 years, the dealer channel supports our core brands, the Pitcos, the Blodgetts of the world. But where we've seen incremental growth really starting the midpoint of last year is now they're starting to sell our ice brands. They're starting to sell the TurboChefs. We're starting to sell our combi, and that has really been where we've seen momentum. That momentum has continued into this year. We are, as we said, comping stronger back half of the year in this quarter, and it has essentially run flat in the third quarter, which Britt called out.

That should not be read negatively. It should be read as there continues to be a lot of momentum. Projects ebb and flow from quarter-to-quarter. but it's a function of lapping the strong back half of the year, but we continue to see very good momentum, very good alignment across the dealer channel in supporting our brands and expect that to continue to finish out the year and into next year as well.

Understood. That's very helpful. And you mentioned opportunities outside the U.S. It seems like it continues to grow. How would you compare profitability of these international markets versus the U.S.? How wide is the difference in margin right now? And can those eventually converge?

Yes. Tami, correct. We see international as a major opportunity. You're seeing, obviously, in the quarter itself, most of our international markets did very well. On the strength of some of our chain programs that we're a part of as well as the local teams growing more with emerging chains in their local markets. Continue to see that as a strong driver of growth, both with chains and local chains for next year.

In terms of the margin profile of international sales versus domestic, they actually run pretty similar today. There really would not be a major difference between the 2. So as international grows, it should be only a margin tailwind for us or margin accretive, especially as we continue to grow it. It also puts a lot of emphasis on, as I mentioned in my prepared remarks, the more and more we're leveraging our China manufacturing facilities, I referenced we have 2 great facilities in Zhuhai and those are becoming critically more important of building products in those facilities that we're not only selling within China, but we're actually starting to support our customers outside China and parts of Europe and parts of Asia, parts of India as well. So that plays a critical role, and that is very helpful from a margin perspective as well.

And our next question is from Ian Zaffino with Oppenheimer.

Can you guys maybe talk about the pricing environment a little bit and how you're going to market with that? I know that you've always been the leader and -- but just wondering if there's any kind of price fatigue you're seeing out there?

And then I know initially, I think some of the customers were saying that some of this inflation is temporary because of the war and it's continued. So has that tipped the pricing environment more in your favor given that some of these inflationary headwinds are still there and aren't necessarily going away anytime soon?

Yes. This is Steve. Thank you for the question. Again, I think over the last 4 or 5 years, we have done a very good job of getting pricing through the market to keep up with the inflationary environment that we've had to deal with going back to really the supply chain challenges from '22 and '23 and then the period of strong inflation, which obviously has continued into this year.

I think the fact that we have done a good job on pricing has allowed us to be very thoughtful about where we are from a competitive standpoint in the marketplace because we know that's always a balance that we have to find. I think as we go into next year, we're very thoughtful about our pricing with chain customers, global chain customers and not maybe as much of going to the general market. It's much more strategic in pricing at the product level, at the SKU level to make sure we're where we need to be. But this also does come back to knowing it is a challenging environment, controlling other parts of our costs and our margins that are in our control, and this is why I'm so emphatic about the operational initiatives that I think are going to be a critical part of next year.

So that's why I think that is certainly more in our control. Pricing is always a lever, as I commented earlier, but really leaning in more and more to the operational excellence initiatives will be the biggest driver for our margin in '27.

Okay. And then can you also maybe talk about, again, the current environment? I know there's a lot of innovation out there. I know you have something like the KFC Kwench. And how is that -- how is some of the new innovation being received right now, just given the environment in general, are you seeing more receptivity to it? Would you be seeing maybe less receptivity to it, just given where we are?

Yes. Great question. I think the headline answer is our customers are very receptive to the new technologies and innovations. A question we get often is what are metrics that you can look to, to help better understand how large chains and chain operators are thinking about their own CapEx? And is it same-store sales? Is it traffic? Those are all historically always important.

I think there has been divergence this year in particular. And it's because of these new innovations that we're talking about is the fact that the very proactive and progressive chains are not waiting anymore. They have released projects and a lot of them, again, are focused on driving new dayparts to the restaurant. They're focused on beverage platforms, they're focused on ice platforms. And this is why the fact that we've been able to build up a complete portfolio of beverage brands, beverage solutions is why we're winning. And obviously, we've called out the one big chain that you've referenced, and we're powering that entire rollout at this point and expect that to continue.

And again, apply that same concept across multiple chains which they've been very public about. And you can see the answer to the question of why, yes, chains and customers are very keen and very open to adopting our new innovations because it's helping them make their business better. It's helping them drive new dayparts and increase their sales.

The next question is from Chris Senyek with Wolfe Research.

Great quarter again, and love to see the buyback very opportunistically, which has proved to be very good given the stock price move recently. So could you unpack the major end markets a little bit more and what you're seeing and what you saw kind of during the quarter, QSRs, C-stores, emerging trends? Are the trends becoming more concentrated, they're broadening, how that kind of trended during the quarter?

And then kind of what your assumption is into the fourth quarter for kind of just -- is it expected to be sort of somewhat linear, it's back-end loaded? Any color on that would be super helpful.

When I think about the various end user markets, again, we do focus a lot on the QSR segment. And that segment, in particular, which is a large portion of our business did very well in the third quarter. We would expect that to continue into the fourth quarter. It's historically or maybe I'll call it, pre-COVID, you would potentially see trends of some chains backloading their development into the fourth quarter. That really has gone away the last several years really since COVID.

So it's a lot more of a linear finish to the year, but linear in a very positive direction. So QSRs, and again, I've called it out, a lot of international growth. That's definitely going to be their focus currently and their new store development is very internationally focused in '27 for sure. We're talking about the new daypart and new beverage and ice they're adopting. So that's very focused on QSRs.

If you look at other end markets, C-stores, again, is maybe a category we haven't talked as much about. We've made a lot of investments in our relationships within C-stores. It's also very heavy in beverage, ice, rapid cook, ovens. So we're very well positioned there, again, did very well in the quarter. Casual dining, fast casual also did well in the quarter. So really, across our multiple segments and multiple end channels for the third quarter, it was positive growth and expect that to continue into the fourth quarter and frankly, into '27.

Great. And then in terms of recent margin trends in ice and beverage, I know some of the products are ramping new ice launches, Gravity, FizzBot, others. How should we be thinking about that as we kind of reach operating leverage, all that stuff with respect to sales as those ramp up as we get into 2027. Is there some ramp we should expect in terms of incremental margins? How do those look versus maybe overall? Any color would be helpful as you sort of ramp up those product rollouts?

Yes. Thanks. I think as we talked about with the comparison to the margins that we showed at Investor Day, one of those initial levers starting in 2027 is the removal of the brewing business and exiting there. That will enhance the margin profile of the Ice & Beverage businesses. Also, as you mentioned, right now, we have the investment into the innovation and the standup of production and manufacturing capabilities. So we expect that to start to scale in 2027.

As production increases and those products are launched. And then there will be expected top line growth as those products take hold in the marketplace. So it will continue to grow throughout there. I think we've talked about some other items as well as the ice business consolidation. And just like we're doing on Taylor and Pitco, some of these lean manufacturing and product simplification items that we've mentioned, we're going to be continuing to push throughout the entire product portfolio.

So that application will continue to allow that platform to continue as we move throughout our 2028 targets to come closer to what we had expected in those higher margins that we've seen on the cooking and warming side.

And the next question is from Tim Thein with Raymond James.

Congrats again to both Tim and Steve, very well deserved for both of you. The first question I had was just on the kind of the concept of innovation. That's obviously one of the growth pillars for Middleby. We've talked a lot over the years around technology investment around things like IoT and controls and connected kitchen, et cetera. Where do you think that -- I think that in terms of the ultimate uptake you could argue has been maybe mixed.

And obviously, the industry has been dealing with some real challenges historically so -- or not historically, but in recent years, just in terms of some of your key customer segments. So where does Middleby see that going in terms of -- are you stepping on the gas or are you pulling back? And I'm just curious how that -- to the extent there's a change in the influence, how that may impact margins going forward to the extent, again, that investment -- yes, so anyways, maybe that's enough to start with. So just the spending and how that flows through into the margin trajectory.

Yes. Tim, it's James Pool. Thanks for the question. I mean we're absolutely continuing to invest in IoT with our leading Open Kitchen platform. This year alone, we saw kind of record connectivity across Middleby given we're finally at scale kind of at the beginning of the year with connected products. So now we're able to offer the broadest portfolio of connected products at the point of sale with our dealers and for our chain customers that are looking at Middleby solutions.

Additionally, outside of connectivity to the equipment, our open kitchen platform is also winning on the restaurant automation side with its EMS platform and HVAC and lighting control capabilities, which drives substantial ROI for our customers. And with the connectivity, the restaurant automation, it's really enabling us to continue to win rollouts as we did in '26 and moving into '27 because of these investments and connectivity across the various Middleby brands. So our foot is still on the gas as it relates to Open Kitchen, and we expect connectivity to continue to grow year-over-year as we add new features and benefits to the Open Kitchen platform.

Got it. Okay. Maybe we talked a lot about the potential '27 growth outlook. But maybe just circling back, and apologies if I missed it, but you're growing kind of 8-ish percent year-to-date, the step down in terms of the year-over-year growth in the fourth quarter. I know you have the dealer -- the kind of the channel issues we talked about earlier that helped last year, but you're also benefiting a bit more from price, I think, in the fourth quarter. So is there anything worth calling out in terms of just -- again, it's more at the margin, but just in terms of that growth decelerating in the fourth quarter, anything worth calling out behind that?

Tim, this is Steve. I don't -- I think a lot of the trends continue that we've talked about. I think as I think about more 2027, when I think of the 3 or 4 various channels of -- if I were to bucket our customers into and how their growth algorithms work into next year, I think, again, start with the dealers, which we talked about. Again, we've had tremendous momentum starting in the back half of last year. I expect that continued very steady growth to continue into '27.

Again, that's from adoption of new products, selling the complete portfolio, et cetera. I think the second area of growth is in international markets, which I keep talking about. It's where our large chain customers are growing. Their new store opening pipeline for next year is as robust as it has been for the last several years. We'll see how timing of development rolls out, but there is a very good pipeline of international growth. And then you -- and then really the third bucket would be this adoption of new innovations, new products.

Obviously, we keep talking about ice and beverage. That's a huge area of growth for us in '27, '28. So when I think about the 3, it's like the dealers is the foundational growth that I think is just very steady, international new store openings, new development, especially with chains and as we move into more emerging chains and local customers area of growth. And then you have the third bucket of growth, which is that new product adoption. And that's why I think we have confidence in the -- not only finishing the fourth quarter, but how we continue to grow into next year.

Got it. Okay. Just a quick clarification. On that international growth, the way that Middleby discloses domestic versus international, if Taylor is selling a product that's produced in the U.S. and it's going to a chain in Germany, does that show up the way you disclose it domestic or international?

It's international. It's based on ship to.

And this concludes today's question-and-answer session. I would now like to turn the conference back over to Tim Fitzgerald for any closing remarks.

Yes. Thank you again for all that have joined today's call. In closing and wrap up, I'd just like to say I know firsthand, Middleby could not have 2 more capable and committed leaders taking Middleby forward into the next chapter than Steve Spittle and Brittany Cerwin. They both exemplify what it means to be Middleby and the company is in their great hands with a bright future ahead. As a shareholder, I am more excited than ever. Middleby is competitively positioned stronger than any time in its history with transformational initiatives underway and a team that will take the business to new heights under Steve's leadership.

To all my Middleby colleagues, I'm grateful for the journey we've shared building Middleby into the amazing company it is today, and I look forward to seeing many of you in the months ahead as we all work together to support Steve as he takes the reins and ensure the next chapter of Middleby is off to a great start. Thank you all.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

All right. Welcome, everyone. Thanks for joining the 9:30 session with Middleby. I'm James Ko, covering industrials at Jefferies with Steve Volkmann. So I'm joined by Brittany Cerwin, CFO; and Steven Spittle, CCO. We will do this in a hybrid format. Brittany and Steve will present for the first 20 minutes or so, and then we'll move on to fireside chat questions. But before we do that, we are happy to take questions if you guys do. So please raise your hand. So now Brittany and Steve, the stage is yours.

Great. Well, thank you very much. Good morning, everybody. Great to be with all of you. Thanks for taking time to be with us. Very excited over the next 20 minutes or so to talk about what has been a transformative year at Middleby. And if you haven't -- either you're new to Middleby or you haven't stayed up with Middleby, when I say transformative, it's not a fancy buzzword, we truly have changed the landscape of our company this year.

Beginning of this year, we sold off a 51% portion of our residential platform to 26North in a joint venture with them. And then 5 months later, we completed the spin-off of our food processing platform into its own separate stand-alone public company today known as Midera. Very exciting for both platforms, allows them to continue to grow and expand in their various categories. But what it allows us to do is now get back to our roots and to be very focused as a pure-play commercial foodservice company, which is where Middleby started 25 to 30 years ago.

We'll talk about a number of different initiatives today. Probably the biggest thing I want to stress is that we -- for -- as long as I've been at Middleby, we have always been a very sales-centric organization, always very focused on our customers, very close to our customers. And you're seeing that come through in what we've done so far this year. We talked about it at Investor Day. We've seen top line net sales grow 8% so far this year. We're very happy about that. We're going to talk more about that.

But we know that if we want to be an elite industrial compounder, we have to marry up great top line growth with world-class margins. And so that's what we're going to focus on more in this presentation today than we ever have before. And how do we do that? That's through operational excellence, talking about how we're thinking about our portfolio of brands, our SKUs, our facilities and coupling up with our organic sales growth.

Again, if you're new to Middleby or haven't stayed up with us for a while, just a quick recap of what Middleby Commercial Foodservice now looks like. 2025, $2.4 billion in revenue, segment margin of 27% EBITDA, 65 brands across the globe, 38 factories and about 6,000 employees. As you see in the bottom right corner of the slide, we're very fortunate to have a great and very diverse customer base, some of the leading chains around the world, across QSRs, across C-stores, across retail, both domestic and abroad. We'll talk a little bit more about the split in commercial foodservice between our core Cooking & Warming brands, which is about 2/3 of the business and then our ever-evolving Ice & Beverage platform.

These are the brands of the portfolio today. You start on the left-hand side, and it's the core cooking brands that I've referenced that go back to the initial acquisition of Pitco and Blodgett for Middleby back in 2001. So we've built great brands, very focused in leading technologies within cooking and warming.

But over the last 6 to 8 years, we've developed and built out our Ice & Beverage platform, very focused on, again, C-stores, but the ever-evolving and ever-growing segment of beverage, which we'll talk more about. And it's the unique combination of the cooking and warming and Ice & Beverage that is the secret sauce for Middleby, right? This is a portfolio of brands that nobody else in our industry has, and we'll talk more about how that has actually helped us grow both parts of our business.

This to me is -- if you pay attention to nothing else, this slide to me is why I'm so excited about Middleby is, again, back to my time here, I've been here 16 years. We've always been very focused on our customers. We've been very close to our customers. We're a very sales-centric organization. And then we have a deep DNA within innovation, new product technologies, new developments. We're expanding in new markets. Again, we're going to talk more about Ice & Beverage, international markets. But what is so exciting is really the fifth bucket today, which we'll talk more about, and that is our drive towards operational excellence. So I think this is coupling the best of Middleby of the past, what we've done so well and coupling it with this next chapter of Middleby.

So these are our 5 key pillars of our growth over the next several years. Even though we've always been a very sales-centric organization, we've never want to be complacent about how we think about how we engage our customers. And so this slide shows all of our either brand-new or completely rethought go-to-market initiatives from our independent sales reps here in the U.S. to our ever-evolving digital marketing strategies. We've built innovation kitchens around the world to allow our customers to experience Middleby firsthand, flagships in Dallas, but we've built ones in Europe. All of these initiatives are to make it easier for our customers to understand Middleby to be closer to Middleby and for us to be closer to them.

And you may sit here and say, okay, Steve, hey, that's great. Everybody you're going to see today probably has a slide that similar list about how they're close to the customers, what they're doing. But let me give you a real-world example of why all of these initiatives matter. I shared this during our Investor Day back in May and very fortunate and very thankful to KFC for letting us share a story together and this initiative together. KFC has been a long-time customer of Middleby on the cooking and warming side of our business for decades. KFC came to Middleby saying, we want to add a beverage platform to our menu about 2 years ago. Think about a fried chicken concept saying we want to be a premium beverage. -- like it's -- you have to really start to think about how you get your head around that. And they came to Middleby to figure out how to do that.

And so they started our innovation kitchens in Dallas, moved to our innovation kitchens in the U.K., working very closely with their suppliers. And the end result is what you see on the right-hand side, a combination of 100% Middleby products. Taylor, QualServ, Marco and Terry, Middleby is now powering the Quench program for KFC. And KFC is very vocal and very transparent about this initiative. It is truly driving new daypart and new traffic to their stores. It's been rolled out in a lot of international markets in the U.K., Canada, Australia. They have big growth plans for this. This does not happen for Middleby if we don't have the relationship, if you don't have the innovation kitchens, if you don't have the portfolio of brands. If you didn't have cooking and warming, you didn't have the relationship. If you didn't now have Ice & Beverage, this doesn't come to fruition. So like this is the power of Middleby.

And then again, you couple it up with international distribution, aftersales service and support, that is why this has been such a success not only for KFC, but for Middleby as well. I'm giving you this as one example. There are so many QSRs or so many fast casual concepts that are really focused on adding new beverage, premium beverage to their menu is a great example of how Middleby is leading the charge on this initiative right now. Yes, very excited to talk about customers. Now back to numbers. This is just a recap. This is what we presented at our Investor Day back in May of our financial outlook over the 3-year period going through 2028, which I'll talk a little bit more about.

You can read the page of the net sales growth, 3% to 6%, coupled with 6% to 9% EBITDA growth, 200 to 400 basis point margin expansion, which we're going to talk more about in the slide deck and the appropriate 10% to 15% EPS growth. As I said at the beginning of the slide, we're very happy with how the first half of this year has come together from a top line perspective, growing 8% so far through the first half of the year. Our guidance for the year has increased to being up 7% overall. We're very fortunate to have a recurring revenue stream around parts and service, which today is about 17% of our annual revenue, and we believe we can continue to grow that segment.

What I'm very happy about from a growth perspective is our sales are very balanced. It's very balanced among QSRs. It's very balanced in the U.S. domestic business. It's very balanced in our international segments in Latin America, Europe and Asia, especially. So it's not one particular customer. It's not one in particular segment that is driving our growth so far this year, which gives me a lot of encouragement for how the rest of this year and the next several years continue to unfold. But as I said at the beginning, we know that we have to marry the strong top line with the margin expansion, which we're going to talk a little bit more about in these upcoming slides.

One of the questions that we do get and would like to give some clarity to is the margin profile of our Cooking & Warming segment versus our Ice & Beverage platform, which today, is about a 400 basis point difference between the 2 platforms. What I want to stress is that there is no structural difference between the 2 platforms. There is no reason that Ice & Beverage cannot get to the same margin profile as cooking and warming. Cooking and warming is a more established platform, which is part of it. There still is a lot of development and investment that's going on in Ice & Beverage.

Last night, we announced the closure, and I'll talk a little bit more about it of our brewing business. which represents for Ice & Beverage, a 220 basis point pickup as we go into next year. So immediately right there, we're closing a part of the gap. There are a number of start-up costs as we talk about new products around beverage that we're investing in. But my biggest point and my biggest takeaway here is, yes, there's difference today, but we feel like we have a very clear path to close that gap. And there is no reason that both platforms can continue to expand their margin profile, but the Ice & Beverage in the long run will certainly be in line with our Cooking & Warming platform.

We shared this '28 bridge during our Investor Day back in May. I would just like to provide some additional context to it of how do we drive those margins from where we are today to the targets from Investor Day. And we called out 4 specific buckets of focus, which are mix, scale, productivity and then the fourth in volume growth. I'm going to talk a little bit more about a couple of these. But the biggest thing I want to stress here is we gave a 200 to 400 basis point range as our target. Today, we announced the closure of the brewing platform, which is 60 basis points of margin pickup as we go into next year.

I'm going to talk more about Pitco and Taylor, 2 of our biggest divisions and the opportunities that we have going through a lean transformation and supply chain opportunities that we feel like between those 2 divisions alone, there's another 100 basis points. So we feel like just between those 3 specific areas, we're already, call it, halfway there almost to the 400 basis point opportunity. So again, I'm going to go through a couple of the key initiatives, but I'm trying to give you additional context as to what we're working on so far and what the road map is for us as we go forward.

As we announced yesterday, I just called out, as part of a very intentional focus on our portfolio of brands, on our SKUs, on our customers, we did make the decision to exit our brewing platform, which is 3 brands of Ss Brewtech, Deutsche and Wild Goose. Always tough decisions to close businesses, but we felt like the end user or the end segment in the brewing business has been challenged the last several years. There's a pretty heavy secondary market for beverage equipment, and we just did not feel like there was a good road map for growth in this segment. And so it made sense for us to announce the closure, which will occur towards the end of this year. You can see the financials for '25. It's a very similar profile for '26, both on the top line and the bottom line. I would just say this is very intentional. This is something that we have been working on. It's been part of our bridge, and this is an ongoing review that we continue to have of our portfolio, and this is the first example of doing so.

Just like customers, this is what I'll probably get a little bit more excited about. We are in the very early stages of going through a lean transformation within Middleby. It's a new area of focus that I'm very excited about. And the best case that we started on so far is with our frying division up in New Hampshire. This division I came up through within Middleby. So it's been very exciting for me personally to watch how new team members we brought in with an 80/20 background, a lean background has started to transform Pitco. You can see some of the metrics. We -- again, if we're using a baseball analogy, I would say we're in the second inning of our journey. But you can see already so far this year what having a different mindset around lean, a very detailed focus on lean has driven inventory reduction, increase in throughput in our fry pots, reduction in lead times. And this is without a change in order patterns, which remains strong. This is not a change in increasing labor. This is all from very, very specific lean initiatives.

The biggest thing that I cannot stress enough, it's most exciting thing, and it's on the right-hand side of the page is Pitco historically has operated out of 3 very old facilities. It's not always been that efficient. We've made the best use out of it. Our mindset for a long time is at some point, we would need a new building for Pitco. And we were down that path to go find land and to build a new building for Pitco. As this new team has come into Pitco and they've gone through implementing lean into the facility, not only do they feel like we don't need a new building, we don't need 3 buildings, but they feel like they can do it within 2 buildings. And so a great example of the mindset, the initiatives that allow us to not only consolidate plants, but also at the same time, increase throughput, increase margins.

And we know that lean cuts across the entire organization. It's from customer interface to high-quality products to driving margins to safety. And I'm calling this out because like we feel like we have the road map now. Like Pitco is in early stages, but we can see how the impact that we're seeing at Pitco can cut across all of our other divisions. Taylor is the next one up for us. It's another big division that we're in early stages with. So as we think about how do we take control of our margins. I'll turn it to Britt here for just a second. It's really being very focused in what we can control on our own. And certainly, that lean and operational excellence part of our road map is what we feel like we control so much and why we're so excited about where we're headed from here. So I'm going to take to Britt for just a couple of slides to recap some of our finances.

Okay. So this financial outlook slide is a recap that we had out there for our Q2 earnings, kind of highlighting our full year 2026 guidance that we have out there. As Steve mentioned earlier, we have increased our net sales growth from earlier in the year. So our midpoint for organic growth for the full year is 7%. If you recall, we've also got a comment below that kind of shows where were we at Investor Day back in May and how do those targets line up. So you'll see the improvement from about 5% to 7% on organic net sales. We are extremely proud of that and believe that is a lot of our focus on that customer and our go-to-market initiatives.

On the adjusted EBITDA side, you will see the growth versus midpoint of 5%. That's when we'll dig in a little bit deeper. And again, where our focus is now is on our ability and our capabilities to expand margins even with some pressures under inflation right now. And then really, again, one of the things that was highlighted on that 3-year investor target is making sure that we have that focus on return back to our shareholders. So again, we're at 12% for the midpoint for 2026. And as you can see, that increased from Investor Day from 9%.

Steve, if you want to flip one forward. What we want to talk about is we did highlight going into the second half, we are seeing increased inflation pressure. What we wanted to do on this slide was really highlight how those inflationary costs have come in, kind of the exposures that we're seeing, but also what are the initiatives that we have underway that give us confidence in our ability to achieve those growth targets that we put out there, both in the short term and our goals to the 2028 targets as well. And as you see, the first 4 items really focus on initiatives that are underway and actions that we are focused on, on operational excellence. So again, yes, price #5 is still an option and a lever, but that is not our only option and lever, and we are in control of a lot of the initiatives in operational excellence.

Steve highlighted, obviously, some of our facility consolidations, one that is called out in the slides that we started this year with consolidating our Ice platform. We've also rolled our Evo plant into the Tennessee Star Manufacturing plant. These items of rolling lean throughout the facilities, also facility consolidation and the recent announcement of the brewing closure. Again, these are the items that give us that confidence in expanding margins.

And then the last one that I'm going to cover here is really kind of our focus on capital allocation, really kind of highlighting to everyone where our focus is, where it's been and where we're headed. So coming out of the spin that just happened at the start of Q3, we're a little bit higher leverage within our typical range of where we expect to be between 2x and 3x is what we put out there at Investor Day. So what we've commented on is that we will be planning to delever towards the end of the year.

Obviously, it calls out here CapEx and reinvesting back into the organic growth of the business is always our primary focus. But it's a capital -- a low capital-intensive business. So that allows us with our free cash flow generation to again focus on returning back to shareholders. As we've called out, the vast majority of our free cash flow has gone to share buybacks, a little deviation here in the back half, but we will continue to be opportunistic in the right areas.

And then the other item we wanted to call out is Middleby has been known to build up the platform through M&A. In our 3-year outlook, there's nothing planned there in the current time, but that would be our third capital allocation bucket as we focus into the future as well. Back to you, Steven.

Okay. Thank you, Britt . So I think just to wrap it up, and obviously, everybody can read the slides. But I would just call out that I've been at Middleby for 16 years, have seen a lot of ebbs and flows and changes over the company in those 16 years. I've never been more excited about Middleby. When I think about getting back to our core, our heritage as a commercial foodservice business, the focus that allows us to have in the business, I've never been more excited.

And it goes back for me to the 5 buckets of we've always been very connected to our customers. We're a very sales-centric organization. We have a deep DNA around innovation, new products, disruptive technologies, providing solutions to our customers. We're expanding into new markets around beverage, international development. And then it really is, as you picked up today, that fifth bucket of operational excellence, lean integration, having a lean culture.

That is why I'm more excited about Middleby than I ever have been before over -- I feel like we have the road map now for the next several years to set Middleby on this new path that we're on. So very excited about it. Thank you for letting us go through it, and I'm happy to kick it back to you for any questions.

All right. Thanks, Steven, Brittany, for the insightful presentation. Before I start firing away my questions, I just wanted to open the floor in case anyone has questions here. Mic, please.

With your customers, do you have any sort of long-term service agreements where once you get the equipment installed that you guys are servicing that over a period of time?

Yes. Great question. It is -- we didn't hit a whole lot in this deck in particular. But when I think of key initiatives in the company beyond what we talked about, aftersales service and support is actually one of the biggest initiatives we're working on right now. It's been one of the most challenged parts of our industry as a whole. Middleby has been working on Middleby First, Middleby Advantage service. And what that allows us to do is have a dedicated network of service companies, service agents, not that we own, but that are dedicated to Middleby that service all of our brands across the portfolio and allow us to have a great experience, number one, for our customers afterwards, but also allow us to do what you're talking about to lock customers into service agreements, whether it's preventative maintenance or just a long tail on service in the field, but coming to Middleby for that service.

So it's something that we have not had historically. This is a very active project. Again, using the baseball analogy, we're probably still in the second or third inning of where we are. We see it as a major initiative. Not only does it help, obviously, the relationship with your customers if you can commit to a phenomenal aftersales service and support experience that's going to connect you even better. It's going to have a better, just, I'll say, sticky relationship between customer and us. But to think about the opportunity for aftersales service and parts is a massive opportunity for us. So great question. It's an active project right now that we're super excited about.

Can I ask a little bit more about the brewing business that you guys are shutting down? You show how it is not making money. How long has it not been making money? How -- what kind of lease did the company kind of give it to kind of do better? And then internally, what is the message to other businesses that may not be doing so great?

Yes, fair question. I mean, as I think about the brewing platform, which was really kind of built going into COVID or kind of the back half of that decade. Brewing was, if everybody remembers during COVID, a booming industry, right? Everybody was a lot of home brewing. You saw a lot of craft brewing that was built up. So the brewing segment was doing very well in that COVID period. over, I would say, the last 2 years, especially is where you've seen that business, unfortunately, that end segment just drop off. People are -- as Britt said, people are not drinking beer like they used to. The craft breweries have unfortunately come and gone a bit. So it really is, I would say, more over the last 2 years than anything where we've seen just the drop in volume, which has then led to the financial impact.

So I don't know -- I won't say we gave them a lot of leash. I think we were still assessing like, hey, was this an end segment that potentially had an inflection to come back. Obviously, we felt like that has not been the case. In terms of internal messaging, I mean, these are always tough decisions to make, right? You're affecting your employees and livelihood. So that is something we never take for granted and very thoughtful about that. There are other companies in our portfolio that we think there are opportunities to certainly improve margins. There are some that are investments for us. There are some that are just on a journey of margin expansion. There's not necessarily another segment in our portfolio that is like brewing, which also maybe made a decision a little bit easier. It is -- there's not as many synergies with the other rest of the portfolio. So I don't know if it's much a message to other divisions. I think everybody is always focused on driving them, but that's a little bit of a context as to the history and why we made a decision we did.

And to add on to that, just a little bit in terms of the message to divisions, I do think it does help us show that commitment to investing in the core and our capital allocation.

Yes, great point.

Maybe just staying on that thread. Is there anything else in the business, any divisions that are kind of loss-making that you could take a similar action with? Or is this really, this is it?

Again, I would call out, I think we're trying to be very thoughtful about what the portfolio definitely looks like. That is an active project. This one is unique, I would say. I think there are other parts of our business that are not at a margin profile that we are happy with. Some of our -- we feel like there are investments in -- where we do see the potential inflection in certain segments like coffee would be a very good example of that where we're making investments. Coffee is obviously a growing market. So that has ramped up. I think some of the beverage platforms that we talked about where it's still investment into new products, truly new products, new development and just the revenue needs to kick up to drive the margin. So -- there's others like that, but they're different than I would say, a segment where like the end market has really been depressed, continues to be depressed. This is kind of the one in that category.

Right. If there are no further questions, I'm going to start asking questions here.

Make sure Britt gets the hard -- I only get the easy ones. Britt gets the tough one now.

Yes. I guess the first one, I guess this is relevant to you. I guess the Pitco results looks pretty impressive for the first 9 months on like lead time inventory and output. What has that actually meant for the margin so far? And has the lean transformation had any impact on the growth side?

Yes. So we have not specifically called out individual numbers on that. We have seen some improvement in margins, but we still have our target out there. Obviously, we gave that kind of combined for Pitco and Taylor. But just these initial phases, we have seen some margin improvement. You see simplification in the business and the throughput. I think also when it comes to lead times, those are important to our customers. So it does allow a better story in terms of that communication with your customers when they know and can believe in those lead times and the ability of us investing back into that.

Got it. And kind of following up on that, I think Taylor is kind of next in line here. So what should we kind of expect the Taylor version kind of from the -- here from now?

Yes. And I think one of the things that we highlighted in Investor Day on Taylor was really also the product line simplification for them, making the business less complex, looking at what products we're offering to the customers and how that drives our pricing discussions, where that drives our supply chain focus in terms of value engineering and leveraging the Middleby scale. So again, I think it will be a lean transformation, but there is also a big element for Taylor on the product line simplification as well.

Got it. And I guess kind of staying on this like the product kind of the pruning kind of side of the questions here. Is there any kind of risk that pruning kind of lower volume products like kind of cost your revenue or chain relationship where those products were kind of part of like what is bundled sales or something like that? I think you talked about Taylor maybe simplifying some SKUs there. Is there any kind of bigger impact from that side?

I think there are potential impacts. I think we're looking very carefully across all of our brands. Taylor, as Britt said, a very good example of where I think there are opportunities from a SKU rationalization standpoint, even a customer rationalization standpoint. The way that you help customers through that is if you have a chain to say, buying 10 or 20 SKUs across your portfolio and you can say, hey, if you move to a certain SKU and consolidate that, we can assure you better lead times, we can assure you better potentially pricing, like that's how you get a customer on board with us. So it hopefully doesn't create these challenging like, hey, we're just continuing to SKU and now it's going to affect the customer relationship. You're always trying to find hopefully a good win-win solution for the customer as you go through that process.

Awesome. And I guess I wanted to touch on that incremental cost that you talked about, $10 million to $50 million. Like you talked about like several initiatives to kind of offset that. And I don't think you're intending to really offset that fully through pricing, but the offsetting initiatives you laid out seems like it's more of the longer term kind of building into 2027. So how confident are you that like that $10 million to $50 million gets offset within 2026? Or is that more of the 2027 story?

So I think it leads into some of the items that I highlighted. So Pitco is on its transformation. So we've already started to see some early successes at Pitco and expect that to continue here in the back half. And as we mentioned, we're starting at Taylor. So we expect just like Pitco, there will be some early wins that will allow us to see some expansion. We also have the Ice consolidation, Evo going into Star. So there are these ongoing initiatives that we feel that we will start to be getting the benefits for. So it is not all a 2027 story.

Got it. And I guess I wanted to touch on that long-term target that you laid out here, 3% to 6% organic growth and 200 to 400 basis point margin target. So can you kind of remind us like how much of that is like dependent on the market itself kind of improving? Or -- and how much is kind of deliverable through your own initiatives?

Yes. So on the top line, we talked about how 1/3 is really kind of volume growth associated with that. Again, within that volume, we've also called that, that includes any pricing that we would also take through there. So again, 2/3 is more in our control. Some of that being through new product innovation through new product markets for the beverage and ice kind of expansion. Also what Steve talked about is our journey on service. So again, solving that aftermarket service and giving that commitment to the customer of that higher quality uptime or that preventative maintenance to make sure that their equipment runs longer allows that upfront sales process to be stickier. So those are some of the -- on the sales side. On the margin side, what we've talked about for the 200 to 400 basis points is that really about 80% of that is what we deem within our control, really driving some of these operational excellence initiatives through the platform, leveraging Middleby's scale as it relates to supply chain in addition to that and then really 20% being more on that volume growth.

Got it. All right. That sounds great. And I guess you talked about kind of new product introduction kind of also driving kind of growth here. And I think a lot of the new product introduction has been focused around like Ice & Beverage. So which of the like the new items are kind of furthest along in customer adoption today and which is most likely to be a swing factor for like 2027 growth?

Yes, great question. I think more about how we think about '27 and beyond are a lot of the new products that we've been talking about, which is Gravity, Fizz, FizzBot, which is all around dispense technology. So think about your traditional soda fountain dispense valve technology in there, but then also a fully automated version of that. So a system that when a customer enters an order through POS, it's dropping the ice, it's filling the cup, it's dispensing the soda and that also has an automated lid sealer on it. So think about I'm saving labor in incorporating the lid sealer to allow carryout and DoorDash as an example. So those are products that we've spending a lot of time and development on over the last 12 to 18 months. There are customers that are tied to those. We've stood up its own separate manufacturing facility in Dallas for those products. So that like we're happening in real time, but that ends up being revenue we start to realize in '27 and beyond.

Got it. Awesome. I think we are up in time. I think that's a wrap. Thanks for joining us, Steven and Brittany. Thanks for joining.

Thank you very much.

Good day, and welcome to The Middleby Corporation's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] On today's call are Tim FitzGerald, CEO; and Brittany Cerwin, CFO. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Tim FitzGerald. Please go ahead.

Good morning, and thank you for joining today's call. Early last year, we set out to separate our 3 leading foodservice businesses into independent companies to best position each business for long-term growth and to unlock value for all of our shareholders.

We completed the first step in Q1 of this year, selling a controlling stake in the Residential Kitchen business to 26North. And on July 6, we completed the spin-off of our Food Processing business, launching Midera as a separately publicly traded company. Midera now as a stand-alone business, is extremely well positioned as a best-in-class leader in the growing food processing equipment industry, and we are confident that business and the Midera team has a very bright future ahead. With that, the transformation is complete. I'm proud of how our teams work together and in the execution. It is a significant milestone and achievement in the history of our company.

In parallel with our business transformation, we returned $1.3 billion to shareholders through repurchases, including $200 million in the second quarter, reducing our outstanding share count by 16% over the past 6 quarters. We are very pleased with the strategic allocation of capital that we believe has delivered substantial value to our shareholders during a pivotal time. We are now embarking on a new exciting chapter for Middleby. Middleby now moves forward as a focused solutions provider and the innovation leader in commercial foodservice. We're extremely well positioned with our leading brands, best-in-class innovations and momentum in equipment categories that deliver the highest ROI for our customers.

