Thank you for your continued patience. Your meeting will begin shortly. If at any time you need assistance, please press star zero, and a member of our team will be happy to assist. Please stand by. Your meeting is about to begin. Welcome to JBT Marel's earnings conference call for the third quarter 2026. My name is Leslie, 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. To register to ask a question at any time, please press star one on your telephone keypad. 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, Leslie. Good morning, everyone, and thank you for joining JBT Marel's third quarter 2026 conference call. With me on the call are Brian Deck, our Chief Executive Officer, and Matt Meister, our Chief Financial Officer. In today's call, we will use forward-looking statements that are subject to the cautionary language in this morning's press release and 8-K filing. Actual results may differ materially from our projections. 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. Also, our discussion today includes references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found on our IR website. With that, I will turn the call over to Brian.
Thanks, Marlee, and good morning all. For the third quarter of 2026, we achieved record adjusted EBITDA of $179 million, and we reached an adjusted EBITDA margin of 18%, also a record, which exceeded our expectations even as we experienced lower-than-anticipated book-and-ship revenue associated with the CPG end market within our Prepared Food and Beverage Solutions segment. Our teams did an excellent job managing inflationary pressures and tariffs while continuing to improve our underlying cost structure. Moreover, we have made significant progress improving productivity as part of our footprint rationalization and transition to lower-cost operations. At the same time, we saw excellent sequential improvement in our warehouse automation business, which delivered meaningful cost improvements and revenue growth following its restructuring in the second quarter. Our strong profitability also reflects the progress of the JBT Marel integration.
These benefits, combined with our continuous improvement initiatives, support confidence in the path to delivering our adjusted EBITDA margin target of 20% in 2028. While economic pressures and geopolitical events have continued to give rise to an uncertain environment, we remain positive about the demand landscape, especially global protein, which continues to have a strong pipeline. Specific to poultry, our customers have made clear their investment priorities are to lower their cost structure and meet growing demand for value-added prepared foods. I will come back and talk further about the demand environment and progress on our strategic initiatives. In the meantime, let me turn the call over to Matt to discuss our third quarter results and update our full-year guidance.
Thanks, Brian. Third quarter consolidated revenue of $994 million declined 1% compared to the prior year period. On a segment basis, Protein Solutions continued to deliver solid growth, with revenue increasing 6% year-over-year, driven primarily by poultry volume. Revenue in the Prepared Food and Beverage Solutions segment declined 6%. As Brian mentioned, the decline was due to lower book-and-ship revenue in our Diversified Food and Health business, reflecting continued softness in the CPG-related end markets. The other businesses within the segment, which are prepared foods and warehouse automation, both performed well in the quarter. Third quarter consolidated adjusted EBITDA of $179 million increased 5% year-over-year, representing a margin of 18%, with both segments delivering year-over-year margin improvement. Protein Solutions margins improved 110 basis points, primarily from volume leverage, mix, pricing, and cost synergy realization.
Prepared Food and Beverage Solutions improved 90 basis points year-over-year, as improved performance in our warehouse automation business, expense savings realization, mix, and price discipline more than offset margin impact of lower volume. Year-over-year corporate expense was roughly flat at $27 million and slightly better than our forecast, driven by operating expense seasonality and lower incentive compensation expense. Sequentially for the fourth quarter, we do expect corporate expense to be closer to $30 million. In terms of adjusted EPS, we delivered growth of 13%, driven by our better margins and lower interest expense. Now, moving to the balance sheet. We generated $252 million year-to-date free cash flow, representing an increase of approximately $90 million versus the prior year.
During the third quarter, we generated $73 million of free cash flow and repurchased 800,000 shares for $94 million, returning capital to shareholders while maintaining a leverage ratio below 2.5 times. As we announced in this morning's press release, our board of directors authorized an increase to our existing share repurchase program, bringing the total authorization to $700 million. Increased authorization provides us with additional capacity to repurchase shares when we believe the stock price does not reflect the intrinsic value of JBT Marel, consistent with our disciplined approach to capital allocation and shareholder returns. Finally, in terms of guidance, we are revising our full-year revenue and adjusted EBITDA outlook, primarily reflecting the lower third quarter book-and-ship volume and our fourth quarter expectations for the DF&H business within our Prepared Food and Beverage segment. We now expect revenue of $3.95 billion-$4 billion.
That translates to year-over-year growth of approximately 5% at the midpoint, including a 1.5% foreign exchange benefit. We increased our adjusted EBITDA margin guidance to 17.25%-17.5%, even as we revise our volume expectations, demonstrating our ability to operate efficiently and control expenses. We also increased adjusted EPS guidance to reflect our assumptions for lower interest expense, taxes, and share count. Our adjusted EPS guidance range is now $8.10-$8.40. With that, I'll turn the call back to Brian.
