Welcome to JBT Marel's earnings conference call for the first quarter 2026. My name is Ben, 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 speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, press star one. If you would like to withdraw your question, press star one again. I will now turn the call over to JBT Marel's Senior Director of Investor Relations, Marlee Spangler, to begin today's conference.
Thank you, Ben. Good morning, everyone, and thank you for joining our first quarter 2026 conference call. With me on the call is our Chief Executive Officer, Brian Deck, President Arni Sigurdsson, and Chief Financial Officer, Matthew J. Meister. In today's call, we will use forward-looking statements that are subject to the safe harbor language in yesterday's press release and 8-K filing. JBT Marel's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available on our IR website. Our discussion today includes references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measures can be found on our IR website. With that, I'll turn the call over to Brian.
Thanks, Marlee. Good morning, all. We got off to a solid start in 2026. We demonstrated our commercial momentum with a second consecutive quarter of orders exceeding $1 billion, including continued robust global demand from our poultry customers. We captured meaningful year-over-year margin expansion enabled by further synergy savings and strong execution. Additionally, cash flow was extremely strong, allowing us to make further and significant progress in reducing our financial leverage. As a result, we remain confident in delivering our original earnings guidance for the year. Before we talk more about the first quarter, I'd like to thank everyone who was able to participate in our Investor Day in late March. It was an important milestone for JBT Marel as we unveiled our next-gen strategy and detailed our 2028 financial targets.
As we discussed, we are very pleased with our progress integrating JBT and Marel, which underscores the commercial, operational, and financial benefits of the combination and provides confidence in the journey ahead. I'll now turn the call over to Arni to provide details about our next-gen strategy. Matt will follow up with a financial recap of our first quarter performance.
Thank you, Brian. At our Investor Day in March, we detailed our plans for profitable growth and continued margin expansion through 2028. Our food and beverage customers are shifting to an outcome-based model that increases the demand for integrated solutions across the value chain and requires full lifecycle support, high uptime, and data and processing insights to run at the highest performance level. JBT Marel is uniquely positioned to deliver these comprehensive solutions, and our next-gen strategy will strengthen our competitive position even further. The key pillars of the next-gen strategy are first, advancing our customer-centric service model by building on our large global install base to deliver a better customer experience through prescriptive maintenance, improved parts delivery performance, and more regional accountability. Second, it is enhancing our product offering, full line solutions, and digital capabilities with targeted innovation through our food application expertise.
Third, it is capturing commercial opportunities through cross-selling and growth in emerging markets and delivering end-to-end solutions that optimize customer performance. Of course, our culture of continuous improvement will further enhance the efficiency of JBT Marel, allowing us to invest in the business and be more competitive. Finally, at the right time, we plan to pursue strategic and disciplined M&A to build an even more comprehensive offering and strengthen our value proposition of integrated line solutions. Putting this all together, we expect our revenue to grow at a three year organic compound annual rate of 5%-7%, and we are targeting an adjusted EBITDA margin of 20% in 2028, supported by our margin enhancement initiatives and volume growth.
We're confident that our strategy positions us to deliver profitable growth and value creation for both customers and shareholders, and we look forward to updating you on our progress. Now, let me turn the call over to Matt to discuss our performance in the quarter.
Thanks, Arni. As Brian mentioned, we're off to a good start in 2026. Our first quarter consolidated revenue was $936 million, an increase of approximately 10% year-over-year. Organic revenue growth was 4%, with foreign exchange contributing additional 6%. Consolidated adjusted EBITDA of $142 million improved 27%, and adjusted EBITDA margin of 15.2% improved by 210 basis points. From a segment perspective, Protein Solutions revenue of $460 million grew 22% year-over-year, which included an approximate 8% benefit from foreign exchange. Organic growth is primarily due to higher poultry volume as we executed on strong backlog built in 2025. Protein Solutions segment adjusted EBITDA margin improved by more than 500 basis points year-over-year to 21.7%.
This significant improvement was driven by volume leverage in poultry and the results from synergies and continuous improvement initiatives in our Marel Meat and Fish businesses. Prepared Food and Beverage Solutions segment revenue of $476 million was flat year-over-year, which included an approximate 4% benefit from foreign exchange. As we've discussed on previous calls, we experienced softness in the CPG end market during 2025, which contributed to the lower volume. Adjusted EBITDA margin for the segment declined 170 basis points year-over-year to 14.7%, which included the expected impact of higher tariff costs, the volume decline, and underperformance in our Warehouse Automation business. For the quarter, we generated free cash flow of $100 million, driven by our earnings performance and an increase in customer advanced payments from our strong order intake.
