Earnings call transcript: JBTMarel Q1 2025 beats earnings, stock dips

JBTMarel Corp announced its first quarter 2025 earnings, reporting earnings per share (EPS) of $0.97, significantly beating the forecasted $0.86. The company also exceeded revenue expectations, posting $854.1 million against a predicted $743.62 million. With a market capitalization of $5.5 billion and trading at a P/E ratio of 39.7x, InvestingPro analysis suggests the stock is currently overvalued relative to its Fair Value. Despite these positive results, JBTMarel’s stock price dipped by 1.4% in pre-market trading, reflecting investor concerns over tariff uncertainties and restructuring costs.

Key Takeaways

• JBTMarel’s EPS and revenue both surpassed forecasts, with a notable $110.48 million revenue beat.
• The stock price fell by 1.4%, despite strong financial performance.
• The company suspended full-year 2025 guidance due to tariff uncertainties.
• Restructuring efforts are underway, with expected savings in the future.

Company Performance

JBTMarel demonstrated robust performance in Q1 2025, with consolidated revenue exceeding guidance by $19 million and a consolidated adjusted EBITDA margin of 13.1%. The JBT segment saw a 4% year-over-year revenue increase, while the MRL segment remained flat, showing a 2% growth in constant currency terms. According to InvestingPro data, the company maintains a healthy current ratio of 3.48 and operates with moderate debt levels, with a debt-to-equity ratio of 0.83. The company’s liquidity position remains strong, with approximately $1.3 billion available.

Financial Highlights

• Revenue: $854.1 million, up from $743.62 million forecasted.
• Earnings per share: $0.97, compared to $0.86 forecasted.
• Adjusted EBITDA margin: 13.1%, exceeding guidance by 60 basis points.

Earnings vs. Forecast

JBTMarel’s earnings per share of $0.97 surpassed the forecast by $0.11, a 12.8% positive surprise. The company’s revenue also exceeded expectations by $110.48 million, marking a significant beat. This performance highlights JBTMarel’s ability to outperform market expectations, continuing its trend of strong financial results.

Market Reaction

Despite the positive earnings report, JBTMarel’s stock price declined by 1.4% in pre-market trading. This decline suggests that investors may be cautious due to the suspension of full-year guidance and ongoing restructuring costs. The stock trades between its 52-week range of $82.64 to $139.05, with analysts setting price targets from $85 to $161. InvestingPro subscribers have access to detailed analysis including 10+ additional ProTips and comprehensive valuation metrics that could help better understand the stock’s potential.

Outlook & Guidance

JBTMarel has suspended its full-year 2025 guidance due to uncertainties surrounding tariffs, estimated to impact the company by $50-60 million annually. For Q2, the company projects revenue between $885 million and $915 million, with an adjusted EBITDA margin of 14.5% to 15.25% and adjusted EPS ranging from $1.20 to $1.40.

Executive Commentary

CEO Brian Deck stated, "We believe we are well positioned to withstand the pressures of the current economic environment," reflecting confidence in the company’s strategic direction. President Arne Sigurdsson highlighted the poultry industry’s growth potential, while CFO Matt Meister emphasized JBTMarel’s financial flexibility.

Risks and Challenges

• Tariff uncertainties have led to the suspension of full-year guidance.
• Restructuring costs are expected to impact financials in the short term.
• The white fish market faces challenges due to quota reductions and shifts to farming.
• Potential supply chain disruptions could affect operations.
• Macroeconomic pressures may influence global demand and pricing.

Q&A

During the earnings call, analysts inquired about the impact of tariffs and the company’s mitigation strategies. JBTMarel plans to address these challenges through supplier negotiations, pricing actions, and supply chain restructuring. The company also noted varying lead times across its product lines, ranging from 45 days to over a year.

Full transcript - JBTMarel Corp (JBTM) Q1 2025:

Bailey, Conference Operator: Welcome to JBT Morell’s Earnings Conference Call for the First Quarter of twenty twenty five. My name is Bailey, and I will be your conference operator today. As a reminder, today’s call is being recorded. At this time, all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

I’ll now turn the call over to J. B. T. Morell’s Senior Director of Investor Relations, Marley Spangler, to begin today’s conference.