Thanks, Matt. Let me come back to the topic of orders and the business outlook. We experienced normal variability and seasonality in equipment orders in the third quarter, with a 3% year-over-year increase and a year-to-date increase of 10%. Given the strength of the Protein Solutions end markets, including prepared foods, we remain positive about the demand outlook, notwithstanding near-term book-and-ship volume from the CPG end market. Interestingly, from an equipment orders perspective, our Diversified Food and Health business had its best orders quarter since the combination of JBT and Marel on the strength of some larger 2027 CPG projects. Further, we have very strong momentum entering the fourth quarter for poultry globally across primary, secondary, and further processing. Specific to the U.S., the primary and secondary poultry industry is underinvested relative to global standards, creating opportunities for producers to improve their cost structures through automation and modernization.
With still healthy balance sheets and a supportive regulatory environment, we believe customers have both the means and incentive to invest. We are deeply engaged with major poultry producers on plans that include meaningful investments in their operations. Moreover, the anticipated USDA ruling regarding higher line speeds, which we continue to hope for the fourth quarter, could provide an additional multi-year tailwind for U.S. investments. More broadly, we are proud to serve as a thought partner to the USDA on several important matters. At the top of the call, I also mentioned the progress we are making with the JBT Marel footprint integration. We have made good progress in improving productivity in our facilities. During the third quarter, we completed the closure of five manufacturing, distribution, and service facilities, including one large facility and four modest facilities. We are now starting to enjoy the run rate benefits specific to those actions.
We have much more to accomplish on our footprint optimization through the end of 2027, as we take deliberately phased approach to these initiatives. Overall, I am pleased with how the JBT Marel organization has come together and continues to unlock opportunities for value creation. Improvement in our profitability has been significant. As compared with the pre-merger baseline performance of our two companies in 2024, the midpoint of our 2026 margin guidance implies more than a 350 basis point expansion in adjusted EBITDA margin. This improvement reflects our ability to realize cost-effectiveness through continuous improvement, supply chain optimization, labor efficiencies, and more recently, initial benefits from our footprint consolidation. This is all part of our operational distinctiveness NextGen strategic pillar. At the same time, there is significant work underway across the organization that extends beyond the initiatives benefiting our near-term financial performance.
We are building capabilities that we believe will increase the resiliency of our business model and make JBT Marel an even better partner to our customers. Specifically, another pillar of our NextGen strategy is our integrated value proposition. This involves continuing to invest in our core food technologies and integrating them into full-line systems for our customers. To deliver a comprehensive differentiated offering, we must also embed our ongoing investments in software and digital tools, our food application expertise, and our service and aftermarket support into these solutions, strengthening customer engagement and helping our customers succeed. With that in mind, I would like to provide some color on the work we are doing on our customer-first service organization. By elevating service excellence across JBT Marel, we can deepen customer relationships, grow our recurring parts business, and create additional opportunities to support customers with incremental equipment and solutions.
Strategy here is multifaceted, but here are two examples of key initiatives underway. First, we are deploying a much better tracking and understanding of our installed base and its potential. We are piloting the use of AI tools that bring together multiple installed base data sources and harmonize them with our equipment maintenance cycles, giving us a clear share of wallet visibility that helps our teams identify and pursue opportunities more proactively. Second, we are looking to drive more productive spare parts fulfillment operations and improve lead times. We are streamlining our quotation processes by piloting an agentic workflow, automating quote assistance, and implementing a more intelligent inventory set of tools to align parts inventory with customer criticality and installed base demand patterns. Together, these steps can deliver faster response times, better parts availability, and more efficient use of working capital.
These are just two work streams underway as part of our parts and service value proposition as we continue to elevate the JBT Marel brand. You can expect more to come on this. As you can see, we have many value-creating initiatives underway. To our entire team driving this work, thank you for strengthening our ability to serve customers around the world. Now, let's open the call to questions. Operator?
Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. To leave the queue at any time, press star two. Once again, to ask a question, that is star one. We will take our first question from Jeff Hammond with KeyBanc Capital Markets. Please go ahead. Your line is now open.
Hey, everyone. Good morning. This is Mitch Moore on for Jeff. Thanks for taking my questions.
Good morning.
Maybe if we could just start with the increased buyback authorization. I was just wondering how you are thinking about utilizing this. Will it be programmatic, opportunistic? Just wondering your willingness to maybe add some leverage for buybacks. Thanks.