The strategic investments we have made in our business are gaining traction, and we are seeing the benefits in our top line. We continue to set the pace in the industry, bring next-generation solutions that have practical application and meaningful impact to our customers. Our go-to-market strategy that has been underway for the past several years as is closer to our customers than ever before, and we are viewed as a strategic partner. And our more recent investments in our operational capabilities are at early stages but are starting to take hold, and we're confident these initiatives will drive margin expansion and operational excellence over the next several years. Taken together, these investments are what underpin the 3-year targets we have laid out at our Investor Day in May: net sales organic growth of 3% to 6%; adjusted EBITDA growth of 6% to 9%; and adjusted EPS growth of 10% to 15%. And we are confident in our ability to deliver against these targets.

Turning to our Q2 results for Commercial Foodservice. The quarter reflected strong execution against our strategy as we delivered over 8% organic revenue growth. This marked the second consecutive quarter of organic sales growth in a challenging macro backdrop, a trend we expect to continue in the third and fourth quarters. This also represented the second largest quarter for revenue in the history of Middleby Commercial Foodservice. The growth in the quarter was broad-based as we saw strength across channels and customer types, including with our chain customers and also in the general market with our dealer partners. We were pleased also to realize growth across geographies with increases in both North America and International. We continue to make inroads on the back of our go-to-market investments and new product innovations. And we're seeing the benefits of targeting newer markets, including ice and beverage, where we have an even greater pipeline geared towards next year. The current industry backdrop is not ideal. However, Middleby has continued to drive year-over-year organic revenue growth.

Turning to our second half outlook. Industry conditions remain challenging, particularly with traffic at the QSR segment and customers are being more selective on their capital plans for the back half of the year. Within that, we are seeing replacement spend stable relative to our prior thoughts with unit growth being pushed out modestly by some larger chains. That said, we are carrying momentum into the second half with global chains, and we have visibility into the pipeline of opportunities into 2027. This momentum gives us confidence to raise our revenue guidance expectations for the second half of the year.

We also saw year-over-year EBITDA growth in the quarter, although our margin percentage was below our expectations, driven by a few key areas. The revenue growth included better-than-expected strength in our ice and beverage platform, which has margins approximately 400 basis points lower than our longer established cooking platform. Additionally, inflationary costs, particularly ocean freight shipping and steel surcharges accelerated faster than anticipated, driven by the recent broader macro. And our investments in the ice and beverage platform weigh on margins in the near term as we ramp production for new product launches to support 2027 customer demand in the pipeline.

Although we anticipate these margin pressures to persist through the second half, we expect to see sequential margin improvements in both the third and the fourth quarters. We have a number of operating initiatives currently in progress, including product simplification, lean manufacturing and mixed profitability. While these are longer-term initiatives, they will partly offset recent accelerated inflationary pressures and support sequential improvement in margins ahead of larger benefits as we move into 2027. In addition, we are confident of increased margins at our ice and beverage platform, particularly as we move beyond the initial investment phase in 2026.

We're excited about this new chapter for Middleby. With a portfolio transformation now behind us, we will benefit from greater focus on the execution of our strategic plans, both top line and bottom line. Our team has a lot of momentum, and we are looking forward to accelerating it.

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

Thanks, Tim. Today's conversation will be focused on Commercial Foodservice. Given the spin-off of Midera did not occur until July 6, food processing results are included in our continuing operations for Q2. For details on Food Processing, we invite you to join Midera's inaugural earnings call on Thursday, August 13.

Turning to the results. For Commercial Foodservice, second quarter revenues were approximately $631 million, driven by organic revenue growth of 8.3%. As Tim mentioned, positive impacts were broad-based and seen across all channels in both domestically and internationally. Organic adjusted EBITDA margins were 25.8%. In terms of margins, Tim laid out the drivers to our second quarter results and the implications for the remainder of the year.

During the second quarter, we experienced a total margin headwind of nearly 100 basis points, which is driven by the higher-than-expected inflationary impacts, partially offset by the benefit of a tariff refund of approximately $5 million. For the remainder of the year, we expect incremental inflationary margin pressures of approximately $10 million to $15 million relative to our prior expectations. From a margin percentage perspective, we expect sequential improvement in the back half as we begin to benefit from the operational improvements Tim laid out, including product simplification, mix and lean manufacturing.

On a consolidated basis, total company adjusted EBITDA for the second quarter was approximately $193 million and adjusted EPS from continuing operations was $2.35. Adjusted EPS expansion was achieved primarily through organic EPS growth, 2026 share repurchase activity, share repurchases utilizing the proceeds from the residential transaction and carryover from the 2025 share repurchase activity. This was offset by increased interest costs associated with the maturity of our convertible notes and a higher tax rate associated with discrete foreign tax items and nondeductible expenses as compared to the prior year. Adjusted EPS, excluding Food Processing, for the second quarter is estimated to be $1.74 as compared to the prior year of $1.40. This presentation of adjusted EPS is aligned with how we expect to report Middleby results on a post-spin basis with Food Processing as discontinued operations starting in the third quarter. Please refer to Slide 11 of the presentation we have posted online for a complete adjusted EPS bridge for the second quarter as reported and Slide 17 and 18 for post-spin adjusted EPS bridges for Q1 and Q2.

Second quarter operating cash flow was approximately $100 million, and free cash flow was approximately $89 million. Our leverage ratio per our credit agreement at quarter's end was 2.4x. At spin, our estimated pro forma leverage ratio was 2.7x. As stated at our Investor Day in May, we expect to delever to approximately 2.5x by the end of the year and anticipate debt paydown will be the primary use of excess capital in the second half of the year. Regarding capital allocation during the second quarter, we repurchased 1.4 million shares or approximately 3% of our outstanding shares for $200 million or an average purchase price of approximately $142 per share on a pre-spin basis.

Let me walk you through our third quarter and full year outlook, starting with the third quarter. For the third quarter, on a post-spin total company basis, we expect to achieve the following: revenue of $620 million to $640 million, equating to organic revenue growth, of approximately 4%; adjusted EBITDA is forecasted to be between $143 million and $150 million; adjusted EPS is projected to be in the range of $1.67 to $1.83 assuming approximately 45.2 million weighted average shares outstanding.

For the full year, on a post-spin total company basis, we expect to achieve the following: revenues of $2.48 billion to $2.53 billion, equating to organic revenue growth of approximately 7%; adjusted EBITDA of $572 million to $588 million; adjusted EPS is projected to be in the range of $6.73 to $6.89, assuming approximately 45.8 million weighted average shares outstanding. Please refer to Slide 14 and 15 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.

[Operator Instructions] The first question comes from Jeff Hammond with KeyBanc.

So gross been quite impressive year-to-date. I mean the macro still seems pretty choppy. You do have kind of a step down, and I'm just wondering if it's less easy comps or if the first half had more kind of program, maybe beverage wins in there? Just a little more color on the cadence.

I think last year, we talked about the double-digit growth from our dealers. So we still see strength across the market, and Steve can chime on both dealers as well as chains, but there was some we're not expecting the continued double-digit growth at the dealers. So I think we see it moderating in the back half of the year, but we still have momentum and robust demand, as I mentioned kind of in the opening comments.

Yes, I would just build on that. This is Steve. I mean the growth we've seen within our dealer channel has been pretty much sustained for the last 4 quarters now. And even though, as Tim said, the comp is tougher for the back half of the year, we still expect growth within the dealer channel. So that is really the primary difference. We are seeing, and it's what we saw in the first and second quarter, pickup has really been within the chain space, specifically the QSRs. A large portion of that has been driven by new product adoption as they look to expand menu, expand dayparts and certainly, beverage and ice, as we commented on before, has been a big driver within that space. And we expect that to continue in the back half of the year, and that is actually where the predominant portion of growth we expect comes in the third and fourth quarter.

Okay. Great. And then I understand a lot of kind of inflation pressures. Can you just speak maybe unpack the -- what really drives the sequential margin improvement? Is that -- is there any mix in there? Is it just getting this price through? And then are you contemplating any additional IEEPA refunds?

Sure. This is Brittany. I can comment to that. First, in regards to the IEEPA tariffs, we mentioned $5 million in the second quarter. And we expect a similar dollar range of about $5 million potentially in the back half to be received. As it relates to the sequential margin step-up that we're expecting as we go from second quarter and into the back half. I think that's a mix of a few items. We are expecting a little bit of mix improvement. So in the second quarter, as it relates to mix. And as we mentioned, new product innovation and the launching of manufacturing around the new beverage equipment, that was a headwind in the quarter to margins of about 150 basis points which we will start to see reduce a little bit as we get into the back half, along with some improved mix, the pricing that we've mentioned primarily will not start to benefit us until the fourth quarter. So that's why we are kind of expecting some sequential as we move from Q2 to Q3 to Q4 improvement along with the operating initiatives that Tim commented on in the prepared comments.

Yes. Jeff, I would just say, we obviously laid out at Investor Day a lot of the new capabilities that we have built up over the last year plus, very similar to what we've done with innovation and go to market. So you can see that taking hold on the top line. A lot of the operating initiatives that are in flight. So we really are just starting to get traction, we think, in the back half of the year. So we feel like we've got pretty good line of sight to that 200 to 400 basis point improvement that we talked about Investor Day, we're at the very early stages of that. So some of that will bake into the year as we kind of progress particularly in the fourth quarter.

The next question is from Tim Thein with Raymond James.

Great. Just to come back, Brittany, on the comments I think you mentioned earlier, $10 million to $15 million of incremental costs that you hadn't foreseen, I guess, 90 days or so ago. Is the -- how are you expecting the yield on the pricing, how that plays through and how much that's some offset presumably that you're expecting? And I guess a lot of that comes in the fourth quarter, but I guess that's part one of the question. The second is just thoughts around the pricing strategy as you go into '27. I think normally, those pricing actions are taken around the start of the year. Does this kind of adjust that or alter that potential strategy as you look into next year?

Yes. So I'll start with a little bit on the margin headwind. So as we wrapped up the first quarter, obviously, we had some inflation. And as we sit here 90 days later, that inflation has accelerated, and that's what we have anticipated here in the back half of that incremental $10 million to $15 million. When we put in the pricing, obviously, that's general market pricing, which has to be announced well ahead of the 8/1 effective date that we had. So that was really to start to partially offset the cost and inflation that we are seeing at that time. So -- and as mentioned, we'll start to see some of that benefit roll through on the pricing in the fourth quarter. So it will be a headwind for us on this inflation into Q3 and some of Q4 as well.

Okay. And then ice and beverage called out a couple of times. And I think maybe, Tim, as you were going through the initial comments, you mentioned just more of a pipeline building. And I think you mentioned that into -- more of that hits in '27 on top of that. Any -- I know we touched on a lot of this at the Investor Day, but I mean, is that size that pipeline as you think about the contribution to what that can mean for '27? Any further clarity on that in terms of meaningful that could be?

Yes, I don't think we're going to lay out the magnitude in terms of top line, but I would say it's just positive, right? Like I mean I think that's a big addressable market that we've identified. We've made a lot of investments. We continue to make those investments. We've got momentum. It's part of the revenue growth that we're we're seeing now, and there is more to come because we have new products that we're launching going into 2027. Those are some of the investments we're making right now, the size of that pipeline has been expanding a bit ahead of some of the products that we'll be launching next year. And those are some of the continuing investments that we're making right now. So I mean I think that gives us confidence in our growth outlook and algorithm for the next several years because is and beverage will continue to play a part of it.

Next question is from Tami Zakaria with JPMorgan.

My first question is organic growth. Can you clarify what your organic growth outlook is for CFS. I think when you started the year, you said 4% to 6%. I'm guessing it's now higher, more like 6% to 7% or whatever. So can you clarify what that number is for the year? And within that number, how much is driven by price versus volume? And is there any thing embedded in terms of headwind from the product line simplification initiatives that you spoke to. So if you could parse out the organic growth outlook for CFS, that would be helpful.

Yes. I could speak, Tami, to the full year guidance that we've given for Commercial Foodservice. That has now increased to be between 6% to 8% for the full year.

Yes. Tami, this is Steve. In terms of the price volume dynamic, the predominant driver this year has been on volume. We took some low single-digit pricing towards the end of last year into the beginning of this year, and we just put forward, as Brit talked about, another one, low single digit in general market in early August. But the predominant driver is on the volume side. And again, that's coming through a lot of new product adoption from our chain customers. That's what gives us the confidence and that's volume versus price. In terms of the product line simplification that we highlighted at the Investor Day, we're certainly still early days in that process. So really have not seen or don't expect much of a headwind from a top line volume perspective the rest of this year.

Understood. That's very helpful. And second question is on tariffs. I wanted to clarify your tariff headwind is now expected to be -- it seems $77.5 million for the full year, net of the additional increases and reductions under Section 122, 232 and 301 that you called out. So can you clarify how much of that $77.5 million is already absorbed in 1Q and 2Q and how much is expected in 3Q versus 4Q?

Sure. With regards to the range that you provided, that's our gross tariff exposure as we look at the Commercial Foodservice business on a continuing basis. As we look to kind of the spread between the quarters. I would say it's pretty -- it's starting to be more evenly split between the first half and the second half. Obviously, we're going to have a little bit of a step up, as we mentioned, with the new 301 tariffs that will start here towards the later part of the second half. But that the $2.6 million annualized is an annualized number that will start here in the back half of gross exposure on those.

[Operator Instructions] The next question is from Ian Zaffino with Oppenheimer.

I wanted to just drill down a little bit more into the QSR growth. I know that you mentioned that there's been some menu changes, but is there demand coming from anywhere else, like are you starting to see like a replacement cycle yet or at least start of a replacement cycle? I know the [ Angelo plant ] is quite old and quite past replacement. So what are you seeing in there?

Yes. Thanks, Ian. it's Steve. As I think about -- we think about QSR segment and the key drivers for demand, I'll bucket it maybe into 3 different areas of where demand comes from. So historically, you have new store opening growth, which has been relatively flat year-over-year this year. We do have pretty good visibility to that pipeline into next year, which changed our expecting growth, but we also know there's been ebbs and flows of push-outs there. So the second area is what you just highlighted is the replacement demand, which has we feel like been muted over the last really 5 to 7 years, and we feel like there is a pent-up demand -- replacement demand cycle that's coming.

We have seen that pick up as this year has gone forward. I wouldn't say it's quite off to the races, but compared to where we were a year ago, we have seen change start to go back and replace aging equipment. But really, the third bucket is where we have seen the growth this year and really where we would expect the growth to continue to accelerate next year. And that is within new product adoption for additional menu items, driving dayparts. We talk a lot about beverage and ice but anything that is helping them fuel throughput, consistency, labor efficiency in new products. That's really been the primary driver this year and into next year with the QSR space.

Okay. And then just on international, can you maybe just talk about the growth there? How much of it -- is it just deeper penetration? How much of it is more -- or things like very innovative products like KFC Kwench or something along those lines? So how much was something like that? Or in that bucket be driving that? And then just given the success that you've had in that area, what should we expect as you maybe kind of bring some of those solutions to the U.S.

Yes. Great question. Thanks for highlighting international. We have -- in all international markets over the last several years, we have reinvented our teams, our processes, we've opened innovation kitchens across the world. I would highlight, I think one of the biggest changes, maybe call it Europe, specifically, but really true of all of our international markets. is, historically, we only sold a handful of our portfolio within international markets. So it's very heavy in fryers, very heavy in ovens. And it was very focused on large global chains.

Large global chains are going to continue to grow in international markets, and we're very well positioned to grow with them. But really, the biggest change that's happening in real time is selling the broader portfolio. and it really is selling the technology brands. It's moving beyond just fryers and ovens, but selling a complete Middleby package that now includes areas like beverage and ice. So that really is the biggest I would say, step change we've seen in our international markets is selling the complete portfolio, not just relying on global chains, but by selling a complete solution, you can obviously penetrate into more emerging chains in local markets. and really just those local customers. So that's the primary driver that we've seen, and we'll expect that to continue certainly into next year within pretty much every international market that we're in today.

The next question is from Mig Dobre with Baird.

This is Peter Kalemkerian on for Mig this morning. Tim, you mentioned initiatives in ice and beverage, and I appreciate it. Brittany, the commentary on the 150 basis point drag from investment there in the second quarter. Is there any detail you could provide on the specific initiatives that you have ongoing in that platform and the time line for some of these investments to come online?

Yes. Great question. So we've highlighted a lot of the new products that we've been launching, particularly products such as the [ Fizz ], which is kind of our automated beverage machine, Gravity, which has got a lot of interest from customers. Those are ramping in terms of production. So we're actually bringing up a facility in the back half of this year. We do have significant customer interest, and there are tests going on. So we're investing not only in the production but in testing and product approval. So we see a lot of that coming online kind of right at the tail end of the year, really not impactful to this year, but starting to become impactful in 2027.

And I guess the follow-up here on beverage. As we think about '27, what's the right way to think about that 400 basis point margin gap? Does that close significantly? Or is that more of a longer-term story?

I think it will close over time. I mean we'll first start to move past the investment stage, which I think we'll start gaining traction or kind of move into revenue in 2027. And then kind of along with that, we've got a lot of operating initiatives, which are across the entire platform with all the beverage companies and the ice companies because that's a big part of the story as well. We've acquired some new companies there. We're consolidating the platform and certainly benefiting from lean manufacturing SKU simplification at some of our larger brands.

So we see that kind of continuing to gain momentum, including in the latter stages of this year and then kind of expanding as we go through 2027 and 2028 as part of the 3-year plan. But I'll just kind of underline again, those initiatives are underway. So a lot of the capabilities we've built over the last 12 to 18 months, a lot of the initiatives we really started at the back end of last year. So that's kind of why we feel like we've got a high degree of confidence and line of sight of those gaining momentum, particularly as we go into next year.

The next question is from Chris Senyek with Wolfe.

So kind of following on the margin opportunity in ice and beverage. I know structurally, it's lower than the hot side of the business. But is there anything that could close that gap further over time in terms of pricing actions, competitiveness because you can offer customers now are not just buying sort of 3 products, perhaps, but they're buying 5 or 6 and you can bundle things and price better that way. So I guess, over the next couple of years, is it that ice and beverages just structurally lower margins? Or is there pricing opportunities funding opportunities, obviously, cost efficiencies you talked about that over the next 3 years, that you can kind of close that gap even further or above and beyond efficiencies from higher production.

Yes. There is nothing structurally within that platform that would cause those margins to be lower than the cooking side. There is a lot of innovation and technology there. I think I'd really kind of chalk it up to where are we at in the journey, right? Like we've been at it with cooking and warming for a long time, which, by the way, there are opportunities there as well as we kind of execute on the operating initiatives and some of the things to leverage the scale of the platform. It's still a relatively early-stage platform, and we're mid-20s, right? So I think -- and we're making significant investment in innovation R&D. So I mean I think that's one of the things that excites us.

If you look at some of the more mature companies within that platform, they're actually, I'll say, at or above our target margins right now. So I mean I think it's really just where we're at in the journey as we kind of move forward to scaling some of the new products that we are launching. Some of the operating initiatives underway, including some of, I'll say, the integration of some of the new businesses and then execution of kind of the operating initiatives. I mean we've got a high degree of confidence that those businesses kind of get to the target margins that we have, which are I'll say very similar to what we think we're at and can achieve in cooking and warming.

Okay. Great. And then another question on QSR visibility, QSR stuff has improved. Is there any more visibility line of sight through the year-end this year than you've had in the last couple of years in terms of their store rollouts and openings or as we kind of get to this back half of the year, that there's still risk like there's been for the last years and beyond that, that you could see potential pushouts towards the end of the year? Or do you think that that's stabilized better than in the last few years where you were comping negative?

In terms of new store openings, we have -- we've had very good visibility over the last several years. I think it's greatly improved as we went through some of the supply chain challenges from '22 and '23. That said, I think the new store opening pipeline, the rest of this year is fairly stable. I mean, there's going to be pushouts, but there have been pushouts really over the last year or two. So I think it's pretty consistent.

I think where we have more visibility is in just some of the new projects that we've been talking about that are starting to get freed up more and more, and they're starting to be greenlighted more and more. And so I think that's where, from a pipeline perspective, we're more excited about where we are today versus say where we were a year ago is in that new product pipeline.

The next question is a follow-up from Tim Thein with Raymond James.

Sorry to come back here. Maybe two for Steve that I'll package together. The first is just on the mix within -- the product mix, and I guess this is probably more of a general market question. But just as operator budgets continue to get stretched, I'm just curious if you've seen that show up in terms of features and content within items or opting for lower-priced units, things like that. I'm just curious if the -- you talked about mix from the standpoint of hot versus cold, but I'm curious if if you've seen it more pronounced in terms of features and specs.

And then the second part is on the organic growth, call it, 8-ish percent in the first to to 4-ish percent in the back half, the comps get a little tougher. But is it the rollouts that may be getting pushed? Is there because you got presumably maybe a little bit more pricing that kicks in. So I'm just curious if -- or none of the above, just in terms of guess how we go from the first half organic run rate to what we're modeling for the second.

Yes. Thanks, Tim. I'll try to take a pass of both. -- it's really interesting in terms of your first question and especially within the QSR space. We know that the end user operator, the franchisee is certainly watching costs more than ever before. There is a very clear delineation, I think, in chains that are winning in the market versus the ones that aren't. And it's tied to, are they trying to buy the same products they always have and just trying to buy them at a cheaper price. Like that's one approach. And that approach is currently tied to, I think, chains that are not doing as well versus the change they're investing in the new products, new equipment that's giving them operational improvements, it's fueling throughput consistency, giving them new additional dayparts.

So in spite of what -- how you teed up the question of, it is a challenging environment from a cost perspective, I actually think it's leading QSRs to actually invest in better technologies with more features and benefits because it gives them a greater ROI, which is -- has become probably the most important metric that they're looking at for their franchisees.

In terms of the second question, the rest of this year, Tim, it really is a function of we grew so much the back half of last year within the dealer segment in the U.S. Again, it was double-digit growth in both the third and fourth quarter. That growth is continuing to be positive, it's just not growing at the same pace it was a year ago. So that really is the big change in the back half of the year. So dealers remain positive, just not at the same level. But really, the growth is coming from, again, the continued growth in chain customers, predominantly the QSR. So it's really not a function of anybody slowing down. It's more a function of how it compares to the back half of last year.

This concludes our question-and-answer session. I would like to turn the conference back over to Tim Fitzgerald for any closing remarks.

Thank you, everybody, for joining today's call. I also want to thank all of the Middleby team members around the world who contributed to what's been a major milestone and significant achievement with the execution of the separation of our businesses into the 3 leading platforms. That was a heavy effort from many across the organization and through the entire transformation, the team stayed focused on moving our core commercial business ahead with many exciting initiatives that have us positioned stronger than ever. I'm thankful for all of those efforts and very proud of the team.

So with that, thank you all for joining today's call, and we look forward to speaking with you on next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hi, everybody. Good morning. I'm Rebecca Ellin, SVP of Investor and corporate development. Welcome to the Middleby and Madera Investor Day. The agenda for this morning, Tim FitzGerald, the CEO of Middleby, is going to start us off with an overview and discuss the company and industry growth drivers. We also have the entire senior leadership team here that will go through a deep dive of the initiatives that's going to drive Middleby over the next few years. The story that we are here to learn about today is about two industrial technology leaders that are at fundamentally distinct stages of their growth journey, which is what makes this a different kind of spend.

At its core, these are two businesses that have a lot in common. They both have an extraordinary heritage, are mission-critical to their customers and have a superior financial profile. After the JV of the residential business was complete earlier this year and the spin-off of the food processing business is complete in early July, we are now at the last step of Middleby's transformation into a pure-play commercial foodservice leader. Middleby is poised to emerge as a scaled platform, an innovation leader and deliver strong returns to shareholders. And to give you a little more insight into Middleby, we have a short video to show you.

[Presentation]

I think I'll be walking up to ACDC here, but hopefully, it's a good way to start the day. Welcome, everybody. Thank you all for being here. So we're excited about the day. We've got a lot of great stuff to cover on the things that we have been doing over the last 3 to 5 years, which honestly has been very transformational for Middleby. And we're excited to be at this point, too, also with the spin. As Rebecca said, two amazing businesses with food processing and commercial. So very excited with the future of where food processing is going as well because we've got a great journey ahead and excited for Mark and team to present what that vision is as well. But obviously, we'll be going through commercial in the journey that we are on right now.

We have come a long way in the last 3 to 5 years. I think that's one of the hidden parts of the story, which sometimes it's hard to understand, given that we did have 3 portfolios and also our industry has had some challenging dynamics, but if you look at Middleby, where it is today, it is very different than where we were 5 years ago. So I think that's one of the things that we really want to come across today in terms of how we're leveraging scale, the investments that we've made to drive organic growth, and we think we're very well positioned in kind of this next chapter.

Maybe just kind of hitting some of the key highlights here. We've got an industry-leading portfolio of brands, and we think we are extending our competitive advantages with really the initiatives that we've taken underway the last few years. And we're accelerating innovation, and we think we are doing that in a very meaningful way. And then we're also driving those innovations and solutions into the marketplace with a go-to-market engine that you'll hear a little bit more about today that we've built.

Operational excellence is a competency that we've built up over the last several years, which is starting to take hold, gain traction, and we're confident that's going to give us a roadmap where we have a roadmap to expanding margins.

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the brand has always been very important to Middleby and this spares up with the solutions that we have. So this brand portfolio has been put together over several decades in a very thoughtful and strategic way. The brands are #1 and #2 in the categories that we serve globally recognized that kind of stand for quality and service and I think, importantly, we're packaging these more and more as solutions over time to our customers. That's really unlocking cross-selling opportunities, and we're gaining traction because of that approach in the marketplace.

Commercial Foodservice at a glance. I think many of you know, we're a global organization, and it's got an attractive growth drivers. So kind of if you look at the sales by demand, really over 50% of our revenues are coming from recurring base. So it's not only parts and service, but really the replacement market that creates a lot of stability and repeat customers and connect us to customers in a very important way. And then if you look at the sales by product, obviously, the long hallmark of Middleby has really been the cooking and warming segment. But now we're a meaningful player in ice and beverage, and we'll talk about that a bit more today because we see significant market expansion opportunities. So that pie will likely continue to grow.

And then I'll just kind of call out at the bottom, like we're very proud of the customer base that we have, so it's a blue-chip customer base that we have is kind of who's who of the industry, and we are partnered with those customers closer than ever before. So I mean, I think as we have broadened out our solutions, we really are becoming in many cases, the most preferred partner and thought leader with those customers. And that's opening up opportunities to unlock a lot of solution selling and additional brands. I think a really good example for that is ice and beverage. A lot of the customers that we've been selling cooking and warming to for a long time are now buying ice and we're engaged with beverage solutions. So that strategy is working and the relationships we have with those customers are very important.

The other thing I'd just call out is even though these are large companies, for us, a large customer is only -- there's very few that are over 1% of revenue. So it's a very diversified base as well. And we don't have any customers that are 5% or nearing 5%. So I think that's really one of the strengths of the business is the relationships, but as well as the breadth of the customers.

A little bit more on -- we kind of dive deeper into Middleby today by the numbers. Cooking and warming. Obviously, we've got a phenomenal platform here. There are additional levers of new growth that are coming out right now is we've got strong NPI, and we're putting more digital, et cetera, on to cooking and warming. So there is growth avenues, and we will continue to grow cooking and warming. For ice and beverage, we're relatively new on the scene. So we've made significant headway in a pretty short period of time, but there's significant expansion opportunities. And if you look at the margins of the business, which are already very strong, it is still in early stages of our development. So we're investing in R&D, new product launches, commercializing products that are now going to customers. So there's an opportunity for those margins to come up to cooking, and we expect that to happen.

I think one of the things also importantly and we'll talk about this quite a bit today is the platform investments that we're making, which are very strategic in nature. So I'll just kind of call it, those platform investments are what the pillars that we've been putting in place over the last 3, 4 years that are driving our engine to drive organic growth across the businesses as well as profitability. And if you were to go back 4 years ago, that number was 0. So we are reinvesting in our business in a very thoughtful strategic way to really drive growth into the next chapter.

So a little bit more on that. So this is the $35 million that I had on the other slide. These are the strategic pillars of growth that we have invested in. And we've talked about some of these on investor calls, but I don't think we've really taken everybody through this. So that is one of the things that we're going to do a little bit in ad nauseam today. I'll just touch on those a little bit here, go to market. We really do have new capabilities that did not exist 3 or 5 years ago, they were very much focused on the end user. And we'll talk about what those capabilities are, but they're really driving solutions and innovation into our customer base.

Innovation and technology. We're taking it to the next level, really accelerating innovation, but we're accelerating innovation where we think the industry is going. Certainly talk about things like controls, software, IoT and automation, and that's really what fits into that platform. Operational excellence, which is a competency, we've been building up, I would say, we're pretty far along in supply chain, and we're extending that into other areas, and we really believe that gives us an opportunity to expand margins kind of in the next several years.

And then the last one which I call the holy grail internally, which is service and aftermarket. So we're building a unique capability and engine here that's tech-enabled, it's dedicated, it's captive service agents to really transform the service relationship. And the journey of kind of that we're going to go on with the customers is really about the life cycle of the equipment out there and service is the biggest pain point for our customers.

So if we solve that, that is a big game changer. It gives us -- it's a solution sale across the whole platform. A lot about -- a lot of this here is really about leveraging the scale of the platform. So that is a strategy, and that is sort of -- is what embarked on really kind of as we were coming out of COVID in the last 3 to 4 years, kind of in a very thoughtful and strategic way.

The good news on a lot of this stuff is much of this is already in place. Like we are starting to see the benefits and bear the fruit of this right now. And it's hidden in many ways because restaurant industry has been pretty difficult. So it's like taking everybody a little bit lower behind the scenes to understand what we're doing is what we're going to be doing today, which we're excited about.

Just talking about the foodservice industry a little bit more backing up. Food away from home has been growing for a long time. So you can see the blue chart is the dollars and it's grown about -- this is over a 30-year period. It's grown about 5% as a CAGR over that period. And then also importantly, the food-away-from-home spend has gone up. So if you go back 30 years ago, its 48%, now it's about 59%. So food away from home is 10% more than what it used to be. That is a long-term trend. We don't see that trend continuing. That is very good for the foodservice industry, and that kind of drives a lot of the category attractiveness into where we play in terms of the installed base and also a lot of kind of the trends and the dynamics that are in the industry. One of the reasons why food away from home is growing is because food is more convenient. You got drive-through, you've got delivery. This all requires new equipment, new solutions for our customers and that's one of the demand drivers. But it is a long-term, stable growing industry.

That being said, it's been challenging the last couple of years as well. So as we've kind of gone through, if you look on the left here, this is a real restaurant sales. And we went through, I'll say, the massive whipsaw that we kind of saw in a lot of industries certainly ours with COVID, and then we kind of came out with a very uneven demand cycle, and I'll say, challenged demand cycle really in the last 2 years. So if you kind of look at what happened in the last couple of years. Traffic has been down and probably more importantly, it's been -- there's been a lot of operating cost pressures on the restaurant operator.

So in particular, food costs raised significantly, labor has been a challenge. So with combination of the restaurant traffic as well as operator profitability, that deferred equipment demand in the last couple of years. So certainly, we've seen that. The good news, I'll say: a, it's a long-standing growth industry that we're in, we are seeing the beginning of signs of recovery. So as we look at our customers, a lot of the challenges that they were faced with last year. They've addressed those. So like you see value pricing on the menu, you see LTOs driving traffic back in new restaurants, you see menu shifts where they're bringing chicken on the menu, which is more profitable for the operators, they're bringing in beverage, which is very profitable. We're well positioned into that trend.

So they're kind of resetting where they're at right now. And you can actually see that in some of the results, if you look at the QSRs in the first quarter, they're in a very different place and seeing the benefits of some of the strategic initiatives that they took last year. And as you kind of look here at what we were seeing in the 0.6 is what the traffic in the real restaurant sales were down.

And the forecast is that to return to growth. And even though that doesn't seem like huge swings in percentages, it's actually very meaningful to our operating customers. So it's a little bit of backdrop of what we've lived through in the last couple of years.

So now if you take that to Middleby, this is Middleby sales for a long period of time. I've been here through this whole period, actually a few years before. So we have grown the business pretty consistently over several decades. It's a combination of acquisition growth and organic growth. During this period, it was actually 4% organic growth that we have grown over a long period.

You can see we kind of came into the COVID period in 2021 that everybody did. And then the last couple of years has really been that restaurant disruption in '24 and '25 that I just talked about. So we experienced the same thing that our customers experience. We are starting to see some of the beginning of the inflection right now. So I mean, I think, we are forecasting and giving guidance that we're going to be growing this year. And some of that is tied to some of the churn in the backdrop of the industry that I just talked about.

So now taking it another step deeper. This is kind of what our sales look like by channel last year. And I think it sheds kind of a light on a lot of things. So we were flattish, down negative 2% last year. You can see how it breaks down between chains, the general market, both North America, international as well as our parts and service. I think there's probably multiple call-outs here, but I would say the one big takeaway is like we're a very strong index to the chains. That is by design.

Like the chains have been faster growing over time, they are the ones who adopt technologies, which is great for us because we are the innovation player and they grow at scale. We think that, that will happen again. But last year, they were very difficult. And I can tell you, we gained market share in chains last year when we posted down 8%. We have better relationships, we have more products approved in the system of those customers, and we have a strong pipeline.

So really, if you look, we had made progress in a lot of areas, particularly in the general market dealer where a lot of the strategies that we're deploying, were causing us to take market share, bring more sales into that market. But chains was really the headwind. And so I kind of call and some of you have heard me say this, this is where we're losing where we're winning, right?

I think long term, we win here, this will inflect, but this is really what we were impacted by last year. So I don't have it broken out in the first quarter. But in the first quarter, we just reported 8% organic growth. So what changed? It was the change. I mean there's maybe a few other pieces, but it is really the chains turn back positive. We were already had kind of ahead of steam in the general market, we were outperforming what we think a lot of the indicators were there, but chains as they kind of come back all of a sudden that a negative turns into a positive and then the number on the right changes pretty significantly.

There's a lot of trends in the industry. I can go through for a long period of time, but I'll kind of move past that right now, but I would just say we're very tied to the trends whether it's chicken, beverage, automation, et cetera. So maybe going to size and scale a bit of the market that we are in. So the overall commercial foodservice market, so this is kind of the restaurant sales globally, is about $4 billion. And the equipment market that supports our customers about $43 billion, of which $13 billion is in North America. So Middleby is $2.4 billion, so it's roughly 5% market share overall. It's a higher market share in the U.S., but it is a large global market, we are operating at scale. We're one of the top operators, but there still is room to grow through market share gains.

And then taking it down a little bit more in really the markets that we serve. So this is cooking and warming. So we're $1.6 billion in sales. The TAM in North America for cooking and warming is about $4.5 billion, and then globally, it's $16 billion. So just kind of shaping out the size of the market. And then you can see the categories that we play and how that kind of fits within our Middleby wheel overall as well as our position.

So we are #1 -- #2 in most positions. There's a few that we're not, and those are targeted growth opportunities for us. But kind of as we look at where we play, we're really heavily focused on the faster-growing parts of cooking and warming. So that is automated cooking. We talk about that a lot and ventless rapid cook. Both of them are on trend, as you would imagine, because they're solving labor needs, they're smaller kitchens, speed of service is very important. So that's why those are faster growing segments. And we're extremely well positioned in those areas and will benefit as those segments grow.

But also, as importantly, just because we're very strong in many of these categories, there are still market share opportunities that we're going after. In ovens, it's really -- we lead really in convection ovens, but there's a market called Combi ovens, we are not the leader. Now we just came out with a new product that is a targeted market of growth, and that's a meaningful TAM within the $4.5 billion and the $16 billion that we will be going after for the next several years. And then you've got warming and holding, which is a pretty big category as well. And just as we are selling solutions more and more, bringing things together, warming and holding goes very naturally and with cooking solutions, and we're gaining share in that area as well.

So we've got story of faster-growing markets and market share opportunities here as well as other things like controls, IoT, et cetera, that will drive and accelerate growth across all the categories, including fryers, ranges et cetera.

Now taking a little bit of the same slant at where we're at with ice and beverage. So ice and beverage, what's interesting to me, and hopefully to all of you on this, it's actually a bigger TAM. So it's about the same in North America. It's slightly bigger internationally. So we're going after a large market, and our objective is to have similar market shares, frankly, in ice and beverage. And I think we've made a lot of runway actually already. We are a player, I would say, innovation and beverage is not necessarily on this slide, but we actually have the broadest portfolio of solutions and it's really the most innovative and tech-enabled solutions in ice and beverage. So we're very excited about where we're at with this platform.