Marley Spangler, Senior Director of Investor Relations, JBT Morell: Thank you, Bailey. Welcome, everyone, and thank you for joining our conference call. With me on the call today is our Chief Executive Officer, Brian Deck President, Arne Sigurdsson and Chief Financial Officer, Matt Meister. In today’s call, we will use forward looking statements that are subject to the Safe Harbor language in today’s press release and eight ks filing. JBT Marill’s periodic SEC filings also contain information regarding risk factors that may have an impact on our results.

These documents are available in the Investor Relations section of our website. Also, our discussion today includes references to certain non GAAP measures. A reconciliation of these measures to the most comparable GAAP measures can be found in the Investor Relations section of our website. With that, I’ll turn the call over to Brian.

Brian Deck, Chief Executive Officer, JBT Morell: Thanks, Marlee. We are very pleased with JBT Marelle’s performance in the first quarter, highlighted by better than anticipated revenue, adjusted EBITDA and margins versus our guidance. We also enjoyed strong year over year improvement in margins and orders. Our top line benefited from strength in recurring revenue as well as solid operational execution on the equipment side. In terms of our margin performance, we enjoyed the flow through from the higher volume and good expense control.

We were equally pleased with the order flow with another solid quarter of demand, up 12% year over year following record fourth quarter levels. We experienced increased demand from the poultry industry continuing a recovery we enjoyed over the last few quarters as we benefit from the industry’s robust fundamentals. We also benefited from our diversified end market participation with healthy orders in meat, beverage, pharma and pet food. In terms of geography, we saw fairly broad based strength across global regions. While we are excited about the financial performance and the continued order strength, we are even more enthused about the company we have created as JBT Morel, highlighted by our more comprehensive product offerings, enhanced service capabilities, increased scale and even greater value proposition in our customer partnerships.

On the integration front, we are making excellent progress. Arne will provide some color on that in a few moments. We understand that the impact of U. S. Tariff policy and the macroeconomic uncertainty it has created is top of mind for investors.

While the situation is fluid, we believe in the short term JBT Morale is at least as well positioned to manage the near term impacts as our peers. On an intermediate to longer term basis, we believe that we are in better position given our global footprint and available capacity in The U. S, Europe, Brazil that provides the flexibility to reposition where we assemble equipment and source and manufacture parts. However, any long term actions involve time and resources to implement and therefore require more clarity on the trade environment. As you read in our earnings release, we have temporarily suspended our full year financial guidance and moved to providing second quarter guidance only.

While our first quarter results and second quarter guidance reflect the company’s strong competitive position, healthy end markets and good execution, we have less visibility for the back half of the year due to the difficult predicting the potential impact of slower economic growth, higher prices and uncertainty on our customers’ investment decisions. While we have not seen widespread changes in customer behavior to date, we have had a handful of lost or delayed orders. We are monitoring customer behavior closely as the spectrum of tariffs becomes real and as uncertainty continues, including reciprocal tariffs and how that benefits to changes in order flow. As we get greater certainty on tariff rates, especially as they impact the European Union, we hope to reinstate full year guidance. On the cost side, we have done a thorough analysis of the geographic origins of equipment and components, calculating the impact of today’s tariff rates on cost of goods sold.

We currently estimate the annualized cost impact of approximately 50,000,000 to $60,000,000 or 12,000,000 to $15,000,000 per quarter before any mitigating actions. This includes costs associated with buying parts as well as higher the higher cost of importing equipment manufacturing at JBT Morel non U. S. Sites to serve our U. S.

Customers. Of course, we are taking actions to mitigate the impact of tariffs as we look to secure concessions from suppliers and implement select pricing actions. Given the timing of tariff enactment, our inventory on hand and our mitigating actions for the remainder of 2025, we believe the negative cost impact of $12 to $15 per quarter could be reduced by more than half. While we look for greater clarity in the macroeconomic environment, the fact that roughly half of JBT Morel’s top line comes from resilient recurring revenue is a particular asset to our business in uncertain times. Looking past tariffs, we are more confident than ever in the benefits of the JBT Morel combination and our ability to better collaborate with our customers on the commercial side, capture cost synergies and bring even greater value to our customers as we transform the future of food.