Yeah, I think primarily it will be opportunistic, as we are really focused on that disconnect between where we think the intrinsic value of the stock should be and where it is trading. I think going forward, we will maintain our leverage targets of between two and 2.5 times and balance share buybacks and debt pay down during that time.
Great. That is helpful. Just as we think about the footprint optimizations, I think five facilities closed and more to come. As you look forward, does the complexity or difficulty of those consolidations and footprint moves, do they get easier as we move into Q4 and 2027?
I would say over the last six months or so, there's been, I'll say, multiple closures, as we mentioned, five and another few underway as we speak. As we roll into 2027, there will be less shutdowns in terms of number of facilities, but larger facilities. So, a little more impactful on each individual one, but we're phasing those in with one of the larger ones in the front half of the year and the second larger one in the back half of the year. So, I would say a little less activity, but a little more impactful per item.
Yeah, and I would just add to that, the products that we are moving in these future facilities, we're moving to a facility that's already made either the same or very similar products. So, the technological transfer isn't as complicated as some of the ones we've already done.
Great. Thank you.
Thank you. We will take our next question from Mircea Dobre with Baird. Please go ahead.
Yes, thank you. Good morning. Maybe a quick clarification surrounding your guidance. If I'm doing the math right, it would imply a 7% increase in revenue sequentially in the fourth quarter relative to the third. I'm curious as to how we should be thinking about that flowing through at segment level. Then I'll have a follow-up on that.
Yeah, I think, Mircea, what I would forecast is slightly higher growth in the Protein Solutions segment sequentially, and slightly lower growth in Prepared Food and Beverage Solutions just because of the continued demand softness that we've seen in the CPG end market. Like I said, it's a little higher than the 7% in Protein Solutions and probably a little lower on the Prepared Food and Beverage Solutions side.
Then in terms of margins, you'll see more upward mobility on the PFB margins sequentially and flatter margin progression on the Protein Solutions side.
Okay, that's helpful. Thinking back pre-Marel acquisition, there was a seasonal aspect to your business where the fourth quarter was usually this kind of like the seasonally strong quarter of the year, and I'm wondering if that dynamic continues to apply and if this 7% bump in revenue that we're seeing is predominantly a seasonal factor or there's something else that we need to be thinking about from a demand perspective here.
Yes, I would say the seasonality impact does still exist relative to pre-Marel. Maybe not quite as accentuated. However, clearly it is part of our overall demand or, I will say, ship and revenue recognition pattern. In part, it is because you often have some food facility shutdowns in the fourth quarter after they get through the shipping of the food for Thanksgiving holidays so they can do some more maintenance and repair and installation of equipment. That is also the higher season in Brazil on some orange juice lease activity, so we usually get a bump there as well. Overall, some seasonality certainly exists, but additionally, we do have quite a strong backlog, particularly on the poultry side as we go into delivering in the fourth quarter.
Okay. If I may, one last one. On Prepared Food and Beverage Solutions, last quarter you talked about $20 million of revenue that ended up getting pushed to the second half of this year. I am looking to understand as to whether or not that is still the case. This time we heard about some issues with CPG. When I am kind of looking at this segment, we have had negative organic growth throughout the last three quarters, and I am trying to understand here how much of all of this is a function of demand as opposed to a function of, I am not going to call it execution, but some of the things that you are doing to the business as you are consolidating footprint.
As you look towards 2027, I recognize you are not providing guidance for that today, but is it reasonable for investors to expect a return to organic growth in this segment? What are the factors here we should all be thinking about? Thank you.
Sure. Just as a reminder, the Prepared Food and Beverage Solutions segment includes three businesses. It includes our Diversified Food and Health business, which includes the CPG, typically on beverages, juices, and ready meals. So, it is a big part of their business along with pet food and some fruit and vegetables. That is certainly the business that has been most affected, and they will be down more than 10% this year or so. So, it is having a fairly outsized impact on the overall environment. Separately, we have our AGV business and our prepared foods business. Both prepared foods business is in good shape, and given some of the trends on investment, particularly on the poultry side, but outside of that as well in terms of frozen foods, et cetera, that business is in good shape.
Nice growth here in the quarter that you really can't see because of DF&H, but that trend is good. AGV, as you recall, went through a really tough period going from 2024 to 2025 and then into the front half of 2026, and particularly with some of the impact that tariffs had on their customers, and we seem to be coming out of that. We had a really strong quarter with AGV, again, somewhat buried within those PFB numbers, but they went from kind of a 0% EBITDA business to very strong contributor in the third quarter, which helped quite a bit on the margins, but also they're starting to build backlog again. To get to your question, overall, can we return to mid-single-digit revenue growth? We believe so. We're working on our planning as we speak.
