Good morning and thank you for joining us for The Middleby Second Quarter Conference Call. With us today from management are Tim Fitzgerald, Chief Executive Officer, Bryan Mittelman, Chief Financial Officer, Steve Spittle, Chief Commercial Officer, and James Pool, Chief Technology and Operations Officer. We will begin today with opening comments from management, then open up the call for questions. Directions on how to get in the queue will be given at that time. Now I'd like to turn the call over to Mr. Fitzgerald for opening comments. Please go ahead, Sir.
Good morning. Thank you for joining us today on our second quarter earnings call. As we begin, please note there are slides to accompany this call on the investor page of our website. I will start the call this morning with comments on our decision not to counter and further increase our offer on Welbilt. We continue to stand by our view that the originally accepted offer to acquire Welbilt through a merger transaction offered superior value to Welbilt shareholders by participating in the ongoing growth of Middleby, along with sharing in the benefits of the combined organization. While on prior calls, we shared our enthusiasm for the transaction, we're even more enthusiastic about the many opportunities we have at Middleby and the growing momentum of our business.
As we contemplated the decision of the Welbilt board to accept an all-cash offer, we were unwilling to further increase the consideration of our offer at the expense to our Middleby shareholders, particularly in light of the excitement around our standalone business prospects. We remain in an extremely strong financial position that will allow us to make investments to support our strategic sales and profitability initiatives, and execute on our longstanding track record of smart, strategic, and shareholder value-enhancing M&A. Although a Welbilt transaction would've been sizable, we have a considerable pipeline of other strategic acquisition opportunities consistent with our history over the past 20 years. These opportunities will provide a higher return to our shareholders as we continue to successfully build our business for the long term.
As it relates to the quarter, we continued to build upon the positive momentum across all three of our segments, investing in technology and product innovations addressing market trends, furthering our strategic sales initiatives, and adding to our brand portfolio with strategic acquisitions. We remain focused on evolving our business to meet increasing customer expectations and rapidly changing industry dynamics. While we execute our strategic initiatives, we also continue to make progress against our financial goals. We posted improvements in EBITDA margins at each of our three business segments, all in excess of 20%, and all exceeding pre-COVID levels of 2019.
While we face near-term pressures with massive supply chain disruption and material cost increases, we remain committed to our long-term profitability targets as we drive profit improvement through acquisition integration initiatives, manufacturing and supply chain activities, and improvement in the mix of product sales as we promote higher technology solutions. As we move into the second half of 2021, we continue with our optimism around market demand and the strength of our positioning in each business segment. For our commercial food service business, the restaurant industry remains disrupted but continues to improve, and our customers are making strategic investments in their food service operations, leading to greater acceptance of new technologies to address rapidly changing consumer trends and increased operating challenges, most importantly, the availability of labor.
At our residential business, new home starts continue to be robust, while strong existing home sales and increased time spent at home is supporting kitchen remodels. These conditions support a continued favorable backdrop to our business for the year and carrying into 2022. We're excited to have debuted our newest residential showroom located in Dallas, Texas. This showroom is tied to our Middleby Innovation Kitchens and demonstrates the crossover of product innovation at our commercial and residential businesses, bringing to life our differentiated ability to offer professional restaurant innovations in the home. We're also pleased to have recently announced the latest addition to our residential brand family with the acquisition of Novy. Novy brings a premium line of built-in cooking and ventilation, featuring performance with a modern European design. Novy is a terrific complement to our existing brands and product offerings.
We're excited to welcome the Novy team, and we see significant growth opportunities in the year ahead. At our Food Processing Group, the impact of COVID and travel restrictions will continue to be a challenge to installations and timing of large projects. However, demand continues to increase for our complete solutions offering innovation to address operating challenges, including labor, safety, rising food costs, and sustainability. We are positioned to address these demands with solutions featuring our new product introductions and acquisitions we've completed over the past several years. Now I'll pass the call over to James to touch on some of the innovation initiatives and most recent product launches highlighted in our investor slides.