I'm just kind of calling out a couple of things, even though, we are actually a large player in ice, we're one of the biggest right now, but it is also interesting because there's really two categories. There's nugget ice, which we are the leader and it's a faster-growing spot, but the bigger category in ice is cubed dice. And we're a new entrant. That was an acquisition. We came out with a full-line solution. So despite the fact that it's a big part of this wheel and we've got a market-leading position already today, there's significant market share opportunities still. And then beverage, dispense and coffee, which I think we'll hit quite a bit today, including some exciting products that we have out in the hallway there so you can visualize actually what we are doing, we're kind of new on the scene. So we are the disruptor, those are both big market segments. There's a lot of trends that are tied to beverage dispensing and coffee and we're going to be going after that over the next several years, so expecting to grow.

Okay. So hitting financial outlook pretty quickly. Obviously, Brett will cover this in detail, but what does all -- some of this mean, we're forecasting over the next several years, our guidance is 3% to 6% organic growth. About 1/3 of that is coming from the market recovery, market demand, which includes both price and volume and then 2/3s is really kind of the self-help initiatives, which is our driving innovations and our go-to-market initiatives are really going after some of those market share. opportunities that we're well on our way. We do expect to expand margins kind of, as I mentioned, 200 to 400 basis points, about 1/3 of that is also volume driven, but a lot of that is our operational initiatives, we expand margins kind of across the platform.

And then as I mentioned, a hallmark of strong cash flow, which we're going to redeploy that really kind of translates to double-digit EPS growth. So digging a little bit more in setup for the team is kind of we talk about how are we approaching growth and what are we actually doing. These are kind of -- this is really our strategy here.

So the first is driving innovation. So we lead in innovation, but we are taking it to another level. Selling our portfolio as solutions, which is not an approach that we had 3 to 5 years ago, we're doing that very effectively today. Expanding into new addressable markets. It's really the ice and beverage that I talked about. But there's also international where you saw we have some of that white space. We've made significant investments in international over the last several years. And then leveraging our go-to-market engine, in which we've built out, and that is gaining traction and kind of the last piece here is really driving operational excellence across our business units.

I'm going to talk briefly about the 4 and then we're going to go kind of in a deeper dive. So what is accelerating innovation. We've made significant investments in our capabilities over the last handful of the years. Some of these were acquisitions we bought controlled companies, software companies, we bought an IoT company. We have embedded capabilities in Middleby. This is part of the investment that I put up there early on.

Our competitors do not have these capabilities. And it's unique to say, hey, we've got a connected device, but it's very different to have a business that's focused on it every day. That's a sustainable model and it's, I'll say, far ahead, I'm pointing out Open Kitchen in particular because that allows us to scale leverage of the platform and really bring a solution with many products tied to it into our customers that drives a high ROI. But I would say all of these solutions here and capabilities are accelerating the pace of growth. So a lot of the NPI that James will be talking comes out, we would not be able have that pace of NPI. And it's game-changing NPI if we hadn't made these investments. So we're taking innovation and accelerating it to a next level.

Go to market. Some of you have seen this slide before. We kind of beat on it, but this is a real thing. This is not just a concept, like these are people and teams and capabilities within Middleby, where we're really focused on the end user customer, and we've really retooled the organization, whether it's our selling organizations, our innovation kitchens, which many of you have seen. Those are easy to see because they're on video. But alongside that, a culinary team, which Middleby did not have a culinary a number of years ago, when we went from last to first. Digital marketing, which is the way of the world, and I think we're doing game-changing things there. And certainly, our key account management with our national accounts where that's really building a pipeline and how do we bring innovation in into those customers really as partners. So a lot of exciting things here that Steve will go through.

And then on that wheel, but kind of as I mentioned before how do we go after the service market. So this is a little bit behind where we're at with innovation and a little bit behind where we're at with the go-to-market, but it is in flight, like we have developed a tech-enabled service stack. We are retooling our service agents, which again are dedicated in their captive, and we are going to have a reimagining service, and we're going to be providing a differentiated platform, which is a simplified platform. It's really data driven, and again, the way I think about it is we're going on the journey with the customer on the life cycle of the equipment. And I think that opens up more equipment sales, I think it opens up, obviously, different revenue models as we think about managed service programs as well.

And then operational excellence. I mean this really started with supply chain, which kind of hit right at COVID when we started. So again, all those folks have been on defense Initially, it was, hey, we couldn't get new products and then it was, hey, everything skyrocketed with inflation and then followed by there's a whole bunch of tariffs and then the tariffs change every quarter, including this last quarter. So we are going to reposition from defense to offense kind of over the next several years, but they really did build up some strong capabilities over the years as well. So as we really leverage supply chain, we see cost savings opportunities.

And then there's significant other areas that we really built up tools and capabilities. These are, again, people and teams that are focused on product line simplification, design manufacturing and how we do product teardowns. And we're just starting on our journey of lean manufacturing, which is a unique journey because it's -- we brought a lot of people from the outside, they're focused on Industry 4.0 that are really tech and digitally enabled.

We think all this can drive 300 to -- 200 to 300 basis points. The last thing I'm going to talk about here is AI. AI is just a topic. So I really wanted to make sure the audience know, AI is real within Middleby. We started this journey two years ago. It was where we kind of identified what the high use cases were within Middleby and then really started to take an action. I think one of the big things with AI is making sure, especially when you have a diversified portfolio, how do you get all of the data accurately in the same place so that you could use that as an engine for AI to run a lot of initiatives over. But I was just going to leave you with a lot of these initiatives are in flight or already out there, and we're using them commercially. I would say, the service platform is going to be hugely AI.

It will be a huge engine for that. We're doing a lot of that commercially today, including in kind of our sales tools as well. So I would just say, I think, we -- our objective is to use this as a competitive advantage and be ahead of others in the industry, and I think we're well on our way.

Just want to talk about some of the principles of Middleby that is very core to us now, which a lot of this has to do with focus, and it has to do with leveraging the platform at scale. So obviously, the first thing is really having strategic focus after this transaction. You have a commercial team that is very much focused on this business every day. And that is going to drive benefits. And the -- as you kind of think about the customers, the platform innovation, the operational simplification and service transformation, those are our growth pillars that I went through there, too. So really, if you think about that also a great deal of focus where we're leveraging the scale of the platform, we think that we're going to have much better execution because of the way we're approaching the business and approaching the market and then just portfolio discipline. How do we keep going every day after products, customers, drive simplification to make sure we're investing dollars and time to where we need to most.

And last slide here as I've already started to run over. You can't do it without a team. I'm very proud of this team. I can confidently say this is the best team in the industry. I don't think I'm being arrogant by saying, it really is the best team in the industry. It's been assembled over time, that executive leadership team, it is very commercially focused. We are operators. We are frontline. We know the customers, we know the products. So it is a very good team to lead this next chapter. But we've built out the team around us as well. So like we have great leaders across the business. And as we've talked about strategic initiatives, we have new seats, right, because we didn't always have somebody leading channel or chains or service, et cetera.

So like we have -- I -- my only disappointment is I should have a whole bunch more names on here, by the way. But as you kind of look at some of the faces up here who have a tremendous amount of experience. Some of them came from our competitors. We still all the best, some of them are sitting here in the front row with them are with us today here, but they're leading our market expansion efforts such as in international, leading our go-to-market as we kind of think about chains and channel partner, what are we doing to transform service, leading the world in digital and in operational excellence, right?

So we have people who are focused on initiatives. So I mean, I think that has been part of the transformational journey too, really is to rebuild the structure of the organization so we can execute on all this and really we can kind of surge in our growth strategy.

Okay. So with that, we're going to move on. So we'll be talking about a lot of these strategic pillars here. The next one up is go-to-market, which Steve Spittle, our Chief Commercial Officer, is going to cover. Thank you.

I thought we were chest bumping. I know I think you missed the memo coming up or you forgot. So good morning, everyone. I think everybody needs to go hit the automated beverage and get recaffeinated outside with the Middleby equipment we have. So it's great to be with all of you this morning. I'm excited to walk everybody through all of our go-to-market initiatives that Tim was referencing. What was so exciting is so many of these initiatives are either brand new or have been completely reinvented over the last 3 to 5 years. And what is the most exciting is we're seeing those go-to-market initiatives start to pay off in customer wins right now in real time, but also setting us up for what we feel is a great run of growth over the next couple of years.

As Tim mentioned, it all starts with a portfolio. You can have the best go-to-market strategy in the world, but if you have the wrong brands, the wrong products, or in our case the wrong portfolio, I guarantee you it will fall short. And so we're very fortunate that our portfolio at Middleby is our competitive advantage. It obviously starts with the core cooking brands. On the left-hand side, the brands that have been in Middleby for pretty much from day 1, the Pitcos, the Blodgetts, the Southbends, the core cooking brands in our portfolio.

But then, it's been complemented now with the expansion into ice and beverage. And why does this matter? It gives us the full range that we can go to any customer, any kitchen and do everything in the back of the house. And fundamentally was that gets you, it gets you closer to your customers. You're close to your customers. What does that lead to you're going to gain a bigger share of their spend. Tim referenced this earlier. We've shared this slide before. This, to me, represents everything I'm going to talk about, everything on the right-hand side of the wheel are all the go-to-market initiatives that we have been working on over the last 3 to 5 years.

These are all about how do we make it easy to do business with Middleby for ultimately that end-user customer. The customer that is working the fryer, the customer that's loading a TurboChef hub and the customer that's dispensing Follett ice, how do we make it easy for them to understand and navigate Middleby. All of these go-to-market initiatives do one fundamental thing, and that is move us from being transactional with our customers, to be more consultative with our customers, and I can't stress that enough. I want to start with an explanation of the foodservice channel. I think we all take it for granted because we live it every day until you put up on a chart and it looks somewhat complex. I will walk you through it. But I would say from a high-level standpoint, even though there is complexity in what this chart looks like, I can tell you the Middleby approach to everything on here is incredibly well orchestrated.

It's not just a portfolio of brands, they're off doing their own thing. Everything up on this page that I'm going to walk through is highly coordinated across all the various channels. On the left-hand side, it starts with our brand sales team. So this is our individual brands, the Pitcos, the Blodgetts. They are working very closely in the U.S. with our manufacturers rep groups, which I'm going to talk a little bit more about our frontline selling organization.

Those manufacturers, reps, along with our sales teams are calling on the consultants, which I'll talk about, the dealers, which is our transactional arm in the U.S., ultimately servicing again that end user in the middle of the circle. As you move over to the right, again, I'll talk more about we have a dedicated national account team that again is on point for all of the big accounts over on the left hand side of things. Their goal is to again make it easy to navigate Middleby, make it easy to sell the complete portfolio and solutions that we have. And so now I want to move into some of the areas that we have on the left-hand side, and it starts with in the U.S., our frontline selling organization, which is our manufacturing rep partners. This is our true extension of the Middleby selling organization right? This has gone through a tremendous journey over the last several years.

Going back not that long ago, we actually had 156 rep groups across the entire country. As we did acquisitions, you'd have more and more groups come in, but what that led to is if you were in a place like here in New York and you wanted to open a restaurant or you were a dealer that wanted to specify a project and you want to use all Middleby, you were literally going to 5, 6, 7 different companies to help you do that. It was incredibly complex to work with Middleby. So we knew we had to do something different. And over the course of these last several years, we have pared it down to having a dedicated consolidated rep in every market.

Now we're down to 16 groups because even over time, we fine-tuned it more and more. We've gone intentionally after we've taken the best reps from Welbilt. We've taken the best reps from ITW. We've taken the best reps from Ali Group, and that's the group you see on the page today, 16 of, by far, the best manufacturing rep groups that are in the industry. Why is that critically important? Because it becomes an extension of us. Just like us, they're selling the complete portfolio of brands. They've made their own investments in their own people. You can see just in the last couple of years, we've averaged 20 to 25 additional reps on the street with our manufacturer rep groups. They've invested in culinary experts. They've invested in beverage specialists.

They have truly become an extension of Middleby. The manufacturing reps specifically help us call on our dealer channel partners, right? So again, this is the transactional arm of Middleby in the U.S. And again, this, just like our reps has gone through a tremendous journey over the last several years. In the U.S., there's roughly 400 dealers across the country and at various stages, we transact with most of them, but we took a very specific approach over the last several years to intentionally go after the top 25, knowing that, that is the group that drives volume and controls mix better than anybody else.

And you can see these are some of the biggest dealers up on the left-hand side and the top buying groups that were the right side. And as we've leaned into this group, we've leveraged our innovation kitchens for training. We've given them dedicated resources like their own commercial app. We've given them an e-learning platform with Middleby University to help better understand Middleby. And what does that ultimately lead to? We want those dealer salespeople, not just be order takers but to become, again, Middleby extensions of our sales team. And I can tell you, we have never been more aligned with our dealer partners than we are today, and you're seeing it happen, especially these last several quarters, as the business, and this primarily is focused on the general market that the dealers' coverage general market, it's institutional, it's emerging chains.

Where we are winning because how we've leaned in is these dealers historically, yes, they buy the Pitcos goes, they buy the Blodgetts, the core cooking brands. But now because of how we've leaned in and we're selling the portfolio, now they're pulling in ice, they're pulling in the TurboChef, they're pulling in Combi. And so what maybe on a project would be 3 or 4 Middleby brands has now become 5, 6 or 7. If there are any kids in the room, I just said 6, 7 I get harassed from my kids. The point is like we are gaining more market share with our dealer partners than we have had before, and it's been very intentional. And again, you'll see it happen in real time.

One of the areas we probably haven't talked quite as much about is the role of consultants in our go-to-market strategy. So this is really the farthest upstream in the selling process that you can go. So consultants are the ones they are specifying could be large stadiums. It could be B&I-type applications. A consultant comes in and they specify cooking equipment, they specify the HVAC, they specify the utilities, they do the layout of the kitchen. And then it goes from the left-hand side of doing that design process all the way through a bid process with our dealers and then ultimately to an order.

And this process that represent up here can be 12 to 18 months. So going back a couple of years ago, we frankly did a horrible job calling in the space. We didn't have a presence. We weren't focused on them. But today, we have a dedicated team that all they do is focus on consultants. So I feel like we've gone from probably being one of the worst being the best short period of time because I know if I can drive the specification here to our brands, to Middleby portfolio, to pull in the additional brands we've talked about, the likelihood of it leading to an order downstream gets obviously greater and greater. So tons of focus from our team, a dedicated team focused on the FCSI consultants. And again, it's roughly 1,500 around the world.

So, so far, I've covered off the left-hand side, going back to the channel of, again, us, our manufacturers reps consultants and dealers. Now I'm shifting over to the right-hand side of the column, which is our global national account team. So this is the dedicated Middleby team that's focused on 4 specific areas of customers. Number one, the big global chains, which I'll talk a little bit more about. Most recently, we have team focused on aggressive growth accounts. So these are up-and-coming emerging chains could be anywhere from a couple of locations to a couple of hundred locations, but the goal is to get in early with them and ride them up as they grow and to get them thinking Middleby from early days. And then the last 2 groups are retail grocery and then the ever-evolving world of C-stores, which I'll talk a little bit more about.

This group, just like our reps, just like our dealers is very focused on selling solutions, selling the entire portfolio and that is what this team is all about. We've been very intentional about the people that are on this team, many of which have come from an operator background. They have done what our customers are doing in prior life. It gives them tons of credibility, but also finding the right people that are hungry and aggressive to go after new business, not just farm existing accounts.

And so you may be saying, hey, Steve, everything you've gone through it sounds great, dedicated team selling solutions. Maybe it sounds pretty hypothetical, but let me give you a very real world example. We're very grateful to Yum! and to KFC, first of all, for letting us share, this partnership that we've embarked on over the last several years.

So this all started with KFC approaching Middleby about 18 months ago. KFC has been a very good, longtime customer of Middleby for decades. And they came to us and they said, "hey, we are interested in adding a new beverage platform to our restaurants." I have to be honest with you. I think our first reaction was wow, like are you crazy, like we did not expect the KFC to come to us with something like this. They said we do not know how to do this. We know we need to do something to drive additional day parts. We know we have to drive additional traffic. How can we do this?

We started at the Innovation Kitchen in Dallas. The Middleby team, the Yum! team, some of their suppliers on the actual product side, we literally sat in the ad hoc kitchen in the Innovation Kitchen and started working on how could we bring this idea of this concept to life. We did testing in Dallas. We did testing in our Innovation Kitchen in the U.K. And the end result is what you see on the right-hand side, a complete Middleby solution that tailored for doing milk shakes, complemented with Flavor Burst to do different type of flavors. Marco doing the dispense for their coffees, their lemonades, refreshers, TERRY Water Solutions doing the filtration and then QualServ building the complete bench on the right side.

KFC would not be doing KWENCH if it was not for Middleby. And you can go find it, they're very public about where they've rolled it out so far, which has primarily been in Canada, the U.K. and Australia. You can see their goals, you can see their targets for this. It is having a meaningful impact in those markets in KFC. And so I would go back to why is everything I've just talked about so important? Let's walk through the scenario.

If we don't have the relationship with KFC, this doesn't happen. If we don't have the innovation kitchens in Dallas and in the U.K., it doesn't happen. If we don't have the portfolio of beverage brands to complement the cooking brands, it doesn't happen. If we don't have a global network, which I'll touch upon from Taylor to do the delivery, the installation, the actual sales service, it doesn't happen. There's no one else in our industry that could have done this. And we are delivering this in real time for KFC. So a huge win for Middleby, a huge win for KFC. I couldn't be more excited about where this is going. Think about this with other QSR segments, you're seeing more and more beverage coming to life. Think about other areas where you see beverage is not just a concept. It is happening in real time.

One more case study just to round it out in the C-store market, a little bit different case study where we were approached, again, through a channel partner to work with an emerging regional C-store operator. If you haven't been to a C-store recently, I will tell you, it is not the good old days of roller grill hot dogs and bad coffee. It is a very good food service experience and the leading C-stores have heavily invested in premium beverages. But this C-store, in particular, knew that they were behind and they knew they had to do something different. Their channel partners said you have to come talk to Middleby.

And so again, we came to the MIK, we brought them to the MIK. We did testing across the beverage portfolio, across [indiscernible] portfolio. It started with rolling out the Concordia coffee machines, which are on the left side, eventually rolled out the TurboChef ovens for food service and Follett ice. The coolest thing in this scenario, which was a great case -- makes a straight case study is the operations team with C-store after we actually rolled out the equipment said, "Hey, it would really be great if we could understand better what's happening in the stores. How could we see what's happening with the coffee machines, TurboChef ovens in real time?" And we said, "Well, we have a solution for you. It's called Open Kitchen." And so we actually went back with them and we installed Open Kitchen on all the equipment, very easy to do in the field. And now in real time, they're seeing everything that's happening with their equipment in the rest -- or in the C-stores. So again, a great example of working with a channel partner, taking our core cooking equipment and layering in unbelievable technology. Again, nobody else could do this except for Middleby.

Just jumping over, I've primarily been talking a lot about our domestic footprint, our domestic go-to-market strategy, but I would certainly be remiss in not highlighting everything that we have done to expand our footprint from a global standpoint. You can see the orange dots represent all of our major sales and distribution offices across the world from obviously, Latin America, Europe, the U.K., throughout India, the Middle East and multiple locations in Asia. I can tell you, our international teams have never been stronger, and there are so many opportunities for us. One, as the global chains continue to grow, a lot of their growth, let's go back to KWENCH is in international markets. But there are so many emerging chains, chains that nobody in this room has ever heard of that are growing in places like China, in places like Europe, in places like Brazil and making sure we have the right people, the right resources, the right innovation kitchens in those markets to support that growth has been critically important.

So we are on a journey for sure internationally. In some ways, even though we have many of these offices, I feel like we're early days in the opportunities that we're going to unlock in the international markets. And I'm going to talk a little bit about the innovation kitchens on the next slide. I would also be remiss in not calling out specific to our China facilities. We have 2 manufacturing facilities in Qingdao and Zhuhai, where we are operating world-class manufacturing facilities. They're building Middleby brands, Middleby brands that we're selling both local in Asia, but we're also starting to sell -- support our customers in some international markets. So really starting to leverage the investments we've made in those China facilities.

Middleby Innovation Kitchens. We've talked a fair bit about this. It's hard to believe the flagship Middleby Innovation Kitchen in Dallas just crossed our 5-year mark, and we just crossed 45,000 visitors that have actually been through the MIK. It is by far the best way to experience Middleby. You can see all of our equipment. You can see everything together. You can see the solutions that we're talking about as it comes to life because of a world-renowned culinary team led by a certified Master Chef, Russell Scott. The opportunities that have come from having the innovation kitchens are measurable. I go back to KWENCH. I go back to C-stores. Those do not happen if we do not have the innovation kitchens.

Based off the success of Dallas, we have taken the similar blueprint. We've opened the facility in the U.K. where Middleby U.K. is headquartered up on the top right. And then the 3 in Europe have been the last several years. Madrid, Spain, the first one. And then last year, opened our very first location in Germany, in Munich and then the Venice, Italy facility in conjunction with the food processing team, which we'll talk a little bit more about. This has become part of the Middleby DNA, right? We've proven it time and time again. There's no better way. It's great to go to a trade show. Yes, you can learn. Yes, you can go to website. Yes, you can read about Middleby. There's no better way to experience Middleby than the innovation kitchens. And every day, there's a building pipeline of opportunities that come from customers and channel partners that come to our events.

My last area going around the circle, I know I hit everything pretty quickly, is digital sales. And Tim says a lot, when you think of digital sales, people say digital marketing, I think everybody says, okay, hey, do you have a nice website? And yes, we have a nice website. So it is important. But we have invested a dedicated team, a team that has a tremendous background in all things digital. One of our biggest investments, it's not the most s*** thing in the world, but has been the investment in our PIM, our product information management system. Think about all the brands we have in our portfolio, all the products, how do we make sure that we have all of the information from a digital perspective for those products in one location, one source of truth that just makes it easy to interact with Middleby from a digital perspective.

And that PIM now powers everything on the right-hand side, our app that we've given to our customers, our websites, you go through the SEOs, our product catalog. But the most exciting thing that the digital team has recently launched is what we call Middleby Shop. I encourage you, the website is at the bottom of the screen, shop.middleby.com. We launched this in September. We know that there is a continued growing market of customers out there who want to find Middleby online, right? They know they want to buy a Pitco fryer. They know they want to buy a TurboChef hub and they go online to try to figure how to buy that. But then oftentimes, they can get lost into the world of e-commerce.

So how do we make sure we grab that customer, we make it an easy experience. They better understand Middleby, but how do we make sure that eventually leads to an order as quickly and easy as possible. So that is where Middleby Shop comes in. Today, if you go to middlebyshop.com or shop.middleby.com, you can learn about every product in the Middleby portfolio. It helps you select the products if you don't know what you're looking for. You can engage with Grillbert, our AI-based customer service agent. And fundamentally, you can go in, select the products that you're interested in, build your own cart and then it seamlessly works with our reps and our dealer partners to convert that to a quote and then it's the easy button to go hit the Order button. So we're shortening the time from interest, to quote, to actual order shorter than we ever have before. And I can tell you, I keep saying today, there's nobody else that's doing this in our industry. There's nobody else that could do this in the industry for 2 reasons: One is the investment that we've made. You have to invest in everything behind the scenes, which we have. But two, you have to have the right portfolio of brands to do it. And again, this is incredibly powerful, the information we're gaining from customers, the data we're collecting from customers, but most importantly, like all of these initiatives, how are we being easy to do business with to fundamentally gain that order and gain market share.

And so I guess just to wrap it up, I know I hit everything pretty quickly, but I fundamentally do believe that we are taking market share across our respective customer markets. We're gaining momentum with our go-to-market initiatives. And I think, again, it's being driven by several specific areas, the portfolio depth, number one; a global selling organization that's aligned across markets and channels; proven integrated solutions, helping customers grow and evolve; the Middleby innovation kitchens, which we talked about has become part of our DNA; every day, customer visits are driving real opportunities; and then lastly, the digital platforms. They're not just a nice website, but a strategic part of our selling team and initiatives driving new opportunities like Middleby Shop. I can tell you, I've been in Middleby for 16 years. I can tell you without question, without question, our selling organization and our selling initiatives have never been stronger. And I'm very excited about all the work we've put in now starting to pay off and very excited about the future.

So thank you very much. Very pleased to introduce my colleague, James Pool, our Chief Technology and Operations Officer.

Good morning. I'm going to hit 3 main topics today in my 20 minutes that I'm going to be with you, or 25 minutes.

First is our ability to accelerate innovation at Middleby, which is fairly unique. And that allows us to drive a tremendous number of new products into the field every year. Secondly, I'm going to hit our continued investments in connectivity and also our investments in trying to digitally automate the kitchen. And lastly, I'm going to cover our efforts to reimagine service and our journey to improve our customers' experience with the Middleby product.

So let's dig into innovation and talk why we're able to innovate so quickly in Middleby. So we'll hit the, what I like to call, the Middleby innovation ecosystem. Our ecosystem is really strategically derived from 2 factors: Number one, our acquisition strategy; and number two, our continued investments in technology platforms. And these are what help fuel innovation at Middleby. Because we run our brands and our engineering departments decentralized, innovation starts at the brand level, right? So every new product we have coming out is coming out from a brand. And this is because the brands have the deep-seated knowledge of how to innovate the best fryer, the best combi oven, the best rapid cook oven. They have the know-how, they have the show-how and they have access to the IP to drive innovation through their organization at a rapid rate. Now once we decide to do a program, meaning we've looked at the development, we've decided it provides a meaningful customer benefit or ROI and a meaningful benefit for Middleby, then we start to layer on these technology strategies to the development program in order to fully further accelerate the innovation.

I like to call these technology synergies that we layer on our Middleby technology toolkit. And we have 5 tools in the toolkit. The first one is our common controls platform. This platform started in 2020 when we went to go standardize controls across all the various Middleby brands to give the small brands, the big brands access to the latest technology, the best UX and UI. And this has driven a lot of benefit and acceleration in R&D within Middleby because now our brands don't have to spend time developing a new control for every project that they undertake. Now invariably, they're going to have to adapt the control to the new technology, the new product that they're innovating, and that's where our company Blue Sparq comes in. Blue Sparq is a team of 30 engineers outside of Coral Gables, Florida, and they specialize in hardware and software design. And so they can take the brand's innovation, they can take our common control platform and adapt it to the new technology. Now in some cases, our company control platform will not be adequate for the new innovation. In this case, we have the ability at Blue Sparq to redesign the hardware, redesign the software platform and we can even bring that to production in low to medium scale.

Open Kitchen, that's our investment in IoT. Every new product that we have coming out of Middleby is IoT connected, and this is going to be important -- in a minute -- and I'll get to that here in a second.

Middleby Global Engineering. This is a group out of Bangalore, India, that allows our engineering teams to kind of flex up and flex down on engineering hours as needed. And then finally, our secret, secret weapon is the team at Newton CFV in Sebastian, Florida, where they are helping us innovate the latest beverage dispensing technologies on the market today, which are helping us future-proof beverage dispense for the industry. Give me one second here, I need to take it [indiscernible].

Middleby, what does this mean for our customers? Number one, it means that all the technology in Middleby is organically grown. We own all of our IP, and we're able to readily support IP. A lot of times, when you rely on a third party to develop IP and you need support on that IP, their priorities don't align with your priorities and the project is delayed.

Next, I talked about Open Kitchen and the benefits that, that brings. When we develop a new product, I said it was connected. But when we test that product, it's also connected. So our engineers are looking at that product development in real time. They're looking at the experience of that product in the field, and they're solving problems almost immediately and continuously improving that product. And then many times, they're doing that without the customer even realizing that there is an issue because we're getting the data and we understand what's going on with the product in the field.

Next, the Middleby customers -- our customers really trust our innovation and they trust our process. Now we have the brands to thank for that, but we also have Steve's global account team to thank for that because they come in and help us manage that relationship between the brand and the chain during the testing process, thus helping us streamline communication and very rapidly get that product into approval so we can be selling it to the chain.

I talked a little bit about Middleby Global Engineering, a group of 50 engineers in Bangalore, India. And these engineers are there to help the brands with new product development, sustaining engineering, cost-out activities. They also have 15 full stack developers on the team in India. And these full stack developers are helping do a lot of the digital work that Steve talked about from the PIM to Middleby Shop. The other big benefit is with our team in India, we're able to do follow-the-sun development. While we're working, they're sleeping. While we're sleeping, they're working. So we can really double time the engineering hours and crank through projects much faster with the team in Bangalore.

Now to the fun part. I love talking about innovation. We have a ton of new products coming out, both on the hot side, cooking and warming and on the beverage side. It's actually a record number of new products and a record number of award-winning new products. I don't have time to go through each product because they're only giving me 25 minutes. I can really geek out and spend 25 minutes on each product. But we have a great innovation video playing out in the lobby. So I would encourage everybody to watch the video because it goes through each one of these innovations one by one, gives you features and benefits of the product so you can better understand what's going on. The other thing that I want to point out is these aren't just minor improvements to an existing design. These are really fundamentally new innovations that bring a tremendous amount of automation to the kitchen to provide our customers that benefit to where these products drive meaningful ROI.

And I'm going to jump in. I get a pick a favorite now. Everybody would normally think I would pick TurboChef because that's where I grew up in the industry. But I'm going to pick the Pitco TorQ Fryer. This is the first ever commercialized continuously filtering fryer on the market. So what does that mean? That means as we're frying, we're continuously filtering the oil and filtering that particulate out of the oil. It's the particulate that denatures the oil, causes the oil to go bad and thus for you to have to dispose of the oil. A traditional fryer, you fry, you filter or maybe you don't filter, you fry, you filter, you have to pump that oil back in the other fryer. And so it's a process. And depending on how well you filter or how often you filter drives the life of your oil. But since we're continuously filtering in the TorQ fryer, we get near infinite oil life, thus driving oil savings and a massive ROI for our customers. I really do believe the TorQ fryer will change frying in the commercial food industry for freezer to fryer type products and very excited about it. I'm pretty excited about everything else, too.

The beverage innovations. We have 6 groundbreaking beverage innovations coming to market. I would like to point out, one of them has been on the market since the beginning of 2025, but the other 5 on the screen have either just come to market or will be coming into the market at the end of the year. And every one of these products on the screen have a tremendous amount of customer interest or pent-up customer demand behind their launch. Again, these are all part of the innovation video in the lobby. So again, I encourage you to see that. But we also have someone special in the lobby. We have Gillian Callaghan. She is the President of Newton CFV. Remember, they were that fifth tool in the toolkit, that company in Sebastian, Florida, that really has helped us unlock beverage dispensing technology by developing a unique valve that future-proofs beverage dispense. She can talk to you about the 3 products we have in the lobby, the, SYPP, the Gravity and the FizzBot. So please, when we're done, spend 5 to 10 minutes talking to Gillian because she'll be able to go through these products in great detail.

Well, the one that I'm going to pick on or talk about is the new NexGen FDM from Taylor. This is a new innovation that the Taylor team really did such a good job on in driving through so many innovative new features to this product. It literally doubled the cost of the product for the customer that we are developing it for. But even with all that technology and the features and benefits that we add and the cost that we added to the product, the customer is still seeing a less than 6-month ROI on this product that costs twice as much as the product it costs.

And why is it doing that? It's doing that because of the automation that they've embedded in the new NexGen FDM. That automation is all around cleaning and operation. On the cleaning side of it, they've increased the time between deep cleaning breakdowns from 28 days to 96 days. So that means you only have to break this machine down and clean it every 96 days, up from 28 days. We've also reduced the daily clean cycle by 50%, down from like 4 hours to well under 2 hours. And then lastly, with the new cleaning features, we can now dispense product while the machine is being cleaning, which allows our customers to dispense product at a near 24/7 rate in the restaurant, which helps them drive incremental sales because the machine is never down for an extended amount of time in the restaurant.

Tim talked about Open Kitchen. I talked about Open Kitchen. Let's do a deep dive in Open Kitchen. Open Kitchen is our restaurant automation platform. It is the only enterprise IoT platform on the market, period. And what do I mean by enterprise IoT platform? I mean it has front-of-the-house automation with HVAC, lighting and energy management. It has middle-of-the-house automation with asset reporting, labor tracking and cold chain monitoring, and it has back-of-the-house connectivity with the products to allow us to push menus for LTOs, new firmware to the products, but also to get alerts from the products to tell us when there is an issue with the product in the field so we can react to it. I will also tell you that Open Kitchen is the only OEM-agnostic platform on the market. We have 32 other competitive OEMs on the platform for the benefit of our customer. So nobody else in the industry has it.

They either have front of the house, middle of the house or back of the house, but nobody has a single pane of glass that has all 3 elements working together for the sake of automation. PowerHouse Dynamics, a group of 54 people in Boston that we acquired in 2019. While they are working to develop the latest, greatest IoT platforms, they're also supporting over 18,000 locations in between the U.S. and Europe with over 85,000 pieces of connected equipment in the field. So Open Kitchen is not vaporware, it is very much a scaled solution on the market today. Now -- getting to scale was kind of a unique challenge for Middleby. When we acquired Open Kitchen in 2019, we had kind of an, oh, no, moment when we realized that our controls were not capable of being connected. So that's what really launched the common controls strategy in 2020. And it took us from 2020 to the end of '24 to build up enough critical scale, meaning putting enough connectable controls on Middleby product where we could legitimately sell a complete kitchen connectivity package. We hit that at the beginning of 2025. And because of that, we believe we're going to be able to very quickly start to ramp up our connectivity sales at Middleby.

If you want to think about a TAM, and this is going to be the Middleby TAM. In 2025, we produced 60,000 connectable products. We connected 4,200 of those products, about 7%. So there is a lot of growth between that 7% and 100% for us over the next several years. But because we have scale, we are now able to do it rapidly, and this curve should start to go [indiscernible].

Now how do we monetize Open Kitchen? We do it 3 ways. First is our enterprise SaaS sale. Again, enterprise SaaS sale, that means we're selling the front-of-the-house automation, the middle-of-the-house automation and back-of-the-house connectivity. So it's the complete Open Kitchen platform. We're also selling connected equipment SaaS. So that means as our dealer is selling a Pitco fryer, a TurboChef Rapid Cook oven, a Blodgett Combi or all 3 at once, they're also able to sell connectivity at that point of sale, further driving installations of Open kitchen in the market. Now what I'm most excited about is in 2025, we won $45 million worth of rollouts because of connectivity.

Let me say it differently. If we did not have connectivity on these products, we would not have won had we not invested in Open Kitchen in 2019, all the way up through today and driven connectivity throughout the Middleby brands. And because we did that, we added over $45 million to our 2026 and 2027 revenue. So connectivity has been a very big game changer for Middleby.

Now with all the great innovations that we have coming down the pipe comes the need for service. No matter how good we are as engineers, things tend to break. Korey is over here shaking his head. And when they break, you've really got to put the full effect of your service team on it to make sure that your customer is well taken care of in the time frame that they expect you to. I will tell you that service has not recovered from COVID. Our service response times, our first-time fix rates are all way out there. Again, it's really because of COVID. Before COVID, we used to be able to fix a product typically in under 24 hours. Now that we're outside of COVID, we're generally around 3 days, and we're trying to drive that back down to a day.

The other challenge that we have in the industry is the way service is conducted. We go to market -- or we go to the service network through independent third-party ASAs. The challenge is these ASAs do all the same work that they do for us, for our competitors, which means everything is transactional. So there's really no way for us to strategically partner with that agent because he essentially has the same relationship with our direct customer. So what we decided to do is step back and take a 3-pronged approach to reinventing service at Middleby.

And the first step is to create a new Middleby First Service Network, and this network is going to be comprised of service agents who are exclusive to Middleby and are strategic partners to Middleby and are contracted to put Middleby's needs and our customers' needs first. We're also building out a new life cycle management tool by the name of AMI or Advanced Middleby Insights. And this life cycle management tool is designed to help the brands and our chain customers manage warranty and manage life after warranty through insights, reporting and a whole bunch of AI that I'll talk about a little bit later.

And then when I take these 2 items together, Middleby First and AMI, that allows us to expand our product offering with our Middleby Advantage service platform. Now we can start offering services to our customers to where we can start driving service revenue beyond our historic part sales.

The Middleby First Network, I think, is on the same journey as Steve mentioned about his reps. Remember, he talked about taking the rep groups down from 156 reps to 16. Well, our brands today service their customers with over 1,000-plus ASAs in the market. And again, these are all transactional ASAs. Our goal with the Middleby Service First network is to whittle that down or distill that down to a little over 100 strategically aligned service partners who are contractually obligated to put Middleby first and our customers first. We started the journey in 2025. We're continuing it through 2026, and we should be at the goal line or the finish line of our journey in Q1 of 2027.

AMI, Advanced Middleby Insights, is our life cycle management tool. This is just kind of an engineering block diagram of all the features that AMI has embedded in it. But very simply, it's here to help us manage warranty, dispatch service, produce reliability reports, warehouse data such that our customers and our brands can understand what's going on with their products at any one time. So I encourage everybody to spend a little bit of time on this slide just to see all the great capabilities that AMI is going to bring to Middleby and service.