I do think you're going to, again, see higher growth areas, especially given our backlog on the Protein and the Prepared Food side, and ideally AGV. At UP, I do expect lower growth or flattish on the DF&H side, but overall, the mix should be decent as we go into next year.
That's great. Thank you.
Thank you. We will take our next question from Ross Sparenblek with William Blair. Please go ahead.
Hey, good morning. This is Sam Carlo from William Blair. Thanks for taking my questions. I appreciate the comments on the USDA ruling. Could you maybe remind us what the competitive landscape looks like in regard to that potential upgrade cycle in the U.S., and how much of this incremental demand you would expect JBT Marel to capture, assuming this ruling goes through?
Sure. The competitive landscape on primary and secondary. On primary poultry, there is a handful of players, really three, you can argue potentially four, but really three larger players, and JBT has the largest market share in North America of that group, very, very solid market share. On the secondary side, there is more competition, but again, JBT is, we believe, the leader in that space as well. The area that you would see the investment would be the secondary and the primary side. Basically, as line speeds increase, you need to improve the overall operation because you will be creating bottlenecks in various spots across that primary and secondary line. That is where the opportunity lies.
In terms of sizing the market, that is a little hard to determine, but what I would tell you is there is approximately 350 primary poultry lines in the U.S., and about 20% of them are already running with waivers at the higher line speeds. If you are talking 250-275 lines that are, I will say, upgradable, if you will, and anywhere from, call it, $3 million-$10 million investments for those lines over the course of, say, the next five years or so, add that up, that is a pretty big number, and then you apply our market share to that. You do a little math on that, but you can see that is quite a large number. Again, a little bit, the question is to the pace of that adoption.
It will take some time. However, we do feel that over time, this will be a nice opportunity for the U.S. poultry industry to close the gap, or at least partially, with what we see in Europe, which are running at much larger, faster line speeds.
Got it. That's all super helpful. I guess switching gears just for a second, you called out pork orders as strong in the quarter. Could you maybe remind us where pork margins are now versus what they were when you acquired Marel, and then where you see those margins potentially going as those orders and revenue recovers? Then maybe the same question for the fish business.
Right. When we acquired the business or merged with the business, the meat business was kind of running in that very low single digits, kind of close to zero. It's running in high single digits as we speak. The fish business was running kind of in that negative 5%-10% adjusted EBITDA margins, and now they're running, again, similar to meat in that 5%-10% type range. Kind of depends on the quarter and the projects at hand. We don't see that getting to the mid-20s type range that you see in some of our other businesses, but we certainly are striving to get into those mid-teen levels over the next two to three years. So, some fair amount of upward mobility.
Part of it does require some continued strength in those underlying markets, which we feel good about, just given the protein consumption across the globe. But that's kind of the overall landscape.
Got it. That's super helpful. I will leave it there.
Great. Thank you.
Thank you. We will take our next question from Ian Zaffino with Oppenheimer. Please go ahead.
Hi, Greg. Just wondering if you could give us a little bit maybe more color on the CPG and the Prepared Food and Beverage Solutions business. Because it did seem like last quarter, a lot of this was kind of internal stuff that you guys were dealing with, and now it seems to be on the customer end. So, where have trends been going, I guess? When did you first maybe recognize some of the weakness there, and did it accelerate throughout the quarter? And I guess exiting the quarter, is it getting worse, or is it stabilizing, or what exactly are you kind of seeing there? Thanks.
Sure. Yeah. We've been signaling the CPG weakness throughout the year within that PFB segment. As I mentioned, it's down kind of 10% year-over-year. So, we've been talking about it. However, it did weaken during the course of the quarter. Just to give you some little bit of color on the CPG business specifically. I'm sure you've heard in the news how a lot of these CPG companies, given the consumer inflation environment, it's really hampered some of their businesses, and they've tried price decreases, they've tried price increases. But at the end of the day, what they're finding is that they ultimately need to invest in some of their brands, new products, et cetera, and really create an interesting value proposition that will drive customer re-engagement, if you will.
But what we are seeing here in the shorter term is that they are managing their expenses, they are managing their short-term cash, et cetera. That is hurting some of the, I will say, short-term cycle, and it certainly got worse, and worse than expected going from the second to third quarter. We had assumed it would be at a relatively low level, but flat Q2 to Q3, and that did not hold, and we are assuming it is basically going to be flat at this lower level going from Q3 to Q4. But as I said in the prepared remarks, what was very interesting was that segment had really strong orders in the third quarter for some longer-term projects.
