Earnings Call: Q2 2021

Aug 12, 2021

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 Brian Mittelman, Chief Financial Officer Steve Spittle, Chief Commercial Officer and James Poole, 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 Q2 earnings call. As we begin, please note there are slides to accompany this call on the Investor page of our website. I'll start the call this morning with comments on our decision not to counter and further increase our offer on Wellbolt. 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 Walpole 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 long standing track record of smart, strategic and shareholder value enhancing M and A. Although a wellbulk transaction would have 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. Now as it relates to the quarter, we continue 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 3 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 twenty twenty one, We continue with our optimism around market demand and the strength of our positioning in each business segment. For our commercial foodservice business, the restaurant industry remains disrupted, but continues to improve. Our customers are making strategic investments in their foodservice operations, leading to greater acceptance of new technologies to address rapidly changing consumer trends and the 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 and 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 Novi. Novi brings a premium line of built in cooking and ventilation, featuring performance with a modern European design. Novi is a terrific complement to our existing brands and product offerings. We're excited to welcome the Novi 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. And we are positioned to address these demands with solutions Featuring our new product introductions and acquisitions we have completed over the past several years. Now I'll pass the call over to James to Thanks, Tim. We have a lot of terrific innovations happening and 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 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 6 initiatives across our divisions to bring much needed labor savings, enhanced efficiencies 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 earning presentation, I highlighted 3 new innovations within Middleby To ensure a strong demand pipeline. The first innovation, the TurboChef by Alcar is an excellent example of brand level Collaboration and Innovation. This first of its kind thermal processing oven offers our customers a 45% to 90% reduction and processing times across a wide variety of food types by utilizing 5 unique heating technologies. In addition, the Alfa oven also enhances yields by 2.5% to 5%, which might not seem significant And to put 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 1st 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 have 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 Xencor 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 3 of the many great innovations we are bringing to the market. I look forward to discussing more in the future. And now to Brian. Thanks, James. For the Q2, revenue of $809,000,000 and adjusted EBITDA of 186,200,000 We're just a bit ahead of what we had indicated early last month. GAAP earnings per share were $2.13 and included a $19,000,000 or $0.33 benefit from tax legislation impacts primarily in the UK. 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 $50,000,000 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 $1,000,000,000 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, disposition and FX impacts. Total company adjusted EBITDA of just Over $186,000,000 represents approximately 15% sequential growth in 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 $5,000,000 in technology initiatives quarterly. As a result, our strong cash flow generation persists. Operating cash flows of nearly $113,000,000 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 foodservice 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 $113,000,000 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 2.3x, while our covenant limit is 5.5x. We also have over $2,100,000,000 of current borrowing capacity. We will continue to execute our M and A strategy as well as investing to improve our operations and in turn increase profitability. An incredibly important investment we have made is the Mick, the Middleby Innovation Kitchen, 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 Mick, 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 Mick. And since I won't be able to offer tours at NAPLAN 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 Middle B 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 Carnet course, Our talented chefs will occasionally admit to a bit of a bias for hard fuel powered cooking. Coming out of Spain, The Jossper Charcoal Grills are always a favorite of cooks and diners alike. A tomahawk dry aged for 90 days in our tender chef was absolutely delicious. And lastly, moving on to the Sandwich Food Group, what the Plexer can do will be market changing. And with our Middleby controls, it is so easy to use that even I could Great. The grilled Reuben was toasted perfectly, a crispy outside with a warm savory inside. I could go on and on about the menu broth that the Plexer can deliver. And 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. So having covered Q2 and my culinary ramblings, it's time to look forward to the rest of 2021. We've provided order and backlog data in the presentation that is available at the Investors 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 play some downward pressure on margins. We are taking pricing actions to mitigate margin impacts, but 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 is 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 Foodservice 