This resulted in free cash flow conversion to adjusted EBITDA of 70%. We continue to make great progress deleveraging our balance sheet with our leverage ratio at 2.6x at the end of the first quarter, and we remain on track to reduce leverage to approximately 2x by year-end. Given our first quarter performance and strong orders, we are maintaining our full year 2026 guidance. At the midpoint, that reflects revenue growth of 6%, adjusted EBITDA margin expansion of 145 basis points, and an adjusted earnings per share improvement of 29%. For the second quarter, we anticipate revenue of $975 million-$1 billion and adjusted EBITDA margins of 17%-17.5%.
Now, regarding the impact of tariff changes on our guidance, we are forecasting that the benefit from the elimination of IEEPA tariffs will be essentially offset by incremental Section 122 and Section 232 tariff increases. Additionally, we have not factored in any IEEPA tariff payment refunds. Therefore, our full year guidance remains unchanged and continues to reflect a 25 basis point to 50 basis point headwind from tariffs after all mitigation actions. With that, let me turn the call back to Brian.
Thanks, Matt. Speaking of the outlook for JBT Marel, let me comment on our commercial momentum. As I mentioned at the top of the call, orders exceeded $1 billion in the first quarter, a year-over-year increase of 17%. That gain reflects continued robust demand from our poultry customers globally, driven by unabated demand from end customers. Beyond poultry, the benefits of our diversified model are also playing out with broad-based order strength as we experience double-digit year-over-year growth from both our Protein Solutions and Prepared Food and Beverage segments. Specifically, we saw a pickup in investment in Prepared Foods as well as the meat and fruit and vegetable end markets. Geographically, investment was strong in most regions with a sequential increase in demand from Europe, North America, and Latin America.
Additionally, we continue to capture synergistic orders as our go-to-market strategy promotes cross-selling of legacy JBT and Marel solutions. As it relates to the conflict in the Middle East, we are not experiencing any noteworthy impact on our order book and pipeline. As a reminder, the Middle East region has historically accounted for less than 5% of total JBT Marel revenue, even today, we continue to progress on opportunities in the region. Moreover, we have not seen an impact to broader customer investment trends in Europe as the demand to meet the needs for protein output, automation, and efficient operation continues. However, the conflict is resulting in a more challenging logistics, fertilizer, and energy inflationary environment, which heightens our attention to any implication for these cost dynamics for both JBT Marel and our customers.
It seems our customers remain confident in their ability to pass these costs along or otherwise manage through them. Our teams are executing well despite the dynamic macro environment, which speaks well to our prospects for the remainder of 2026 and beyond. Thank you to our talented people across the globe for making it possible. Let's open the call to questions. Operator?
We will now begin the question and answer session. Your line will remain open for follow-ups. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your headset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ross Sparenblek with William Blair. Ross, your line is open. Please go ahead.
Hi, this is Sam Carlo on for Ross. Thanks for taking my questions.
Good morning.
Really, really great to see the strong orders in the quarter. I mean, you kinda touched on this, but we had been hearing some concerns that input cost inflation may have been impacting your customers', willingness to order. Can you maybe walk through how this current inflationary trend compares to 2022?
Sure. Happy to do so. Two things. I would say first, specific to our poultry customers, they are in a much stronger position today versus a few years ago, with excellent customer demand, balanced supply, good price cost spreads, and strong balance sheets. More specifically, corn and soybean are in abundant supply and remain in that low-cost position here in 2026 versus high prices in 2022, which, if you recall, were exacerbated by the Russia-Ukraine conflict. Wholesale prices for poultry today are, while off its highs, are still at a level where producers are making really nice money. In part, you saw the Tyson report yesterday, a nice quarter. Again, balance sheets remain strong, and there's still a continued bias towards investment in all the things that we've talked about.
I'd also say, from specific to a JBT Marel standpoint, as a combined company, we really now have the benefit of a more diversified product portfolio within poultry, because now we have primary, secondary, all the way to end of line and including a much deeper further processing portfolio, and we're seeing a lot of investment on further processing coming along. Remember, we've got much broader end market exposure outside of proteins, a better mix of recurring revenue, a broader geographic exposure. Additionally, if you recall back in 2022, 2023, Marel Meat and Fish, they weren't really contributing much to the situation from an earnings perspective. Now, while we've got a lot of room to go on those businesses, they're both contributing nicely, so we're simply more diversified financially as well.
Really, what I'm saying is the combined benefits of the scale and diversification of both the product and the market side, we've severely de-risked the company compared to where we were in the past. That was a big part of the industrial logic of the two businesses coming together. While I'm not saying that we're immune to cyclical forces, I'm just saying we're a better business today and more diversified than we were back then.