Where I get particularly excited is now that we have AMI, we have this tech stack that we've evolved around AMI. And that tech stack includes Open Kitchen, right? So as I have issues in the field, Open Kitchen is reporting that service instance to AMI, which then creates a service ticket, which then automatically dispatches the call to the service agent. So that means a restaurant manager is no longer having to spend time on the phone calling Middleby for service.

Number two is we're embedding a ton of AI into AMI. We have this Ask AMI feature, which then queries our Middleby data lake. The Ask AMI feature is a great tool for the service tech because as that service tech is on route to fix the Pitco fryer -- sorry, Phil, or the TurboChef oven, he can type the serial number into AMI, and AMI will then go out to the data lake and will come back with a very concise, condensed service history of that product. If that technician further has a deep technical question of, "Hey, how do I resolve this issue? I haven't seen it." He can ask AMI. And if AMI knows it, he'll know it in about a second.

We also have an AI parts predictor that when a service agent is going to a call and looks at the reported fault, well, that AI parts predictor has already scrubbed all of the historic service records, and it will recommend the agent the service part or 2 that he or she needs to effectuate a first-time fix rate of 90% to 95% before he even leaves the warehouse. So he is insured to have the right part on the van every single time.

Then lastly, we have Middleby University. This is our learning management platform that is built into AMI so our service techs are able to stay current on our new products and our existing products by taking short refresher courses. And then we also track that on AMI and give them credits, which then go towards certain incentives that we offer our new Middleby First Service agents.

Now talk about Middleby Advantage. So Middleby Advantage is really leveraging this new captive network that we have with Middleby First. It's managing all the data that AMI is providing to now allow us to be able to go offer these managed services to our customers, such as installation services -- bundled installation services like KWENCH or the C-store program that Steve had talked about, extended warranties or even selling Open Kitchen connectivity. So when you take Middleby First Service, AMI and partner that or pair that with Middleby Advantage, we really do come to a point where we have best-in-class service in the industry.

I am out of time at exactly 25 minutes. So I'm going to introduce Korey Kohl. Korey Kohl is the Group President of Middleby Beverage and Ice.

And I have lost the monitor. So bear with me. So first off, I'm going to be just talking about operational excellence. Some of you are going to be wondering why is an ice and beverage guy talking about operational benefit -- excellence. Twofold. One, James stole all my good source and information. But two, I've been in the commercial foodservice industry for 43 years, 35 of those have been on the operational side of the business. So worked through a lot of different things, and I'm going to apologize as I kind of turn since I can't see what I'm talking to upfront here. We really, as part of the operational excellence, are focused on, we take the scale and leverage that comes along with Middleby. We also take the skill sets at the centralized location, and we work very, very closely with that. This whole road map is to target 200 to 300 basis points. Tim mentioned 200 to 400 earlier for the overall. As he mentioned, about 1/3 of that is from a volume impact. The rest of that comes from things like we're going to talk about right now. I'd like to talk a little bit our manufacturing locations. So we have 38 locations globally. 10 of those we refer to as our manufacturing centers of excellence.

Those are multiple branded locations. So it's not just geared towards one particular location. We have 22 independent brand manufacturing locations. So we'll take a couple of examples on the -- 1 of the 10, the Center of Excellence we'll use STAR, which is located in Tennessee. It has 11 different brands of products coming out of that facility. When we purchased the Standex hot side of the business several years ago, there are a lot of common items that were in that product portfolio that were also at STAR. We consolidated that all into the one location in STAR as far as the assembly goes. We kept the manufacturing and fabrication in Nogales, Texas, and that became a shared service center. Shared service center is a vertically integrated, high-volume facility that gives us the ability to help and support our sister companies as we do the fabrication and vertical integration.

A couple of things I want to point out about the first 32 facilities is we feel we've done a good -- there's work-life balance in your job. There is centralized -- decentralized balance in our factories. What we try to do is we have resources that are still centralized at the main facility, very dedicated, and we're going to talk about those in the next several slides. But then the factories themselves are very, very decentralized. We're responsible for our own P&L, our own engineering, our own selling, our own operations, and it allows us to be very flexible, nimble and responsive.

So the various categories that we're going to talk about are listed up here. I want to highlight that the centralized team associated with each of these, there's an expert team for each one of those categories. So again, a strong resource for all the individual brands to pull to and to work to.

Supply chain. Our supply chain teams manage about $850 million worth of spend. Again, somewhat centralized in that we have a team that allows us to negotiate steel pricing in particular. But they also work with all the brands. We use them a lot when we acquire companies, bring them on board. They're part of the onboarding process with making sure we're using approved suppliers. We have what we call the middle of the yellow pages, which is a booklet of the approved sources by category. So we have a new company come on board, maybe needs to get into injection molding. We have an improved team of injection molded suppliers out there. It's, again, one of the collaborative supplier relationships where we work very closely with these groups and to grow the business and to bring it forward.

We have a targeted savings by using these teams of roughly $35 million cumulative over the next couple of years. As part of these teams, I also want to highlight, we do have weekly phone calls. So every Monday morning at 10:00 a.m. Central, all of the supply chain teams get together. They have conversations on best practices. They have conversations on where they're running into trouble in the industry, how they're fixing it, very different suppliers and how we're working that all together.

Product line simplification, PLS, very near and dear to my heart. I've done a lot of this over the years. A lot of people will hear it referred to somewhat as 80/20. But basically, we've got 20% of our customers drive 80% of our revenue. 20% of the products drive 80% of that revenue. We spend a very disproportionate amount of time on the other 80% of the products and the other 80% of the customers. So what we want to do is we highlight very, very closely and focus on the high-volume customers that are buying the high-volume products. We take the low-volume customers, try to drive them to the high-volume products where it makes sense for them. We do a lot of things to standardize the lines, and I'll show you in just the next slide, some examples of things we are doing at Taylor to do that.

But again, all of it is about simplifying, removing complexity, making life easier on your factories, on your facilities, on all of your people and the teams. The other thing that comes with this is as we reduce the amount of products that we are trying to support and maintain, we now have engineering resources available to work on other products. So instead of trying to maintain and sustain existing product lines, they're actually developing new products, high-volume products, higher-margin products, increasing our road to profitability. So PLS, again, this is a case study at Taylor specific to Taylor, and this is specific to the freezer portion of that product line. Over $100 million in revenue today for these product lines. Through PLS, we are reducing the number of modules from 462 to 123, 73% reduction. Again, huge simplification. The idea behind this and what it did do at Taylor is it's driving 500 basis points improved EBITDA margin for -- or gross margin, I'm sorry, for this particular product and family. We're now going to take that through the rest of the freezer lines, and then we'll be taking it through the hot side of the lines as well.

Overall, on the freezers, we anticipate cutting from 1,004 independent bill of materials down to 309. One of the other benefits is by simplifying this product, reducing costs, being able to be more competitive in the market, it's going to allow us to take these higher volume products to the general market, which is higher margin, but we should see approximately an 18% revenue growth.

Tear-down in benchmarking. This is another great practice done this many times. Sometimes it can be extremely simple. And example is when we were looking at buying Kloppenberg and we're looking -- they are an ice bin manufacturer. We already own Follett, which is then also has an ice bin line. Simple thing. We took a look at the weight of the bins. We felt Kloppenberg had a cost issue. Kloppenberg bin weighed 45% more than a Follett bin. Right there, that told you we had a material issue, overbuilt, overengineered. They were extremely proud of it, but it's what was killing that business. So we went through and we worked and developed and reduced the cost. They had features like a single-piece bin where Follett's was a multipiece. Customers like each one. This gave us the ability to deliver both of those particular needs.

Where we really did a deep dive is on the ranges. So this is commercial related to Southbend. But in the benchmarking we did, we had a couple of different Southbend grills, ranges. We had some other sister brands such as Imperial and Lang. We had heavy-duty residential such as Viking. We had competitors' grills. We brought them all inside. We did a deep dive on every one of them. We took a look at best practices. We were able to take some of those best practices. As an example, you see there in the gas train between the burners, the valving, the controls, we're able to save 25% in cost of those products.

The other benefit is we found the most efficient burners in that process, and we were able to carry some of those burners, which I want to say came from our Viking line, into the commercial product lines as well. So it allowed us to take and bring overall benefit, allow us to be more competitive and a very high-quality product through the process.

Last thing I want to talk about is M-Lean. So again, this is a play on lean manufacturing, but it's taking the best lean manufacturing practices, taking industry 4.0 practices, taking the best of all those worlds and building them into our factories. We have a team, James mentioned a team in India related to the innovation side. There is also a team in India related to the M-Lean side and to the digitizing side of factories. Effectively, we have the digital twin models to where we can take -- we will take an actual factory layout. We'll set up a digital simulation of that layout, and we can rearrange and move things around and understand where the most efficient way is to lay out that particular factory.

So we've taken the digital model. We've laid it out. We run real-time data. We understand what the real savings are going to be, but then we actually take it down to the final level to where we're going into the actual workstations associated on each one of these lines. We then optimize that workstation, reduce the number of steps that are required, make sure we have the parts there when they need them. We are able, through animation, train the new hires as we bring new employees on. One of the big difficult things when you bring a new employee in is you train them, you have now taken an existing staff member, you just reduced their capacity by 50% while they're trying to train this new person in. While using these digital tools, we still do some of the hands-on, but we're able to do a lot of the digital and the virtual training with them, they can actually click the video as they are going to the next steps in the process to make sure they stay caught up, stay trained and are following all the appropriate steps to make sure we're building a very high-quality product.

Shared fabrication services. So I mentioned earlier the Standex acquisition that we kept the fabrication in Nogales, Mexico. We have 3 of these similar type facilities around the world. Some of our factories are very, very vertically integrated. A lot of our factories are not. They're more of an assembly type facility. We were paying third-party companies to do these fabrications. They were getting the margins on them. By using this facility, which was very strong technically, very high-end fabrication equipment, we're actually able to take and use those benefits within Middleby to support Middleby. Our sister companies have seen anywhere from 10% to 50% savings in products coming out of this facility. Especially if you're comparing it to things coming out of high tariff countries, we're able to manufacture it and fabricate it in Mexico, bring it into the U.S. with no tariff. It is a huge impact and benefit and has been great to many companies.

All right. With that, I'm going to turn it over to Brittany Cerwin, our CFO.

Thank you, Korey. All right. My goal today in the financial section is to bring together all the initiatives that the team has just talked about and translate those into our financial foundation that will allow us to have sustained organic growth in our outlook that we are about to present as we stand up as a pure-play commercial foodservice company. There's 4 key growth drivers that I'd like to emphasize that give us confidence in our growth strategy.

First is scale. Middleby for the past 25 years has been a disciplined M&A strategy that has grown the commercial platform to more than $2 billion in revenue. This scale, combined with the deep product portfolio serves as a key strategic advantage to accelerate our growth and profitability.

Next is innovation. As James highlighted, our commercial foodservice companies outpaced the competition in earning awards recognizing innovation. This demonstrates our commitment to our customers to drive technologies that will fuel our growth pipeline. We invest and partner with our customers to bring solutions that address their efficiency needs and address emerging trends in the foodservice industry. We already have, as we begin as a stand-alone company, industry-leading adjusted EBITDA margins of near 23%. We have conviction in our margin expansion plan that will further optimize our operating model that we began heavily investing upon through all the strategies the team just covered.

And finally, we have a strong proven track record of delivering free cash flow built on our sustained organic growth, strong margin profile and low capital-intensive operating model. This allows us to reinvest back into our business and also provide a meaningful return back to our shareholders.

Let's take a minute to highlight some of our financial profile statistics. First of all, over the last 15 years from 2010 to 2025, we've recognized average organic net sales growth of 4%. This shows the resiliency of our portfolio through macro and industry trends. Our strong adjusted EBITDA margin profile is witnessed at the 23% total company adjusted EBITDA margin, which includes about $80 million worth of corporate costs and our 27% adjusted segment EBITDA margin give us a modest baseline to build upon for the future.

While we've been executing over the last 15 months portfolio transformation, we have remained dedicated to deploying the vast majority of our free cash flow to our shareholders. We spent more than $1.2 billion or equating to about 15% of our shares outstanding over the April 2026 LTM period on repurchases. This was feasible due to our targeted free cash flow conversion of near 100% and our strong organic growth. These charts here really highlight the Commercial Foodservice segment historical performance. We just highlighted the average organic net sales growth over the last 15 years. But what that sales pipeline has also proven is that over that same time period, we executed on 40 platform-building acquisitions. Those acquisitions allowed us to build from the ground up the beverage and ice platform and heavily focused on technology investments.

On the adjusted EBITDA side, the segment margins over the last 15 years have averaged between 26% to 29%. What we want to highlight here is over the last few years post COVID, there have been 2 factors that have caused a little bit of compression in our margins. First is the macro trends associated with longer lead times, inflationary costs and tariffs. While those -- you can put together some operating initiatives to reduce those, you'll still have some short-term headwinds before strategic pricing actions can offset those. Also, we've highlighted today the investments that we have prioritized in our go-to-market strategies and our technology advancements over the last few years that we also believe will set us up and position us for growth into the future.

Okay. Now let's take a few minutes to focus Middleby's financials as a stand-alone company. These results reflect restating Middleby's financials without food processing. Starting in the third quarter of 2026, the Food Processing segment will be reported as discontinued operations. So we have reflected here the 2025 numbers without food processing. On a net sales basis, going from 2025 to 2026, we have sales growth expected at the midpoint of 5% of organic growth. This aligns to our guidance that we put out last week in conjunction with our Q1 earnings release, where we increased our fiscal year 2026 guidance to be between $2.44 billion and $2.49 billion for sales growth. In 2026, this would result in us achieving $2.465 billion in sales. We believe through our strong Q1 results of 8% organic growth that we are starting to see some inflection in the demand within the Commercial Foodservice business. On our adjusted EBITDA margins of 23%, inclusive of the corporate costs, we believe our margins are resilient right now as we navigate some current mix impacts and the headwinds in the first half of 2026 from the carryover of 2025 tariffs.

Also, as announced in our most recent quarterly earnings results, we are facing current inflationary headwinds in the areas of freight and control spend associated with AI. And finally, a number we are greatly proud of is our adjusted EPS growth that we expect in 2026 of high single-digit 9% growth.

Let's walk through the bridge going from 2025 actuals to 2026 expected results. This chart is going to highlight some of the key drivers to the changes and headwinds that we faced coming into 2026. You will see a $0.34 impact associated with increased interest costs as last year in September of 2025, we had the maturing of our $750 million convertible notes. Those notes had a stated interest rate of 1%. So the $0.34 represents our increased interest costs that we'll face through Q3 of 2026. Also, you will see a significant increase in stock compensation costs of $0.43. This is coming off the fiscal year 2025, where we had several reductions in the performance tranches of outstanding vesting.

Now let's talk about the fun stuff, the growth drivers. The $0.09 improvement you will see is associated with the over $200 million dividend that is expected once we spin food processing. Also, you will see a 45% increase in adjusted EPS that was driven by the $565 million of proceeds that we received earlier this year as we sold 51% of our investment in our Residential Kitchen segment. And finally, the number that's the biggest on this chart is the $0.80, which supports our strong organic growth.

Let's go into what you've all been waiting for. Even though Tim stole my thunder a little bit earlier in the presentation, let's walk through in these next few slides, what are our key drivers of growth and targets for the next 3 years. On a net sales basis, we expect to achieve 3% to 6% organic revenue CAGR. This is driven 1/3 by industry growth and the other 2/3 is really executing on the initiatives that the team put forth.

On the adjusted EBITDA side, we're expecting to achieve 6% to 9% organic CAGR. This is driven by our volume and our operational excellence initiatives that Korey highlighted earlier. Using those same volume-driven scale and operational excellence initiatives, we also expect to expand the adjusted EBITDA margin by the year 2028 within a range of 200 to 400 basis points. This will also include some impact of favorable mix and our disciplined cost management and sustaining margin expansion.

Finally, on the adjusted EPS, we expect our 3-year target to be a 10% to 15% EPS CAGR. This will be supported by the net sales growth, our margin expansion and our disciplined capital allocation priorities.

So let's talk about the net sales growth initiatives that are ahead of us. As we said, 1/3 of our expected growth is to come from the industry growth. We believe post-COVID, we are coming off some pent-up demand in the replacement cycle, given prolonged cost pressures faced restaurant operators. Also, within this industry growth, we have included what we believe as some of our realized pricing that will go through expected on an annual basis of about 1% to 1.5%.

Now here's where the exciting growth initiatives come in and really center around everything that James, Steve and Korey talked about. First is through product innovation. This is a core competency to Middleby. Our customers value it and expect it as they're addressing the needs of their business. Our recent investments in IoT, automation and particularly in the Beverage and Ice segment have positioned us to address industry trends and demand with a clear line of sight to organic growth. But let's not forget, embedded in Middleby's DNA is its true pipeline on the cooking and warming side of product innovation. James highlighted one of them, the TorQ fryer by Pitco, but also the NexGen Grill by Taylor will also provide a strong pipeline into the future.

Then let's move into the go-to-market initiatives that Steve highlighted. We had a complete transformation of our go-to-market strategies that made Middleby easier to do business with. This included consolidating our third-party reps, enhancing our partnerships with our top dealer and chain customers and really putting differentiated tools to support our sales strategies such as the Middleby Innovation Kitchen and extensive digital training and educational content to really showcase the breadth of our portfolio and the expansive ROI our customers can get from our equipment.

Now where the most recent investments we've been talking about is on the aftermarket sales and service side. As Tim mentioned earlier in his slides, parts and service combined with the replacement business of Middleby represents 56% of our 2025 actual sales. This is a solid recurring revenue base that through the advancement of our service network, we expect to expand upon. We are going to be leveraging Middleby's scale and relationships to launch a digital platform that provides real-time insight to addressing and improving quality throughout our products. We feel that these investments will and have made our growth strategy focused around the voice of our customer and position us to deliver sustained organic growth ahead of what we anticipate from the industry.

Now let's dive deeper into the 3-year expected margin expansion on adjusted EBITDA margin. Starting in 2025 at 23%, we expect our range by 2028 to be within 25% to 27% of adjusted EBITDA. As discussed on the previous slide, we expect that volume will continue to drop through with strong contribution margins in excess of 30%.

Next, we want to focus on what Korey highlighted earlier, and that is by leveraging Middleby's scale to expand our margin. First, is primarily within the supply chain areas. We have been able to centralize spend and evaluate those for future savings. Also, we've built up 10 manufacturing centers of excellence, which really have gained manufacturing efficiencies across product technologies. Korey also explained about us expanding our capabilities in-house to drive divisional operational excellence. We're utilizing this through product teardowns, through product line simplification and lean manufacturing. Those divisional case studies that Korey highlighted are going to be proven and repeatable tactics that we can drive margin expansion throughout the rest of the platform.

Finally, as our customers adopt new product innovation, we realize and re-realize the scale in manufacturing those. It will further expand our margins and improve our mix. But our mix benefits don't stop there. What we'd like to do over the next few minutes is take you on a journey of where Middleby has been in our portfolio Pareto initiative. The first 3 lines on this chart are really where Steve had focused on the go-to-market initiatives. So we have been driving organic growth that we are starting to realize here in the beginning of 2026 and believe will position us for sustained growth through 2028. But that consolidation effort that Steve mentioned is where for the service agents, we feel we can also gain great leverage by building strategic partnerships on the aftermarket service. The last 2 lines on this chart are where we're just starting to scratch the surface. The product line simplification is where we will continue to have concerted efforts to drive this through the platform. The margin expansion will be realized through sourcing, through scheduling and through the manufacturing operations.

On the commodity spend side, Tim mentioned this earlier, our global supply chain team has really been operating over the last few years on a defensive mechanism, really trying to address those macro trends of long lead times, inflation and tariffs rather than being able to focus more of their time on the strategic pricing and sourcing initiatives that will position us for further margin expansion into the future. But we've embedded in all our division leadership as we have annual budget and business reviews with our division leadership and our executive leadership team. The focus is on financial growth, but there is detailed analysis that supports those models using customer and product volume and profitability to address any needs of rationalization or strategic initiatives to address outliers.

A prime example of this was as we were within COVID, Middleby faced a regression in top line in front of us. And we made the strategic decision to rationalize over $100 million in net sales across 2 of our product lines in commodity products that we offer to the market. This positions Middleby to come out while on a lower top line, a more profitable and seamless operating model going forward. We believe that this list will expand and evolve as we continue to provide a consistent margin opportunity. Our strong free cash flow and balance sheet position is evidenced by these statistics.

Our targeted CapEx in the near term is expected to remain under 2%. This is where our historical spend has been and primarily used to invest back in our manufacturing operations and provide automated equipment to gain efficiencies in our operations. As we mentioned earlier, we have strong free cash flow generation and expect that in the midterm to remain at near 100% of adjusted net earnings.

By the year 2028, we expect our free cash flow to be near $400 million, given our profitability of the company, our organic growth strategy and also the low capital-intensive nature of our business. Our targeted net working capital is expected to be around 20%. But as mentioned in the product line simplification and other operational excellence initiatives, we expect that we will benefit from simplification driven through the manufacturing operations here.

And finally, through all these statistics, we will remain balanced with a 2 to 3x targeted net leverage, which we believe supports our strong balance sheet position and ability to execute our capital allocation priorities as shown here. Our first priority is always to reinvest organically within the business. We believe that we have to maintain the growth of our existing business by investing in the capital expenditures to improve operations. The return of capital on a consistent and meaningful basis to our shareholders remains a disciplined priority for us with deploying the majority of our free cash flow towards share repurchases.

Finally, Middleby was built on an M&A strategy. And while we have scaled the platform, we will continue to evaluate any potential opportunistic or strategic acquisitions that could enhance the portfolio. As previously noted, we will maintain all of these priorities while operating within a 2 to 3x net leverage ratio. Hopefully, as we believe with a conviction, this presentation has demonstrated Middleby's foundation of historical performance and as we start our next journey as a pure-play commercial foodservice business is poised to benefit from immense organic growth opportunities in the near term, a renewed focus on clear strategic initiatives to optimize our operating model and deliver solutions to our customers while returning consistent value to our shareholders.

All right. At this time, I'm going to call the rest of the management team back up, and we'll open it up to Q&A.

I'm going to be taking questions. There should be some mics in the room. And if everybody could just say their name and their firm before they ask the question for the webcast. So we can start with Mig.

I'm Mig Dobre with Baird. I appreciate the effort that went into the presentation, lots of detail here. I have a lot of questions, but I'm just going to start with one. Your commentary on service, I found to be very interesting and very different than what I've heard from Middleby in the past. And I just want to maybe clarify a couple of things here. So as I understood it, you're sort of applying a very similar strategy to what you've done with the reps to your service operation, but these folks remain independent third parties. At the same time, you talked about Middleby being able to derive some service revenue. So that there are third parties, presumably you've got revenue [indiscernible] to them. I'm trying to understand that distinction and that difference.

And in optimal state of Q1 '27 and beyond when you have this network all set up, what does that do in terms of driving your ability to grow? How does it differentiate you relative to your competitors? I mean we all know in that ITW has a pretty comprehensive service offering. What would you look like relative to something like that?

I think we're trying to build a different service model. There's -- ours is less capital intense. So we're really trying to drive it on the brains, the data, how do we stay with that customer on the life cycle. I think that's why the AMI platform that James talked about is so important because having information, just like we see with IoT is kind of a game changer. A lot of customers don't know what's happening in their own operations and being able to track data over time, data is kind of power and then you can then tie that to an ROI of a piece of equipment, which is very important and you can tie that into the upfront sale that is very powerful.

So I would say just that whole data element is something that's unique relative to others in the industry. Also being able to do that scale, right? So I mean, as we talked about leveraging the platform, a lot of you can do that across a whole kitchen, whether it's ice machines, fryers, speed cook and you can facilitate customer understanding really what's going on across the kitchen, we think that's competitive advantage. So the first benefit of that is frankly selling more equipment because if you can do that, then you can really tie that into an ROI to a customer. And again, you're talking about one of the biggest pain points to the customers, which is service, right? It is not only a nuance, but it takes your kitchen down, which you've got a loss of revenues, it's an employee situation and service is very expensive. Maintenance -- there's a huge ROI just by avoiding a service model. So controlling that aspect, there's a lot of value there. I think then having the captive network, I mean, then you're aligned and tied together. So maybe we don't have the trucks and the parts, but we don't necessarily want to manage all that. We just want to have aligned partnerships that can execute the same understanding and expectations of KPIs, et cetera. So [indiscernible] one is selling more equipment sales with higher ROI to the customer with less pain points. And then it's like what kind of managed service programs can you have, how you tie IoT together with services. There's a number of different revenue models that you can have without actually having all the feet on the street, trucks, et cetera. So that's kind of the general direction [indiscernible].

Let's go to Tami.

This is Tami Zakaria from JPMorgan. I was wondering if you could shed some light on how long the replacement cycle for cooking equipment is? And over the life of the product, what's the average service opportunity versus the original cost of an average equipment? And how much of that do you capture now? And is there a target to raise that to a certain level by 2028?

[indiscernible] I'd like to start the first part. When we think about the replacement cycle on the equipment, I would say it's tough because, obviously, we have a broad portfolio of products. I would say 7 years is kind of the rough average life that you would expect. We've talked a lot about that just given that we feel like we've had this deferred replacement cycle, which is not what you're asking, but I would just be remiss in not mentioning that another great opportunity we feel like we can capture some growth. But -- so 7 years is just say, the average life cycle. And then maybe my tip tick over, James, is really that first year or first second year when the product is in warranty is obviously when we have the most visibility into what's going on with our customers from a service-related standpoint. We oftentimes do lose visibility once it gets out of that time frame because it's going to a broader range of people who can fix it. So I think that's obviously a big benefit to what we're doing with the AMI platforms, maybe.

Yes. So I would say one of the big drivers of AMI is really giving the brand visibility to understand what's going on in warranty and out of warranty such that we can improve our products. When I was running engineering, I used to tell my team, the single biggest cost reduction we can do for our products is making them more reliable, avoiding service in that first year, second year, however long that warranty period is. And having good actionable data will help the brands achieve higher levels of profitability through lower warranty spend. AMI is also, along with this network, going to enable us to unlock these managed services. Even though we're not running the calls, we will still make margin on these managed services such as bundled installations, PMs and extended warranties where we can start moving our service revenue from 17% slowly tick that up a few percent. So that's what we're trying to do with service. And as Steve said, anybody can sell one product. It's a second product that's the hardest to sell because how well you take care of that product in the field will dictate how apt that customer is to buy another product from you. And with our renewed service effort, we believe that service really can be our best-selling tool.

Jeff Hammond, KeyBanc Capital Markets. Maybe to focus on the financials. One, are you assuming in that 10% to 15% earnings growth that it's 100% buybacks? Or how should we think about the split of M&A and buybacks going forward? And then it looks like in the bridge, your incremental margin is kind of 40% to 50% to get to those incrementals, which seems pretty healthy. So I'm just wondering a little more color on how you hit those incrementals and maybe what opportunities there are to take out of corporate along the way?

So first, let me start with like the assumptions that we put in there on the adjusted EPS earnings. So we kind of assumed that there would be a healthy balance between about 50% going to share repurchases and some debt repay down as well over those periods. As we look into the margin, incremental margins there, we've got a few things right now where we've got some mix headwinds that we talked about, but we also believe a lot of these operational initiatives that we're putting through for operational excellence will continue to have the benefits in those margins and really allow us to expand and achieve those as these volumes grow.

So I think we believe that really our margin expansion that we're showing, it's not based on solely volume growth. It's really dedicated by what we've been putting through the factories and what we've been focused on strategic initiatives that should really help us expand those margins. And also probably the final thing, too, is the product innovation. So James highlighted, we're selling equipment that is higher technology based, which drives a higher ROI for our customers and associates with the higher sales price. So as you continue to get leverage on those new products, it will improve the mix as well.

Just a first question on the residential -- the forecast that you laid out, does that assume ownership of your stake in the residential business? Or is that just optionality?

Yes. So the ownership interest, the 49% that we'll start to get in Q2 of 2026 associated with the residential kitchen business. We've excluded those from our adjusted EPS projections as we really don't believe that's core to our future platform. So that is not baked into any of those EPS assumptions.

For potential monetization of it or...

Not at this time, not in the near midterm.

Okay. Maybe a separate one on the -- Steve, you spent a lot of time going through the investment and the work you've done with a lot of those high-profile brick-and-mortar dealers. Maybe just speak to kind of how the online channel is developing. Clark is now almost a $4 billion entity. So Middleby's approach in terms of how you plan to participate with that fast-growing segment of the market and what implications that may have in terms of -- as you think about mix and pricing going forward, if there's any kind of an interplay there to the extent you become more active in that space?

Yes. Thanks for the question. It's a very good question. I think that if you look at the big e-commerce dealers, obviously, Clark is by far the biggest. They've had a phenomenal run growth, actually being recognized as the dealer of the year in our industry next week at NRA, which is appropriately so. There are a handful of other pretty significant e-commerce players where we have a very strategic relationship with. I will pivot to saying this emphasis around more and more customers going online by product is the big driver of why Middleby Shop is so forth, right?

But we have to control our own destiny because it's great to have our products have a strategic relationship with Clark or others. But it's also once you go to a website that maybe [indiscernible] there, but if it gives you the opportunity to potentially move to a different product because of how it's being displayed online, that's obviously what we're trying to avoid with Middleby Shop, right? So I think the fact that we're investing so much in this digital platform, again, is to control our own destiny to make it as sticky as possible between that online customer coming and buying Middleby.

It's still very complementary to our e-commerce partners, right? Because in many cases, we may take that calling opportunity from Middleby shop and actually still run it through a Clark or [indiscernible] as an example. So we feel like we're strategically aligned with them, but it's trying to do our own things that complements them to make sure we can bring as much of that customer to Middleby as possible.

[indiscernible] has another question.

I just had a couple. I may have missed it, but one CFO question. I didn't catch what leverage would be immediately post spin. And then just second, with the service network, which sounds really interesting, how are you incentive -- I love the idea [indiscernible], but how are you economically incentivizing them to do so?

On the net leverage right at time of spin, we've estimated that to be at about 2.8x. But as we get through the back half of 2026, we expect to delever down to about 2.5x.

So then I will -- I'll take the part B of that. We will have certain metrics for the agents and then they will be bonus based on a percentage of their warranty labor dollars.

I think it's also very appealing for our partners to be partnered with [indiscernible]. They -- as you guys said, it's very transactional in nature. And I think the rep model is a very good example of it. Those reps are stronger in the market because they're partnered with Middleby. They actually can make more money because they're selling higher technology, but we try to align our incentives where if we make more money, they make more money. And I think given the uniqueness of the service model, they also see the merits and the opportunities of that. So they see that as a big opportunity that, frankly, we're bringing to them.

Mig has another question.

On beverage, I feel like there was a lot that [indiscernible], are you planning on disclosing how cooking equipment or hot side versus cold-side beverage is performing on a go-forward basis? And I have a few other follow-ups.

I think -- I didn't quite hear it, but I mean, obviously, we gave some information.

No, no. I'm saying going forward, are you going to be providing insight into how beverage is growing relative to the hot side?

I think...

Yes. Post spin, we're going to be evaluating the platform in terms of the segmentation that we will be reporting per GAAP. And we will continue to evaluate what those specific segments will be. But I think no matter what, in our quarterly discussions throughout this year and on to next year with the beverage innovation that's in front of us, we'll continue to highlight how much of our growth is really being driven by the 2 platforms.

I think a lot of this is you'll see a release annually and then perhaps a little bit more regular basis.

In the 3% to 6% organic growth plan, how is beverage comparing to that company average?

We're not disclosing that, but you -- from the discussion, you can see, right, there's more market share opportunities and there's a significant pipeline. But I don't want people to need anybody to believe that cooking and warming is not growing and there's not significant opportunities there as well. We pointed out some markets that we think we can expand into, plus there's a significant part of the pie, which is faster growing. So I think we're baking in growth on both sides of the business.

Just from my perspective, it seems like this is where your customers are innovating the most. So if they're innovating, then that presents opportunities like your example with KFC, for instance, right? And then if I remember correctly, the slide where you were showing the margin breakdown, the lift from a margin standpoint seems to be disproportionately concentrated in beverage as well. So if you're growing faster, you're going to have more margin expansion, which is why I was trying to tease out how much of this plan that you're putting forth here is really kind of driven by beverage itself and then maybe, I don't know how much when you think about that platform, where are you from a scale standpoint and product standpoint? Do you need to do to basically concentrate M&A over the next 3 years here, specifically? Lots in this question, maybe [indiscernible] can unpack all of that.

Okay. So I'll take part of it, and then Steve can jump on after that. So I think one of the things that people didn't understand is actually a lot of the M&A that happened over the last several years, which maybe was a bit confusing was in ice and beverage some of those products. You mentioned labor burst, which is part of the Punch program. I mean, things of nature like that, which are now taking hold. But also a lot of the investments in technology as well, the CFVs, the blue sparks like that is where we've got a strong pipeline of new products coming out. So it's a mix of a lot of those investments that were made that were M&A, both from a technology and from a product standpoint. So are there other opportunities to acquire within the beverage space? Yes, there are. But actually, we're pretty excited about -- if you look at the platform today, it's the most complete portfolio.

So one of the advantages is most of the people competing in beverage don't have ice. So actually bringing ice and beverage together is a competitive advantage and a lot of coffee players don't have beverage dispense. Beverage dispense don't have ice cream machines. So when you look at that, it's actually the most complete portfolio out there today. It does not mean that there's not M&A opportunities, but we've actually done quite a bit to scale that platform over the last 3 or 4. It kind of goes back to the beginning. These are some of the things I don't think shareholders fully appreciate until it really is the game time and [indiscernible] get traction. And luckily, I mean, our customers are now focused on there. And I think they're focused on higher innovation. I mean innovation is hitting the spot of the types of products that are coming out in the marketplace right now. So we think we're very uniquely positioned as the new player, and that's why I say we are a disruptor in beverage right now.

One more question for Tami, and that's going to be our last question.

Tami Zakaria from JPMorgan. One of your slides mentioned international general market was down 10% last year. Could you tell us what the overall industry you think was, up or down in those regions that year? And stepping back, do you think price competition from maybe Chinese or local players was part of the reason why we saw that decline. And lastly, overall, do you plan to compete on price or service or innovation or a combination of these as you want to take share in international general market going forward? start on that.

I'll do my best. I think maybe I'll go backwards and see if I remember as we go. I mean I think no matter if we're selling in the U.S. or selling in Europe or selling in Asia, I think the selling approach is always the same. It think it always starts with great product. I don't think we've ever been a company that has sold [indiscernible], right? I think we have to have, obviously, competitive pricing, but it's more about are we delivering a great ROI for our customers. That holds true. I don't care what part of the world we're in. That has always been our approach and will continue to be our approach.

I do think now that to piggyback on we've talked a lot about services. Now when you layer in service globally, that is a competitive advantage. So it's like you kind of take price off the table a bit because back to what James said, I can guarantee every chain customer, especially if you can guarantee great service will pay [indiscernible]. So it takes pricing off the table.

Your question -- your first question around just how we thought about international general market last year. It's tough in that rolled up slide because I feel like we actually have made so many great inroads in markets like Europe have -- doing great, markets like the Middle East that we've actually made great investments in the last several years, which is obviously the tough spot right now.

Asia is another one where we've made a lot of great investments, which I highlighted but I feel like there's just so much going on there. It just is a tough market right now. So it's kind of like the same thing that Tim talked about where with the chains, we're winning, we're losing or as you said like we're doing a great job. It's just those inherent markets have just been tougher last year. So I still think we're -- as I said in my slide, I think about the progression of people, resource, investments in those markets positions us well as we ever have.

But I think a lot of the challenge last year was focused -- concentrated on Asia. And a lot of that was geopolitical. But as he just said, we actually have made significant strides in Asia in terms of our localization efforts, the quality of the products coming out. So we're actually very well positioned in Asia, particularly China if those markets also come back, which we think they will.

[Break]

Good afternoon, everyone and thank you for joining us today. My name is Rob Fagan, Vice President of Finance of Midera Food Processing. On behalf of the Midera leadership team, I am delighted to welcome all of you to our inaugural Investor Day presentation.

Please note that today's presentation will include forward-looking statements, which are subject to risks and uncertainties, which may cause our actual results to differ materially. You may find a more detailed description of risk factors in our recent Form 10 filing. We'll also present non-GAAP measures, which are reconciled in the appendix of today's presentation, which has been furnished with the SEC and is available in the Investors section of our website. One specific item to note, references to stand-alone adjusted EBITDA reflect management's review -- management's view of profitability fully burdened by our estimated stand-alone corporate costs post spin. These are not reflected in our historical segment reporting results and not fully captured in the Form 10 carve-out financial statements.