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 This demonstrates that our management actions to address costs, integrate acquired businesses and Generally Improved 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 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. And with that, Tina, let's please open the call to questions. Thank you very much. Our first question is from Tim Thein with Citigroup. Good morning. Thank you. Just Brian, maybe coming back on the comments there on pricing and when those increases take effect. Is So is it fair to assume that what's the opportunity or the ability to price what's in the backlog Is limited at this point, meaning, what's you have a PO, but The order is not shipping for 6 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? Yes, this is Tim. So that is fair. A, we're not generally repricing the backlog. The orders are in, and frankly, we still want to disrupt our customers. So we're very focused on the long Determine getting being proactive about where pricing should be as we go into next year. Got it. Okay. And 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, but and you also have, as you said in the release, a lot of customers that are obviously still Struggling from shutdowns and the like. So is there a way to kind of I don't know if you how much of this you have on your fingertips, but Kind of help us in terms of customer segments that are Considerably that are still kind of early days of recovery and what that represents from an overall And this would be for the commercial business obviously. So maybe just a little bit more color in terms of the kind of the leaders and laggards. Thank you. Yes. Good morning, Tim. This is Steve. So I would break it into maybe 3 groups to help simplify how we're thinking about. So Yes, I think kind of Group 1 would be the segments that hung in there pretty well last year and continued to do well. So certainly, QSR, Pizza, Retail, C Stores. I mean, I think again specific to QSRs, I mean, they're back to We're doing new builds at pretty aggressive levels. I think that certainly continues into next year. So that's kind of, I would say, bucket number 1 Continued to well outperform 2019 and prior levels. So then I think you have kind of group number 2, 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. So 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 Placement business that I do think has started to come back. So that's kind of Group 2. And then Group 3, I would say are the hardest Segments, right. So we're talking about institutional, we're talking about travel leisure and the independent restaurants. So I would share some color just specific to schools, I think, is an interesting one. We've talked about schools before And kind of the order cadence that you normally see. So school business for us from an order standpoint is actually running pretty well ahead 2019 levels, which I think is very encouraging for two reasons. I think they're back to the 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. So those are kind of, I would say, the 3 segments. I think they're all Trending positively, Group 3 is still well behind kind of Groups 1 and 2. So hopefully that helps Kind of frame up the perspective for the back half of the year and certainly into next year. Yes, it does. Thank you. And I mean just Not to the 3rd decimal place, but as you think about that Group 3, I mean, what are we thinking like a quarter Kind of 30 ish percent ballpark in terms of what those categories would represent? I I mean, again, I think if you go back, we've kind of shared that chart in the pie chart in prior Slides or investor decks. And I would say it's in the yes, it's probably in the 25 ish percent neighborhood, I would say, historical levels going back to kind of 'nineteen levels. That's probably a rough And your next question is from Larry De Maria with William Blair. And your next question is from Larry De Maria with William Blair. Thanks. Good morning, Good morning, Larry. Hey, guys. Hey, Tim. So obviously, you haven't walked away from available until now, I understand your sentiments. But curious your big picture thoughts now on M Consolidation in the Industry. Are there other large deals that are likely to play out do you think? And does this potentially Please set off another wave or maybe larger cross border deals that we've sort of been waiting for for the last few years that are now hitting or is this give you this sort of one off Industry and it's back to small and medium sized deals in general. Yes. So Larry, I generally, we don't comment on deals obviously well, but it was Very public. Typically, we don't comment on deals till after we announce them. So I'm not and we've been at this for a long time, over 20 years we've seen a lot of transactions happened. The world has become more global, right? So 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. So I mean, I'm probably not going to get into A thesis of what may happen in M and A overall. I would just say that we're the best positioned In the industry, given not only balance sheet, but our core competencies and, I guess, our strategic approach 2 acquisitions. And as I mentioned in the opening comments, I mean, we always have a strong pipeline of ideas focused on Brands and building out our competencies, whether that's innovation, route to market, international. So I mean, we feel very good about our pipeline, but I'll probably leave it And then secondly, I think when you gave your guidance In July, you expect this 2Q backlog to be over $1,000,000,000 came in under $1,000,000,000 and processing orders came in below what you said you were going to come in. So Is that the delta? Is that processing orders came in a little bit lighter than expected and maybe accelerated post quarter or just timing? Or can you just give some color why there's the different numbers