Thanks, Tim. We have a lot of terrific innovations happening at each of our divisions day to day. They continue working on the next generation combi, convection oven, rapid cook oven, fryer, espresso machine, processing line, and the list goes on and on, just like the song. These brand-level innovations will always be a part of our engineering DNA. Beyond this, we are also focused on six initiatives across our divisions to bring much needed labor savings, enhanced efficiency, such as speed of service, and profitability to our customers. They are automation, Beverage expansion, automation, common controls, IoT, health and safety, and ventless. In today's earnings presentation, I've highlighted three new innovations within Middleby to ensure a strong demand pipeline. The first innovation, the TurboChef by ALKAR, is an excellent example of brand-level collaboration and innovation.
This first of its kind thermal processing oven offers our customers a 45%-90% reduction in processing times across a wide variety of food types by utilizing five unique heating technologies. In addition, the ALKAR oven also enhances yields by 2.5%-5%, which might not seem significant until you consider the tonnage of product that the machine will process over its lifetime. The next innovation is a textbook example of the power of embedded and collaborative automation. The PizzaBot is the first system designed to prepare and process any size or type of pizza to exacting standards, ensuring perfect consistency while substantially minimizing food waste. From the PizzaBot, our collaborative robot takes over and moves the product to an oven for the perfect rapid bake.
We are very excited to bring the PizzaBot to market, and while it would've made its debut at the NAFEM show, it will be in use and on display at the Middleby Innovation Kitchen and in our customer locations. Finally, I want to introduce our new VentCore product by Evo. This is an exciting innovation in our ever-expanding lineup of ventless products. The VentCore product was designed to turn some of our most aggressive, high-temperature cooking systems into ventless systems. The Evo VentCore uses new patent pending technologies to minimize the reliance on consumables and accessories while improving the cleanability and maintenance of the ventilation system. The VentCore was designed to bring all types of cooking to all types of venues. These are just three of the many great innovations we are bringing to the market. I look forward to discussing more in the future. Now to Bryan.
Thanks, James. For the second quarter, revenue of $809 million in adjusted EBITDA of $186.2 million were just a bit ahead of what we had indicated early last month. GAAP earnings per share were $2.13 and included a $19 million, or $0.33 benefit from tax legislation impacts primarily in the U.K. Adjusted EPS, which excludes the tax items, amortization expense, and non-operating pension income, as well as other items noted in the reconciliation at the back of our press release, was $2.11. Operationally, we continue to build upon our strong foundation and have delivered another solid quarter. Looking at total company performance, revenue continues to trend very positively, with growth sequentially of over $50 million from Q1. On a year-over-year basis, revenues grew 71%, or 65% organically, with strength in all three segments. Order trends also continue to be robust.
We exceeded $1 billion in orders during Q2, and our backlog is at a similar amount. Our 23% adjusted EBITDA for Q2 was a substantial increase over Q1, as well as Q2 of 2020. We sequentially expanded margins meaningfully in each segment. By the way, all margin values I will discuss are on an organic basis as well, meaning excluding any acquisitions, a disposition, and FX impacts. Total company adjusted EBITDA of just over $186 million represents approximately 15% sequential growth from Q1 and 150% growth over the prior year. We continue to grow our bottom line faster than our top line. When comparing Q2 to the prior year, we grew EBITDA over twice as much as revenues, even while we are investing over $5 million in technology initiatives quarterly. As a result, our strong cash flow generation persists.
Operating cash flows of nearly $113 million was a record for us for a second quarter. Our profitability expansion and increasing cash flows are the benefits from the actions we took to improve our business as the pandemic hit, and the ongoing focus on integrating acquisitions and managing through the challenges we continue to face while delivering innovative solutions to our customers. Looking at our segments, commercial food service revenues globally were up 80% organically, and we're looking at just at North America, the increase was approximately 77%. The international increase was 89%. Our margins continue to expand sequentially. We produced nearly 26% adjusted EBITDA for Q2. In residential, we saw revenue up 63%. Very high levels of demand persist for our premium appliances and outdoor cooking platforms. Here, too, our margins continue to expand sequentially. We grew to well over 22% for Q2.
In food processing, revenues increased 25%, and the adjusted EBITDA margin was over 23%. Another highlight was our operating cash flows of nearly $113 million. Discipline around cash flow is core to running the business for us. We continue to demonstrate our ability to manage costs and cash while investing, driving innovation, and providing excellent service to our customers. Our total leverage ratio is down to 2.3 x, while our covenant limit is 5.5 x. We also have over $2.1 billion of current borrowing capacity. We will continue to execute our M&A strategy, as well as investing to improve our operations, and in turn, increase profitability. An incredibly important investment we have made is the MIK, the Middleby Innovation Kitchens, as well as the adjoining and stunning residential showroom in Dallas. Along with having awesome facilities, we have an outrageously talented culinary team.