Kind of what we are seeing, as I just mentioned, is as they start to invest in some brands and products, they have been doing some testing on some end markets and some new product introductions. As those start to take hold, they are starting to make these longer-term investments in support of that. So, it is a data point. It is not a trend yet, obviously, and I do think that short-term pressure will persist for at least the next quarter or two. But after that, we are hopeful that some of these longer-term thinking and investments to strengthen their brand will take hold.
Okay, thanks. Then maybe as a follow-up, can you give us an idea of the M&A environment you are seeing right now? I know you are kind of out there buying back a lot of stock and presumably a little bit about leverage, but what are you seeing there? Are you seeing any motivated sellers? Do you think you are well-positioned, especially maybe with the USDA doing what they are doing, where you might need to add anything, or are we just going to operate what we have and just buy back stock? Thanks.
Sure. Certainly over time, M&A will become an important part of our strategy, and there will be certainly opportunities to fill in some of the white spaces that we have, especially within our Prepared Food and Beverage Solutions segment, but also on the packaging side and other places where we have some holes. However, that said, I would say given the current environment, we think that the best use of capital, at least for the foreseeable future, is on stock buybacks. We think that is the best use of capital for our shareholders, and so that is where we concentrate and, at the same time, continue to execute on our integration. We have lots of value creation levers there, so we are going to be really executing as hard as we can and returning capital to shareholders where we think the best return on that investment sits.
All right. Thank you very much.
Thank you.
Thank you. We will take our next question from Justin Ages with CJS Securities. Please go ahead.
Hi. Morning, all.
Good morning.
You mentioned you're making good progress on achieving the cost synergies that you laid out. In the presentation, you mentioned you're augmenting the synergies with the accelerated footprint reduction, given that supply chain efforts are being impacted by inflation. Just wanted to get an update on where we are on the supply chain efforts versus expectations.
Yeah, I think the team has been really working hard to try to continue to execute on their pipeline of activities and projects in support of consolidating suppliers, both on direct and indirect spend. They've done a good job doing that, but they're also at times getting pulled into other activities associated with trying to offset some of the tariff impact and trying to resource products to other parts or other vendors to try to reduce the impact of tariffs. There's a little bit of distraction associated with some of the tariff impacts. Also, they've been working hard on some of the challenges we've seen with logistics, not only the tightening of logistics availability, but also just the higher inflation we saw in logistics.
The inflation that we're seeing, plus some of the focus being shifted towards resourcing for tariff mitigation, that's sort of slowed down some of the progress we've made on the supply chain side and somewhat diluted some of the impact of the benefits that we saw from the pipeline of projects within the supply chain organization. We've always had sort of this larger portfolio of projects to be able to achieve the synergies, because we knew that some things would be easier than others, and that's why we're seeing maybe an acceleration to some extent of some of the footprint consolidation to try to offset the impact we've seen on the supply chain side.
I would just add, over the longer term, that same pipeline of opportunities for the supply chain continue to exist. However, I think some of that will press beyond that initial three-year opportunity, especially as you think about reshoring or onshoring production from Europe to the U.S. to avoid some of the tariffs and some of the value-add, value-engineer work that goes along with that. So, the pipeline is pretty tremendous. However, again, as Matt said, with tariffs and logistics and whatnot, resources are finite, and they move around where we need them most.
That's helpful. Thank you very much for that. Then switching gears a little bit, talking about revenue synergies. Can you just give us an update on where we are in achieving some of those that, I know they're not as pertinent to the story, but you mentioned that there could be some cross-selling opportunities and the like.
Sure. So I think as we mentioned, through the second quarter, we were something in the range of $75 million cumulative over the prior 12 months. There wasn't huge synergy orders specific to the third quarter, so it's only modestly moved up from there. We do have a nice, again, pipeline of opportunities, but we had originally suggested we can get $75 million in synergy orders in three years. We did that in a year and a half. I will say, generally speaking, the value proposition that we're putting forth on some of these things, particularly on the prepared foods side, particularly on the secondary side of poultry, as well as end of line with weigh-pack label, have really garnered a lot of interest and a lot of activity, more so than we would have originally thought.
So I would say the thesis is actually a little stronger than we would have thought coming out of the gate in that first 18 months, and we do think that will continue here for some time.
Thank you very much for taking my questions.
Thank you.
Thank you. At this time, there are no further questions in the queue. I will now turn the meeting back to Mr. Brian Deck.
Thank you all for joining us this morning. As always, our investor relations team is available for any follow-up questions.
Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.