Today is an important and exciting milestone for Midera Food Processing. Our goal is to give you a deeper understanding of who we are, how we operate and how we think about long-term growth and value creation. Before we begin, I'd like to briefly walk you through today's agenda, so you know what to expect. We'll start with Midera Food Processing CEO, Mark Salman, who will outline Midera's strategy, a company overview, its market positioning and playbook for long-term value creation. Next, Mark Bowie, Midera Chief Operating Officer, will highlight the company's margin expansion initiatives, including maximizing the value of our recurring aftermarket business, along with driving operating efficiencies through innovation in the Midera Operating System.

From there, you'll hear from our Group Presidents, Peter Jongen, Andrea Colussi and Scott Ruhe, who will provide insights into the protein, bakery and snack market categories, respectively, highlighting market trends, examples of how Midera harnesses the collective strength of our brands and their leadership to deliver value for our customers, followed by their strategic priorities in support of our value creation playbook. Next, Midera's Chief Strategy Officer, Matt Fuchsen, will share his M&A framework and how the company plans to build upon its proven track record of generating shareholder return through disciplined execution of inorganic initiatives. Our Chief Financial Officer, Amy Campbell, will then review Midera Food Processing's financial profile and how we expect to combine a strong balance sheet, substantial cash flow generation and a capital allocation strategy to maximize shareholder return. Following the financial portion of today's presentation, we'll open it up for a Q&A session before final words from our CEO, Mark Salman.

I'd now like to invite Mark to the stage and ask that everyone please enjoy this brief 3-minute video before we get started with today's presentation.

[Presentation]

Thank you for attending our Investor Day. Midera, we are a global industrial automation company that feeds the world with our customers. We focus on further processing where the value added is in the food manufacturing process. We solve mission-critical problem every day to the world's leading food company. Why should we invest in Midera?

One of our strengths is our established leading brands that have been run by a leadership team that is very entrepreneurial And motivated to deliver strong financial results. Another strength is the favorable industry mix that we have across our end markets. These trends tend to create durable tailwind that pushes our revenue and earnings. Another strength is our clear growth strategy built on 3 strong pillars. Those strong pillars will enable us to deliver 5% to 7% organic growth by -- over the next 3 years. Total line solution, market penetration and aftermarkets. You should invest in Midera because margin accretion is a core focus of our value creation plan. Through mix improvement, operational excellence and scale, we expect to generate approximately 500 basis points of margin uplift by 2028.

Another reason you should invest in Midera is our proven M&A growth engine. We earn the right every day to consolidate in an industry that is $70 billion strong and highly fragmented. We are the acquirer of choice with long-standing target relationships. Last but not least, our strong balance sheet. Our strong balance sheet will support the growth, inorganic and organic that we have in our plans. In other words, we know that our balance sheet is our weapon for shareholder value creation. Taken together, this position Midera as a high-quality, differentiated automation platform built to compound value over time. That is why Midera and that is why now.

Our success starts and ends with the customer and the value we consistently delivered over the past 2 decades. Midera began its journey in 2005 with the first acquisition of our protein company that put us into that food processing world where we are solving complex problems for our customers. I joined Midera in 2015 coming from the bakery side and bringing a perspective of a customer of a food processing supplier. At that time, Midera was shy of $300 million in revenue with 14 brands and a substantial untapped market potential. Since then, we have nearly tripled the scale of our business, adding another -- for a total of 33 brands and deliberately focusing on the growth of our protein and bakery platform and recently in 2024, entering the snack food platform. A core competency of Midera is disciplined acquisition and successful integration of our targets. We have added more than 30 brands while preserving entrepreneurial leadership and customer intimacy across the brand level. Importantly, this growth was not financial engineered. It is built on pure customer value.

Today, we operate in high-growth markets with shifting consumer preferences where customer need for automation, scalability, reliability and innovation is needed more than ever. This combination, customer-led strategy, proven execution and structural market opportunity is what has driven our performance to date and positions Midera for continued compounding ahead. The spin of Midera is designed to unlock the full potential of a focused pure-play food processing leader in innovation equipment across protein, bakery and snacks. We operate leading brands across a broad range of food categories, unified by high-performing total line solutions that starts with preparation and mixing and end with finished products. This allows our customers to partner with a single trusted platform rather than manage a fragmented supplier base. Everything we do is focused around our customer, adding value to our customer. That means improving uptime, yield, labor efficiency, food safety, scalability, outcomes that directly impact customer profitability.

We anticipate customer need. We invest ahead of demand and we innovate highly engineered solutions that enable our customer to grow profitably in a dynamic, fast-changing food market. This is where Midera win, not price-driven equipment but the highest value, most mission-critical part of the processing cycle, where automation, reliability and seamless integration matters the most. As Rob presented earlier, this is the senior leadership team driving Midera's strategic vision and day-to-day execution. Collectively, this group brings decades of experience in the industry. And behind this leadership team is another bench of company brand presidents that have been leading their businesses and delivering consistent results for years, talent that ensures resilience and scalability, which is what we need as we pursue our growth strategy.

Who is Midera? Midera is a scaled global automation platform with strong financial performance and a differentiated operating model. In 2025, we generated $850 million in revenue and $140 million in EBITDA, including our estimated stand-alone public company cost, demonstrating both scale and earning quality at day 1. We operate globally with 33 best-in-class brands supported by 20 localized sales and aftermarket offices that keep us close to our customers and responsive to their needs. Approximately 40% of our revenue is highly recurring, coming from aftermarket sales, which carry attractive margins and benefit from a massive installed base. From a market perspective, we have achieved leadership positions in both protein and bakery and having recently entered the snack food category, we are now expanding both our addressable market and our long-term growth opportunity.

Geographically, we are truly global. 44% of our revenue is generated outside the U.S. with 31% in the EMEA region and growing in large underpenetrated emerging markets in Latin America and Asia. At the core of our differentiation are the 20 total line solutions, which enable customer to partner with Midera across complete systems rather than individual pieces of equipment. We recently added 3 new total line solutions and continue to expand capabilities in this critical growth pillar, driving large orders, higher switching cost and incremental aftermarket attachment. Taken together, Midera combines scale, recurring revenue, global reach and differentiated technology, positioning us as a premium food processing automation company with a clear path for sustainable value growth.

One of our differentiator are the premium brands. For investor less familiar with food processing, this slide matter more than it may appear. The brands you see here command pricing power as category leaders that customer actively seek out and rely on mission-critical operations. What's unique about Midera is what we presented, is the entrepreneurial spirit and competitiveness of each brand while connecting them to total line solutions that solve bigger and more valuable problems for customers. We operate as a decentralized brand-driven company where decisions are made quickly and the closest to the customer, not in a corporate bureaucracy. This combinations of strong individual brands with a platform level integration is a key competitive advantage and a major driver for our growth.

Another differentiator is our global footprint. And there are 3 takeaways from this slide. First, our operational footprint serves customers and sell products across 6 continents, allowing us to support food producers wherever they operate and wherever they want to go. Second, we have invested heavily in this footprint over the past 3 years, particularly in our global innovation centers. These centers provide unique customer value, enabling collaboration, testing, co-development of solution and positioning Midera as a true technology and innovation partner, not just as an equipment supplier. Third, we are now accelerating returns on these investments. We are monetizing these footprint with organic growth, deeper customer engagement and expanded total line solutions, while also leveraging through disciplined M&A to fill white space and enhance scale in a highly fragmented business. Taken together, this platform is not just reach. It is a strategic growth engine for Midera.

Another differentiator is the high-value sandbox we are in. Let me briefly define where Midera specializes in. We're not in primary processing. We're not in secondary processing where the kill and deboning happen. We are in further processing. And very clearly, we are the leader in this category with a strong emphasis on our thermal processing. This is where the most dense and complex solution are derived for the customers. If you look at this page from left to right, what you see is more commodity on the left and more value-added products on the right. When a customer wants to launch a new type of bread or a new hot dog or whatever is the product that we specialize in among our 29 total line solutions, decisions are made around quality, consistency, food safety, yield, automation, all of them happen inside the 4 walls of a further processing plant. This is our sandbox. This is where Midera brings the best value, solve the hardest problem and becomes a true partner in our customers' growth and profitability.

Now that you know who we are, let us tell you how we're going to grow and drive value. Over the 10 -- over the past 10 years, end market CapEx has delivered low to mid-single-digit growth across protein, bakery and snacks. Diversified exposure across growing end market drives demand and limits cyclicality and long-term demand driven by underlying consumption growth, evolving consumer preferences and equipments replacement and/or upgrades. The total addressable market for food processing is approximately $70 billion. The top 5 players represents around 10% of the revenue in that market, with most other equipment manufacturer focused on single category or localized markets. And while disciplined M&A remains an important lever, we believe heavily in engineered-led innovation, customer centricity and total line solutions that have already driven and will continue to drive organic share gains.

In a fragmented market of this size, share shift is a powerful growth engine and Midera is well positioned to capture it. One of our many strengths are the favorable industry trends that we see in this marketplace. I'm not going to detail each of these individually but every one of these drivers causes our customers to call Midera for equipment solutions. Consumer demand and global population growth continue to drive volume and product innovation across food categories. At the same time, increasing requirements around plant automation, labor efficiency and food safety are forcing customers to upgrade and rethink their processing lines. In an increasing uncertain world, food security concerns are accelerating the localization and industrialization of food manufacturing, driving new plant builds and capacity investments closer to end markets.

Let me be very clear on Midera's growth strategy, which is differentiated in its value for customers and ultimately for you, shareholders. Everything we start with is for the customer and it ends there. Whether we're delivering total line solution, launching a new innovation, penetrating a new geography and expanding our service and aftermarket platform or executing our disciplined M&A, every decision we make runs through a very simple filter. Do we materially improve customer outcomes in this decision? That customer-first mindset is powered by 4 integrated growth pillars, total line solution, market penetration and aftermarket. They reinforce one another, accelerating growth and creating a compounding flywheel. We'll walk through each of these pillars today but the results already speak for themselves.

Over the past 6 years, this strategy has delivered approximately 12% of compound annual growth. And a focused stand-alone pure-play food processing company with a sharper execution, faster decision-making and disciplined capital allocation, we believe the opportunity ahead is even greater. This is a strategy to create real customer value and one designed from day 1 to compound shareholder value over time. Let's begin by defining what's a total line solution and why we believe they are unique to Midera? What you see here is a bacon line where you put a pork belly on this side that comes from the primary processing and end up with a packaged bacon product on the other side. $2 input, $8 input per pound -- output per pound, 4x value creation. This is the heart of food processing. These are 6 best-in-class brands that we acquired over a period of 10 years. creating a high-performing line that is fully integrated that a customer can purchase and install from a one-stop shop from one reliable supplier, Midera.

For Midera, total line solutions deepen customer relationships. It expands our share of wallet and pull through additional opportunities in aftermarket, service and future line expansion. Importantly, this is not a theoretical concept. It is a capability built over years through deliberate portfolio development, disciplined M&A and operational integration. The ROI for our customers is powerful and it is real. These are real numbers. In this example, our total line solution for bacon delivered approximately $4.4 million of saving per year, representing a 55% ROI for our customer. For you, as Midera shareholders, that matters. When we sell a total line solution, our pricing is supported and directly reflects the quantifiable value delivered to our customer. Put simply, total line solutions drive both growth and margin.

And just importantly, they create repeat customers, customers who come back to Midera for aftermarket support, sales and expansion into the next production line. Total solution raised the bar. They moved the conversation away from pricing and individual machine towards performance, reliability and long-term partnerships. And as we scale this capability globally, we see a long runway to drive customer value and sustain above-market growth. Today, we have total line solutions across more than 20 food categories. On this slide, we've highlighted some of the largest and fastest-growing end markets within processed foods. Poultry, which is our highest growth category. It expanded over 30% last year. portable snacks, particularly protein, celebration cakes, where we have the best integrated automated line that can produce up to 6,000 decorated cakes an hour.

Across these solutions, we create value for our customers across the full spectrum of profit drivers, we increase throughput and yield. We reduce operating and input costs, and we ensure sanitation and improved product quality. And in many cases, we enable our customers to offer entirely new products, opening up additional revenue streams. This is what differentiates Midera, not just selling equipment, but delivering integrated solutions that directly improve customer economics and growth potential.

Having covered our first growth pillar, I'll now turn on to our second growth pillar, expansion through new product innovation and new geographies. We have already a truly global presence. Our customers operate globally, and we are structured to meet them where they are today and where they want to go. The scalability to produce and sell across the world provide us with a significant advantage to grow and scale our M&A targets. This footprint enables organic growth and scalable M&A, giving us ability to integrate and accelerate businesses rapidly.

With 20 sales offices, 29 manufacturing sites and 4 innovation centers, we combine global reach with execution discipline, creating a powerful platform for growth. In short, this pillar is not about building presence. It's about unlocking growth through scale, speed and execution discipline.

At Midera, innovation isn't a department or a function. It's a mindset that defines how we partner with customers, where Midera invests in state-of-the-art innovation center that help them develop their businesses. So what's an innovation center? They are places where customers don't just see equipment and test them, they experience what their operations could become, where ideas move from concept to reality, where complexity is simplified and where performance is engineered with intention.

Our customers enter our innovation centers seeking help and clarity, and they leave with a clear vision of what world-class looks like for their own operations. They work side-by-side with our food technologists, our bakers, our engineers, our R&D specialists, testing, validating and optimizing complete solution before making capital decisions. Our innovation centers are not showrooms. They are growth engines for our customers, for our brands and for the future of food processing.

This slide shows an innovation we are very proud of, the Helix oven, purpose-built for poultry application and designed to meet accelerating consumer demands, particularly in the U.S. The customer challenge is clear, how to cook products with a higher yield, better product quality, using less time and less space. Scanico, our spiral company, addressed this challenge by designing a highly flexible spiral oven built around a unique thermal approach, combining steam, convection and microwave to dramatically enhance speed, control and product quality.

The Helix oven delivered material results, up to 5% yield improvement, 40% to 60% faster cook time and roughly half the physical footprint of conventional solutions. More importantly, this is innovation with real economic impact, transforming our customers' operating economics and meaningfully accelerating their return on investment.

Aftermarket, we have a very strong foundation in there. This is our third growth pillar, and it's the continued expansion of our aftermarket parts, service and business that's going to be driving a lot of our growth moving forward. Today, this high-margin revenue represents around 38%, 40%, depending on the year of total sales. And that mix continues to expand, reaching the mid-40% in the next few years.

A key accelerator within this pillar is our focus on total line solutions. Again, roughly 20% of standalone equipment sales include the service agreement, while total line solutions drive an attachment rate of over 90%. The reason is straightforward. Complex and high ROI systems require deep technical expertise and our global service organization plays a key role in keeping customer operations running at peak performance.

With an installed base exceeding 100,000 units and systems in the world, we have a long runway for durable recurring revenue, one that expands margin, deepens customer relationships and increases lifetime value. This is more than a look of where we are today. It is a clear statement of the company we are becoming. We built an industry-leading platform anchored by best-in-class brands and equipment, serving markets with powerful long-term secular tailwinds.

Our growth is proven and driven and reinforcing engine -- driven by 3 reinforcing engines: total line solution, innovation-led market penetration, further geographical penetration and aftermarket. We are the acquirer of choice in a fragmented market, backed by a disciplined playbook and a consistent track record of integration and value creation.

What makes this platform truly durable is our culture. It is defined by entrepreneurship, intensity, accountability and a relentless will to win. As we enter this next chapter as a public company, these strengths form a powerful accelerator, compounding growth, expanding margins, generating strong free cash flow supported by disciplined capital allocation, driving sustainable long-term value for shareholders.

Today is about communication, the foundation, the platform, the strategy and the culture we're taking public. What comes next is execution. Our team will now drill deeper into each of these categories, our growth engine, showing how they convert into earning power, cash flow and disciplined capital deployment. This is the beginning of our next chapter, and we are excited to lead you through it.

With that, I will now introduce our Chief Operating Officer, Mark.

Thank you, Mark. All right. Thank you, everybody. This clicker going here. Aftermarket expansion. I get to talk about some exciting stuff with you guys today. So let's dive into aftermarket and look at it from really through a financial lens. What you see here is the foundation of our high-margin recurring revenue engine of the business today.

While capital equipment sales are vital for expansion, our aftermarket business is what drives our cash flow stability. We are currently leveraging an installed base of over 100,000 units, as Mark said earlier. This isn't just a service footprint. It's a massive locked-in ecosystem for recurring demand. In an industry where food producers face widening in-house knowledge gaps, our services are transitioning from reactive maintenance to mission-critical operational insurance.

From a margin perspective, this is one of our most attractive revenue streams. By providing a single point of contact and data integration, we are moving up the value chain, shifting from a low-margin break-fix repairs to high-margin life cycle optimization. Our base of experience supported by 800 global professionals allows us to scale these higher-margin services without a proportional increase in overhead. We are effectively monetizing those assets in the field through their entire 15- to 20-year life.

Finally, on the right, our philosophy of durable design all the way through part availability creates a defensive moat for us in the marketplace. This offers you, as investors, downside protection against market volatility and a compounding growth lever as we continue to expand our installed base. We are not just a manufacturer. We are a high utility service partner with a growing, predictable and highly profitable revenue stream.

Now let's look at some numbers. What we are building is a highly predictable recurring revenue engine that gains momentum with every new piece of equipment that we sell. Looking at the case on the left. What we see here is over 50% of the aftermarket revenue comes from service contracts and long-wear parts. However, the real aha moment is on the right side of the graph. Opportunity grows with complexity. Historically, on a standard equipment sale, we might see a 20% service level agreement attachment at installation.

As we pivot to total line solutions that Mark touched on earlier, and you will hear a lot about today, that attachment rate skyrockets to over 90%. We aren't just selling the machine anymore. We're selling a long-term high-margin service ecosystem. When you look at the life of the asset, the financial impact is staggering. We are currently capturing roughly 60% of the original purchase price back through aftermarket parts and services over the equipment's lifespan.

But here's the takeaway for the room. Despite these strong numbers, we still see significant upside opportunity. As equipment becomes more sophisticated and our total line approach becomes the standard, that 60% capture rate isn't just the goal, it's our starting point.

The previous slides were the what and how much. This slide is the where we're going. We are moving from being a vendor of machinery to a partner in enterprise total line solutions. Look at the trajectory from left to right. On the far left, you'll see a single piece of equipment, happens to be an oven here. In that world, the customer has limited in-house oversight and our role is limited to low-level reactive service, parts and support. This is a more commoditized, lower-margin space.

As we move up the arrow, customer risk and requirements increase, and that is exactly where we want to be. As complexity grows, again, the customer needs our expertise. We move through operational maintenance where our high-touch adaptable service becomes their safety net, then to automation, where the sophisticated hardware and software of our equipment enable systems to become the brains of our customer's operation.

And then finally, we reach enterprise level, all the way on the right. This is the Midera difference. We aren't just maintaining a machine. We're providing a full line integration, where we're giving customers the data and the leverage they need to optimize their entire facility's profitability. By providing a seamless coordination of technology, software and service, we create a massive amount of leverage. We move from a break/fix vendor to a strategic partner integrated into their C-suite financial goals.

For us as a business, this shift is transformative. Every step to the right represents a higher switching cost for the customer, deepens competitive moats for us, and most importantly, significantly higher margins as we sell high-value integrated software solutions and optimization services rather than just switches and stainless steel. This is how we leverage our digital solutions and expertise to own the customer relationships from the shop floor to the balance sheet while partnering with customers to drive their growth engines.

Now let's look at my favorite part, innovation and operational excellence. As Mark said earlier, innovation in this company isn't just a buzzword. It's a disciplined high-velocity process that contributes a massive $341 million in revenue over the last 3 years, 20% of our new equipment sales during that time. Many of you have seen snacks hanging around outside. Most of those snacks or a lot of those snacks were the result of innovations that we brought to the market that you could enjoy today or on your way home.

Our innovation isn't just done in a vacuum. It's a 4-step feedback loop. It starts with voice of the customer. As Mark touched on earlier, everything here starts with the voice of the customer, identifying the real-world bottlenecks that those customers are seeing. We deep dive into the physics and mechanics of their processes. We give local teams ownership to develop the solution side by side with those end users.

And then finally, and most importantly, we iterate and replicate those wins across our entire 100,000-unit global installed base. This isn't just theory, it's a working engine. Each one of our brands has a healthy and active innovation roadmap in front of them. Looking at our 2026 innovation funnel, the pipeline is robust. We currently have over 70 innovations in development across 17 different market subcategories.

Crucially, we are balancing our risk. While 20% of these are modernization innovations, keeping up with our existing customer base, we also have 12 game-changing innovations on deck. These are breakthroughs that define new categories and expand our total addressable market. In short, our aftermarket base gives us insight into how to innovate. And our innovation engine gives us the new and existing customers new value for them. And this is how we ensure that Midera doesn't just lead the market today but defines it for the next decade.

We discussed some of our market-facing strategies. Now let's look at the engine under the hood. This is my favorite part. The Midera Operating System is how we translate focus into margin expansion. It's built on 5 pillars: a lean toolbox, a robust quality system, aggressive technology application, a resilient supply chain and intelligent design. These aren't just departments. They're a unified discipline designed to strip out waste and grow our bottom line.

To understand the real-world impact of this system, look at the technology application example on the right. In a traditional manufacturing environment, a highly skilled welder can produce around 17 inches per minute of weld. By applying the technology pillar, we've integrated a cobot into our workflow. These cobots don't just work faster, but act as a workforce multiplier by working alongside our skilled welders. That's a 7x uplift on a critical manufacturing process that exists across almost all of our facilities.

But the value goes beyond just speed. This automation drives consistent quality, improved safety and recurring -- and reducing costly rework and insurance liabilities. More importantly, it allows us to reallocate our skilled human capital to more complex, higher-value tasks that automation simply can't touch today. The takeaway here is simple. We have an opportunity to make operations a meaningful driver of margin.

With our focus post-spin, we can apply our resources and incentivize focused experts who do nothing but find these wins. Our operational system builds on Midera's -- on Middleby's foundation, ensuring that as we grow, we don't just get bigger, we get systemically more profitable.

Turning to the next slide. Let's discuss how we institutionalize lean excellence through the Midera Operating System. We don't view operations as a must-have function. We view it as a toolbox to enable a strategic weapon to succeed. At the base of everything is strategic plan alignment. Every action on the shop floor or in the supply chain is anchored to our long-term growth objectives.

We are ensuring that from the CEO to the front line, everyone is pulling in the same direction. As we move up the maturity curve, you'll see our core pillars. In the early stage, we focus on visual management, Gemba reporting, getting our leaders to the floor to address challenges real time. Moving into the mid-tier, we are scaling proven methodologies like 5S, TPM, and underneath that, highlighted SQDC&G framework, which stands for safety, quality, delivery, cost and growth. This isn't just an acronym, it's a mentality focused on relentlessly eliminating waste and driving accountability.

At the top of the house, we reach a mature operations. This is where we leverage advanced tools like just-in-time planning, innovation monetization and developing a multiskilled workforce to create an agile environment capable to adapting to market shifts instantly. We are also prioritizing technology integration to address our most complex operational challenges, ensuring that our margins remain industry-leading even as we scale.

To be clear, we are still very early in this journey and have a long way to go to maturity. But by formalizing these processes today, we are making operational execution a permanent strategic advantage for Midera. We are building a culture of get it right the first time every time, which is the ultimate driver of long-term shareholder value.

Operational excellence doesn't just stop on the plant floor. It extends all the way back to our 1,800 key suppliers. While our steel sourcing remains strategically regionalized to protect against global volatility, our technology sourcing is broad and diversified. The critical takeaway here is the lightly tapped opportunity to leverage our scale and focus. We are currently working to consolidate our supplier base to maximize our buying power and drive down unit cost.

To achieve this, we use a framework of resilience and cost analytics. We don't just buy parts. We have a plan for every part. By focusing on reducing the 7 types of waste and utilizing value stream mapping, we are ensuring that every dollar spent is optimized for both cost and speed. We aren't just reacting to the market, we are using purchasing signals and real-time analytics to stay ahead of it.

Our supply chain roadmap for the coming year is clear: consolidating suppliers, implementing full systems across our organization to drive up on-time delivery performance and then we're moving to a fully integrated data-driven procurement model. Finally, the 4-step process on the bottom, the playbook is simple and impactful, delivering a customer-friendly financially appealing result from our supply chain efforts.

Thank you for your time today. And let me turn it over to my friend, Peter, to talk a little bit about the protein business. There you go, my friend.

Hi. This is Peter Jongen. I hold a master's degree in engineering and I've been working in the food processing industry for over 25 years. Before I joined Midera, I was working for Marel. In the last 15 years, I've been focusing on food -- on protein-related activities. I've been with Midera for over 10 years, and what makes Midera special for me is our focus on the brand, our entrepreneurship and the closeness we have to our customers. The last 5 years, I've been Group President, Slicing, Loading and Packaging (sic) [ Packing ].

Today, I'll walk you through the protein group at Midera, covering our portfolio, key market trends customer case and our strategic priorities. To set the scene, the total addressable market for equipment in the food processing industry is $32 billion a year. This substantial market, combined with shifting consumer demand and our total line solutions, creates strong opportunities for us.

Let me introduce you to our brands. This slide shows you our 13 brands in protein, and on the bottom, 7 brands that we share with bakery. We have organized them in 4 categories. First is the thermal processing group, where we have 6 dedicated brands, and together with Scanico and Frigomeccanica, we've got 8. With this group, we have key unique capabilities covering cooking, heating, drying, pasteurizing, freezing and preservation technologies. Then we have the processing and preparation group, with 2 brands covering grinding, mixing, emulsifying, pressing and much, much more.

Next, the slicing, loading and packaging group, 3 brands that ensure efficient portioning and final packaging. And finally, facility automation with 2 brands from the protein group and 3 shared brands enabling us to get end-to-end integration and smart factory solutions. This structure allows us to combine specialized expertise with integrated total line solutions, which is increasingly what our customers are looking for.

Let's look at some trends shaping the protein industry. First is what we call K-curve. At the upper end, we see growth in premium products like charcuterie, beef and clean label foods. These are fresh, minimally processed, high-quality products. They align well with technologies like to heat, pasteurization and advanced cooking and drying solutions. At the lower end, we have value-based products such as hotdogs, poultry and deli items. These focus on convenience and quick preparation. Here, efficiency is driven by best-in-class preparation, thermal processing, packaging and especially automation to reduce costs.

Midera is supporting both ends of the spectrum with our total line solutions and our innovative products. The second trend is the need for automation, driven by labor shortages and rising labor costs. Customers are increasingly looking for fully automated solutions with minimal operator requirement, and that is exactly where our integrated approach adds value.

Third trend is lifestyle changes are reshaping the demand. Urbanization is increasing the need for convenience food like case-ready, ready meals and deli products. Younger generation, especially Gen Z, are driving proteinization, shifting from powder and shakes to portable protein foods. At the same time, trends like GLP-1 treatment and broader dietary shifts are increasing overall protein consumption. All of this reinforces the importance of flexible, efficient and scalable production solutions.

To bring this to life, let's look at a customer case. This is a well-known global food manufacturer based in the U.S. building a new greenfield facility. Traditionally, such a plant would require around 1,300 operators, creating significant costs and complexity. The production process was also highly complex with multiple steps across different products and a strong demand for the product. Customer needed a fully integrated and automated solution.

Midera delivered a total line solution, including material handling, thermal processing and cleaning and sanitation systems. We also integrated the intra-logistics and storage, which was critical due to the strict hygienic requirements. [ This held ] the system running with tens of millions of dollars. The results were very compelling. Customer achieved more than a 3% increase in yield, reduced headcount by over 50% and improved the operational margin by more than 5%. This resulted in a payback time way less than 3 years. This clearly shows the impact of automation and installation.

Finally, let's look at our strategic priorities for the protein group. First, expanding our product offering. We've recently added capabilities in areas like portable protein foods and charcuterie, allowing us to address higher value segments. Second, expansion. We're leveraging Midera's global footprint, modernizing the installed base and driving innovation through a strong pipeline of protein and total line solutions.

We also see strong growth opportunities in Brazil through our local brand, MaxMac, and we are increasing our presence in EMEA through the Italian innovation center. Poultry is our fastest-growing product group. Last year, we grew over 30% in revenue, like Mark mentioned earlier.

Third is the aftermarket. We're expanding service contracts tied to new equipment installations and growing our global field service team. This not only drives recurring revenue, but also strengthens customer relationships.

And finally, M&A. Acquisitions help us fill white spaces in our total line solutions and target fast-growing segments where we are not yet a market leader. Cultural fit remains an important factor in this decision. In summary, the protein market is growing steadily and becoming more complex, driven by automation, lifestyle changes and evolving consumer demand. With our strong portfolio, integrated solutions and clear strategic focus, Midera is well positioned to capture this opportunity.

Thank you for your attention. Let me now hand over to Andrea to talk about the bakery group.

Thank you, and good afternoon. My name is Andrea Colussi. I've been in the industry for the last 28 years. And my family has been the previous owner of Colussi Ermes. Colussi Ermes is a company specializing in industrial washing equipment for the food and pharmaceutical industry. The company has been acquired by Midera in 2022. In 2017, I had the honor of meeting Matt Fuchsen and Mark Salman. And from there, we started the collaboration.

I was selling my industrial washers to the bakery and protein group for their total line solutions. This time has been quite important to me because I had the opportunity to learn how the Midera philosophy was working. Our group of companies managed to work together with an entrepreneurial approach towards the global market arena.

A few years later, when my company -- when my family in 2022 decided to sell the business, we decided to stay with Midera because it was the right choice to continue the legacy of our family to continue dreaming and innovating. Today, my family is still leading Colussi. And I can tell you that investing the future into Midera, it was the right choice.

Today, I'm the Group President for the Bakery sector of the Midera Group. The group consists of 13 companies plus 7 that we are sharing with the protein group, companies that are quite unique per se, where their essence is to work with a decentralized organization where each brand maintains its own identity and organizational independency and where each president retains his own entrepreneurial approach towards the industry.

The group serves a broad range of end markets within the bakery sector, including products such as celebration cakes, muffins, buns, cookies, crackers, pizza and focaccia. This product portfolio spans the entire industrial baking process, including dough mixing, shaping, sheeting, lamination and baking and cooling. And from the automation point of view, we are capable of providing integrations such [indiscernible], washers and slicers and [ makers ].

The group is very unique because it's very flexible, can cope with very industrial large projects or can cope also with small artisanal segments. But their competitive advantage is to be able to evolve with the market trends that we are dealing with today. Market trends that -- sorry, the market trends that can be defined as shift into the -- towards the results driven culture where consumers are engaging more often, but in a smaller scale. This is often seen and accelerated by the increased dietary awareness, including GLP-1 users, driving demand for [ minimize ].

We can see also the growth of products such as sourdough and seasonal bread with a long fermentation, cleaner product, cleaner label. And from the industrialization and automation, we see a dual trend into the market globally, where developed markets are prioritizing artisanal and specialty products to clean label, while developing markets continue to drive volume through industrial and indulgent segments.

We should also mention the sensory experience, the products that are generating with the texture that sensory experience of cracking, snapping or oozing. And in terms of lifestyle changes, the GLP-1 are reducing the overall consumption of commodity products by driving a higher quality bites, smaller portions, as mentioned earlier, high fiber, better-for-you bread.

Now I would like to introduce to you a unique case study about pinsa. It's not pizza, it's pinsa. I don't know if all of you know about it, but it's a typical Italian flat bread with having characteristics of high hydration, long fermentation and unique ingredients. Why we selected this product is because lately, thanks to the ongoing contact with the market, Midera has seen the growth of this product. And thanks to the total line solutions that we have developed, we are pretty much the only ones capable to provide to the customer a complete line.

The essence of it is that we have the complete knowledge about the product, complete knowledge about the process and how to integrate all the equipment together. So the customer has the opportunity to have a line with a common software data collection, AI integration for process optimization and predictive maintenance, a sustainable approach, including energy-efficient components and heat recovery and probably the most important, accelerate the time to market. Thanks to this [indiscernible] characteristic long fermentation, the cost of recipe is reduced by pretty much 40% to 60%. And the other advantage is that the payback is within the 2 years' time.

Now I would like to mention on this slide something that I'm personally close to because it involved my personal time, not personal time, my time for the last 1.5 years. And it is the Centro di Innovazione, our latest innovation center. A unique structure that I invite you all to visit. It's located northeast of Venice, Italy. It covers a surface of 80,800 square feet and required an investment of about $23 million. The visitors have the unique opportunity to visit the center, extremely educational. You can learn from visiting the flooring, the panels, the utilities, the piping, all what has been placed in there to simulate a real plant, a real industrial plant. It's not a showroom. It's a dynamic environment where the customer can test industrial units with his own ingredients, can test before investing and is capable also to interact with engineers, food specialists, technologists.

And educationally, which is very important, we invested a lot into possibility of hosting university classes. We are currently having a Master in Food Science. We are also using the center internally as a group of companies to be self creative, on how to innovate, how to become better, how to share hygienic concepts within the group, bakery and protein. As today, within only 7 months from the moment that we opened the center last October, the plant managed to generate about $33 million orders. So it is really, really unique. And again, I invite you all to visit.

And finally, I would like to summarize all our strategic priorities into our total line solutions, of course, with a lot of focus into products such as pizza, pinsa, applications that are going to be very flexible because in the same total line solution, we'll be capable of handling pizza, pinsa and focaccia. It's quite unique. Nobody is capable of doing this nowadays. The expansion in other markets, EMEA or increasing our strength in Europe. The aftermarket, we are going to have dedicated and strategic locations to handle spare parts, reduce the responsiveness for the customer for service packages. And finally, with mergers and acquisitions, we're going to become stronger and stronger with partners that are going to add on, on innovation of our lines. So I would like to thank you for your time, and I'm going to pass it on to my colleague, Scott.

Thank you, Andrea. Good afternoon. How many people eat more Mexican food today than they did 5 years ago. This has been one of our primary drivers for our business, and we look to take and leverage this as we go forward. My name is Scott Ruhe, and I'm very excited to be leading the newly formed Snack segment at Midera. Over the last 35 years as CEO of our family company, I've helped grow it from $1 million to $74 million prior to joining Midera in 2024. Our core business at JC Ford -- JC Ford's core business has long been centered around delivering complete line solutions for the tortilla and tortilla chip industry, building on our original corn tortilla systems developed in 1945. From 2020 to 2024, our company experienced significant growth while transferring from California to Tennessee, positioning us for long-term scalability and operational efficiency.

Today, more than 50% of our products are exported with Europe accounting for roughly 20% of our total volume. That experience in scaling, leading and growing our business over time naturally led to our next phase of growth. To further accelerate and leverage this growth, we joined Midera in 2024. Midera's strength in baking complements our leadership in tortillas. And together, we now have a powerful global platform. Today, I'm focused on leading the next phase as we expand beyond our traditional core into a broader snack segment. Looking ahead, I see a total addressable market of approximately $18 billion as we move into adjacent snack processing categories, including both front-end and in-line solutions.

So the question becomes, how do we turn market opportunity into real scalable growth. It starts with the strength of the Midera platform and the partners we bring together. A key advantage of joining Midera is the immediate integration of complementary technologies across our platform. Several partners are highly synergistic with our full-line solution. Escher Mixers enhance our flower tortilla systems on the front end, Scanica cooling systems capabilities enhance all of our systems. Filtration automation improves oil management in our frying systems for tostadas, tortilla chips and taco chips. Spooner Vicars expands our thermal capabilities across our entire platform and Burford provides end-of-line packaging and bagging solutions.

This integration allows us to deliver more complete efficient systems while increasing revenue per line and strengthening our value position to our customers. With that integration platform in place, the next piece is demand and market trends driving the demand are increasingly strong. The momentum behind our business is driven by powerful long-term consumer trends, one of the greatest being the Mexican food, which has been a major factor in our growth in the last 20 years. The Hispanic population today has reached 70 million or roughly 20% of our population. Mexican cuisine has become deeply embedded in the American culture. Mexican restaurants have grown from roughly 10,000 locations in 1990 to over 90,000 today nationwide. More than 5,000 Mexican specialty markets now operate across the country.

At the same time, mainstream adoption to -- excuse me, at the same time, mainstream adoption continues to expand fast and casual, QSR chains like Taco Bell and Chipotle are rapidly introducing Mexican products inspired around the world. Traditional restaurants are incorporating wraps and tortillas into their menus. Globally, tortillas and tortilla chips consumption continues to rise, fueled major brands like Doritos and Mission Tortillas. Additional snack trends that are driving growth include rolled products like Takis in the snack food segment, better-for-you options, grain-free alternatives such as cassava, lentils and protein. Increased investment in categories include Frito-Lay's $1.2 billion acquisition of Siete, cassava based tortilla chip and tortilla and continued flavor innovations with bold and spicy profiles leading the market.