I've been with them on a few occasions recently, and I'm willing to admit to getting spoiled by them. Being at the MIK, which by the way, is the largest IoT-connected kitchen in the world, is really an awe-inspiring event. Looking at our list of brands on paper is impressive. Seeing them physically together is amazing, and enjoying the output is even better. We are proud of the breadth of what we offer. While all our brands are great, I felt it was imperative to somehow come up with a top three list to commemorate my days feasting at the MIK. Since I won't be able to offer tours at NAFEM this year, this can serve as a quick Middleby tour to get you all hungry as the lunch hour approaches. One brand that does not get as much recognition in Middleby family is sometimes Globe.
Their preparation solutions brought to life what may have been my favorite dish. The masterfully created watermelon gazpacho hit the spot, especially given the Dallas heat. It was incredibly flavorful, a little spicy, a hint of sweet, cool, and refreshing, or crazy good, as our CCO aptly described it. Moving on to the carne course, our talented chefs will occasionally admit to a bit of a bias for hard fuel-powered cooking. Coming out of Spain, the Josper charcoal grills are always a favorite of cooks and diners alike. A tomahawk dry-aged for 90 days in our TenderChef was absolutely delicious. Lastly, moving on to the sandwich food group. What the PLEXOR can do will be market-changing. With our Middleby controls, it is so easy to use that even I could operate it. The grilled Reuben was toasted perfectly, a crispy outside with a warm, savory inside.
I could go on and on about the menu breadth that the PLEXOR can deliver. I'll have to come back to the cookies another time, as I probably should put aside my side hustle as chief food officer and get back to my typical CFO duties. Having covered Q2 and my culinary ramblings, it is time to look forward to the rest of 2021. We've provided order and backlog data in the presentation that is available at the investor section of our website. We also provided a full-year outlook in a release last month, which I want to further address. As I've noted before, even with a solid start to the year, we are keeping our expectations at modest levels for the near term.
The reason for some caution in my tone, even with the order trends, is due to the variety of supply chain issues and cost pressures we are facing. Many positive factors do contribute to optimistic views, such as our backlog, the innovative solutions that are addressing customer challenges, and the development activity by many of our customers. However, I don't want anyone to fail to recognize the near-term risks that are impacting our cost structure and availability of raw materials and other inputs for our products. These forces do limit our ability to generate higher top-line growth for the next few quarters and will place some downward pressure on margins. We are taking pricing actions to mitigate margin impacts. We don't expect meaningful contribution from those until early 2022, given our backlog levels.
I will note that we are currently anticipating low single-digit growth in overall revenue sequentially from Q2 to Q3, with margins compressing. Also, we call it food processing as a lumpy business. As we look at how contracts will be fulfilled, we will likely see a temporary revenue decline for this segment when comparing Q3 to Q2. However, order strength has continued, thus Q4 should show solid growth for FPG. As we look out to Q4, we expect total company revenues could grow at least mid-single digits from Q3, which includes the seasonal benefits typically seen in residential at the end of the year. Given the volatility impacting the supply side of our business, it would be prudent to anticipate Q4 margins not exceeding Q2 levels. In closing, to highlight what the full year 2021 should deliver.
Food processing and residential should see revenue growth in excess of 20% over 2019 levels, with margins having expanded as well. Commercial food service organically will be at similar levels to 2019 in terms of revenue and margins. It is important to remember that the margins, while likely at similar to 2019 levels, are after considering the inflationary impacts we are facing and the investments we have been making. This demonstrates that our management actions to address costs, integrate acquired businesses, and generally improve operations are generating results. In total, consolidated company margin for 2021 should exceed 2019 levels as well. While it is a little too early to specifically be addressing 2022 and beyond, I will reiterate our commitment to the medium-term margin targets we have set for each of the segments, which are 30% for commercial and initially 25% for the other two segments.