Got it. That's super helpful. Kind of sticking on the same theme, has your ability to internally pass through your own inflationary costs meaningfully changed since 2022 following the Marel acquisition?
I would say generally, we're more competitive than we've ever been, by virtue of just our continuous improvement efforts, and we have strong market positions. Yes, I think we do, have a good ability to pass things along. We're obviously very conscious of where we sit, in the marketplace from a competitive pricing situation, so that always comes into play. Certainly, we feel we're at a, in a good spot generally.
Maybe just to add a little bit, because, if you look at kind of more specifically to the end markets that Marel was focused on back in 2022, there was basically a perfect storm. There was a headwind in most of our markets. If you look at the pork business, obviously the war with the sanction on Russia and kind of the Ukraine market closing down, that was north of 10% of the meat business at the time. What was also happening, which was an extra headwind, was that China really cut down on their imports of pork because kind of China was building up their herd after the African swine fever.
There was an oversupply of pork in Europe and North America, kind of independent of what was going on from a, from a cost standpoint. The beef cycle was turning at that point, kind of to a more negative environment. On the fish side, you were seeing quotas being cut for the first time for a few years on the whitefish side. Norway introduced a 40% tax on salmon farming, which is close to 50% of the salmon farming in the world. There was also just, like, a very specific dynamics if you were looking kind of more specifically at the Marel business back in the day.
Like Brian said, we're a different company and much stronger from a scale, from a diversification standpoint, not only from an end market standpoint, but also across kind of the value chains in those end markets.
Got it. That is great color. I will leave it there and pass it on.
Thank you.
Your next question comes from the line of Justin Ages with CJS Securities. Justin, your line is open. Please go ahead.
Hi, morning all.
Morning
I was hoping if I could get a little more color on some of the headwinds in Prepared Food and Beverage Solutions. you know, what's causing these persistent headwinds in Warehouse Automation?
Well, I think in Warehouse Automation specifically, that business had a bigger impact from the tariff changes on its customers than the rest of our business did. They've been really impacted by demand because of the impacts on its market. They've also had a few discrete projects that they've been working through over the last two quarters. We think that's largely behind us now, and the business is taking some actions to try to address the lower volume and improve margins going forward. We should expect those actions to start to impact late here in Q2 and then going on to Q3 and Q4.
Thanks for that, Matt. Switching to poultry, you know, good to see strong, robust demand. Is it possible to get a little more color on where that is geographically? Is it broad-based in all your regions? Is it specifically in one region, leaving an opportunity to grow more in another region? Just looking for any color there.
Sure. The demand is fairly broad-based. Europe is strong. North America is, I would say, even a little earlier in the cycle than the European cycle, and we expect continued demand there, especially with some of the opportunities with line speeds and whatnot. I would say they're actually earlier in the cycle than Europe. South America is very strong for us right now. We may have a record year this year down there. I would say Asia is a little earlier or a little not as quite strong, but good opportunities, especially in the Australia, New Zealand area.
Very helpful. Thanks for taking the question.
Sure.
If you would like to ask a question, please press star one. Your next question comes from the line of Mircea Dobre with R.W. Baird. Mircea, your line is open. Please go ahead.
Yeah, thanks, and good morning, everyone. Brian, just maybe tagging on to those last comments that you had on poultry, I'm sort of curious as to what your visibility is here at this point, right? I mean, we, you know, just in speaking with investors, I think this is kinda like the primary concern that we've had a pretty decent poultry cycle here going for more than a year. The question is kinda on sustainability. Maybe you can talk a little bit about that and what you're hearing from customers. I mean, what is driving this investment?
Can you put a finer point on what's happening with the line speeds in terms of how that manifests itself in incremental business for you guys in terms of orders either for 2026 or maybe even beyond 2026?
Sure. From a demand profile, there's a couple things happening. This is global. There is a true insatiable demand for poultry right now, just in terms of all the, you know, benefits that go along with incremental, the protein aspect to it, the flexibility and flavor profiles, religious, I'll say no restrictions there, as well as the continued progression of people going from green-based diets to meat-based diets. Those secular tailwinds continue to benefit, and I think that will go on for a long time. Now that I'll say that the industry got the supply-demand balance fixed after their struggles 2023 through, you know, 2022 through early 2024, we're just in a, I'll say, more normal cycle in that regard.
I would further say that the most recent, I'll say, demand, real strength has been on that primary and secondary side, which is really supporting automation, but also just the pure volume needs for the industry. As we go further into this cycle, what we're now seeing is the need and desire for some of the downstream further processing. You heard that a little bit from Tyson yesterday, where we do expect some real strength there here later in the cycle, as they look to do value added to their portfolio and 'cause they make, you know, more money in that regard. I do think we're gonna see some strength in that side over the next several quarters.