So we have a platform and we have a demand. The next step is execution. How do we translate to real value for our customers? That's where innovation comes in. We are driving our innovation within traditional tortilla chip process, particularly food service, something many of you can relate to the bowls and chips they give out as first meal at the beginning of a Mexican restaurant. Today, there are over 100 systems across the U.S. producing corn tortillas specifically cut, packaged and shipped to restaurants that are fried fresh served at your table. That process dates back to the 1940s and '50s when tortillas were repurposed and famously leading to the creation of Doritos at Disneyland's Casa de Fritos.

However, today, that process remains highly labor-intensive, requiring 4 to 6 people. It includes a staggering 4 to 24 hours of staging to reduce clumping. Our new in-line cutting eliminates labor by cutting directly within the process, removing a significant amount of labor with over 100 systems running across the U.S., a retrofit system of an existing tortilla line will pay back in less than a year with a $350,000 investment. When paired with our new corn tortilla systems are capable of producing over 40% more than our closest competitor or 100,000 tortillas every hour, which translates to 25,000 bowls and chips every year.

This is a great example of how we create value at the product level. Now let me step back and show you how we create across our entire business. Looking forward, our strategy is clear and focused, continue to expand our full line solution capability across global markets, leverage the Middleby worldwide footprint through our Midera worldwide offices to accelerate international growth, to build a strong reoccurring aftermarket through service parts and upgrades, pursue strategic acquisitions that enhance our technology portfolio and market. In closing, when you combine a strong platform, a favorable market trend and proven innovation with clear ROI, I believe we are uniquely positioned to lead the next phase of growth in the global snacking market. Thank you.

I'll now hand it off to Matt Fuchsen, who leads our M&A strategies.

Thank you, Scott. Good afternoon. Before I jump in, I would be remiss if I did not recognize the past 15 years spent with Middleby and to extending Midera, thank you to the Middleby Board for positioning Midera for our next chapter as a singularly focused growth company, colleagues that we have had that pleasure to work with and learn from daily. But most importantly, it's the partnership and moreover mentorship of our CEO, Tim FitzGerald. Thank you all. Now let's roll it forward. I'm excited and honored to be part of this fantastic Midera team. I'm going to spend the remainder of our 15 minutes walking through Midera's M&A strategy. How we think about capital deployment, how we manage risk and most importantly, how this has become a repeatable engine for long-term shareholder value creation?

At Midera, M&A is not something we do opportunistically based on where the cycle is. It is an embedded operational capability supported by a clear framework, a proven team and decades of execution. I would like to highlight 4 key takeaways about our M&A framework before we get into further details. First, our approach is disciplined and focused. We do not chase scale for its own sake. Every acquisition must strengthen our platform in a very specific way by either expanding total line solutions, adding differentiated technology or deepening our aftermarket and service penetration. That discipline is what allows us to do deals consistently across cycles. Second, a highly fragmented market with more than 2,500 food processing equipment manufactured globally. That fragmentation creates a long runway for disciplined consolidation.

Third, we are builders, not collectors. We're not assembling a portfolio of loosely connected businesses. We are building an integrated global automation company focused on high-value further processing where the whole is more valuable than the sum of the parts. That mindset drives both how we select targets and how we integrate them. Finally, we view M&A as a value compounding mechanism, not a growth shortcut. Our framework is designed to deliver attractive ROIC, margin expansion and compounding free cash flow, not just near-term EPS accretion. And these elements align, shareholder value creation follows.

When you apply that framework consistently, what you get is what is reflected on the chart shown, the M&A track record. For us, M&A is not an aspiration. It is a proven capability. Over the past 20-plus years, this platform has been built through 30-plus strategic and complementary acquisitions, each selected for a specific reason, investing roughly $850 million into the platform and importantly, doing so in a disciplined, repeatable way that has driven sustained revenue growth, margin expansion and strong free cash flow across cycles.

Acquisitions have not been about scale for scale sake. What's equally important is where we deploy capital. These acquisitions have expanded our presence across protein, bakery, snack, sanitation, automation and packaging, each one incrementally strengthening our total line solutions, allowing us to move forward from selling individual machines to becoming a long-term solution-based partner to our customers. As the platform expanded, it has also created natural operating leverage through broader customer relationships, higher aftermarket penetration and better utilization of our global Midera operating model that Mark Bowie took us through. This is how we think about M&A, not as discrete transactions, but as a rolling flywheel that repeatedly compounds shareholder value.

Just as important as what we buy is what we don't buy. And I would like to elaborate on that, how that disciplined framework is. Our portfolio philosophy is intentional and systematic. We focus primarily on small to midsized targets, predominantly tuck-in acquisitions, but always evaluate every target with an open mind to the right larger deal. We never jeopardize discipline, integration capacity or realizing our KPIs. The tuck-in approach is crucial. This approach reduces execution risk and avoids acquiring unwanted assets that may be embedded in larger acquisitions.

That matters because bilateral trust-based transactions is how you win deals without chasing price. Every target is evaluated through the same lens across all acquisitions. Does it strengthen total line solutions? Does the culture fit our entrepreneurial operating model? Does it expand access to growth markets or aftermarket revenue? Can we add clear operational and financial value?

In summary, this is an intentional portfolio destruction -- construction by design, guided by a clear and disciplined playbook. It's good to lighten up the mood. Midera's disciplined M&A is possible because of our strength of our funnel. Referring to the center of the slide, today, we are tracking more than 100 companies with over 30 active opportunities under evaluation. Approximately 90% of these opportunities are sourced internally through long-standing relationships, not auction processes. That proprietary sourcing is critical. Off-market transactions tend to be better aligned culturally, carry less integration risk and result in more attractive valuations. As noted on the right part of the slide, it is also why roughly 75% of our funnel consists of tuck-in bilateral transactions.

A very important fact about this funnel is it exists within a highly fragmented market. As noted, $70 billion worldwide with 91% of white space. There are more than 2,500 food processing equipment manufacturers. That fragmentation creates a long runway for disciplined consolidation. This deep market, along with strong inbound relationships and internal entrepreneurial network of former owner operators with generational relationships in the industry is how we are able to repeatedly apply our playbook. We don't need to stretch or change our criteria to stay active. Our significant funnel allows us to be patient and selective. Walking away from deals is just as important to our discipline as closing the right ones.

The question we get most often is not can you do M&A. It's how you can continue to do it well over and over and over again. The answer is the Midera execution and integration playbook. Midera is an acquirer of choice because our playbook, we respect brands. We keep the decision-making at the brand level close to the customer, further deepening our ability to quickly solve customer problems by bringing the right expertise to the table the first time. Former owners often continue to run our businesses long term. In fact, roughly 1/3 of our brands are still operated by former owners. This is not accidental. Scott and Andrea are both great examples of that. It also keeps the entrepreneurial engine running while layering in advantages of scale.

From an execution point of view, the playbook is built around speed, clear accountability and focused approach to synergy realization with total line solution cross-selling, execution of the Midera operating model and aftermarket expansion. This is not theoretical. Our execution and integration capabilities are institutionalized. The main reason for the spin-off is to allow the historical M&A execution team to be 100% focused on Midera's inorganic growth. This team on average has closed 7 deals annually since 2015. Our deal team works side-by-side with a dedicated integration team, inclusive of our COO, Mark Bowie, our group presidents with a clear mandate to grow their respective markets, and a brand champion assigned as an integration partner.

It is the integration continuity that preserves customer relationships, institutional knowledge, innovation momentum and accelerate synergy realization. In parallel, Midera's global scale, procurement capabilities and operational excellence elevate our brands to a level that they could not have achieved independently. Bottom line, reputation matters, and this is why sellers trust us. Being known as the acquirer of choice who respects legacy, invests for growth and delivers on commitments gives us access to better opportunities and reinforces the quality of our funnel every day.

This slide pulls it all together, and this is really where the math starts to matter. This is a snapshot of value created across multiple acquisition vintages. Across these 3 examples, or all of these examples, revenue scaled meaningfully, adjusted EBITDA margins expanded materially, returns exceeded our underwriting through TLS cross-selling, implementation of the model and aftermarket and growth synergy realizations. Equally important, the 4 most recently closed acquisitions since 2014 are tracking at or above diligence underwriting. Given our recent and current macroeconomic environment, this performance speaks to our disciplined diligence and underwriting process, execution of the Midera operating model, as well as the resilience of the further food processing end market. Speed matters, we focus on capturing synergies early and quick, which accelerates ROIC and derisks the investments we make. That's how we consistently convert strategic rationale into measurable shareholder value.

So where does this leave us as a stand-alone Midera? Quite simple. We believe we are entering the strongest chapter yet of the story, the inflection point, both from an organic and an inorganic point of view. Mark Salman, Mark Bowie, our Group Presidents, illustrated the inorganic growth opportunity and now adding in the compelling inorganic M&A growth opportunity driven by a highly fragmented market, a deep pipeline of attractively sized culturally aligned targets that support targeted deal velocity and a strong balance sheet that gives us flexibility and patience. Post spin-off, the model becomes even more powerful because financially and moreover, human capital allocation becomes singularly focused. Organic reinvestment first, disciplined and accretive M&A second, with a net leverage framework below 3x. We don't need to stretch. We don't need to chase scale. We simply need to repeat what has worked for the last 15 years with a sharper focus.

The objective is clear. Target double-digit plus ROIC by year 3, sustained margin expansion, EPS and cash flow accretion in year 1, each leading to compounding shareholder value. That is the opportunity ahead, and we believe we are uniquely positioned to capture it. In summary, M&A Midera, it's not about ambition, it's about execution. And with a stand-alone balance sheet, a focused and disciplined mandate, a proven playbook, we believe the inorganic growth opportunity is powerful lever for long-term value creation in front of us. Thank you for your time today.

And while our colleagues at Middleby introduced you to the virtual Amy, I'm going to introduce you to the real life Amy.

Thanks, Matt. I'm excited to be joining Midera as a CFO as we enter what really is the next chapter of an already impressive growth strategy and growth story. What I want to do with my time today is share the financial case for Midera as a stand-alone company, what is already working, what will change as Midera becomes a stand-alone pure-play industrial automation company and how to think about our financial outlook through 2028 and the capital allocation priorities that support our growth.

If you remember only 3 things today, I would like it to be this. We are already a high-quality compounder with 20 years of truth behind us. The spin improves focus and sharpens capital allocation priorities to support growth, and we have the balance sheet to play offense from day 1. At a headline level, Midera begins with 4 clear strategies and strengths. Market-leading brands with deep customer trust and solutions that solve real customer problems. We help customers improve throughput, labor efficiency and yield, and we help them bring new products to market. We stay close to them in ways that few peers can match. We have exposure to globally growing and resilient end markets, where CapEx is essential to our customer strategies. It's not discretionary.

The Group President shared tangible examples of how we are helping our customers grow and meet their own customers' needs through total line solutions. We have a clear and credible path to margin expansion, driven by mid-single-digit top line organic growth, operating system execution and recent acquisitions maturing toward our expected returns. And last, a clean balance sheet and strong cash flow as we spend, giving us flexibility from day 1 while keeping us disciplined. As Matt noted, we have an active acquisition pipeline, a repeatable playbook and the balance sheet to act. Midera is spinning off from a position of strength, already a high-quality industrial technology business, and the separation simply brings more focus to both the performance story and the capital allocation story.

With that context, let me start with the financial profile because it shows the durability of the engine we are building on. And what we are building on is a business that has already been performing. Looking at Midera Food Processing, based on historical segment reporting under Middleby, sales grew from roughly $440 million in 2019 to more than $850 million in 2025. That is a 12% CAGR, including M&A and over 5% organic growth. During that same period, segment adjusted EBITDA nearly doubled. This is a business with a strong track record of profitable growth. And that history matters because it underscores why we believe the model is resilient and repeatable. Our end markets invest against secular needs like automation, food security, food safety and population growth.

Add to that steady replacement demand and the fact that nearly 40% of our sales are recurring aftermarket, and you get a demand profile that is less cyclical than most industrial verticals.

Now I do want to take a minute to help investors understand how to evaluate the business. Quarter-to-quarter results can be lumpy. We sell large complex solutions that my colleagues just talked about and shipments can move between quarters based on customer readiness, installation schedules and project timing. In any given quarter, sales can shift simply because of project timing, not because demand has fundamentally changed. So the right lens to think about Midera's growth is either a 6-month or 12-month rolling performance, where the underlying trend is much clearer. We are going to measure the business that way internally, and we encourage investors to do the same.

Beyond an impressive history, we also start as a public company with an impressive financial profile. In addition to historical Middle East segment reported results of double-digit sales and adjusted EBITDA CAGR from 2019 to 2025 that I just spoke to. We delivered estimated stand-alone adjusted EBITDA margin of 16.4% in 2025. That is industry-leading even in what was a tough year, and we have a clear path to expand from here. We are also benefiting from strong demand. We have averaged a book-to-bill above 1 for the last 8 quarters with order and sales pipeline activity that supports our 2026 guide and beyond.

And finally, we start with a strong balance sheet. Net debt is estimated to be between $200 million and $225 million of spend, providing liquidity along with attractive levels of free cash flow to fund reinvestment, M&A and provide resiliency through any cycles. But this is just the starting point on this slide today. It's not the aspiration. And that is why we are confident in what we are forecasting going forward because, frankly, it looks a lot like what we have a history of already delivering.

And I want to spend a few moments revisiting 2025. We experienced margin pressure last year that was identifiable, temporary and is already reversing. In 2025, 3 dynamics were happening at once. Sales growth was modest, and it was driven by acquisitions. So reported growth did not translate into margin last year. And adjusted EBITDA margin was under pressure versus 2024, driven by identifiable headwinds rather than a change in underlying demand, and I'll speak to that in a moment. At the same time, we saw backlog and orders accelerate into year-end, setting up a better absorption and mix environment across all 3 of our platforms, protein, bakery and snacks as we moved into 2026.

As I said, the margin pressure we experienced last year was not structural. It was the result of timing and temporary cost headwinds we can offset and grow through. Specifically, margins were impacted by 3 things: acquisition dilution. Newly acquired businesses typically enter below our platform margin, and this had a dilutive impact of about 100 bps last year. Shortly after an acquisition, we launched detailed strategic plans with the leaders in the acquired business to lift the company's performance to our profitability expectations. And this is usually a plan over a 3-year time horizon. And as Matt demonstrated, we have a track record of significantly improving margins over time. And we expect these recent acquisitions to follow the same pattern.

Second, inflation and tariffs have the largest impact. Given our long-cycle equipment backlog, often 6 to 18 months, cost headwinds can take time to reprice, and we expect them to persist until we work through the backlog, which we have expected to work through that backlog by the second half of this.

And finally, reduced fixed cost absorption. During a period of customer hesitation last year, orders slowed temporarily, but they did not disappear. We made a deliberate choice to not take short-term actions that would compromise long-term growth because we had clear visibility into the sales pipeline even though it hadn't translated into orders yet. And you can see that ultimately, that happened in the fourth quarter with record backlog at the time that we closed the year.

So now let's take a moment to look at how we started 2026. because the first quarter demonstrates the momentum we are carrying into Midera's spin. Based on Middleby's segment reporting last week, Food Processing sales came in at $224 million, up 34% from a year ago, with 25% organic growth. And this is not a one category story. We saw double-digit top line growth across protein, bakery and snacks. Segment adjusted EBITDA grew 38% to $41 million, with segment adjusted EBITDA margin expanding to 18.5% or 19.5% when you exclude the impact of acquisitions and FX.

Importantly, we see a clear path to further margin expansion from here. The composition of our backlog is increasingly favorable from a mix standpoint. And our recent acquisitions are continuing to mature and contribute more meaningfully to profitability. These tailwinds give us real conviction that margins will expand as we move through the year. Orders in the quarter were $231 million, up over 25% from last year, and the number that underpins it all is the backlog. The backlog ended the quarter at a record $416 million, up 52% from where we were a year ago. That backlog is essentially sales that we have already won, and it gives us visibility into the rest of 2026 and frankly, into 2027. When we talk about confidence in our full year guidance and our multiyear forecast, this is why the order book is strong. The backlog is at a record and the margin trajectory is positive, and we expect it to continue.

Now before I walk through the financial forecast, I wanted to connect it to what you have heard from my colleagues today because this is really the bridge between their presentations and the numbers that I'm about to share. Mark opened by walking you through the strength of our industry-leading platform with over 30 best-in-class brands, a large global installed base, diversified end markets and our innovation centers. And he made the case for why the industry tailwinds at our back, rising living standards, automation, changing consumer preferences and food security, among others, are durable and structural, not cyclical. Mark Bowie and the Group President, then laid out how we capture growth organically through total line solutions, market penetration and focused aftermarket growth. Matt walked through the M&A history and philosophy that we will believe will continue to compound value for our shareholders.

And just as important, and I can promise you definitely Bowie's favorite. You heard how the Midera operating system drives our DNA, a results-driven, customer-centric, entrepreneurial-minded culture with the speed of innovation that is difficult for others to replicate. This is a proven formula and makes execution against this playbook believable and repeatable. This playbook is precisely why we have confidence in the financial framework I'm about to present. When you see our sales growth targets and adjusted EBITDA margin expansion, they are a direct output of these pillars working together.

So how does sales growth build? We think about it as a stack, baseline market growth plus specific Midera growth drivers with meaningful M&A upside on top. As Mark discussed, based on industry reports and management estimates, we expect baseline industry growth of about 3% to 4% on average per year through 2028. That's what you would expect if we simply kept pace with the market, but that is not our goal. On top of that baseline, we had 2% to 3% above-market growth from our growth strategy.

Total line solutions. Customers want partners that deliver throughput and uptime across full line, not point solutions. Our platforms are bringing new solutions to market that expand our share of wallet and deepen customer relations.

Market penetration. We follow customers into new geographies with an asset-light approach, typically adding sales and service coverage as demand wars. We also localize innovation where our technology translates well into evolving consumer trends and regulatory needs and aftermarket growth, higher margin recurring sales and a natural pull-through from our installed base. We're scaling this through a proven commercial model and tighter execution across parts, service and upgrades. When you add those layers together, you get a forecast that is diversified by end market, by customer need, by geography and by sales type. This is diversity that builds resilience in our business model. Put these drivers together, and it supports 5% to 7% organic sales growth CAGR through 2028, built from structural demand and a clear above-market growth strategy.

And on top of that 5% to 7% organic growth, there is M&A upside at an exciting level, which is supported by a repeatable playbook, clear return thresholds and increased stand-alone focus. It's important to note that this forecast is not dependent on hero assumptions. It's built for multiple growth engines that we can measure and we can manage. And it is aligned with the track record of performance that we have already delivered. But growth is only half the story. Let's look at how it converts to margins.

In our business, margin expansion is typically driven by 3 things: absorption as volume improves, mix as aftermarket grows and productivity as the operating system scales across the footprint. That's why we're confident the low 20s estimated stand-alone adjusted EBITDA margin target is grounded in identifiable levers, not aspiration. By 2028, we're targeting sales growth above industry trends as we execute on our organic growth strategy and estimated stand-alone adjusted EBITDA margins in the range of 20% to 23%, reflecting the impact of sales growth, mix and operating system productivity plus maturing acquisitions. The path there is clear, and it's built from the same levers we've used historically. Volume and mix improved costs, fixed cost absorption and aftermarket growth improves both margins and cash conversion.

Recently completed acquisitions mature toward our platform margin expectations through pricing, sourcing and commercial expansion. And the operating system drives efficiency through discipline with standard work, procurement leverage and operational productivity. And this is exactly the margin profile we want because it's supported by growth. We're not cutting our way to a number. It's backed by the operational discipline of the Midera operating system, and it's grounded in levers that we can control.

Now let me spend a moment on capital allocation because this is one of the biggest advantages of being a stand-alone company, clarity of priorities and accountability for returns. Our capital allocation priorities are simple and disciplined, and I'll describe them to you in the same way we'll run them internally. First, organic reinvestment, protect first, then grow. CapEx will largely be focused on maintenance needs, automation and improved operational capability. Then after we invest in ourselves, we expect to execute on our disciplined M&A strategy. Matt talked in depth about the strict financial framework and philosophy that we have for M&A, but to recap a few key points.

We are returns-driven, targeting double-digit ROIC by year 3. We expect acquisitions to be cash EPS accretive in year 1. And our primary focus on M&A will be building out gaps in our total line solutions or entry into new markets or categories. We will invest organically and inorganically with balance sheet discipline, which we define as managing within a net leverage framework below 3x, allowing us to preserve flexibility while maintaining a strong balance sheet. As a stand-alone company, every capital decision is made through a single lens, building the best food processing technology platform. This gives us clear priorities and clear accountability for returns. And this focus is a meaningful unlock and it's enabled by the balance sheet that we're starting with. And this balance sheet was designed for growth and flexibility.

At spin, as I said, we expect net debt of $200 million to $225 million, which is expected to result in net leverage of approximately 1.25x, enabling ample firepower to continue our track record of disciplined M&A. We anticipate having a simple debt structure, a committed revolver with access of up to $1 billion in liquidity, providing flexibility at an attractive financing rate. We expect free cash flow conversion of 50% to 55% of adjusted EBITDA, supporting significant reinvestment in the business, along with disciplined M&A.

And finally, our free cash flow forecast and our leverage capacity, we expect to give us an estimated $700 million plus of M&A firepower over the next 3 years. We intend to use it selectively with discipline and in service of the strategic priorities that we've laid out today.

Let me bring it all together and talk about what it means in the numbers, near-term in 2026 and then in the trajectory through 2028. The way to think about 2026 is better volume, absorption and pricing as the backlog converts and we work through orders and ongoing acquisition integration that the margin pressure we saw in 2025 is beginning to reverse. For 2026, we are guiding to sales of $915 million to $945 million, reflecting backlog conversion and continued execution on our growth levers.

Estimated stand-alone adjusted EBITDA of $154 million to $176 million and estimated stand-alone adjusted EBITDA margin expansion of over 100 basis points, which we view as a realistic first step on the path to the low 20s. As you look through to 2028, our framework remains consistent. 5% to 7% organic top line growth on average per year through 2028, driven by the 3 pillars of our growth strategy with M&A upside from there. 20% to 23% estimated stand-alone adjusted EBITDA margins on net organic sales growth as growth, mix, operational discipline and acquisition maturation compound, strong free cash flow generation of over 50% of adjusted EBITDA, supporting reinvestment and value-creating opportunities and leverage managed well with inside our framework, preserving our flexibility. These targets are designed to be achievable, credible and well supported. They are grounded in our track record and in our current visibility.

So to close, let me end with where I started. Midera is a growing, high cash-generating industrial technology platform with a clean balance sheet, a proven track record and M&A playbook with a clear path to above 20% estimated stand-alone adjusted EBITDA margin. We are excited about the future, not because it's a new story, because it's not, but because it's more focused continuation of a model that's already working with clear reporting and more focused capital allocation.

And with that, we're going to turn it over to the Q&A portion of the call. I invite my colleagues.

Just as a reminder, we do have microphones in the room. So if you do have questions, please raise your hand and allow for our mic runners to find you. And for the benefit of those in the room as well as those listening on the webcast, if you introduce yourself with your name and the firm you are from followed by your question that would be greatly appreciated.

Justin Ages, CJS Securities. With the focus on total line solutions, can you tell us a bit of how much -- what percentage of your sales are total line solutions and how that dynamic works between your sales reps going to customers and saying, would you like total line solutions or your customers saying, we've seen what you guys can do, and we're interested in the solution?

Let me try to address the second part. The first part, we don't share the specifics of sales between total line solution and replacement equipment. The total line solution go-to-market strategy is very simple. We have brands that sell products, replacement products. And when there is a big project there is a new capacity or replacement of the line. Our brands get together. There is a category manager that drives this whole initiative. And together, they engage with the customer and create the solution effectively so that they said and that there is one decision maker that basically drive that transaction.

From an inorganic point of view, where we're at today is not where we're going in the future. From an M&A point of view, we try to fill in white space within the total line solution, look for other new total line solutions in growth markets. So where we're at today is clearly a baseline to where we are going to be in the future.

I just wanted to ask in terms of the history of acquisitions in the food processing space, what is the typical multiple being on sales or EBITDA and has that environment shifted over time with interest rates changing?

That's a great question. Multiples over the history of the platform changed, obviously, from the -- between mid-2010 to COVID era and after. But if you kind of look at the platform construction as a whole with the roughly $850 million of capital deployed at roughly an average of 11% EBITDA, you can kind of back into the math.

Mig Dobre with Baird. On your margin targets, there's a little bit of tension, at least for me, between the Midera operating system generating 200 to 350 basis points of uplift in a short amount of time in three years versus the history of you being able to acquire businesses and expand margin post-acquisition. So what's not clear to me is what is it that you're doing now that you didn't do before? Because obviously, you have to do something right in order to integrate those acquisitions and be able to get more margin to begin with, but something is missing, right? And apparently this is what this operating system is supposed to bring in...

So maybe let me take the first shot at it and maybe you can add some more color. If you look at our history as a segment reporting within Middleby, every year since the year 2021, we've been adding 100 basis points to our EBITDA margin. And we got to those numbers, we got -- in 2024, we got to 25.6% EBITDA margin. So we've done it. We've been there before. So as we have a new -- we're separating and we're now -- we have to have the public company cost 100 basis point improvement every year from a lower position is something we've done for the past 4 years, 5 years.

I mean from an acquisition point of view, obviously, as a stand-alone company, there's going to be 100% focus both on the execution but moreover on the integration. We've built a team ready and scalable for growth and with the addition of Mark Bowie and the promotion of group presidents, we're putting muscle behind the exercise. So I mean...

Yes. I think that's it. Obviously, we want to build muscle. We want to pull on all the levers. We want to continue to execute on our new acquisition playbook and strategy to develop new goals. So we want to double and triple down on our operational efficiencies. We want to make sure that we're extracting that value out of mature organizations underneath our umbrella but also the new organizations that join us and really put that operation system as groundwork how we conduct business day in and day out. We want to couple on top of that a more aggressive approach around our supply chain to protect those margins and really double and triple down our efforts after the separation after the spinout and focus on the areas we have the biggest impact from a supply chain standpoint as well. You then lay on top of that to continuing to stay after our pricing, and you really have 3 levers you can pull to extract more value. I think we're being pretty conservative in how we're looking at it, but we want to make sure that we are very focused on pulling on each one of those 3 levers underneath our umbrella.

And let me -- I think I'll just add to the math there. So the 100 bps that comes from the M&A maturation, that's from the 4 acquisitions that we've acquired over the last 2 years. So just when you take their percent of sales as a percent of total, their individual margins grow much more than that, but the impact on that to consolidated margins is about 100 bps. And when you look at the implied or forecasted improvements in margins from the Midera operating system, that comes out to be a little over 100 bps a year, about 1% COGS cost reduction. We're well on our way as we've guided 2026 to deliver that, and we expect it to move a little faster as we get the Midera operating system embedded take advantage of the supply chain opportunities that are out there and some of the efficiency improvements we can drive. So that is kind of how the math works, if that helps.

If I may follow up then, we didn't talk much about pricing and price cost. Obviously, there's incremental cost that you can experience as a public company, but presumably, you have inflation of all sorts in the business that you have to deal with. So can you talk about your assumptions as you look at the next 3 years in this regard to price cost dynamic? And are there opportunities in your business, whether it's on the aftermarket side or anything else that we should be aware of where pricing itself can be a margin driver and a margin lift in the next 3 years?

I'll just answer on the total line solution, we price for value and bring a lot of value to our customers. So we can price our total line solution to protect our margin on the other levers that we have, obviously, on the aftermarket, we typically have pricing adjustments to make sure that we are protecting the margins as well. And then we have the operational improvement that will add to our profit margin and supply chain initiative and all that Mark talked about in operational excellence and efficiency.

I think, Mig, the reality of it is pricing is super sensitive during this time. I mean, depending on what day it is, what hour it is, the supply chain dynamics change based on what's happening out there either from tariffs or inflation or even currency risk. So staying very close on pricing and making sure that we are extracting as much value as we can and staying ahead of that curve is important. As Amy talked about in 2025, that backlog is big, and we want to make sure that we're shifting that exposure as much as we can to our customer on some of those near-term risks, but also staying after pricing to make sure that we are reducing that risk as much as we can internally as we execute on that backlog.

Mitch Moore with KeyBanc Capital Markets. Maybe just to add on Mig's question a bit. Some of the operational excellence initiatives Mark talked about the Midera operating system, how much of that is currently like culturally embedded in the business versus maybe needs to be developed a bit as Midera kind of evolves into an independent company?

Yes, Mitch, let me take that one. The reality of it is we have businesses across pretty full spectrum. We have businesses that are early in the Midera life cycle that are pretty immature. They have strong entrepreneurial management teams that are very customer-focused. That's part of our fit profile. We want to make sure that they have that embedded, but they don't have some of those more mature operational toolbox items that are in place from visual management and countermeasures and really getting strong strategic plan alignment and then driving that from the C-suite if you will, all the way down through the Gemba level where the work is actually being done.

But then we have businesses like Scott's business out in Tennessee with very strong visual management, very strong countermeasure, a wonderful Gemba culture with strong safety guidelines that are embedded in it. So if you look at our businesses, you'll find examples all the way across. And frankly, we don't have any business that I've seen that I would say is mature along that journey. So I view all of that as potential upside and potential opportunities for us to expand margin going forward. Yes, I am looking forward to. As you can tell, I light up like a Christmas tree when I talk about it.

Brzezinski, PSQ Capital. I wanted to ask a question on the management incentive comp plan. Can you give us a sense what the KPIs are for CEO and CEO minus 1 level, and how they're weighed in the incentive comp plan?

I think to answer that question simply is those decisions have not been finalized as the Midera Board and the comp committee won't be formed until we spin on July 6. But what we expect is for the incentive plans to look similar to what Middleby's incentive comp plan. So for the short-term incentive comp, those metrics are based off of EBITDA margin, EBITDA and revenue. And then for the long-term equity plan, it's a mix of RSUs and PSUs with similar metrics and with ROIC added as a comp metric recently.

And I would say to answer like that will be kind of all the way through at least the first kind of 3 reporting lines of the business that those incentives will be in place.

Thank you for those questions. Any additional questions from the group?

Okay. I think that concludes our Q&A session. I'll hand it over here to your host Mark Salman for some closing remarks. Thank you.

Well, thank you. We are committed to making sure that we are going to generate a return on your time and on your investments. Our business, our brands and our unique ability to solve problems for our customers is truly unique in the industry. We have confidence in delivering mid-single-digit organic growth driven by 3 core engines: total line solutions, market penetration and aftermarket. All of this is reinforced by strong industry tailwinds that we discussed earlier.

On profitability, we are equally confident of our ability to expand EBITDA margin through mix improvements, operational and scale, driving approximately 500 basis points of margin uplift by 2028. Beyond organic performance, we are very positioned -- very well positioned to compound growth through disciplined M&A. And that is a core competency of this organization.

And finally, as Amy covered, we have a free cash -- clear free cash flow visibility and exceptionally strong balance sheet, giving us the flexibility to execute all of the above for the benefit of our shareholders.

With that, thank you for taking the time to meet the Midera team. I would like to invite everyone to join us for a reception and refreshments in the gathering space through the door to your right.

Good day, and welcome to the Middleby Corporation's First Quarter 2026 Earnings Conference Call. [Operator Instructions] On today's call are Tim FitzGerald, CEO; Mark Salman, President of Middleby Food Processing Group; Brittany Cerwin, CFO; James Pool, Chief Technology and Operations Officer; and Steve Spittle, Chief Commercial Officer. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tim FitzGerald. Please go ahead.

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 stand-alone public companies.

But 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.

Britt will provide additional color, but 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 in 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. Britt 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 Britt 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 1.

Turning to specifics. In the first quarter, the Food Processing segment generated revenue of approximately $224 million, with orders 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 investments 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 2 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 customers 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 on 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 3 key factors: lapping tariff-related headwinds from Q3 2025, favorable mix in our backlog and continued margin maturation of recent acquisition. In summary, we are 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 the 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 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 a 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 Britt 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 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 per 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. Start the second quarter, we have repurchased an additional 1.1 million shares or approximately 2% of our outstanding equity for approximately $154 million for 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 to $850 million, which is comprised of Commercial Foodservice at $600 million to $620 million and Food Processing at $215 million to $230 million. Adjusted EBITDA is forecasted to be between $180 million and $192 million, which is comprised of Commercial Foodservice at $154 million to $164 million and Food Processing at $45 million to $49 million. Adjusted EPS is projected to be in the range of $2.27 to $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 to $3.44 billion, which is comprised of Commercial Foodservice at $2.44 billion to $2.49 billion and Food Processing at $915 million to $945 million. Adjusted EBITDA of $758 million to $790 million, which is comprised of Commercial Foodservice at $645 million to $668 million and Food Processing at $186 million to $208 million. Adjusted EPS is projected to be in the range of $9.54 to $9.70.

Please refer to Slides 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.

[Operator Instructions] Our first question comes from Jeff Hammond with KeyBanc.

Can you guys hear me?

Yes.

Okay. Sorry about that. Can you unpack the -- Tim, the March, April trend comment and what you're seeing from an order standpoint, kind of what's changing? I kind of sense that maybe there was a little bit of tone change or maybe I'm misreading it.

Yes. I think we're just commenting on what are the macroeconomic conditions that we're seeing out there. Obviously, there's a lot of pressure with fuel prices being up, and we're thinking about how that affects the consumer and some of the traffic trends that we're seeing out there. But in terms of order rates, we've been positive. So I mean, I think things have continued well for us early into second quarter. Remember, our lead times are not all that long, but I think a lot of the momentum that we've seen that started in the back half of last year and carried into the first quarter, we have not seen that change thus far.

We just, again, are very in tune with what our customers are seeing. But as you can also see, a lot of our chain customers, a mixed bag, but a lot of them are performing much better than they were last year, which is also a good sign for us. And a lot of that is related to the initiatives that we had mentioned that they had taken actually with pricing on the menu and moving to more profitable categories such as poultry and beverage. So I think a lot of good things going on, but remain cautious just given the bigger picture.

Okay. Great. And then a couple on Food Processing. One, any kind of good lumpiness in 1Q, just very strong start and kind of kind of flattish organic into 2Q? And then if you can quantify the onetime new product intro cost impact on 1Q? And then just speak to M&A pipeline actionability.

Sure. Yes. Thanks for the question. This is Mark. So on the lumpiness, we really tend to look at our business not just quarter-by-quarter, but more so 2 quarters in a row, 3 quarters in a row because this is -- you take an order, you turn it into revenue between 6 to 18 months. So sometimes you do have some greater quarter than others, which if I look at the first half of the year, the organic growth with our guidance is at 9%, which is something we're happy to pinpoint. And the second part of your question was on?

M&A.

The M&A pipeline. Obviously, we've been active throughout the years. We remain very active. That's one of the thesis of our spin. And we will not give further comment other than we're in a good spot there as well.

And the next question comes from Brian McNamara with Canaccord Genuity.

This is Madison Callinan on for Brian. First, in CFS, what's been resonating with customers? And what drives future growth? Is it innovation? Is it deferrals coming through?

Yes. This is Steve. I think it's all of the above. I think when -- specific maybe to our chain customers, the bigger QSRs right now, a lot of the demand that we're seeing, there is a change. Over the last several years, there has been a greater focus with the bigger chains on new store openings. And although that does continue to some extent, you are seeing more going back into restaurants, making sure operations are delivering a very consistent product and a good experience for consumers.

So you're seeing the demand in the replacement business start to pick up, which has been a thesis of pent-up demand in that area. But really, the biggest area I feel like we're seeing upside with our big chain customers is when they're adding additional products to drive new menu items and new dayparts. And obviously, beverage is a big category we've talked a lot about on these past several calls.

And you're really starting to see that show up meaningfully with some of our customers in their last couple of quarters. And that is very powerful for Middleby just because no matter if you are adding a beverage platform that is anything from coffee to refreshers to shakes, Middleby can do all of that. And so we really have become a one-stop shop for any type of chain customer that's looking to add beverage to their menu. And now you're seeing it actually drive dayparts for them, which is driving traffic, it's driving revenue for them. So it's one aspect of where we see demand coming from, but it's an exciting part of what we think the rest of this year and certainly into next year holds in terms of beverage and just new product adoption for us.

Great. And then how does the recent updates to the Section 232 tariffs impact the company relative to the tariffs you were already paying? And can you remind us of your exposures to cost inputs like steel, aluminum, resin?

Yes. So as it relates to the tariff changes, so with the elimination of the IEEPA tariff and then the changes to the 232 and incorporating Section 122, we still feel that our overall tariff exposure on a gross basis remains relatively the same. As it relates to the inflationary costs that we're recently seeing kind of in shipping and on the control side, we are anticipating that to be a headwind here and have announced that we will be putting pricing through to cover that.

On the Commercial side, we're expecting that to be kind of in the low to mid-single digits. And then on the Food Processing side, obviously, with their contracts, they will -- as they're prudent in their contract pricing and also through parts pricing as well. In terms of the overall exposure, as we do our initial estimate, we believe for each of the segments, that's probably about a 1% headwind on margins.