While the near term may be a little rocky, I believe we are extremely well-positioned for the longer term, and that our products and solutions, as well as the teams and tools we have driving our success in the market every day, will continue to deliver industry-leading results. With that, Tina, let's please open the call to questions. Thank you very much.
To ask a question, simply press star one on your telephone keypad. Again, that is star one to ask a question. To remove yourself from the queue, press the pound key. Our first question is from Tim Thein with Citigroup.
Good morning. Thank you. Bryan, maybe coming back on the comments there on pricing and when those increases take effect. Is it fair to assume that the opportunity or the ability to price what's in the backlog is limited at this point? Meaning, you have a PO, but the order is not shipping for six months or longer. There's limited flexibility or ability you have to reprice anything in the backlog. Is that a fair takeaway from what you said?
Yeah. This is Tim. That is fair. A, we're not generally repricing the backlog. The orders are in, and frankly, we just don't want to disrupt our customers. We're very focused on the long term and being proactive about where pricing should be as we go into next year.
Got it. Okay. Then maybe, I don't know, Tim or Steve, maybe you could just say a little bit more in terms of what you've seen thus far and what you are seeing just from a customer perspective. I suspect that as you think about overall revenues and getting back to or above that 2019 level, I would assume that some of the larger chains have been doing a lot of the heavy lifting. You also have, as you said in the release, a lot of customers that are obviously still struggling from shutdowns and the like. Is there a way I don't know how much of this you have on your fingertips, but help us in terms of customer segments that are still early days of recovery and what that represents from an overall book, and this would be for the commercial business, obviously.
Maybe just a little bit more color in terms of the leaders and laggards. Thank you.
Yeah. Good morning, Tim. This is Steve. I would break it into maybe three groups to help simplify how we're thinking about it. I think group one would be the segments that hung in there pretty well last year and continue to do well. Certainly, QSR, pizza, retail, C stores. I think, again specific to QSRs, they're back to obviously doing new builds at pretty aggressive levels. I think that certainly continues into next year. That's, I would say, bucket number one that has continued to well outperform 2019 and prior levels. I think you have group number two, which I would call maybe some of the other segments that have been a little tougher hit, whether it's casual dining or really just the general market. I think you're seeing some of that certainly come back.
I think we're seeing that more in replacement business, right? It's not as much in the new builds, but it's the replacement business that I do think has started to come back. That's group two. Group three, I would say, are the hardest hit segments, right? We're talking about institutional, we're talking about travel, leisure, any independent restaurants. I would share some color just specific to schools, I think is an interesting one. We've talked about schools before and the order cadence that you normally see. School business for us from an order standpoint is actually running pretty well ahead of 2019 levels, which I think is very encouraging for two reasons.
I think they're back to their normal ordering habits, getting ready for kids to come back in the fall, and I think you're seeing catch up from obviously not doing any kind of purchasing last year when kids were remote. Those are, I would say, the three segments. I think they're all trending positively. Group three is still well behind groups one and two. Hopefully that helps frame up the perspective for the back half of the year and certainly into next year.
Yeah, it does. Thank you. Just to, again, not to the third decimal place, but as you think about that group three.
Yep.
Are we thinking like a quarter, 30-ish % ballpark in terms of what those categories would represent?
Again, I think if you go back, we've shared that chart, the pie chart, in prior slides or investor decks. I would say it's probably in the 25-ish % neighborhood. I would say at historical levels, going back to 2019 levels. That's probably a rough estimate of what those three, four, five segments would represent, Tim.
Got it. Yeah. Thanks for the time. Take care.
Thanks.
Your next question is from Larry De Maria with William Blair.
Hi, thanks. Good morning, everybody.
Morning, Larry.
Hey, guys. Hey, Tim. Obviously, having walked away from Welbilt until now, understand your sentiments. Curious your big picture thoughts now on M&A consolidation in the industry. Are there other large deals that are likely to play out, do you think? Does this potentially set off a wave of maybe larger cross-border deals that we've sort of been waiting for the last few years that are now hitting? Do you view this as a one-off in the industry and it's back to small and medium sized deals in general?
Yeah. Larry, generally we don't comment on deals. Obviously, Welbilt was very public. Typically, we don't comment on deals till after we announce them. We've been at this for a long time, over 20 years, and we've seen a lot of transactions happened, the world has become more global, right? Even with Middleby, you've seen more international acquisitions over a period of time. We've expanded our platform, which we will continue as well. I'm probably not going to get into a thesis of what may happen in M&A. Overall, I would just say that we're the best positioned in the industry given, not only our balance sheet, but our core competencies and, I guess, our strategic approach to acquisitions.