Sorry, what was the second part of the question?
Line splits.
Oh, line speeds and splits. Yes. We're still waiting for the USDA to make final determination, which we expect here in the next few months. The open comment period has now since closed. We met with the USDA, giving our opinion on the matter and put forth our comments. You know, our position on this is that the, you know, our technology and the line speeds, they're built for the higher line speeds, which we currently use in Europe and elsewhere.
Really, the line speeds in North America are a constraint on productivity and it actually increases food costs. But what would manifest if we see some success on the line speed rules is we immediately go from 140 birds per minute - 175 birds per minute, and that would precipitate investment all around. You don't just turn, you know, don't just turn a switch and make it go faster. The entire system has to be harmonized in order to get the productivity that you need in order to execute on that. The shackle lines themselves, but everything around that, the deboning, everything associated with that, we think that's an opportunity.
Even without, I would say, the waivers, we are still seeing demand for line splits, which effectively allows the increased speeds under the current rules of 140 birds per minute, where you split the line where the USDA inspection occurs to slow it down for a period, and then you join those lines back up. We actually had a deployment in Q1 in that regard. That was nice to see one of our customers deploying that. We do think independent of what the USDA decides, we think there's some opportunity to invest, which allow our customers to get that productivity regardless.
Okay. Is it fair to think about this line speed issue as just kind of fundamentally altering the poultry investment cycle in North America? You know, is this something that perhaps doesn't really have that much of an impact for the overall guidance I'm talking about here?
This is one of the reasons why I mentioned we're earlier in the cycle in North America compared to Europe, because Europe's been at these higher speeds. I think this is a multi-year investment opportunity because of the 300 or so processing lines out there, only handfuls are running at higher speeds. We do think this is a longer cyclical tailwind specific to North America.
It is kind of, how you think about it, is kind of a transformation because all the infrastructure around kind of the farming side, ensuring supply, and the current facilities are not necessarily set up in the right way to deal with the kind of the technology that you need and the speed and so on. It will be a kind of a gradual kind of shift in the market, we believe. It is not like Brian said, it's not like you buy one piece of equipment and you swap it out. It's really, you need to think about it much more broadly. It has, it will take time to progress over the whole industry.
That's very helpful. Maybe one final follow-up on Prepared Food and Beverage segment. It sounds like demand is getting a little bit better. You know, you talked about some challenges in 2025, but demand gets a little bit better. How should we think about organic growth here in terms of what's embedded in guidance? Maybe you can comment on Q2 specifically and then the rest of the year as well. You know, how do we also see margin progress? We started clearly slower in Q1. You know, do we revert to some year-over-year margin expansion at any point in time in fiscal 2026? Thank you.
Sure. I'll speak and then Matt's talk specifically about some of the trends here. We are seeing some, I'll say, recovery in some of those end markets that were a little bit more challenged in 2025. Some of the CPG, QSR, we're starting to see improved pipeline and that manifested in stronger orders in Q1, which is nice to see.
Yeah, just to add on that, I think we saw close to double-digit order improvement in Prepared Food and Beverage Solutions in Q1. That's the positive momentum that we're seeing in the segment overall. From an organic growth rate, it will be sort of in that, I call it sort of mid-single digits, probably a little less than the average that we're looking at for the total business at 6%. If that's our midpoint, it'll be higher in Protein Solutions, a little bit lower on the Prepared Food and Beverage Solutions side, probably closer to 3%-4%.
Especially given the slow start, right?
Correct, in prepared food and beverage. That's how I would see it. It's going to progressively improve because we have built some backlog here in Q1 and we're starting to see some positive momentum in their primary markets.
The margins?
Yeah, from a margin perspective, again, Q1 was certainly a bit lower than we expected. Certainly we had some expectation with the AGV business and warehouse automation being down, that volume decline did have an impact on margins. With the improved volume significantly in Q2 and Q3 and Q4, we should see sequential improvement going forward from Q1 all the way through the year. I would expect to continue to see significant progress in Q2 and then sequential progress from there, Q3 and Q4.
To be clear, do you expect to be up margin-wise here? I understand the sequential comment. At what point in time do we get margins up year-over-year?
Yeah, margins will be up year-over-year in Prepared Food and Beverage. That is our forecast for that segment, yes.
All right. Appreciate it. Thank you.
There are no further questions at this time. I will now hand the call over to Mr. Brian Deck for closing remarks.
Thank you all for joining us this morning. As always, our IR team will be available if you have any additional questions.
This concludes today's call. You may now disconnect.