And the next question comes from Mig Dobre with Baird.

Brittany, congrats. Look forward to working with you going forward. I guess my question, starting with Tim or Steve, when I'm looking at the organic growth in Commercial Foodservice, it really stood out to me not only relative to your initial guide, but just relative to what the company has been able to grow over recent years if we're kind of leaving out the post-COVID recovery, right? The Q1 performance was just materially above recent trends.

So what's different? What changed? And were there any sort of onetime items that investors need to be aware of either as it relates to prebuying by dealers or some stocking of channel inventory effect or even maybe some of your larger customers on the QSR side that have had any onetime purchases or lumped purchases for lack of a better term in the quarter?

Mig, so I think we'll kind of pass back and forth between Steve and I. We did not see anything that was kind of onetime or unusual. I think in terms of what changed, it was probably the chains starting to pick up. So I mean I think as we had mentioned last year, I mean, we were doing pretty well with the dealers in general market growing double digit in the back half of last year. And I think we have been taking market share there. And last year, we felt we were also taking market share with chains, but we're over-indexed to the chains, right? So that had been a challenging part of the business, but I think I describe it as losing where you're winning.

So I mean I think we're very well positioned with the chain. So it's still a mixed bag, but they are performing better. So as you see the chains inflecting, that's kind of where that is now showing up in the numbers. So you have kind of both parts of the business up as opposed to one up and the other one, which was a larger portion down in last year. So that's really kind of the inflection in the front part of the year.

Yes, Mig, I would just add, I mean, I think the traction we see both with chains and certainly within the dealer community in the U.S. there's been a lot of work and investment over the last 2 or 3 years to get to this point. I feel like we've done a lot of work with a challenging backdrop, and we've invested both in people, resources, programs, trainings, both at places like the MIC, online trainings.

And I think as the underlying markets for dealers in general market for institutional as that has started to come back around, we're taking market share in those segments because of the work we've done over the last 2 or 3 years. And so you're seeing it pay off in areas that we have maybe not been as successful with before wrapping projects together.

So like for dealers, they used to potentially buy 3 or 4 brands on a project. Well, now because of the work we've done, they're packaging 6, 7, 8 brands, including stuff like ice, combi, TurboChef, et cetera. So both for dealers and chains, I guess I'm just stressing that we've put a lot of work in behind the scenes over the last 2 or 3 years with some pretty substantial time and investment to drive some of the growth that we're starting to see right now.

That's very interesting. Again, looking at your guidance, you're still talking about, call it, 5% organic growth in Q2 at Commercial Foodservice and just the full year organic growth of 5%. Again, if we're excluding the COVID recovery, that's the best organic growth you've had in a decade. So I guess my follow-up is, how sustainable do you think this is? Clearly, the year has guided the way it is, but I'm anticipating here at the upcoming Investor Day, are we to the point in your view that either through your investments in new product or the dynamics in the industry, we're finally back to this business, Commercial Foodservice being able to grow kind of mid-single-digit organically on a more sustained basis?

Yes. I mean I think we are confident in what we can control. I mean I think the investments that we made, and Steve just talked about a few of them, both with the go-to-market initiatives and all the innovation, we think we have been very thoughtful and executed on that well. And I think we're -- those investments are now made and starting to bear fruit, right? Like some of that was even disruptive as we went through the period, but certainly, the backdrop of the industry in the last 2 years has been disrupted, right?

So I think we're confident in our execution and what we can control. We are optimistic that the industry is improving over a very disrupted period. But certainly, the industry is not completely off to the races either. There's a lot of pressures out there with pricing costs, et cetera. But our chain customers are starting to perform better. So I mean, I think as we think about it over the next 3 years, yes, we feel like there's a pretty good setup for industry to be in a better spot than the last 3 years. And certainly, we are in the best position we've ever been.

And the next question comes from Tami Zakaria with JPMorgan.

Congrats on the wonderful results. My first question is similar to Commercial Foodservice, do you have any price increases planned this year in response to tariffs? Or are food processing orders part of long-term contracts that have escalators that kick in and that issue gets taken care of eventually over time?

Well, Tami, thank you for the question. First, yes, we always price our contracts based on what we believe is going to be our cost. Whenever we get these big contracts, we go and immediately contract our suppliers to firm up the costing side of it. On the aftermarket, we do take price increases just to reflect the headwind that we typically get on pricing. So I think we're pretty much ahead of the curve at this point of time once we are done with the second quarter with the remaining tariff impact that we've had from 2025.

Understood. That's very helpful. And the other question I had was for the Commercial Foodservice segment, EBITDA margin was down year-over-year in 1Q, and it seems you're guiding to down again in 2Q. Do you expect to return to year-over-year growth in 3Q with pricing kicking in? Or is that going to happen in 4Q as pricing takes full hold?

Yes, Tami, this is Brittany. So I think as we go through the first half here, we're still lapping that tariff impact from 2025 on a margin perspective. And also, as we commented here in Q1, we still have some mix challenges that are impacting the margins, and we expect that to start to improve in the back half of the year as we look at the larger chain new unit growth and rollout plans that we have indication for right now.

So that's why in addition to what we see from the inflationary pressures that we're facing on the cost side, we're being cautiously prudent in terms of the guidance for the margins for Q2, but do believe with lapsing the tariffs and as we continue to put further pricing out there to help us cover the new inflationary costs that we will start to have some benefits in the back half.

And the next question comes from Chris Senyek with Wolfe.

Great quarter. The momentum continues, and I like the surprise upside to the buyback. Ice and beverage continues to be a standout area of momentum in the last couple of quarters. Can you elaborate on what's driving that strength, whether it's cold beverage innovation, menu expansion, customer mix and how we should think about that as we look out over the coming quarters and over the next year?

And I guess related to that same question, was there any more front-end loading of the ice and beverage rollouts in the first half of the year for menu changes in the back half of the year with these chains? Or is it sort of you think, going to be pretty non-lumpy over the course of the year this year?

Yes. Thanks, Chris. This is Steve. Maybe I'll take the last part first. Don't really expect a whole lot of lumpiness in terms of prebuy or how the purchasing happened both last year or throughout this year. I would call out two specific areas where we're seeing growth in both ice and overall beverage. I hit just a little bit earlier, but number one, within the dealer part of our business, we see massive opportunity to take market share, which we believe we have, again, packaging it with other Middleby brands. So we certainly saw increases in market share, both in the dealer community in the back half of this year. That continued definitely into the first quarter and expect that to continue throughout the year.

But really in the chain side of our business, I keep talking about, but you're seeing QSRs that have never been in the beverage space adding beverage products to their menu, and it's become very, very prominent. And in many of those cases, it's being powered by Middleby and in some cases, exclusively powered by Middleby. And again, the chains are looking to us more and more to be able to provide a single solution that can almost immediately drive revenue. And from a franchisee standpoint, it's actually a very quick ROI, and that has become critically important to us.

So again, I keep coming, it's beverage goes everything from ice to dispense to the actual product sales like it's everything in between and Middleby can do all of that, and that is why we're uniquely positioned. So that's -- so we have the dealer business and then we have a chain business that really is where we see momentum right now. And in many ways, I feel like we're actually just starting to scratch the surface of what the next couple of years can hold.

I think to that last point, a lot of those products are still coming to market right now. So I mean, I'll say some of them aren't even scratching the surface yet. So a lot of the coverage disruptions that we've got because I think our products are very differentiated. A lot of that will show up really 2027 and 2028. So we've got a pretty robust pipeline there. So that's very exciting for us.

Indeed, it is, yes. And then separately, on the buyback, I know there's upside to the buyback in the quarter and that kind of just changed maybe the mix of the buyback guidance. But how should we be thinking about the cadence of cash flow over the next couple of quarters as we think about modeling what might be available for the buyback in any particular quarters? Anything strange with working capital in certain quarters or anything else we should be aware of?

No, absolutely. As you commented, we did have obviously a front-loading here of the buybacks as we continue to utilize the proceeds from the residential transaction and continue to use the vast majority of our free cash flow to convert that. As we put kind of in the guidance slide, we are guiding for Q2 to be around $175 million with the back half of the year about $50 million each quarter. So continuing that trend of the buybacks, and we'll continue to be opportunistic at the right time.

This concludes our question-and-answer session. I would like to turn the conference back over to Tim FitzGerald for any closing remarks.

Great. Yes. Thank you, everybody, for joining today's call. Just again, as a reminder, we've got our Investor Day next week in New York on May 12. So hope to see many of you there. And then also call out that we're going to be at the restaurant show in Chicago, which is May 16 through 19. So that's also a great opportunity to come and visit with us and see a lot of the new products that we're launching, IoT, automation, beverage, get the latest in food service.

So thanks very much, and we'll speak to you on the next call.

The conference has concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Middleby Corporation's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] On today's call are Tim FitzGerald, CEO; Mark Salman, President of Middleby Food Processing Group; Bryan Mittelman, CFO; James Pool, CTO and COO; and Steve Spittle, Chief Commercial Officer. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Tim FitzGerald. Please go ahead.

Good morning, and thank you for joining today's call. Over the past year, we have executed decisive actions to unlock significant value for our shareholders through the strategic optimization of our portfolio of industry-leading businesses across Commercial Foodservice, Food Processing and what was formerly our Residential Kitchen segment.

Before we dive into our results for the quarter, let me start with our strategic accomplishments. In February, we announced the completion of the sale of a 51% stake in our Residential Kitchen business to 26North at $885 million total enterprise valuation, delivering approximately $565 million in immediate cash proceeds subject to future closing adjustments. This transaction represents a premium valuation while allowing us to retain meaningful upside through our 49% ownership stake. Following the close of the transaction, Middleby operates 2 highly focused industry-leading platforms, Commercial Foodservice and Food Processing.

While we retain a 49% stake in the Residential JV, we are treating this as a non-core part of our operations, which is why you'll see it in discontinued operations in the fourth quarter and going forward will be excluded from our adjusted results. In anticipation of the proceeds from the deal, we will immediately put this capital to work for our shareholders. Combined with our ongoing share repurchase program, we reduced our overall share count in 2025 by approximately 9% through $710 million in buybacks, one of the most aggressive capital return programs in our industry. This reflects our conviction that Middleby shares remain significantly undervalued relative to our earnings power and growth prospects.

In the second quarter, we plan to complete the separation of our Food Processing business, creating 2 independent pure-play industry leaders. Each business will emerge with enhanced focus, optimized capital structures and the resources to maximize growth in their respective markets. The financial impact is compelling. Following these transactions, Middleby will operate as a focused Commercial Foodservice leader with industry-leading 27% 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.

Turning to our fourth quarter results. Our total revenue of approximately $866 million for our remaining 2 segments exceeded our expectations. This strong top line performance drove adjusted EBITDA of approximately $197 million. Through a combination of these operational results and the substantial share repurchases we made in 2025. This translated to adjusted EPS of $2.14 for the quarter and $8.39 for the full year.

For today's discussion on segment level results and trends, I will be discussing the Commercial Foodservice results and outlook, and I have asked Mark Salman, the current President of our Food Processing segment, and as we announced today, the CEO of Food Processing SpinCo upon completion of the spin-off, to discuss the Food Processing segment performance.

Starting with Commercial Foodservice, we generated revenue of approximately $602 million, which exceeded our expectations during the fourth quarter. The outperformance was driven primarily by the general market with our dealer partners, which had double-digit growth in the quarter. We attribute the second half momentum to improve demand with independents and in the institutional market, along with continued growth with emerging chains.

We are gaining share with our dealer partners as a result of investments to strategically align those relationships over the past several years. The broad-based strength we saw in the general market was offset by continued declines among our large QSRs and C-store customers who faced lower traffic and cost pressures throughout 2025.

While the QSR market conditions remain challenging, we are encouraged by actions taken by our larger chain customers to better position themselves setting into 2026. We've seen our customers address menu pricing, returned to limited time offers and launch new beverage programs to reposition against the challenging backdrop with a focus to drive customer traffic. We are encouraged by the early traction we have with some of our largest customers with our new ice and beverage innovations. This is a targeted area of expansion for our Commercial Foodservice business and we are well positioned with exciting new solutions.

As we think about the year ahead for Commercial Foodservice, we remain focused on building our business for long-term success, but are optimistic that the chain restaurant environment will stabilize and improve as we move through the upcoming year. Bryan will provide additional color, but our guidance assumes a relatively consistent environment relative 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.

More specifically, we have clear catalysts for accelerated growth with restaurant industry fundamentals stabilizing with early signs of traffic improvement. With our dealer partnerships generating strong momentum in the general market and institutional segments, in our ice and beverage platform, representing a significant growth opportunity that we're uniquely positioned to capture. As we think longer term, the investments we have made position us with unmatched competitive advantages, both now and in the future, with the industry's broadest portfolio of leading brands, the strongest innovation pipeline and leadership in automation and IoT capabilities that will drive market share gains for years to come. We still have work to do, but I'm excited for what the future holds for Middleby Commercial Foodservice.

I would now like to turn the call over to Mark to discuss Food Processing.

Thanks, Tim. Before I discuss the segment results, I want to thank the Board of Directors for entrusting me with leading Food Processing SpinCo. Leading this company is the honor of a lifetime and I am excited for the opportunity ahead. I also want to thank you, Tim, for the partnership you've shown me over the past 10 years here at Middleby. I look forward to working with you even more closely through this process.

Turning to the Food Processing segment. In the fourth quarter, we generated revenue of approximately $265 million, which outperformed our expectations. As I look at the business, I am proud of what we have accomplished in the fourth quarter, particularly our extreme strong order rate, but more excited about the strong foundation it creates as we enter 2026.

2025 was challenged with disruption from tariffs and high food costs, which delayed our customers' purchasing and investment in solutions in the first half. However, the latter part of the year, we saw our customers moving ahead. We had very strong orders in both the third and fourth quarters with a record backlog as we finish the year. This was driven by continued success with our Total Line Solution offering along with strategic expansion in international markets. We have a strong sales pipeline and continuing strong order intake. This all gives me great confidence in our position for not only next year, but the longer term.

Taking a step what sets Middleby Food Processing a part is our comprehensive approach to serve individual protein, bakery and snack processors. Rather than creating a portfolio of disconnected brands, 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. Our success reflects a year of strategic investment in building these comprehensive customer solutions, and we are gaining momentum in the marketplace with a growing competitive advantage.

Our decentralized culture promotes agility, innovation and speed. We have state-of-the-art innovation centers with the most recent one opened this fourth quarter outside Venice, Italy, where we can showcase our know-how in the most innovative and collaborative environment. This strategy is one of the key foundations that will drive our organic growth in the years to come.

I am also very excited about the continued opportunities that exist as we expand the platform through targeted strategic acquisitions. We have built the Food Processing business through additions of brands and products, very specific to the food applications that we have targeted and that complement our Total Line Solutions. This has proven to be a very successful acquisition strategy, providing significant revenue and operating synergies. We have a consistent and proven track record of executing on our acquisition strategy over many years with our strategic approach and financial discipline.

Although we have been executing our strategy for some time, we are still in early innings, and it's the right time for the separation into an independent company. We now have the proper scale, we can accelerate what has proven to be our unique and successful business model. I am excited for what lies ahead.

With that, I'll turn the call back over to Tim.

Thanks, Mark. I'm looking forward to what is ahead for Food Processing.

As you've already heard, we have 2 well-positioned segments for growth in 2026 and beyond. On top of this, at a corporate level, our capital allocation strategy remains aggressive and focused. We'll continue our share repurchasing program having allocated over $700 million in 2025, reducing our shares outstanding by approximately 9%. We continued this share buyback activity into the first quarter, expecting to repurchase approximately another $300 million in the first quarter of 2026. We plan to allocate the substantial portion of our free cash flow again to repurchases this year. But most importantly, we have a world-class team around the globe, whose commitment and execution continue to drive our success.

2026 represents a defining year for Middleby as we execute this strategic portfolio optimization and position both businesses for accelerated growth. We are planning an Investor Day on May 12 in New York City, ahead of the Food Processing Spin and look forward to providing greater level of information on profiles and growth strategies for each stand-alone company ahead of the separation in the second quarter.

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

Thanks, Tim. Our fourth quarter results showcased the strength of our execution and the quality of our business model. Let me walk through the key financial highlights and our outlook.

For Commercial Foodservice, positive impacts we're seeing from general market, institutional and emerging chain customer segments. We delivered $602 million of revenue and a solid EBITDA margin of over 26%. This would have exceeded 27%, if not for tariff impacts. Customer engagement and interest in our leading technologies remain strong, especially in beverage dispense and ice products.

At Food Processing, Q4 revenues were approximately $265 million, and our organic EBITDA margin was 23%. Organic revenue growth of 1.3% benefited from improvements in international markets. Margins were impacted by tariffs with higher costs and disruption in order timing impacting production efficiencies. We are experiencing a strengthening order rate and growing backlog. Q4 orders reached $322 million and backlog grew to $410 million with growth across most of our served markets and in our Total Line Solutions.

Turning to Residential Kitchen. Our transaction to sell a 51% stake to 26North closed on February 2. Prior to the close of the sale, Residential Kitchen was treated as a discontinued operation. Following the close of the sale, our future balance sheets will include a minority interest investment reflecting our 49% ownership stake and a note receivable. Our income statement will reflect the impact from our noncontrolling interest on a quarter in arrears basis. Residential results are not included in our non-GAAP adjusted earnings and adjusted EPS calculations as they are no longer part of core operations.

On a consolidated basis, total company adjusted EBITDA for Q4 was approximately $197 million and adjusted EPS was $2.14. Regarding tariffs, the adverse net impact to EBITDA in Q4 was approximately $7 million. We expect benefits of pricing and operational actions implemented in 2025 to offset the cost of tariffs in 2026, although we will continue to have margin dilution in the first half of the year.

Q4 operating cash flow was approximately $178 million and free cash flow was approximately $165 million. Our leverage ratio per our credit agreement at year's end was 2.5x.

Regarding capital allocation, last year, we communicated the decision to deploy the vast majority of our free cash flow to share repurchases. For the full year 2025, we repurchased 4.9 million shares for $710 million or an average purchase price of approximately $144.50 per share. In total, these repurchases reduced our share count by 9% during 2025. To start 2026, we have repurchased an additional 1.7 million shares for approximately $250 million at an average price of approximately $154 per share.

I would like to provide some commentary on our capital structure overall. Our 1% convertible notes matured in Q3 of 2025, which now results in a higher interest expense of approximately $6 million a quarter. This is a $0.12 headwind to the fourth quarter earnings. For full year 2026, the interest rate headwind from the higher cost of debt is approximately $0.34. The 2026 EPS guidance reflects the benefit of share buybacks from the proceeds of the sale of the 51% of the Residential Kitchen business. We retain future upside through our ownership of the 49% of the business and the $135 million senior note.

Turning to the rest of our outlook for 2026. For ease of communication, we provide this outlook on a current company basis, assuming that both Commercial Foodservice and Food Processing remain together for the full year. With that said, we still anticipate the separation of the 2 segments into separate public companies in the second quarter of the year, and we expect to provide updated guidance for the stand-alone companies at our Investor Day in advance of the separation of the divisions.

For Q1, we expect to achieve the following: Total company revenue of $760 million to $788 million, which is comprised of Commercial Foodservice at $560 million to $578 million and Food Processing at $200 million to $210 million. Adjusted EBITDA is forecasted to be between $161 million and $173 million, which is comprised of Commercial Foodservice at $142 million to $152 million and Food Processing at $37 million to $41 million. Adjusted EPS is projected to be in the range of $1.90 to $2.02, assuming approximately 47.7 million weighted average shares outstanding.

For the full year, we expect to achieve the following: Total revenues of $3.27 billion to $3.36 billion, which is comprised of Commercial Foodservice at $2.37 billion to $2.43 billion and Food Processing at $895 million to $925 million. Adjusted EBITDA of $745 million to $780 million is comprised of Commercial Foodservice at $632 million to $658 million and Food Processing at $186 million to $208 million. Adjusted EPS will be in a range of $9.20 to $9.36. Please refer to the presentation we have posted online at our Investor Relations website for full details.

Please note this guidance does not include onetime costs associated with the completion of the Spin transaction, nor does it include a stand-alone public company costs for the Food Processing business. We will provide estimates and detail on stand-alone costs we expect to incur along with additional materials in connection with the upcoming Baird Food Processing Symposium in New York on March 5.

I also want to provide some additional color on the shape of the year for Food Processing revenue. As a reminder, we typically see Q1 is our weakest quarter and Q4 is our strongest with Q2 and Q3 relatively equal in between. We expect 2026 to follow this general pattern. However, in 2026, we expect the sequential increase from Q1 to Q2 to be smaller than the $48 million step-up we saw in 2025. This reflects our expectation that Q1 2026 will be stronger relative to the rest of the year than Q1 2025 was, essentially returning to more normal seasonal patterns after an unusually weak Q1 of 2025.

Before we conclude our prepared remarks and begin Q&A, I want to provide an update on the Food Processing spinoff. We remain confident in our ability to execute the necessary actions to have a successful transaction. Activities to ensure the spin company will be operating effectively, efficiently and independently at inception remain on track. We continue to expect to complete the spin-off by the end of the second quarter. Ahead of the joint Investor Day on May 12, we expect to file a publicly available registration statement, which will include annual audited financial statements in April.

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

[Operator Instructions] The first question today comes from Mig Dobre with Baird.

I guess where I would like to start is with maybe a little more context on what you're seeing in the CFS segment. You talked about the quarter being better than guided and anticipated that it clearly was. And you mentioned improved activity from the general market and the dealers. And I guess, I'm sort of wondering here how much of that was just a return to sort of the normal behavior that we typically see in the fourth quarter from the dealers in the general market? Going back to the prior call, we are talking about how your guidance at the time didn't seem to reflect kind of the more normal stocking dynamics. I'm wondering if that's really what surprised here? And as you think about your outlook for 2026, how do you think about this general market specifically? Can it actually build some ongoing momentum? And -- we're really waiting for here is for the large QSR customers to sort of find bottom? Or is there something else that you're contemplating here?

Mig, I think I'll kick it off and then Steve will probably pick up. Yes, I mean, I think we've been -- we saw continued strength in the dealer market, as I mentioned, in the initial comments. I think some of that's fundamentally us gaining market share there, I think, to a certain extent, and then I would say kind of broad-based, we've seen improved replacement demand in the market. I think we -- that exceeded expectations in the fourth quarter because it was very strong in the third. So we didn't want to kind of bake that into an expectation of that continuing. But I think we feel pretty good about the backdrop of that continuing into next year. So really kind of the inflection is what happens with the change as we go through the year.

They have -- we've seen improvement with the larger chains as we kind of went through the year. I think they've reset as they reacted to market dynamics and we've seen traffic improve, and that kind of gives us some level of improving confidence in that category of the market as we go through next year. And I think that's kind of the pivot point to move back into organic growth for the year.

Mig, I would just add, this is Steve. Specific to the fourth quarter and dealer activity, we commented on prior calls that I don't believe this is the historical, hey, it's the fourth quarter, we're bringing in inventory chase year-end incentives, that is not what I believe happened. One of the big areas we've spent a lot of time leaning in with our dealer partners, whether it's training to the [ MIC ], online digital training has really been to get them to think outside of core Middleby products. So all our dealers historically know the Pitcos, the blocks, the South [ Bend ], where we're gaining market share specifically the back half of last year has been getting those dealer partners to start thinking of us for ice, right, pulling out follower at ice or pulling in Invoq combi, pulling in TurboChef, pulling in coffee and then starting to really package and wrap a full Middleby solution together. And that's more where I think we saw the positive impact in the fourth quarter, not necessarily the historical norm of stocking up in the fourth quarter. We just don't see that bringing in inventory to chase a year-end or chase -- or beat a price increase, it's just not the way the dealer market is operating right now. So we're very happy with, I think, the increased share we're taking in some of those new product categories for us.

Okay. Very helpful. And then my follow-up is related to your tariff comments on Slide 20 of your deck. If I understand this correctly, at least the way I read it, it looks like there's about $74 million at the midpoint of incremental tariff drag in '26 relative to '25, hopefully, I have that correct. I am wondering how that splits between the two remaining segments. And it appears that you're saying you're going to offset this with pricing, but there's a bit of a timing issue in terms of how that flows through. So I guess the question, how confident are you that you'll be able to offset this fully for the year? And is this the primary factor that is accounting for the margin ramp implied in the full year guidance relative to Q1?

Mig, it's Steve again. So the split on the tariff impact between the two remaining companies in broad terms is, I'll say, 2/3 to 70% of the impact is coming from Commercial Foodservice, obviously, the remaining impact from Food Processing. The main split difference there is Food Processing doesn't quite have as large of a supply chain base coming from markets like Asia as we do in Commercial. So that's the reason for a little bit of a difference. We have said that pricing that we took in the back half of last year, specifically on July 1. And then we took another small to mid single-digit increase to start the year on January 1 this year that would cover the impact of the tariffs as we sit here today. We still believe that to be true. There is some vicious timing of when tariffs are hitting, when that pricing starts to or has been flowing through, and that's where you see a little bit of a drag in the first quarter, specifically in commercial and obviously improving as that pricing comes through and then you start to overlap the tariff impact in the back half of last year, which is why you see -- or one of the reasons you see margins improve throughout the year. So we do feel confident we've taken pricing. Again, July pricing has been in place already and now obviously, putting forth another increase to start the year and believe that, that will stick as the year unfolds.

The next question comes from Jeff Hammond with KeyBanc.

Just wanted to come back on the QSR dynamic. One, I think you had some larger QSRs kind of take a CapEx strike in 4Q. I wondered if that played out? And what the -- was that kind of a one quarter event or does that linger? Two, what are they kind of telling you about store openings? It seems like the last couple of years, there was optimism and then deferrals and what's kind of the update there? And then just any -- as you see some of this value pricing, better traffic, some of the stimulus coming into the market like what's -- how is the dialogue changing or not changing around CapEx for your QSR customers?

So I think one of the things that we've seen is increasing confidence in the operators as we've come into the year. So I mean, I think there was a high level of uncertainty and certainly a lot of cost pressures, which caused them to hold up. So I mean I think one of the dynamics that we're seeing is people have a lot more visibility, they're in a better situation in terms of where they're at with menu pricing, profitability, et cetera. So I think that's a much better dynamic and I think that's going to start spurring the replacement cycle, which we saw some early signs of that in the fourth quarter. So I think that's part of the dynamic. We do still have chains that are on, I'll say, CapEx strike, so to speak, as you said. So as we kind of went through the fourth quarter, there were some that were still holding up plans. And I think that is still the case in the early part of the year, but I think we have some good decent visibility that, that probably will pick up as we go through the year, and I think that's reflected in our guidance.

And then with the new store, Steve, maybe if you want to touch on that?

Yes, Jeff. So you're exactly right. I mean, as we saw -- as we went through last year specifically, the new store plans for the bigger, say, top 25 chains definitely pushed out for a number of different reasons. It was slow traffic. It was being thoughtful around costs. I think as we move into this year, Tim said it correctly, I still think there is some pushout that is happening on new builds. And the positive side of that is I actually think it's causing them to go back and really look at their current operations, both from a replacement standpoint. But also, I talked about in prior calls, just making sure that they have a plan of attack to increase traffic through their current footprint, which comes back to increasing day parts. So again, that's been a big theme that we've really seen with the QSRs, which I think will continue through this year is, "Hey, how do I get more traffic through my existing footprint?" And a big trend has been obviously beverage. And you've seen that with some predominant QSRs coming out with beverage programs that they're launching that we're a big part of. And I think why we've been successful just in that aspect, Jeff, is just that they can come to us as a holistic solution, the full breadth of our beverage product, but also comes with the support globally to do installation, to do after sales, service and support. And I think as those chains start to take action on those beverage programs. Again, we're very well positioned. So to answer the question, new stores, I think there's still some push out as this year goes is focusing more back on the replacement cycle, and that's also adding in those day parts as the year progresses.

Okay. Very helpful. The Food Processing, I just want to go to this kind of eye-popping 66% order growth. And just kind of understand how much is just people pausing and now kind of coming back in? Is there some good lumpiness in there? And then just with the order strength against 4% to 6% growth, like why not -- why don't we see more of this order growth drop through to revenue?

Thanks for the question. This is Mark. So a number of factors has affected positively our order intake. The first hour strategy around Total Line Solutions customers are going that route, and we see it in the order intake. Another is what you mentioned. Some of the prior slowness of order intakes, especially in the first half of the year, balance itself with an increasing order intake in the second half of the year. And then the second part of your question is about the why don't we see that in the 2026 numbers, was that the question?

Yes.

Yes, Mark, I'll jump in there on the growth. Jeff, let me know if I'm not -- this is Bryan, addressing your question. Obviously, we had a strong fourth quarter in orders. And as Mark noted, a lot of that is Total Line Solutions. Some of that has a little longer of a delivery tail on it. But we're excited that we're entering the year with a confident view on delivering growth after what's been a little bit of a slow period here. So based on the order trends, again, we're looking forward to being a growth year for us.

The next question comes from Tami Zakaria with JPMorgan.

I wanted to ask about the backlog growth, which is quite impressive, I think, up 36% for Food Processing. Just curious, how much of that is deliverable this year?

Yes, Tami, this is Bryan. A significant majority of it is deliverable this year, but there certainly is a minority portion of it that rolls out into the beginning of '27 as well.

Understood. Very helpful. And if you could comment about your thoughts on broader capital allocation and M&A, in particular, for the core CFS segment once the food processing split is done?

Yes. Tami, this is Tim. So reason for the split, obviously, as we said, there's quite a bit of M&A opportunity within Food Processing. Within Commercial Foodservice, I mean, I think the focus is going to continue to be on share repurchases, certainly in the near term. We're really focused on organic growth. We've made significant initiatives or investments over the last several years on innovation. Go-to-market strategies, a lot of that we're starting to see play out now, and we also expect it to take increasing traction as we go through next year. So that's really going to continue to be the focus. There is opportunities there. So I mean I think as you kind of look over the last few years, we focused on beverage, and we focused on technology, automation, IoT and areas like that.

So -- there continues to be opportunities, so we'll be focused and kind of targeted in that -- those areas, which we think will help us accelerate some of the organic growth, but largely, the focus is going to be on organic growth kind of immediately after the separation.

[Operator Instructions] The next question comes from Brian McNamara with Canaccord Genuity.

First on Commercial Foodservice. Great to see the segment guided positively to both the quarter and the full year 2026 here. I was wondering if you could peel the onion back another layer a bit. To me, it sounds like this will be predominantly pricing-driven. And if so, what's the expectation to kind of get volumes moving in the right direction again?

Yes. Certainly, we'll have pricing benefit going into the year, but I don't necessarily think all of our expectation going forward is pricing driven. I mean, I think there are opportunities as the market stabilizes and recovers. I think we're very well positioned in our core cooking segment. And I think as we think about ice and beverage. And as Steve commented, there's really significant market share opportunities. So I mean, I think -- although it's a meaningful part of our platform today, we really are a new player. There's a lot of new products that have been launched. There's a lot that's in the pipeline. So I mean, I think we're anticipating some organic growth even without a big market turn up in the ice and beverage segment. So I think it's kind of a match of some pricing as well as some organic growth opportunities with volume.

I mean, Brian, I would just add, as we think about the 3 or 4 big buckets of customers to piggyback on Tim's comments is we've commented already on the momentum. We feel like in the U.S. dealer general market institutional and emerging chain business, which I think that continues through the year. The fast casual segment, which I think has outpaced and certainly done better than the QSR segment in the last year or 2, which we're well positioned. We've talked a little bit more about international growth. I think, again, we're well positioned with a lot of the initiatives we've undertaken in the Europe -- in Europe and the Middle East. Asia had a better finish to the year for us, but obviously, still has some, I'll call geopolitical headwinds as we do in Latin America. But still, I think we're well positioned in those markets. So it really does come back to the QSR segment as to where the year potentially does inflect. And I think our approach to the guidance for the year has been to keep a conservative nature based on where that market is today. But also knowing we're well positioned in QSRs, especially when traffic picks up and things turn both with our core business and as we've talked about with the additional products around beverage and ice.

Great. Just a follow-up on the QSR piece specifically. You had mentioned you're kind of waiting for some of the bigger players to firm up their plans, but they do have the big players that have reported so far, obviously, have CapEx plans, unit growth plans out there. So I'm assuming there's some give and take, I guess, as it relates to the equipment spend. Is that how we should think about it? And when do you -- would you expect clarity on that front?

So what we're referencing there, Brian, really, I think of 2 things specifically is how do new builds progress throughout the year. And I think it is, yes, they all put out their projections that they're pretty open with us and obviously, what they share themselves. I think the concern there has just been the pushouts we've seen. So I think the firming up is when do we really see those stop being pushed out and actually turn into real builds. I think the bigger thing that we're waiting for is we have a number of exciting initiatives and projects with these big QSRs, again, around beverage, around new products that, again, I think we need to see traffic improve. We need to -- which, I think, trends to CapEx being freed up, which then, I think, greenlights a lot of the projects that we have in the work. So when we talk about, hey, firming up plans back half of the year, it's really those 2 areas, new store builds and just some of these key projects, getting the official green light to move forward. For us, it's not a matter of -- yes, they're moving forward and are we well positioned, but it's just -- it's a timing of when it actually starts to move forward.

[Operator Instructions] The next question comes from Mig Dobre with Baird.

Just very quickly here. So the Investor Day on May 12, can you maybe give us a general framework in terms of what we should be expecting? It sounds like you're going to have both Food Processing and Commercial Foodservice present in this event. I'm kind of curious for Commercial Foodservice, maybe more specifically. Strategically, are you contemplating any portfolio simplification, 80/20, those kinds of actions? I mean over the years, you really acquired a lot of different brands? And I don't know if that you're reaching kind of the point of the stage, if you would, where simplification does make some sense. Or is there something else from a structural growth standpoint that we should be prepared to be hearing about?

Yes. Thanks, Mig. So it's still a ways off. So I think we'll provide a little bit more lead into what to expect on May 12 as we get closer. Certainly, we'll do a deeper dive into kind of the strategic initiatives, our portfolio, some of the operational execution that we've got planned. But certainly, there's a lot of exciting things going on in Commercial. So I mean, I think there's a great story to tell. And as we get closer to May 12 and certainly at May 12, we'll do a deeper dive into it.

Yes, it will be both Commercial and Food Processing, presenting kind of adjacent to each other.

The next question comes from Brian McNamara with Canaccord Genuity.

Just a quick one on Food Processing. Can you remind us how long it typically takes in order to convert to revenues and what the typical range is? It's great to see the quantification on both there. You mentioned most being converted in 2026.

Yes, Brian, it depends on the type of equipment and the type of solution the customer is buying. But by and large, I would say somewhere between 6 to 12 months.

This concludes our question-and-answer session. I would like to turn the conference back over to Tim FitzGerald for any closing remarks.

No. Thank you, everybody, for joining us today. So we've got an exciting year ahead. Looking forward to speaking to everybody on the next call. I also just mentioned -- as we said on the call, we're going to be at the Baird Food Processing Symposium next week. So looking forward to that. I'll let everybody know that we will be posting some materials publicly as well in conjunction with that to give a little bit more further information on our Food Processing segment. So thank you. Look forward to speaking to everybody next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, everyone, and welcome to Middleby's conference call to discuss its residential joint venture. [Operator Instructions] Please note today's call will be recorded, and I will be standing by should you need any assistance.

It is now my pleasure to turn the conference over to CEO, Tim FitzGerald. Please go ahead, sir.

Thank you. Good morning, and thank you all for joining today's call. Today marks a pivotal moment in Middleby's evolution as we unlock significant shareholder value through the optimization of our portfolio via a residential joint venture with 26North. Going back in time, our residential platform originated with our acquisition of Viking as we look to bring the professional kitchen into the home. We sought to expand and grow our residential platform through acquisitions, product innovation and leveraging the Middleby platform.

While the end markets may have not gone in the direction of our original plan, we still believe that we have created a unique business platform with an unmatched collection of industry-leading brands, including Viking, AGA Rangemaster, La Cornue, Viking, Kamado Joe and U-Line. We continue to believe that the residential segment has clear upside and an opportunity for sustainable long-term growth despite the current tariff-related uncertainty and pressures on the housing market.

With that in mind, you're likely asking why we're choosing to divest a portion of the business now. Over a year ago, we began to explore avenues to enhance and unlock shareholder value. This transaction, along with the Food Processing spin plan for next year is the culmination of this strategic review to maximize the value of Middleby for its shareholders.

The separation into 3 separate businesses will allow for organizational and operational focus with each segment best positioned to maximize its long-term growth potential. This includes setting the growth agenda and capital allocation philosophy for each business independently, along with optimization of capital structure to support those objectives.

This transaction also sets up the business for value creation by positioning the 2 remaining Middleby businesses comprised of our higher-margin and higher return Commercial Foodservice and Food Processing segments for an equity revaluation ahead of the spin of the Food Processing segment next year. We will also be able to use the significant upfront cash proceeds from the residential transaction to repurchase shares and optimize the capital structure ahead of the Food Processing spin-off.