As I mentioned in the opening comments, we always have a strong pipeline of ideas focused on brands and building out our competencies, whether that's innovation, route to market, international. We feel very good about our pipeline, but I'll probably leave it there.
Okay.
Yeah.
Secondly, I think when you gave your guidance in July, you expected Q2 backlog to be over $1 billion. Came in under $1 billion, and processing orders came in below what you said they were going to come in. Is that the Delta? Is that processing orders came in a little bit lighter than expected and maybe accelerated post-quarter, or just timing? Just give some color why there's the different numbers from July and now.
Yeah. You are right. Food processing can be a lumpy business, and as we closed the quarter, one thing flipped in on the other side, right? That business also has sizable orders, so it ended up with the rounding being just short of $1 billion as well. If you would've looked at July numbers, they would've been up pretty robustly. Really, it's just a timing thing on one order. Would also note that residential orders, also as we closed the quarter, came in stronger than we had initially estimated. Put it all together, it was as expected or actually, if I take it with the residential coming in a little bit ahead, probably just slightly better or a little better than we had initially estimated. Really just a timing thing.
Okay. Thank you.
You bet.
Our next question is from Mig Dobre with Baird.
Thank you. Good morning, everyone. I guess, what I'm wondering is if you can give us maybe a little more color on how demand has trended into Q3, what you have seen in July. I'm asking this because this is a question that we often get from investors, whether or not there's really any impact from the Delta variant, either on activity or sentiment, or how customers are thinking about investment in the back half. Can you provide some context on that?
Yeah. Mircea, I would say, obviously we've been reporting orders, and we keep saying we're going to get away from it. I think we truly are now as we kind of came through COVID. Just maybe to give you a little bit of a flavor. In July, that trend generally continued in terms of our orders. As we said kind of in the comments, we do feel pretty good about the outlook for all three of our businesses as we go through the back half of the year. As it relates to COVID, we kind of know what the impact of, to a certain extent, obviously, there's a lot of uncertainty, but really what the impact to our businesses from COVID. We all saw that play out over the last year. I really don't think the variant is going to take us back.
Food service industry's proven extremely resilient. It obviously impacts the different segments slightly different, but the ones that haven't recovered as much, frankly, lead to greater pent-up demand when they do recover, which is kind of what Steve was alluding to, talking about school systems. We feel pretty good about the trends continuing and don't really expect a disruption from an order standpoint based on COVID.
Okay. Then maybe a question on pricing. Look, the data out this morning on producer prices, commercial cooking equipment was reported up 13%. To me, it almost looked like a typo. I'm not really asking you to comment on the reliability of government statistics here, but I am curious, since you're one of the major players in the industry, what are you seeing out there in terms of pricing? It sounds to me like you're saying, "Hey, look, pricing's going to be more of a driver in 2022." That seems to be a little bit at odds with, again, the data that the government has reported this morning. Maybe some context on that.
Okay. I'll kind of go through it at a high level. I might ask Steve to hit some tactics here. We have taken price increases. At a big picture, it's a hugely dynamic backdrop right now. Supply chain issues have increased as we've gone through the year. I think as you've all seen, that's not been the case, or orders have outpaced the increase in capacity. That's really led to increased supply chain disruption. The lack of availability has obviously led to higher and more dynamic pricing issues, right. We're managing through that like all other manufacturers. I think we've been very proactive in measuring those cost increases and passing those along to our customers.
We're very resolute in that, and I think we're very confident that we will be able to do that just as we've always had. There tends to be some lag. We have taken price increases, right? I mean, it's not that none of this will come into effect this year, but again, you've got more of a delay. I think the message you've got from us is that we're very focused on managing it as we go through the year, as we have in the front half, and passing those on. While we'll have some impact as we work through quarters, we are very focused on our long-term margin targets, which are strategic.
While we're managing disruption, we're not losing sight of where we want to be with margins as we go through the next couple of years and feel confident in our ability to execute on that strategy. That's kind of the bigger picture. I'll maybe ask Steve to comment on government statistics and so forth.