Now, let me turn the call to Ernie to discuss our integration progress.

Arne Sigurdsson, President, JBT Morell: Thanks, Brian. As Brian said, we are excited about the progress we are making uniting our two organizations. First and foremost, our team has delivered continuity for customers, as demonstrated by our first quarter results. As of early April, we reached a major milestone in the implementation of JBT Mara’s new organization. The new organizational structure includes a go to market strategy that adopts an end market focus.

We believe this customer centric approach enables our commercial organization to bring deeper process and industry specific knowledge to our customers and enhances JBT Motto’s ability to sell the full breadth of our product offerings. To that end, we have continued to secure orders that combine our complementary capabilities serving the poultry industry as well as other end markets. Speaking of the poultry industry, one of JBT models largest and most attractive end markets. Not only are we benefiting from the current ongoing recovery in the poultry industry, but we believe it is the protein with the strongest long term growth outlook. As for JBT Mara, we are excited about the advantages created by the combination as we now bring the most comprehensive portfolio of solutions, services and software covering primary, secondary and further processing, uniquely positioning us to support customers across the entire production value chain.

Beyond our ability to cross sell our existing products, we are integrating full line solutions that address critical customer needs. For example, we can enable seamless traceability across the poultry value chain from primary and secondary processing steps, such as evisceration, chilling, cut up and deboning, bone detection and intelligent portioning, continuing to subsequent value added further processing. All of this is supported by real time analytics and actionable software insights that enhance food safety and production efficiency. This is an example of what makes JBT model the leading partner in solutions for a sustainable food industry. As I said, our combined organization is working together leveraging our combined strengths to deliver value for customers.

That can be seen in the continued strength of our first quarter orders with combined orders of $960,000,000 reflecting healthy year over year growth for the JBT segment and record orders for the Model segment. While it’s been just four months since completing our business combination, we are very pleased with the progress we’ve made already. As Matt will elaborate on, we are on track to achieve our stated cost synergies and the commercial benefits of the merger. With that, let me turn the call over to Matt.

Matt Meister, Chief Financial Officer, JBT Morell: Thanks Arne. I will begin with a quick recap of our first quarterly report for the combined company. Consolidated JBT MRL revenue exceeded the midpoint of our guidance by $19,000,000 which was primarily driven by better than expected equipment shipments and strong recurring revenue. Additionally, negative effect from foreign exchange translation was about $6,000,000 less than our expectation. Our consolidated adjusted EBITDA margin of 13.1% outperformed the midpoint of our guidance by 60 basis points, driven by volume flow through, favorable mix and good expense control.

Since we accounted for Maral as an acquisition, prior year period reflects only the JBT legacy results. We provided supplemental disclosures in the press release and earnings presentation to show comparisons for the combined company as well as the individual segments. JBT segment revenue increased 4% year over year or 5.6% growth on a constant currency basis. JBT segment adjusted EBITDA of $61,000,000 increased 6% and segment adjusted EBITDA margin improved 30 basis points to 14.9%. MRL segment revenue was flat versus prior year, but on a constant currency basis grew 2%.

Segment adjusted EBITDA of $51,000,000 increased 19% year over year. Segment margin improved 190 basis points to 11.5%, benefiting from favorable mix with higher aftermarket and pet food revenue along with savings from the restructuring actions the company implemented in 2024 and initial benefits from synergy actions. Our first quarter free cash flow was $18,000,000 which included approximately $42,000,000 in one time M and A related payments. In the quarter, we incurred $11,000,000 in restructuring costs and anticipate full year restructuring costs of about $25,000,000 to $30,000,000 We expect our restructuring actions to generate savings of approximately to $25,000,000 in the year and annual run rate savings of 50,000,000 to $60,000,000 as we exit the year. Regarding our other synergies from cost of goods sold, we expect to realize meaningful savings during the year from categories such as supplier rationalization, logistics efficiencies and make versus buy decisions.