from July Yes. You are right. Food processing can be a lumpy business. And as we close the quarter, One thing flipped in on the other side, right, and that business also has sizable orders. So it ended up with the rounding being Just short of $1,000,000,000 as well. So if you would have looked at July numbers, they would have been up pretty robustly. So really, it's just a timing thing on one order. And would also note that residential orders Also, as we closed the quarter, came in stronger than we had initially estimated. So 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. So really just a timing thing. Okay. Thank you. You bet. Our next question is from Mac Daubray with Baird. Thank you and 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. And 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. So can you provide some context on that? Yes. Mig, so I would say, I mean, just so obviously, we've been reporting orders and we keep We're going to get away from it. I think we truly are now as we kind of came through COVID. But just maybe To give you a little bit of a flavor, I mean, we in July, that trend generally continued in terms of our orders. So 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 impacts of Yes. To a certain extent, obviously, there's a lot of uncertainty, but really what the impact of our to our businesses from COVID, we all saw that play out over the last So I really don't think the variant is going to take us back. I mean, foodservice industry has 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. So we feel Pretty good about the trends continuing and don't really expect a disruption from an order Standpoint based on COVID. Okay. And then Maybe a question on pricing. I mean, look, the data out this morning on producer prices, Commercial cooking equipment was reported up 13%. I mean, to me, it almost looked like a typo. So 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 is going to be more of a driver in 2022. That seems to be a little bit of odds with, again, the data that the government has reported this morning. So maybe some context on that. Okay. So I'll kind of go through at a high level. I might ask Steve to hit some tactics here. But And we have taken price increases. I mean, I think just very at a big picture, it's a hugely dynamic backdrop right now. I mean, supply chain Have increased as we've gone through the year. I mean, I think at the beginning of the year, we thought at the back end capacity Would have probably increased the number across a number of industries, but I think as Paul have seen, that's not been the case or orders have outpaced The increase in capacity. So that's really led to increased supply chain disruption. And then 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 mean, I think we've been very proactive in measuring those cost increases and Passing those along to our customers. So 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. Now we have taken price increases, right? So I mean it's not None of this will come into effect this year, but again, you've got more of a delay. So 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. And we don't while we'll have some impact as we work through quarters, We are very focused on our long term margin targets, which are strategic. And 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. So that's kind of a bigger picture. I'll maybe ask Steve to comment on government statistics. I might leave the government alone for this call. But Meg, I would just say, as we thought about pricing Throughout the year, I mean to piggyback on what Tim said, it's certainly a very dynamic, certainly not a static conversation. So Yes, we've kind of approached it in waves throughout the year. So you can go back to the beginning of the year, I would call kind of wave 1 when we took pricing to start the year. And I would say we're kind of in the completion or backside of implementing Wave 2 Pricing, which I would say has been the most strategic. We try to be extremely transparent with especially the larger chains knowing those can be tough conversations, but I think again approaching from a very transparent Your perspective, really explaining where costs are on our side, what obviously we're seeing commodities, what we're seeing materials and really trying to Blaine, our pain points and I think that from a tactic standpoint has been effective. But then I will also say, Even though wave 2 is kind of wrapping up, wave 3 will certainly be coming more or less to start 2022. So we've tried to be very open With our customers, it is tough. They're tough discussions right now. We're in the middle of it, and it will continue certainly as we go into next year. So I would say 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. And the last question for me is sort of a clarification. I mean, 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, but I think we've been pretty clear, there are challenges there. What happens with Delta or hopefully not other variants, right, but 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? And We're not haven't really baked in things worsening, nor have we really baked in things improving, right. So 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. I mean, 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. But again, Supply chain is the most constraining factor, but the overall take is we feel those numbers for the year are still reasonable. Okay. Thank you for taking the questions. You bet. And 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 just I wonder if you have you given us a sense of how much like how many basis Points of margin impact that you might see from price cost, just recovering it. It's just more of a mathematical More of a mathematical kind of question. Are you talking kind of near term in the medium term? Yes, in the second half of this year. Well, as