I might leave the government alone for this call. Mig, I would just say, as we thought about pricing throughout the year, to piggyback on what Tim said, it's certainly a very dynamic, certainly not a static conversation. We've kind of approached it in waves throughout the year. You go back to the beginning of the year; I would call wave one when we took pricing to start the year. I would say we're in the completion or backside of implementing wave two of pricing, which I would say has been the most strategic. We've tried to be extremely transparent with especially the larger chains, knowing those can be tough conversations.
I think, again, approaching it from a very transparent perspective, really explaining where costs are on our side, what obviously we're seeing in commodities, what we're seeing in materials, and really trying to explain our pain points. I think that from a tactic standpoint, has been effective. I would also say, even though wave two is kind of wrapping up, wave three will certainly be coming more or less to start 2022. We've tried to be very open with our customers that, hey, they're tough discussions right now. We're in the middle of it, and it will continue certainly as we go into next year. I would tell you from across all of our brands and across all of our team that manages our national accounts and key customers, it's one of the most important initiatives we have in the company right now.
Okay. That's helpful. The last question from me is sort of a clarification. I appreciated all the guidance detail that you've given, but it's going to take me a while to figure out what all of that actually means for numbers. If I'm thinking about the full year outlook that you have provided roughly a month ago, has anything changed materially relative to that full year outlook, either in terms of revenue or in terms of how you thought about margin and what was implied in that outlook? Thank you.
The simple answer, Mig, is no. Right? We are sticking with that. Right? We do have line of sight to that margin amount. I think we've been pretty clear. There are challenges there. What happens with Delta or hopefully not other variants. What happens in the general business and customer environment, as well as maybe more significantly, to our numbers, what happens with supply chain, right? Do things take a turn for the worse? Right? We haven't really baked in things worsening, nor have we really baked in things improving, right? That view is based on the state today, which could obviously evolve. The revenue side is a little bit also potentially constrained for the same factors.
We are certainly working to increase output, and as I indicated, we do think we'll have some growth sequentially for each of the next couple of quarters, which gets us to that full year number maybe with some opportunity to overachieve slightly. Again, supply chain is the most constraining factor. The overall take is, we feel those numbers for the year are still reasonable.
Okay. Thank you for taking the question.
You bet.
As a reminder, to ask a question, simply press star one on your telephone keypad. Our next question is from Joel Tiss with BMO.
Hey, guys. How's it going?
Good. How are you, Joel?
All right. You start opening up the door on too much information, and the questions never stop. I wonder, have you given us a sense of how many basis points of margin impact that you might see from price cost, just recovering it? It's just more of a mathematical kind of question.
Are you talking kind of near term or medium term?
Yeah, in the second half of this year.
Well, as I mentioned with margins compressing or getting smaller in Q2 to a small or modest degree, it is going to turn against us slightly. You can do the math also with the forecast information that's out there and see that the decline, if I speak in terms of round numbers is 100 basis points, is what we're talking about. Again, as you noted, putting numbers out there is a dangerous thing, but I'm not going to avoid them completely because they are out there. I'll look forward to when we get past these periods, and I can get back to normal Middleby of we'll give you the results as the results happen. That's kind of how the math does play out.
Okay. Just more of an easy question. Just stainless shortages, is that an issue, or is it more on the controller side in terms of the supply chain? Just the way your conversations are going and what you're hearing and seeing, is that more of it'll be cleaned up in 2022, or is it more of a second half of 2022? Just any sense. That's all. Thank you.
Yeah. You characterize that as an easy question. I think that is the crystal ball question, which I think all companies are facing right now. I think there's a multitude of supply issues, so it's not just stainless steel, right? For us, at any point in time, we're dealing with 100+ supplier issues. I think what's unique about us is we have a phenomenal supply chain team. That team has gotten stronger as we've gone through the last several years, and there's a lot of cooperation, collaboration, leveraging kind of the capabilities and relationships across Middleby. I think that has led us to where we really have not had any major disruption in our business to this point and think that we'll manage through it better than others.
Steel is one of the headline items, given it's one of our biggest input costs, and I think people are aware of that. I think it's a daily issue managing steel. I think given the scale of Middleby and the relationships we have with our suppliers there, we've done pretty well, have been able to obtain supply. In terms of timing, I think that, again, crystal ball. I think supply chain issues we will be dealing with certainly into 2022. It's hard to say when the manufacturing world gets beyond that. That is going to be something that we're very focused on throughout the year.