This is expected to deliver approximately $15,000,000 in year savings and run rate savings of approximately $30,000,000 exiting 2025, all prior to any tariff impact. Altogether that puts us on track to achieve total in year cost synergies of 35,000,000 to $40,000,000 in 2025 and annual run rate savings of 80,000,000 to $90,000,000 as we exit the year. With this, we remain confident in our ability to achieve our targeted run rate synergy savings of $150,000,000 as we exit 2027. In terms of debt leverage, we are extremely pleased with the progress we have made in a short period of time. As of the end of the first quarter, leverage was 3.8 times, which is an improvement from just below four times at the close of the transaction in January.

And as measured under our banking agreement, which includes the benefit of certain run rate synergy savings, we ended the first quarter at 3.2 times. Approximately $1,300,000,000 in liquidity, we have significant financial flexibility to continue to fund our operations and provide stability. And we remain confident that we can reduce our bank leverage to less than three times by year end 2025 even with the increased macroeconomic uncertainty. Finally, as Brian mentioned, we have suspended full year guidance for 2025. Due to the uncertainty from the impact of tariff decisions, especially in the second half of the year.

That said, with better near term visibility, we are providing guidance for the second quarter of the year. For the quarter, we expect to generate revenue of $885,000,000 to $915,000,000 which includes a favorable FX impact of 10,000,000 to $15,000,000 adjusted EBITDA margin of 14.5% to 15.25% and adjusted EPS of $1.2 to $1.4 With that, let me turn the call back to Brian. Thanks, Matt.

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

Operator?

Bailey, Conference Operator: Your first question comes from the line of Mig Dobre with R. W. Baird. Your line is open.

Mig Dobre, Analyst, R.W. Baird: Thank you for taking the questions. Good morning, everyone. Brian, maybe we can start with just some updated thoughts around how you thought about the guidance. You’ve obviously pulled it for the full year. But I’m curious if this is just a function of sort of being conservative relative to what clearly is an uncertain environment?

Or if you’ve actually seen customer behaviors change through the month of April? Maybe you can comment on that specifically. And I’m also curious as to what you’re seeing globally, right, U. S. Customers versus folks in Europe or other parts of the world?

Brian Deck, Chief Executive Officer, JBT Morell: Sure. Thanks for the question. So it’s more the former. We feel with the lack of clarity, we’d like to see how this environment shakes out a little bit. Obviously, there’s more shoes to drop with the Trump administration and we just don’t know precisely how that’s going to unfold.

And frankly, we debated whether or to pull guidance or not and we’ve seen what other companies have done. And you’ve seen a mix where people don’t change guidance, but they say it doesn’t include tariffs. You’ve seen people put very wide ranges, which is not particularly helpful either. So to me, it’s kind of half dozen here, six of the other. So at the end of the day, that’s the choice we made.

We have not seen any meaningful change in customer behavior. We have seen a handful of lost orders or deferred orders or delayed orders. I can count them on one hand, frankly. And frankly, the poultry industry in particular, I would describe as robust. And but that said, we’re just we wanted to be a little bit conservative, making sure we understand how things play out from here.

But in the meantime, we’re very proud of the performance in the first quarter. We’re pleased at how the second quarter is looking as well. We’ll see how it plays out from here.

Mig Dobre, Analyst, R.W. Baird: I see. And is there any color on behavior, say, S. Customers versus international? Anything to sort of parse out there?

Brian Deck, Chief Executive Officer, JBT Morell: There’s a little bit. So you’ve got kind of two situations. You have obviously globally, you do have some concerns as to the price of the equipment, right? And what either The U. S.

Tariffs or any reciprocal tariffs have on that. So I just think there’s a general more conversations on cost, etcetera. There’s obviously, given The U. S. Tariffs, there’s more conversations there.

But there’s also on the non U. S. Customers, some of our non U. S. Customers import food into The U.

S. So then the question is should they build that equipment should they build that factory or add that equipment in The U. S. Or should they add it, let’s say, Mexico, right? If there’s going to be food tariffs, are they better off just building it in The U.

S? So there’s just a lot of back and forth on those conversations. I think the good news generally is all these conversations are continuing. The demand profile is there. We just don’t know exactly how this will all play and is it defer some decisions for a month or two as the smoke clears a little bit.

