The Middleby Corporation Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Review: Undertaking strategic review of Residential Kitchen business, recorded $709 million noncash impairment charge during the quarter (accounting-driven, not reflecting loss of confidence in segment's strength). Total revenue of $980 million exceeded guidance range, adjusted EBITDA $196 million, adjusted EPS $2.37 both exceeded upper end of guidance. Invested in innovative technologies to help customers address labor and training challenges. Ice and beverage platform expected to be meaningful growth driver. Residential business has iconic brands, new manufacturing centers, new products, and strengthened team. Food processing improved in international markets, new innovation center opened in Venice, Italy.
• Capital Allocation: Expect to continue share repurchasing using cash flow, believe share price undervalues long-term earnings potential. Evaluate strategic alternatives across portfolio. Food processing spin-off on track, expected to complete in first half of 2026, registration statement filing expected by early March 2026, potential transaction effectiveness anticipated in May 2026.

Segment Performance

• Commercial Foodservice: Generated $606 million of revenue with 1.6% organic revenue growth. Delivered a solid EBITDA margin of nearly 27% (would have exceeded 28% without tariff impacts). Benefited from general market, institutional, and fast casual customer segments, but faced softness among large QSR customers due to lower traffic and cost pressures. Interest in leading technologies like beverage dispense and ice products remains strong.
• Residential: Saw growth across premium indoor businesses year-over-year. Tariff impacts severely hurt outdoor products revenues and pressured margins. Revenues were nearly $175 million, and EBITDA margin was slightly below 10%. Cost impact of tariffs dragged margins by over 150 basis points.
• Food Processing: Q3 revenues exceeded $201 million, with organic EBITDA margin of 21% (would have been nearly 22% without tariff impacts). Margins affected by geographic mix. Exhibited short-term lumpiness but expected strong Q4, especially in protein space and automation solutions. Experiencing strengthening order rate and growing backlog.

Guidance

• Fourth Quarter: Total company revenue expected $990 million to $1,020 million; commercial foodservice $570 million to $580 million; residential kitchen $180 million to $190 million; food processing $240 million to $250 million. Adjusted EBITDA expected between $200 million and $210 million; adjusted EPS projected $2.19 to $2.34 (assuming ~50.4 million weighted average shares outstanding).
• Full Year: Total revenues $3.85 billion to $3.89 billion; adjusted EBITDA $779 million to $789 million; adjusted EPS $8.99 to $9.14. Guidance for 2026 to be provided with fourth quarter results.

Risks

• Tariffs: Adverse net impact to EBITDA in Q3 was ~$12 million, estimated Q4 impact $5 million to $10 million. Uncertainty in where tariffs finally land and volatility in key supply chain markets (China, India).
• Residential Kitchen Strategic Review: No further comments on status of strategic review of Residential Kitchen business will be made on the call.

Q: Mircea Dobre with Baird asked about broader strategic evaluation, including if there are other strategic evaluations in commercial foodservice and management team of food processing spin-off.

A: Tim Fitzgerald said food processing spin-off is on track, and the company has 3 industry-leading portfolios, strategic review is to maximize value of each portfolio.

Q: Jae Hyun Ko with Jefferies asked about non-traffic levers for QSRs in commercial foodservice.

A: Steve Spittle said QSRs are looking at additional dayparts like beverage to drive traffic, and Middleby is well-positioned to offer full beverage solution.

Q: Jeffrey Hammond with KeyBanc Capital Markets asked about revisit of residential kitchen strategic review and grill business tariff management.

A: Timothy FitzGerald said moving some production from China to other parts of Asia, and residential kitchen review is part of holistic portfolio review.

Q: Timothy Thein with Raymond James asked about EBITDA margin drivers and order backlog in commercial business.

A: Timothy FitzGerald said new products, automation, and ice and beverage categories are margin drivers, and order backlog is not the main measurement for commercial business.

Q: Mircea Dobre with Baird asked about cyclical and structural growth in commercial foodservice portfolio.

A: Steve Spittle and Timothy FitzGerald said core business has sustainable growth potential, new categories are long-term growth drivers, and company invests in areas of long-term trends.