I think as you listen to the industry analysts out there and as we talk to our suppliers, I think it starts to improve probably as we go through the first part of next year, but probably hangs on until middle of next year. Again, I would say that's a crystal ball answer. Significant disruption, certainly through the back half of the year, improving as we go through the front half of next year. Perhaps normalizing as we get through somewhere in mid-2022.
All right, thanks very much. At least you guys have a crystal ball. We only have that Magic Eight Ball. All right, thank you.
Thanks.
Our next question is from Jeff Hammond with KeyBanc Capital Markets.
Hey, good morning, guys.
Good morning, Jeff.
Hey, Jeff.
Just on, there's a lot of labor issues out there, and I'm just wondering if, one, you're seeing any kind of slowing around in new store openings as people make sure they have the appropriate labor, or conversely, if you're seeing a lot more uptake on labor efficiency driven products.
Steve, you want to take that one?
Yeah. Jeff, I don't think we've seen a slowdown in new store openings from the bigger chains. They've all been pretty open with their projections for kind of the rest of this year and certainly in the next year. I have not seen a slowdown on that front. I do think they have a great challenge ahead of them. You have this dynamic of, again, I'm probably speaking more to the QSR segment at this point, where the new stores are coming from. They have a real challenging dynamic of they're trying to improve speed through the drive-thru, which has always been a challenge for them, and even taking a couple of seconds out of the drive-thru can be a big deal. You see a lot of emphasis on that front just to expand capacity through drive-thru.
Meanwhile, you have this dynamic of they can't find labor in the kitchen. The impact of not having labor is, of course, extended drive-thru time. They have a huge dynamic they have to solve, and I think it well positions us for equipment that could be used to take labor out and increase drive-thru capacity. If you have anything, James, maybe kick it to you from a product standpoint of things we've seen that can help just in our discussions overall.
Yeah. I think we certainly talk about what our products day-to-day can do to reduce labor, improve efficiencies. I think 1 of the systems that we have out there that is now really getting more and more traction is the Open Kitchen platform through its ability to really automate all facets of the restaurant from the front-end operations all the way back to equipment connectivity. Also providing automated task management within the space. We see customers turning to these technologies because of the labor issues that we're all seeing. I think we're well-positioned from a product standpoint. As we develop the products that we have in the pipeline, we'll be even more positioned in the future to address the labor issue, which will probably likely not subside.
I just cap it off and repeat a little bit because I like to be repetitive. Labor, Jeff, you're asking the question, right? Because it is a massive issue for our customers right now. I think we're uniquely positioned with our solutions, right? We've been going after technology and innovation here, and if you think about a lot of the things that James has talked about and in slide decks and so forth. It's automation that we can bring to our customers to really solve what is today their number one issue.
Okay, great. Just maybe some color on Novy. Can you talk about what the purchase price was? Margins look pretty good, but what's the long-term opportunity to take margins up? Just, kind of cross-fertilization revenue synergy opportunities?
I'll make a couple of comments. I know our Q's coming out later today, so I'll kind of leave the purchase price for that. As you mentioned, Novy's margins are strong already, right? I mean, as we bring it into the platform, it's not diluting and perhaps additive to our margins, which is great. We think there are many synergies with Novy on, I would say, growth, number one. Certainly, there are synergies from a profit standpoint as well, as we kind of think about areas that we can leverage across the businesses. We are excited about the product platform. Built-in is a growing market, and that's an area that we've been developing products, but nobody really kind of adds to our focus there. Certainly they are very strong in the markets that they're in right now, particularly Europe and the Benelux area.
The opportunity for those products and markets such as the U.K. and the U.S. is strong. Certainly, we see a lot of strategic merits on all those fronts.
Okay. Appreciate it.
Great. Thank you.
That is all the questions we have for today. I'd now like to turn the call back over to management for closing comments.
Yeah. Thank you, Tina, and thanks, everybody, for joining us on today's call. Appreciate everybody joining in, and we look forward to speaking to you next quarter.
Thank you again for joining us today. This does conclude today's presentation. You may now disconnect.