We really just need some clarity on tariffs both on the particularly on The U. S. Side, but also any reciprocal tariffs.

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

Brian Deck, Chief Executive Officer, JBT Morell: I think that’s less likely. I think first of all, we enjoyed very good strength in orders on parts in the first quarter and that was before there was any visibility in tariffs which came out in early April. So there’s really we didn’t see any pull through and no meaningful change in February versus March. So that was good. It’s just a good strong quarter.

We would expect that to continue here. Obviously, there will be some conversations about parts pricing and how we think about that in terms of selectively trying to capture any of our increased costs for any of the parts that we import, which is about onethree to onetwo of the parts. So most of our parts are more than onetwo are manufactured in The U. S. From U.

S. Suppliers, but we do have some stuff that’s outside The U. S. So there are some cost impacts that we are considering. But those are moderate in the grand scheme of things.

And given the high level of food production that we’re seeing right now, we still feel good about that entire environment on our parts.

Mig Dobre, Analyst, R.W. Baird: Okay. Lastly for me, and I’ll let somebody else ask the cost mitigation question. I want to ask you on your comments about repricing backlog. Maybe talk us through the mechanism of that of how that would work. And of the existing backlog, the $1,300,000,000 of backlog, how much of that is related to U.

S. Orders or U. S. Customers? I’ll leave it there.

Thank you.

Brian Deck, Chief Executive Officer, JBT Morell: Right. So for JBT Morrell, about 40% of our revenue is U. S. Based. And obviously quite a bit of that is manufactured in The U.

S. And then about 15% or so of our backlog is would be in parts and refurbishments, would be less applicable. So it is a portion of a portion, so to speak. And then specific to how you go about repricing backlog, That is that’s a customer by customer and frankly a contract by contract negotiation depending on what the how the contract was originally negotiated whether or we have the ability to pass through or not. So it is a mix.

We’re going through that as we speak. So we will have some ability, but not on every order. More importantly, we have the ability on existing quotes on our pipeline to certainly re affect what those prices look like for orders that go out from here. Thank you. Okay.

Thanks.

Bailey, Conference Operator: Your next question comes from the line of Ross Barenblatt with William Blair. Your line is open.

Ross Barenblatt, Analyst, William Blair: Hey, good morning gentlemen.

Brian Deck, Chief Executive Officer, JBT Morell: Good morning. Hey,

Justin Ages, Analyst, CJS Securities: maybe just starting with the backlog. I know you guys called out some order delays, but was there a definitional change to that? Because based off our estimates, I think we’re around 1,450,000,000 for the backlog, which is a little bit higher than what you guys reported. I know FX was a bit of a headwind moving to a tailwind. Just anything else to think through there on why there could be $140,000,000 kind of differential?

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

Justin Ages, Analyst, CJS Securities: Okay. That’s reassuring. So no cancellations. Don’t really get the sense based on customer conversations that they’ve been an option. No.

Perfect. And then just maybe take it

Arne Sigurdsson, President, JBT Morell: through kind of some of

Justin Ages, Analyst, CJS Securities: the strength there. Can you give us a sense of, like, the lead times in the first quarter knowing that Marella is a little bit longer cycle last quarter seem to be more of kind of midstream implying delivery in 2025 or anything that’s large lumpy to call out?

Brian Deck, Chief Executive Officer, JBT Morell: Sure. So yes, so you’re right. It is all over the board. It is product by product line. And just to give you a feel for it, it’s anywhere as short as forty five days and as long as twelve, fifteen months.

It is quite a broad range. You are correct in that the Morrell on their large projects, particularly in poultry and meat, those do tend to be in that ballpark in that longer ballpark of the twelve to fifteen month range. We did see some nice order strength in that in the first quarter. So I’d say slight elongation and we are clearly already quoting into 2026. That said, still the vast majority of our backlog will be shipped in the current year as we sit here.

So I can’t give you like a great answer because it’s just all over the board. But that said, our lead times are not extending at this point. We still have the capacity to meet the demand that’s out there. As poultry gets stronger and stronger, we have to make sure we work on that closely. But all in all, from an operations manufacturing operations perspective, we’re well situated.