I talked to as I mentioned with margins compressing or getting smaller in Q2 To a small or modest degree, right? It is going to turn against us slightly. But I mean, 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 middle We'll give you the results as the results happen, but that's kind of how the math does play out. Okay. And then 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 and just the way your conversations are going and what you're hearing and seeing, is that more of a it will be cleaned up in 2022 or is it more of a second half of 'twenty two? Just any sense, that's all. Thank you. Yes. So, you characterize that as easy Question, I think that is the crystal ball question, which I think all companies are facing right now. I mean, I think There's a multitude of supply issues, right? So it's not just stainless steel, right? I mean, for us at any point in time, we're dealing with 100 plus supplier issues. I mean, I think what's unique about us is we have a phenomenal supply chain team, and 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. So I mean, 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. Certainly, 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 mean, I think we it's a daily issue managing steel, I think, given the scale of It will be in the relationships we have our suppliers there. We've done pretty well of being able to obtain supply. So In terms of timing, I mean, I think that, again, crystal ball. I mean, I think this is supply chain issues we will be Dealing with certainly into 2022. I mean, it's hard to say when The manufacturing world gets beyond that, but I mean that is going to be something that we're very focused on throughout the year. And I think as you listen to the industry analysts out there and as we talk to our I mean, I think it starts to improve probably as we go through the 1st part of next year, but probably hangs on until of next year. But again, I would say that's a crystal ball answer. So 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-twenty 22. All right. Thanks very much. At least you guys have a crystal ball. We only have like that Magic 8 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. So just on there's a lot of labor issues out there and I'm just wondering if 1, you're seeing any kind of slowing around new store openings as people Make sure they have the appropriate labor or conversely if you're seeing a lot more uptake on kind of labor efficiency driven products. Steve, do you want to take that one? Yes. So, Jeff, I don't think we've seen a slowdown in new store openings from the bigger chains. I mean, they've all been pretty open with their projections for kind of the For kind of the rest of this year and certainly in the next year, I have not seen a slowdown on that front. No, I do think they have a great challenge ahead of them. This dynamic of, again, probably speaking more to the QSR segment At this point, where the new stores are coming from, but they have a real challenging dynamic of they're trying to improve speed through the drive Through, which has always been a challenge for him and even taking a couple of seconds out of the drive thru can be a big deal. And so 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. So And then the impact of not having labor is, of course, extended drive through time. So 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. So If you have anything, James, maybe kick it to you to from a product standpoint of things we've seen that can help Yes, just in our discussions overall. Yes, I think talking we certainly talk about what our Products day to day can do to reduce labor and improve efficiencies. I think one 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 and also providing Automated task management within the space. And we see customers Turning to these technologies because of the labor issues that we're all seeing. So I think we're well positioned from a product standpoint. And as we develop the products that we have in the pipeline, we'll be More positioned in the future to address the labor issue, which We'll probably likely not subside. Yes. I'll just cap it off and repeat a little bit because I like to be repetitive. But labor, Jeff, you're asking the question, right, because it is a massive issue for our customers right now. And I think we're uniquely positioned with our solutions, right? Like we've been going after technology and innovation here. And if you think About the a lot of 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. And then just maybe some color on Novi. Can you talk about the What the purchase price was, margins look pretty good, but what's the long term opportunity to take margins up? And then just kind of cross fertilization And revenue synergy opportunities. Yes. So I'll make a couple of comments. I know our Q is coming out later today, so I'll kind of leave the Purchase price for that. But as you mentioned, Novi's margins are Strong already, right? So I mean, as we bring it into the platform, it's not diluting and perhaps Additive to our margins, which is great. Certainly, we think there are many synergies with Novi I would say growth, number 1. Certainly, there are synergies from a profit standpoint as well as we kind of think about Areas that we can leverage across the businesses. But I mean, 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 and certainly they are very Strong in the markets that they're in right now, particularly Europe and the Benelux area. But The opportunity for those products in markets such as the U. K. And the U. S. Is strong. So certainly, we see a lot of Strategic merits on all those fronts. Okay. Appreciate it. Great. Thank you. And that is all the questions we have for today. I'd now like to turn the call back over to management for closing comments. Yes. 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.