As we and our Board of Directors analyze the company, we firmly believed that the sum of the parts was worth more than the whole. Accordingly, we believe our 2 upcoming transactions are both transformational for the company and the most efficient way to create long-term shareholder value.

The other question that is likely to be top of mind, why is 26North the right partner? The 26North team has a long history of successfully creating value through corporate partnerships such as this with substantial knowledge of both our industry and Middleby. We believe through this deal, we've identified 26North as the right partner, and we've created the right structure to most efficiently deliver long-term value to our shareholders.

Now turning to the specifics of the deal. 26North will acquire a 51% stake in Middleby's residential business at a valuation of $885 million. Middleby will receive approximately $540 million of upfront cash proceeds, a $135 million note from the joint venture, and we will retain a 49% stake in the business. The transaction has been unanimously approved by our Board of Directors and is expected to close in the first quarter of calendar year 2026.

The Residential Kitchen business will be deconsolidated from Middleby's financial statements beginning in the fourth quarter. We believe this structure from a governance perspective, following the closing of the transaction, the joint venture will continue to be run by the leadership team currently in place and Middleby will retain oversight by maintaining 2 Board seats on the 5-person Board.

For our employees, our dealer partners and our customers, we are incredibly excited about this next chapter. 26North believes deeply in the strength of our brands, our teams and the long-term opportunity ahead. They bring a long-term approach and an operating expertise that strengthens what our brands already do well with additional capabilities to add value to accelerate the successful path for the business.

Following the transaction, the remaining Middleby Corporation will have substantially higher margins with both remaining businesses achieving adjusted EBITDA margins above 20% and higher returns on assets. We believe these segments are currently undervalued based on the strength of each of these 2 industry-leading platforms, which are both well positioned for long-term growth. The ultimate separation of our Commercial Foodservice and Food Processing businesses into 2 independent public companies will better allow for enhanced investor engagement and a more attractive valuation for each of these businesses.

Finally, based on our results to date, we are reiterating the guidance we provided in our November 6 earnings release. Outside of this update, today's call is focused on the residential JV, and we will provide commentary on the quarterly trends for the Commercial Foodservice and Food Processing businesses during our fourth quarter earnings call.

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

[Operator Instructions] Our first question comes from the line of Jeff Hammond with KeyBanc Capital Markets.

Congrats on the announcement. Just maybe just talk about initial dilution from the deal. It sounds like you're planning on buying back stock with the proceeds, but maybe clarify that. And then just as we get closer to the spin and with this announcement, if you could just level set us on how you're thinking about leverage for RemainCo and the Food Processing business.

Yes. So as kind of in the comments and kind of what we've been saying all year long, like the share repurchase is a priority. I think that's one of the attractive things about this transaction with the upfront proceeds that we can continue and accelerate really some of the share repurchase activities that we've had ongoing. So that's certainly an expected use of the proceeds. And I think we'll probably further clarify the expected leverage of RemainCo and Food Processing as we get closer to the spin. But certainly, the proceeds from this transaction allow us to ensure that we're properly capitalized for both of those businesses as well.

And dilution?

Yes, Jeff, I'm not quite sure what you...

Just if you put in disc ops and adjust for the proceeds and the buyback, if there's any dilution or maybe it's accretive?

Yes. I think as we kind of get through -- there's a lot of moving pieces right now. So I think as we get through the next couple of quarters and give more visibility to spin and the closing of this transaction, then I think we kind of put a finer point of all the impacts on EPS, assuming that's the question.

Our next question comes from the line of Tami Zakaria with JPMorgan.

I wanted to ask about your expectation for the EBITDA margin for the RemainCo post the spin-off as it relates to -- basically, the corporate expenses allocation, would that change the margin profile of either of the 2 businesses, the spin-off and the RemainCo?

Yes. I mean, so we will provide further visibility and guidance of that kind of over the next couple of quarters as well because, again, this is pretty transformational breaking the company into 3 independent segments. We will rightsize the corporate overhead, but there will be 3 independent entities. So as that happens, we will have a bit more corporate overhead each. But at the same time, we see opportunities to accelerate growth as well and kind of further leverage scale over time, much like we have done over the years as we've built the 3 platforms. So we'll comment on that with, I guess, further numbers in the quarters ahead.

Great. And my other question is, as these 2 businesses are separating, are there any top of mind immediate cost or revenue synergies or dissynergies that you would want to call out?

Yes. No. So I think one of the attractive things, I mean, a, we run decentralized generally at Middleby, but with the 3 platforms, they largely were running independent, and we had built leadership teams over each business in the last several years, which really allowed us to get to this successful point of being able to separate those. So there's some minimal activities, but nothing significant where there's meaningful dissynergies as we separate.

[Operator Instructions] Our next question comes from the line of Mig Dobre with Baird.

So on Slide 4, you have a footnote here that says the cited EBITDA for Resi includes $15 million of stand-alone company costs. So I guess going back to Tami's question, this $15 million, is this $15 million incremental? Or does this $15 million come out of the corporate expenses that you report in 2025?

Yes. So I would say it's a combination of both. I mean I think that is a placeholder to assume what -- to separate what the JV will include as additional or the stand-alone corporate expenses for that entity. So that is for the JV. There would be some reduction in the expenses of, I'll say, the RemainCo, but it would not be to that extent.

Okay. The $135 million seller note, can you tell us a little more about this? What are the terms of the note? Why was this note part of the transaction? And does it have a maturity associated with it, like an interest rate? Really, any context you can provide here?

Yes, there's a maturity that goes out to just over 5 years. There's provisions where it could be accelerated, which we think there's a good chance that some are all of it may be accelerated during that term. There's a blended rate of approximately 1% on that note. And I think that was to ensure that we had a proper capital structure for the JV kind of at its inception.

And then lastly, I'm seeing on Slide 12 in terms of how 26North seems to outline the strategy for Resi, a focus on luxury equipment and at least in my mind, some of the portfolio that you have here, the grills specifically do not fall in that category. So are we to understand that 26North is looking at maybe monetizing the grills business? And if so, what would you guess the time line would be for that and the value to be recognized?

Yes. So we're right at the inception. I mean, certainly, 26North and the leadership team is going to continue to map out what the future strategy of the business is. I think the slide is the highlight the very significant strengths of the business platform. So I think there's nothing that's anticipated or I'd comment on with the outdoor business there. It's certainly part of the overall platform that goes with the JV.

[Operator Instructions] Our next question comes from the line of Brian McNamara with Canaccord Genuity.

I'm curious, why is the JV the right route? I mean outside of maybe a full divestiture. And there's a school of thought here that maybe we're near the bottom of kind of this rough cycle here and the timing might be maybe really good for, obviously, you guys as you have -- you retain a piece of the business. But just thoughts on maybe investors thinking this timing might be a little rough.

Yes. Look, I mean, I think we balance all the different positives and kind of what the opportunity that maybe we're foregoing. But I mean, I think what's -- the #1 thing is separating the business platforms into 3 independent businesses. We think that accelerates growth of all 3. And again, I'll say, unlocks some of the value from a valuation perspective. So I think that is very attractive, number one.

I think with the significant cash proceeds, repurchasing shares, which is also very high priority to us and attractive right now, particularly given where we think the shares are trading relative to the implicit value. I mean, I think that these are significant proceeds. So that's very attractive, but still retaining that 49% upside because we do believe that there is an upside to the business. But I think actually that upside will be worth more because of this JV structure working with 26North. I think it will -- in a private-like setting and having a great partner will actually be able to further enhance and accelerate the value of that 49% that we are retaining. So I think it really kind of hits on all different points. So I mean I think that's one of the reasons we're very excited about this structure and how this fits kind of within the overall transformation of the portfolio.

And then when we're completed here, I mean, there'll be a great independent Food Processing public company, which we think is best-in-class. And then Middleby will be very focused on our core remaining strength, which is Commercial Foodservice, which we also see very significant growth opportunities, and we've invested heavily in the business over the last few years on innovation and go-to-market strategy. So I think it really allows us to kind of jump ahead to where the vision of the business was going.

Our next question is a follow-up from the line of Jeff Hammond with KeyBanc Capital Markets.

Just on Commercial Foodservice, I know when you reported 3Q, you talked about a couple of QSRs specifically holding back CapEx pretty meaningfully. I'm just wondering if -- since you've reported, if you've gotten any kind of updated trends on Commercial Foodservice, others that are considering doing the same? Clarity on is this kind of a 1 quarter event? Or does it leak into the second half? I know a lot of moving pieces in the restaurant space out there.

Yes. Jeff, I'm going to say I'm going to largely refrain because I do want to focus on residential. I don't think anything has changed in any meaningfully way from the comments that we had on the last quarter. I'll say that we're excited and optimistic as we kind of head into next year for a variety of reasons that we explained on the last call, but I'll probably leave it at that, that comments on the last quarter call continue to hold.

Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. FitzGerald for any final comments.

Okay. No, thank you again, everybody, for joining this morning's call. So again, I'll just kind of reiterate that this is a very transformational moment for Middleby. It's really exciting to allow the separation or announce the separation of really what early next year is these businesses become 3 independent businesses. So I think it's going to really allow us to unlock a lot of shareholder value. And just very excited about this transaction, the JV with 26North, which is going to be a tremendous partner. So thanks, everybody, for joining the call this morning.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Good day, everyone, and welcome to today's Third Quarter 2025 Middleby Corp. Earnings Call. [Operator Instructions] Please note today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to CEO, Tim FitzGerald. Please go ahead.

Good morning, and thank you for joining today's call. I'll begin this morning with an overview of the announced strategic review of our Residential Kitchen business. Before discussing highlights of the third quarter and for each of our business segments.

As part of our efforts to drive long-term shareholder value, we've been undertaking a strategic review of our overall business portfolio. We continue to believe that our shares are significantly undervalued, and we're taking deliberate steps to close that gap, including with the planned spinoff of our food processing business targeted for the completion in the second quarter of 2026.

And also through our significant share repurchasing activities. As we further continue to evaluate opportunities to unlock the value at each of our 3 industry-leading segments, we have embarked on a review of options to maximize the value of our residential kitchen business. This includes an evaluation of a range of options, one of which is a potential separation of our Residential Kitchen business.

During the quarter, in connection with that review, we recorded a noncash impairment charge of $709 million. This is an accounting-driven valuation adjustment and does not reflect any change in our confidence in the segment's underlying strength. In fact, we believe our residential business is positioned better than ever.

With a portfolio of iconic brands, we have invested in new state-of-the-art manufacturing centers of excellence. We are introducing new products with exciting features, and we have strengthened our team across the platform. While the residential market remains challenging, our business is positioned to benefit from a recovery. We intend to pursue options that will maximize shareholder value while benefiting our customers and employees. But please note we'll not be making any further comments on the status of this strategic review on the call.

As for the third quarter, we are pleased with our results, which once again demonstrate the strength of our business and our team's disciplined execution. Total revenue of $980 million exceeded the top end of our guidance range. Each of our 3 segments met or surpassed expectations. This top line performance drove adjusted EBITDA of $196 million and adjusted EPS of $237 million, both exceeding the upper end of our guidance.

These results reflect the benefits of our strategic investments over the past several years, expanding our go-to-market strategy, strengthening local sales support, advancing digital marketing and enhancing aftersales service capabilities. We continue to invest in innovative technologies that help customers address labor and training challenges and operate more efficiently.

Our ICE and beverage platform remains a core area of opportunity and is expected to be a meaningful growth driver in the years ahead. While broader market conditions remain mixed, our long-term strategic focus has positioned Middleby to capture outsized growth when markets normalize. At our Commercial Foodservice segment, we returned to positive organic growth in sales for the first time, since the third quarter of 2023.

Growth was driven by the general market, institutional customers and with emerging restaurant chains, offset in part by ongoing softness among large QSR customers facing lower traffic and cost pressures. We are encouraged by the traction we're seeing from investments made with key U.S. channel partners by partnering and educating our dealer base on the performance advantages of our technologies, we are capturing market share and outpacing overall industry growth in this area.

And we're particularly excited about the growing pipeline of opportunities of our ICE and beverage solutions. At the residential segment, we've continued to make significant progress, both strategically and operationally. During the quarter, we saw healthy growth with our premium indoor brands. This growth was offset by tariff-related headwinds impacting our outdoor product sales.

Additionally, we experienced temporary shipment delays tied to the consolidation of operations, actions that will ultimately drive greater efficiency and profitability across the portfolio. A major milestone was the opening of our new state-of-the-art facility in Greenville, Michigan, which serves as a center of excellence for all our residential refrigeration brands.

This facility will enable scaling on manufacturing, engineering and logistics, resulting in enhanced customer service and long-term margin benefits. In food processing, improving international markets offset continued softness in the U.S. During the quarter, we realized a strong order rate, which inflected positive after a soft start to the year as customers resumed deferred capital projects -- our ability to deliver comprehensive full-line solutions positions us to capture these opportunities.

We also expanded our global network of innovation centers with the opening of the Middleby Innovation Center in Venice, Italy, a flagship hub for the food processing group focused on accelerating customer collaboration and technology development. This new innovation center is unique for the industry, and it will transform how we engage with our customers for years to come.

Our strong financial results and conviction in Middleby's future underpin our capital allocation priorities. We expect to continue repurchasing shares using substantial cash flow we generate. This reflects our belief that Middleby's current share price undervalues the long-term earnings potential of our company. By investing in share repurchases today, we are positioned to drive sustained shareholder value as markets as our end markets recover.

In parallel, we will continue to evaluate strategic alternatives across our portfolio to ensure we are optimizing Middleby's overall value creation potential. Now looking beyond the near-term conditions, our competitive advantages are compounding. We have an unmatched portfolio of brands.

We have the industry's strongest innovation pipeline -- we're making targeted strategic investments in new and growing addressable markets such as ICE and beverage, and we are leading in next-generation automation and IoT capabilities that position us ahead of competitors for the years ahead.

And most importantly, we have a world-class team around the globe, whose commitment and execution continued to drive our success. While we're navigating some market volatility, Middleby is stronger today than any point in our history. The foundation we've built positions us exceptionally well to capitalize on markets fully normalize.

With that, now I'll turn it over to Bryan to discuss our financial performance in greater detail and guidance for the fourth quarter.

Thanks, Tim. Looking back at the third quarter, we were pleased to see revenue, adjusted EBITDA and adjusted EPS performance, all exceeding the guidance we initiated last quarter. I note that adjusted EPS was positively impacted by $0.15 related to stock comp.

For Commercial Foodservice, despite market conditions that continue to be challenging, we delivered 1.6% organic revenue growth. Positive impacts we're seeing from general market, institutional and fast casual customer segments. We delivered $606 million of revenue and a solid EBITDA margin of nearly 27%. This would have exceeded 28%, if not for tariff impacts.

Customer engagement and interest in our leading technologies remain strong, especially in beverage dispense and ice products. At residential, on a year-over-year basis, we saw growth across our premium indoor businesses. Tariff impacts had a rather detrimental impact on Outdoor Products revenues and also pressured margins.

Revenues were nearly $175 million and our EBITDA margin was slightly below 10%. The cost impact of tariffs was a drag of more than 150 basis points on margins. At Food Processing, Q3 revenues exceeded $201 million and our organic EBITDA margin was 21%. This would have been nearly 22%, if not for tariff impacts.

Margins were further impacted by geographic mix. The Q3 performance exhibited some of the short-term lumpiness that can sometimes be seen in this business ahead of what will be a rather strong Q4 especially across our brands serving the protein space and in automation solutions. We are experiencing a strengthening order rate and growing backlog.

On a consolidated basis, total company adjusted EBITDA for Q3 was over $196 million, and adjusted EPS was $2.37. As noted in our earnings release today, we've recorded impairment charges of $709 million during the quarter to write down the book value of the residential segment to its estimated fair market value. Regarding tariffs, the adverse net impact to EBITDA in Q3 was approximately $12 million, and we estimate that the Q4 impact will be $5 million to $10 million.

This continues to be a subject where tariffs. This continues to be subject to where tariffs finally land and is also subject to risks particularly in key supply chain markets of China and India, which continue to be especially volatile. The benefits of pricing and operational actions we have taken are expected to fully offset tariff impacts as we begin 2026.

The Q3 operating cash flow exceeded $176 million, up 12.5% year-over-year, and free cash flow was over $156 million. Our leverage ratio per our credit agreement at quarter's end was 2.3x. Please recall that on September 1, our convertible notes matured. Accordingly, borrowings on our revolving credit facility has increased and our interest expense will be higher in Q4, estimated at $28 million to $30 million.

Regarding capital allocation, earlier this year, we communicated the decision to deploy the vast majority of our free cash flow to share repurchases. Year-to-date, our free cash flow was $365 million, yet we have used $500 million to repurchase over 3.5 million shares at an average price of $144.55 per share. We've reduced our share count by 6.4% during 2025.

Looking ahead to the coming quarters, we will continue to be opportunistic as we have excess capital to deploy. We will do so while maintaining the financial flexibility needed for strategic growth investments. Regarding today's updated outlook for the remainder of the year after the following perspectives. At commercial foodservice we are seeing pressure on a few of our largest QSR customers, which is containing delivering sequential revenue growth.

For food processing, with improving order activity, the fourth quarter will be the strongest of the year as of the normal pattern for this unit. Lastly, in the residential segment, I characterize market conditions as fairly stable. And for Q4, which will also be our strongest revenue quarter of the year, we are forecasting a typical yet modest seasonal step-up in revenues.

So for Q4, we expect to achieve the following: total company revenue of $990 million to $1,020 million. And by segment, this is comprised of commercial foodservice at $570 million to $580 million; residential kitchen at $180 million to $190 million, and food processing at $240 million to $250 million. Adjusted EBITDA is forecasted to be between $200 million and $210 million and adjusted EPS is projected to be in the range of $2.19 to $2.34 assuming approximately 50.4 million weighted average shares outstanding.

Then for the full year, we expect to achieve the following: total revenues of $3.85 billion to $3.89 billion; adjusted EBITDA of $779 million to $789 million and adjusted EPS of $8.99 to $9.14 based on the sum of 4 individual quarters. Please refer to Slide 7 of the presentation we have posted online at our website for all those details.

We will provide guidance for 2026 in conjunction with our release of fourth quarter results. I will conclude my comments with a quick update on the food processing spin-off. We remain confident in our ability to execute the necessary actions to have a successful transaction. Activities to ensure the spin company will be operating effectively, efficiently and independently at inception remain on track.

I reiterate what I noted last quarter, and that we expect to complete the spin-off in the first half of 2026 and more specific information about time lines and business matters will be fighted later in the year. In the meantime, I do note that as part of the registration process with the SEC, we will first need to complete the 2025 financial statements audit.

This will happen by the beginning of March of 2026 and will be quickly followed by a filing of a registration statement. The potential transaction effectiveness then is currently anticipated in May of 2026. That concludes our prepared remarks, and we are now ready to take your questions.

[Operator Instructions] We'll move first to Mig Dobre with Baird.

So gosh, there's a whole lot to talk about here, I guess. And maybe while I would start is with a question on just the strategic evaluation of the company more broadly, you've obviously told us that Residential is now part of this review process.

I understand you don't want to comment further. But the way I interpreted your statement, Tim, is to suggest that there's more to it than just the spin of processing, maybe strategic evaluation of resi -- is there something going on in commercial food service as well that maybe you're working on or that shareholders need to be aware of?

And then for Food processing specifically, I appreciate the time line. I'm curious as to how you're thinking about the management team that will be running this business. Anything that you can share with us procedurally in terms of the things that you have accomplished thus far in anticipation of this spin?

Yes. So I'll take the second one first. So as Bryan just kind of mentioned in his remarks, we have made significant progress, I'll say, in separating standing at the company. So we feel like we are on track. I know that there -- we've made kind of limited announcements thus far, but we do anticipate in the fourth quarter that would start shedding light on some of the things that we've already accomplished in the plants going forward, kind of along with maybe a little bit more details around the time line of execution of the spin in the first half of next year.

So we do feel like we are in good shape and have line of sight of separating the companies and remain excited about that. Yes. I mean, I think the as I said in my comments and said probably for a long time, we have 3 industry-leading portfolios. So, we think they're best in class. They have highest margins, and they're well positioned with a lot of the strategic investments that we've made in each of those portfolios.

So really, as we've kind of undergone this exercise, which started last year is really how do we maximize the value of those portfolios for the long term. Ensure they all reach their full potential, and we think there's a lot of shareholder value duration there. So it's really a continuation of that process and kind of our long-term vision for each of those segments.

So I mean that you shouldn't read anything into commercial portion is our core business. It's a phenomenal business. I think as we kind of go through this process, that will allow us to ensure that we've got greater focus on that segment in each of those segments. So I think the strategic review aligns with the journey that we've been on in each of those platforms for a long period of time.

Okay. Okay. That's helpful. Then my follow-up on commercial foodservice. I'm looking at the fourth quarter guidance, and there is, if I'm doing the math right, it seems to be an implied an organic decline of somewhere around mid-single digit on a year-over-year basis and the business down sequentially from a seasonal standpoint, this is a departure from what we normally see in the fourth quarter being down, call it of mid-single digits sequentially.

So I guess I'm curious as to what's driving that. It sounds that QSR is driving that -- but the point here is that while we're looking at Q3, we saw a bit of a recovery that's not carrying into Q4. So was Q3 unique in any way? Was there some demand pull forward or destocking or anything of the sort? And how do you assess the broader trends in this business? Especially as we start thinking about 2026, is that going to be yet another year of erosion based on what you know thus far? Or is there any reason to be more optimistic?

I think Bryan can comment on the numbers. I'll start off and then kick it to Steve. I mean the markets are volatile, right? Like I think as we mentioned in the comments, that we are seeing strength in certain areas, and we're performing well in those areas. So the general market with our dealers, I think we're doing well there.

Some of that is because of the investments that we've made over time other areas of growth, the emerging chains, retail. But QSR has been tougher, right? I think you can look across the segment and what's been reported over the course of the year, not just this quarter with traffic, et cetera. So that -- we feel we're very well positioned in the QSR segment.

I think our relationships are stronger, the pipeline of opportunities, the products that we've got approved were a meaningful part of what we think is the future plans that they have for I'll say, operational efficiencies and venue development. But because of the market backdrop, you see different purchasing patterns across those chains, right?

So I think that's what we've been challenged with and create some volatility from quarter-to-quarter, but it does give us optimism as we go into next year because of how we are positioned. And I think some of the things that we see them executing on strategically today, our benefits, I think that they will see in their business next year, and we're kind of part of those plans. So I'll say that's kind of a broader comment. Steve, I think why don't you...

Yes. Mig, I would just add on a couple of thoughts to comment on what Tim just said. Again, I think the chains, the QSR specifically, that Tim said, obviously, have been challenged the last really 12 to 18 months. And as Tim said, I think the relationships that we have there continue to be strong. And I think as as traffic in that space continues to be tough, it remains, obviously, a challenge for the fourth quarter and probably into early next year.

I think the positive is what you're seeing in the third quarter is investments we've made in other segments beyond just the QSR space that are starting to come through. The dealer segment, which Tim talked about -- but I also want to highlight, as we think about emerging chains, there's a lot of focus in the U.S. There's a lot of focus internationally as well for us. It's a completely new white space, but I feel like we're very underpenetrated in, and we've made a lot of investments in our people, in our innovation kitchens, we've opened in Europe, both now in Munich and in Spain.

And I think there's so many emerging chains in those spaces that probably many of us in the U.S. have not heard of that are big opportunities for us. So I think as we think about how next year unfolds, I think the dealer business, the emerging chain business, a lot of the fast casual space is very positive next year. And I think even though the QSR space remains challenged I do think you're starting to see some of the QSRs even this quarter as they've reported start to see some trend in the right direction.

So I think QSRs as we get into next year to answer the question, trend better, I also think there's so much underlying demand in the other segments that we're just starting to see our investments pay off. And so I think that's why we feel good about next year, even though fourth quarter with the QSRs remains somewhat challenged.

Move next to Saree Boroditsky with Jefferies.

This is James on for Saree. I guess sticking with the commercial food service here, you just talked about like U.S. traffic remains a headwind. And like based on the data that's kind of weakening further as the latest data available.

And in this backdrop, like what are the like non-traffic levers that can still drive sales among QSRs? Or is traffic the shore driver here? And how many periods of like traffic recovery, would you need to see before change kind of step up investment here?

James, this is Steve again. Good question. I do think traffic is certainly a major driver. And I think as traffic starts to inflect. I think that's when you start to see the QSRs pick back up, while it's on new store openings or investment in the kitchen I think 1 of the trends that we have spoken about that we're really seeing in the QSR space is as they are challenged on I would say, traditional traffic through the restaurant, they're all looking at how do I drive additional dayparts.

Big trend there has been the emphasis around beverage. And I think you're seeing in the QSR space, concepts that you would never expect to have a premium beverage offering in our portfolio are moving towards that and that is 100% to drive new dayparts, if breakfast is challenged, how do they get people coming in, in the afternoon between lunch and dinner as an example.

That is very well, we're very well positioned from that front because there's really no other company that can offer a full beverage solution that goes anywhere from ICE to dispense coffee, beer, water. And so, if you're incorporating a new beverage platform as a QSR to be able to go 1 company that can give you the whole solution and support from a global standpoint is, we think, a very powerful proposition for proposition for our customers.

But like that's how I think the QSRs are trying to overcome the traffic challenges is by looking at additional day parts for traffic.

Got it. That's very helpful. And I guess on the guidance here on EBITDA guidance, can you kind of please walk us through like the contribution by each segment for 4Q? How you think about it?

We've provided the level of guidance that we're going to provide for now. So I don't have specific numbers for for each segment. But I think if you do the math, I mean, there's not going to be significant deviations from where we've been currently.

We'll move next to Tami Zakaria with JPMorgan.

This is Alton on for Tami. So my first 1 is on the tariff front. I was wondering if you're taking any incremental pricing for the latest Section 232 tariff announced back in, I think it was August. And if there's any additional color on how the customer reception on pricing has been in the industry across the board, that would be much appreciated.

Yes, Alton, this is Steve. Maybe I'll take the first pass and pass it around. Specific in commercial foodservice, again, our approach when tariffs first broke in the beginning of the year was to take a little bit more of a wait-and-see approach before we went announcing massive potential price increases as so many of our competitors did.

So I think we tried to be very thoughtful to get as many facts and data to support pricing initiatives to offset the tariffs. So we did announce and execute a increase -- price increase within commercial that has as this year -- back half of the year has unfolded, obviously, comes through more and more.

We've additionally spent a lot of time focused on operational initiatives, whether insourcing more and more into the U.S. are leveraging capabilities we have in facilities like Nogales, Mexico, where we have some in-house manufacturing, coupled with supply chain, just our overall supply chain leverage that we have from a broad base. So as this fourth quarter finishes up, we have expected to be covering the tariff impact from a cost standpoint through pricing and those other initiatives by the end of the year.

And as you go through the other 2 platforms, Residential is slightly more -- is more impacted than food processing just because of the Grille platform and the China space. Food processing does not source as many components from the giant space as well. So that's why they're a little bit less impacted. But really still across all 3 platforms we have said since middle of this year that our expectation was to be neutral in terms of covering the tariff cost impact through pricing, supply chain initiatives and operational initiatives, and we remain on target to do so.

Understood. And just a quick follow-up. I think SP appears to be seeing some improved market dynamics, realizing solid order growth in the quarter. But I was wondering, if you could, I guess, share some additional color on what the key drivers work for improved conversion of some of those larger projects that are out there?

This is Bryan. I will address that one. As I noted, it's skewing a little bit more to the protein side of things as well as automation and washing type of solutions we have, I'll call it, adjacencies to just handling the proteins. You may also understand that we tend to be a little bit more exposed to red meats and dry cured meats and the like, and we're just seeing some greater investments coming together there.

Having said that, there's a little bit of signs of some improvements in the bakery side as well. I will say we've seen good strength in snacks and are very happy with the performance that we're seeing in acquisitions made over the past year that address positive trends and things related to tortilla shifts and prepared cakes and the like.

But again, it's -- we're seeing further investments and I think some of our customers' confidence in the protein markets that we serve. Also benefiting some in poultry, too. Obviously, our exposure there is not significant and that is an area we've noted for a desire for growth and expanding our capabilities.

We'll take our next question from Jeff Hammond with KeyBanc Capital Markets.

I guess just on Res Kitchen, just I think when you did the food processing spend, you got a lot of questions on why not Res Kitchen. And just from your view, what's changed to kind of revisit that? And then just on the Grill business, around tariffs. Just what are you doing or thinking about to structurally change your footprint going forward to kind of manage those -- that tariff issue?

Yes. So we did start moving some of our production from China to other parts of -- of Asian outsource. So that was something that we mentioned last quarter. So that actually is underway and being executed in the fourth quarter. So that will better position the platform going into next year. The slight reduction also kind of announced in tariffs here recently in China does help that platform as well.

So we -- yes. We pick up a bit on the bottom line, but it also better positions us in the top line from a pricing standpoint going forward. Part of the outdoor platform is manufactured in the U.S. as well, kind of on the premium end of things with the links grow. And certainly, we're continuing to evaluate opportunities to onshore some of the products there.

Yes, I'm sorry. So Jeff, your first question. I mean, I think -- that's been an ongoing review of the portfolio. And I'll say, I'll probably just be repetitive with the comments I made earlier, like I think we were looking at the portfolio holistically, even as last year that kind of led us to the sequence of activities and announcements, which is what most recently the announced review of residential.

Okay. That's helpful. And then just on food processing, margins have stepped down quite a bit year-to-year, and I think you mentioned mix and tariff and maybe you can spike that out a little more. But -- as you look at the pipeline and you look at maybe some of the income orders, how are you thinking about margins as we go into 4Q and as we go into '26 in the spin?

Yes, Jeff, this is Brian. And I'll -- as I go through my comments here, I am thinking of things on and organic basis because, obviously, there's always an impact of, I'll say, improving the operations once we've acquired them. So in terms of I'll say, the year-over-year margin pressure because that's really what we're seeing. I think Q3 and Q4 were pretty close together, even with a little less operating leverage that comes through in Q3, given the volumes and also how there's a fair amount of our factories are in Europe that have different, I'll call it, work patterns in the third quarter.

So we did notice a note I'll say, in the neighborhood of 100 basis points of impact from tariffs that we'll continue to try and work through on a cost-wise perspective. But there are also I'll call it, market dynamics at play that are driving a pricing impact as well. So that would be the other factor, I would say.

As we look into Q4 with the improving revenues and trends, we do expect the fourth quarter to be better than the third quarter. And as we take more of that medium-term outlook, as we do have larger orders and we're selling on returning the great benefits that we bring to our customers, that does tend to be margin enhancing for us. There are actions we've been taking on pricing, whether it's on the parts and service side of the business or also making sure we're being responsive in how we manage pricing on the contract.

So I think, again, given the actions we're taking, given the improving orders and backlogs with that should drive a positive margin trend as we think about what may come in '26 versus '25%.

I think just from a spend standpoint, I mean, I think we're inflecting right now, so I mean, I think it's a good -- we've got some momentum building as we go through the latter part of the year and the first half of next year. The pipeline has been strong and now as orders convert that puts us in a pretty strong position.

And I think typically, that's going to be the biggest driver with margins. And I think then as Steve kind of talked about, we'll have overcome some of the tariff challenges as well. So I mean I think we feel like it's a pretty good setup for the first half of next year as we start to execute on the spend.

[Operator Instructions] We'll move next to Tim Thein with Raymond James.

I've got 2, if I may, on the commercial business. The first -- just thinking back to the framework we talked about a couple of years ago with respect to kind of what's going to drive EBITDA or what can drive EBITDA margins that commercial business, sales mix was 1 of the big levers that we saw.

And obviously, you fast forward and the volumes quite haven't come through probably like we expected. But I'm just curious as you kind of revisit that and think through that technology and automation was highlighted earlier. So presumably, that's continues to be an emphasis. But I'm curious how that -- how kind of that has developed in terms of as a catalyst to support margins, but also the emphasis and the strength in ICE and beverage, I'm just curious, I'm assuming that would be additive or kind of supportive of that sale, but not sure even at -- given the growth in that channel, is that a fair assumption, i.e., it is favorable to mix. So we'll start with that one, please.

Yes. So you are correct. That has been part of the strategy to expand our margins, right? So as we went through I'll say, kind of post-COVID, we've cut a lot of SKUs that were lower margin. We've launched a lot of new products. Those new products, we still expect to be a big part of the future. yet to be seen, although certainly, we've gotten traction and there's been announcements of wins that are out there.

We see that as continued to be a building pipeline both to drive automation and efficiency in the kitchen in our core cooking categories as well as new market share gains in categories that we've not been, which is the ice and beverage, and we think those are both attractive margins will be margin accretive over time.

Ice & Beverage is still -- it's relatively large now, but it's still a new part of Middleby, and it's got slightly lower margins than the hot side, but they're in kind of mid-20s. So they're very attractive and expanding as a lot of the new products that James has highlighted on calls come out. We think those are going to be pretty attractive margins kind of as we go forward.

As you kind of think about the immediacy, right, like we're, I'll say, holding serve as we're going through all these tariff challenges as well, right? Like those are not insignificant. So there's a lot of puts and takes as we kind of go through the current period, but I think we're well positioned for the next several years as a lot of these new product initiatives, I'll say, come online with our customers, which we feel pretty confident with...

Got it. Okay. And then just can you update us on the backlog in that business and where -- I don't know where the end of the third quarter where you're expecting to end the year and just thinking if that's supportive of kind of the earlier discussion as whether or not '26 could be a growth year? Just maybe put that order backlog in the context of where you normally operate into fiscal year?

I mean backlog is pretty short in that business. So I mean, I think we really look at kind of the pipeline of opportunities and how we're pretty close with the customers, both our dealer partners and the chain. So backlog is really not the measurement for the commercial business

We will take a follow-up from Mig Dobre with Baird.

A follow-up. And I just want to go back to commercial foodservice. And you talked about some areas of growth. You talk about international, for instance, has been an area of growth. There are portions of your business, however, that are challenged. And I guess, I am wondering, as you're conducting these strategic reviews and you think about growth through the cycle as it were, how do you separate what is cyclical in compressing the growth in this segment versus what may be more structural in nature?

And how do you think about adjusting the portfolio, do you have the right portfolio in this segment to ensure a return to more sustainable long-term growth. And if the answer is no that adjustments are needed, what are some of the things that you're contemplating in this regard.

Yes, Mig, this is Steve. I'll take the first crack. I think I think about it in the portfolio in 2 ways. So I'd say, okay, what is the core part of the commercial portfolio that are again, the core brands that have been part of the portfolio for the last 15, 20 years that I think support I don't know, if it's the cyclical growth, but just the core growth that has kind of built Middleby commercial food service to where it is today.

So like I think you have that core platform that I think as we work through these macro backdrops that we've had to navigate whether COVID or supply chain now tariffs I do think will support sustainable quarter-over-quarter growth. I then think as we have expanded the portfolio into the new categories that are going to drive growth beyond the core, I think that's where the secret sauce is going to come from.

And I think that's what has not been unlocked yet. And I think those, again, are all the categories that we keep talking about around beverage, ice automation. And we're such early days, I feel like in those platforms. But -- so I think that we do have the right portfolio because, again, I think we are uniquely positioned that we're the only company that has both of those pieces to it, but the core business and I think the right pieces from products, from technologies that support exponential growth in years to come.

So I don't know, it's quite answering your question, but I think the answer is yes, we have the right products and portfolio. I think we've appropriately added over the last 5 years throughout all this disruption the right products to the portfolio for when things really get going after, hopefully, the macro backdrop is a little bit more favorable.

Yes, I mean -- and I'll maybe round that out, and it's a little bit repetitive. But I mean, I think a lot of the things that we've talked about with innovation and new investments are around categories that we do think are the longer-term growth drivers in food service, right?

So in cooking, you've heard us, we focus on in [ Ventas ], we focus on electrification. We see the industry moving to digital, right? So we've invested in a control platform across our portfolio, we've combined that with IoT, which we think we've got long-term significant benefits, right? And that actually cuts across our core cooking portfolio.

So we are trying to position where we see the long-term trends and growth and then expanding into the faster-growing categories. That is why we've selected ice and beverage, right? And you can see those trends with our customers. So we've kind of been very specific in the areas that we've invested in and emphasized and shifted to.

So I mean, I think that's why we feel the portfolio is well positioned, and we'll continue to evolve that thinking. And I think it's a good question. We've always got to go back and review the portfolio in its entirety. But I mean, I think the big levers and themes. Those are the areas that we've gone after. And I think that's why we've got a very unique portfolio that is very well positioned as we kind of go through the next 3 to 5 years.

And it does appear that there are no further questions at this time. I would now like to hand it back to management for any additional or closing remarks.

Thank you, everybody, for joining today's call. We appreciate it, and we will speak to you next quarter.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful afternoon.