Justin Ages, Analyst, CJS Securities: Perfect. Thank you, Brian. And then just one last one, if I could. Rarelle’s margin is pretty strong in the quarter. I do believe the first quarter is a seasonally low for aftermarket mix.

So I just trying to understand some of the strength there. And maybe if you could help us quantify some of the benefits from early synergy capture if there were some.

Arne Sigurdsson, President, JBT Morell: Yes, Ross. I mean, this is Arne here. I mean, some of the strength that we saw was clearly due to some of the actions that we have been taking on the business, which explains it. And I think it’s also helpful that you’re seeing that kind of like for like on a GAAP basis now because we have been taking actions on lowering capitalization of innovation and stuff like that that is now fully on a like for like basis. But we also saw some kind of good strength in

Brian Deck, Chief Executive Officer, JBT Morell: some

Arne Sigurdsson, President, JBT Morell: of the business such as on pet food where we saw both growth and margin enhancement. So I think overall just very pleased with the progress and also just considering that we’re seeing continued strength on the order side and kind of the driver in Q1 was kind of poultry. We saw a lot of strength on the other end markets in Q4, but they were still kind of at a healthy level in Q1.

Matt Meister, Chief Financial Officer, JBT Morell: Yeah. Russ, just to add to that. I think, Arty touched on the volume strength and the order strength we saw in the legacy Maral business. But we are definitely seeing flow through and benefits from the restructuring actions that the business took at the end of last year in anticipation of the consolidation as well as some early benefits on the synergy actions that we took primarily on the MREL side as well.

Justin Ages, Analyst, CJS Securities: Yes. Arne, just on the question around the or the color on the lower capitalization R and D, is that purely translational? Or does that imply that you guys are kind of optimizing the R and D spend already?

Arne Sigurdsson, President, JBT Morell: Yes. So we have been taking actions. So kind of prior to the transaction, were looking at that even kind of in the second half of twenty twenty three. So you kind of saw that in 2024. But we are as the two companies are coming together, what we’re doing is really kind of combining the full innovation portfolio, aligning how we kind of measure it.

And kind of in the past, model has been more kind of talking about specific percentage that we invest in innovation. But I think we’re moving more towards kind of measuring the output and figuring out kind of that way what is the right level. So we also have some overlap between the two businesses that we’re looking at. So yes, we have been taking actions, but we’re still kind of working through finding the optimal investment in the right places because now we also have a bigger company with a bigger portfolio and we need to evaluate kind of where do we get the best return on investment.

Justin Ages, Analyst, CJS Securities: Awesome. Very helpful guys. Congrats on the quarter. Thank you.

Mig Dobre, Analyst, R.W. Baird: Thank you.

Bailey, Conference Operator: Your next question comes from the line of Justin Ages with CJS Securities. Your line is open.

Ross Barenblatt, Analyst, William Blair: Hi, good morning all.

Brian Deck, Chief Executive Officer, JBT Morell: Good morning.

Ross Barenblatt, Analyst, William Blair: Gave some good color on poultry demand continuing recovery. We’re just hoping you could give us an update on something from last quarter, which is the weakness seen in the fish and white fish in particular. So just any thoughts around that end market would be helpful.

Arne Sigurdsson, President, JBT Morell: Yes. So on the fish side, I mean, white fish continues to be a challenged market. So just to give you a data point, the quota in the Barents Sea was is kind of being reduced by 25% in 2025. So we are kind of seeing a challenge there. But what is exciting though is due to that there is more investment going into farming on the whitefish side, for example, on cod, for example, in Norway, which is more kind of a very attractive business players such as a JBT model.

But I think the real bright spot is the salmon industry that has been improving over the last few quarters. You see that the challenges on the biological side has been improving. So there’s been basically challenges in salmon farming, which has lowered the quality of the fish and that creates certain restrictions on whether you can export. But that has been improving. So actually, salmon prices have been coming down, which helps with demand.

And that is feeding into production growth that we as expected in the low to mid single digits for 2025 and even slightly higher in 2026. So I think that is kind of promising and we see a bit more activity as we look at kind of at the pipeline. But we’re not out of the woods and we want to kind of see a little bit more strength coming into the numbers. But I would say overall the salmon industry is moving in the right direction.

Ross Barenblatt, Analyst, William Blair: All right. That’s helpful. Thanks. And then just on the recurring versus non recurring split, I know some strength there. We’re just wondering how much of, you know, recurring kind of ticking past that 50% mark is related to, you know, the new digital offerings that were kind of touted at the combined entity versus just shifting of equipment orders?

Brian Deck, Chief Executive Officer, JBT Morell: The primary reason why we’re above 50% in the quarter is just because of the seasonality on the equipment revenue recognition. So from a dollar perspective, when you look at our 10 Q, which is coming out today, you can kind of see the difference between equipment and parts. That will moderate over the course of the year as equipment shipments increase. That said on the software side, so obviously both sides of the business, the revenues in both of our businesses, so it didn’t have a material change from one quarter to the next. But that said, I will say our software and digital folks are pretty excited about bringing the two products together.

Morrell has a mix of what we call line software solutions, which really brings the pieces together across multiple products to get overall equipment efficiency of the line. And then JBT has been quite strongly focused on the optimization of the individual piece of equipment itself with visibility from our OmniBlue software and Morell has made some good strides on the same as well. So we’re bringing that optimization that equipment optimization together. So it’s still early days. There’s a lot of obviously programming and whatnot that comes in.

So we haven’t seen much of an impact so far on revenue synergies there, but more to come with that.

Ross Barenblatt, Analyst, William Blair: That’s helpful. Thanks for taking the questions.

Brian Deck, Chief Executive Officer, JBT Morell: Thank you.

Bailey, Conference Operator: Your next question comes from the line of Mig Dobre with R. W. Baird. Your line is open.

Mig Dobre, Analyst, R.W. Baird: All right. I got back in queue since we didn’t talk about cost mitigation. I guess I’m going to have to bring that up.

Brian Deck, Chief Executive Officer, JBT Morell: No problem.

Mig Dobre, Analyst, R.W. Baird: Yes. Thanks for taking the follow-up. So Slide seven, very helpful. Appreciate all the detail there. So I guess two questions.

It sounds to me like you’re saying Q2 is really not going to experience a lot of these negative cost drags because you have inventory and so on, and the guidance certainly looks that way. How do we think about the second half here? Because it sounds like you’re saying you think you have tools to be able to offset maybe half of these costs. But I don’t know if that’s immediate, if that happens as soon as Q3, if takes a little bit longer. Maybe talk us through that.

Brian Deck, Chief Executive Officer, JBT Morell: Sure. So we will get impacted by in the second quarter, it’s included in the guidance. It’s about $3,000,000 or so is our estimate. And so because we’re writing checks for tariffs already. So it is happening.

That said, some of it gets capitalized into inventory then as you sell it, it gets recorded. But it will accelerate in the back half as you work through your inventory and whatnot. So you see the numbers on Slide seven in terms of that $12,000,000 to $15,000,000 per quarter. I think one of the concerns obviously is where the tariff rates go, which is why we provide the detail where we’re doing the purchasing. So you could do a little bit of your own math.

If European tariffs come down or come up, that will affect the number. But overall, we do feel we have a good path to mitigating the costs, which is why we suggested we can cut that impact by more than half in particularly in the back half as some of these efforts get going. And specifically, a bunch of things in our tool chest here. Obviously, we’re going to just simply push back on price increases. And then keep in mind, we are rarely single sourced on a part on parts purchases.

So we can either reallocate that demand to a domestic supplier and to take the better cost there. We can certainly find new U. S. Suppliers and reallocate that wallet share there. And then we also are working on kind of the make versus buy decision ourselves.

We do have parts capacity in The U. S. At a couple of our facilities as well as Brazil and perhaps even India. So we’re looking to resource some of those parts. That takes a little bit more time obviously than just shifting vendors around or shifting the wallet around.

But we do have that in our tool chest and we’re thinking about those. And then on the equipment side, again that takes a little bit longer. We do ship a fair amount of equipment particularly from The Netherlands. And but again we do have production capacity in The U. S.

And a few facilities again and as well as Brazil that we’re thinking about moving this stuff around. So there’s lots of moving pieces. Obviously, you’ve got just all the uncertainty of the tariffs, what’s the dollar amount, but we’re well underway in trying to mitigate this. But I do feel confident that we can mitigate it by at least half, especially when you consider combining the cost actions with the pricing actions.

Mig Dobre, Analyst, R.W. Baird: That’s very helpful. And then as I think about 2026 and let’s assume that the assumptions that you have on Slide seven remain in place, the tariffs remain as they are. When we get to 2026, do you think you’ll be able to get to the point where the effect of these tariffs would be, fully mitigated? Can you do that with pricing for your 2026 product? Or should we sort of think about this drag, this call it 6,000,000 to $7,000,000 quarterly drag is something that gets applied to 2026 as well?

Brian Deck, Chief Executive Officer, JBT Morell: I think generally speaking, our thoughts are that this just becomes a cost of doing business for us and our customers that gets embedded into the business model. Obviously, that always makes our customers make sure that they still get the ROI on their investment. So I think that’s an ongoing conversation. But I do think this is going to be embedded into our respective cost structures. And some of the if we have to move manufacturing around that could go into early twenty twenty six.

But certainly by maybe the second quarter or certainly the back half of twenty twenty six, we would be realigned as presuming we have some transparency and visibility on what the actual tariff rates are.

Arne Sigurdsson, President, JBT Morell: Mig, maybe just to add. What we’ve also talked about is just how do we see this as an opportunity, because a lot of our peers in the market are situated kind of similarly JBT model. So if you look on the legacy model side, a lot of the competitors are based in Europe when we are in Europe. But with the scale and the global reach and just the fact that we have kind of two supply chains that we are now bringing together, we haven’t brought them together fully already. So kind of as we kind of can think about, I think we have more flexibility and more opportunity to adopt the changing environment.

So I think that’s something that we’re also kind of looking towards as we think further ahead.

Brian Deck, Chief Executive Officer, JBT Morell: And just to actually further the point and I know Bina has dipped to that a little bit. But on Arne’s last point, we have a tremendous business in Brazil. The combined business, we have three large factories and one smaller manufacturing factory. And then we have a large distribution center for parts as well as a customer innovation center there. So we do have the ability to, again, as Ari said, move some global supply chains around and Brazil could be a really nice answer for us if we think Europe is just simply going to be too expensive and we need to alleviate any if we have any constraints in The U.

S. Or higher costs in The U. S.

Mig Dobre, Analyst, R.W. Baird: Understood. Last question is really on integration. It sounds like things are going well. I’m curious if, say, instance, there is an adverse effect on demand either in the back half or maybe even stretching into 2026, what does that mean for your integration effort? You know, do you do you get to maybe pull forward some synergies?

Do you have that ability? Or or maybe it’s the opposite where if you are dealing with lower volumes and you do have to make changes to your manufacturing footprint as previously discussed, then that actually makes the integration process more complicated and and and maybe raises the risk to you being able to deliver on those synergies that you outlined? Curious your thoughts on this.

Brian Deck, Chief Executive Officer, JBT Morell: It is a bit mixed. So certainly on the cost side, on the SG and A, etcetera, logistics, whatnot, we can continue those. And if the demand environment changes, we have a history from our cost side of being able to our continuous improvement side of being able to react appropriately for the demand environment. So we feel that we have that in our tool chest and we can manage that appropriately. The I’ll say the potential offset that obviously would be not so much on the manufacturing side because I think we can get that utilization one way or another and get that efficiency one way if we move stuff around.

The risk would be more so on how much materials you buy, right? So what’s the just the pure volume of raw materials, parts, etcetera, and getting the synergy savings on that combined purchase. So that would be more of the risk in a lower demand environment.

Matt Meister, Chief Financial Officer, JBT Morell: All right. Appreciate it. Good luck.

Brian Deck, Chief Executive Officer, JBT Morell: Thank you.

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

Brian Deck, Chief Executive Officer, JBT Morell: Thank you all for joining us this morning. As always, Marley will be available if you have any additional questions.

Bailey, Conference Operator: Thank you. This concludes today’s conference. You may now disconnect.

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