Welbilt (WBT) Tops Q4 EPS by 12c, Revenues Beat

Welbilt (NYSE: WBT) reported Q4 EPS of $0.15, $0.12 better than the analyst estimate of $0.03. Revenue for the quarter came in at $320 million versus the consensus estimate of $288.66 million.

2020 Fourth Quarter Highlights (1)

• Net sales were $320.0 million, a decrease of 16.2 percent from the prior year; Organic Net Sales (a non-GAAP measure) decreased 17.6 percent from the prior year
• Earnings from operations were $40.6 million compared to $37.4 million in the prior year; as a percentage of net sales, earnings from operations were 12.7 percent compared to 9.8 percent in the prior year
• Adjusted Operating EBITDA (a non-GAAP measure) was $60.0 million compared to $71.2 million in the prior year; Adjusted Operating EBITDA margin was 18.8 percent compared to 18.6 percent in the prior year
• Net earnings were $20.2 million compared to net earnings of $18.4 million in the prior year; Adjusted Net Earnings (a non-GAAP measure) were $21.7 million compared to Adjusted Net Earnings of $27.1 million in the prior year
• Diluted net earnings per share was $0.14 compared to diluted net earnings per share of $0.13 in the prior year; Adjusted Diluted Net Earnings Per Share (a non-GAAP measure) was $0.15 compared to Adjusted Diluted Net Earnings Per Share of $0.19 in the prior year
• Net cash provided by operating activities was $41.9 million, compared to net cash provided by operating activities of $50.8 million in last year's fourth quarter; Free Cash Flow (a non-GAAP measure) was $37.7 million compared to $34.3 million in last year's fourth quarter

Additional Management Commentary

"We are pleased with our fourth quarter results in light of the ongoing COVID-19 pandemic," said Bill Johnson, Welbilt’s President and CEO. "In the Americas, sales to strategic QSRs and fast casual operators increased slightly over last year with improved demand for replacement equipment. In particular, we benefited from increased demand for Merrychef® high-speed ovens to multiple customers. EMEA also saw sequential improvement in demand from strategic QSRs. Crem continued to benefit from a small rollout with an international governmental entity. APAC net sales improved sequentially in the fourth quarter, with sales in Australia, Japan and Malaysia delivering year-over-year sales increases. Sales in China decreased in the quarter due to strong rollouts in last year's fourth quarter. We believe overall demand, while still negatively impacted by the COVID-19 pandemic, will continue to gradually improve over the next several quarters as public health orders and other restrictions are lifted and the rollout of COVID-19 vaccines accelerate, giving both consumers and operators more confidence and driving a gradual recovery in commercial foodservice end markets."

"We continued to aggressively manage our discretionary costs which, combined with sequentially improving absorption of fixed costs due to higher net sales in the quarter and benefits from our Business Transformation Program, allowed us to deliver an Adjusted Operating EBITDA margin of 18.8 percent in the fourth quarter. We remain very focused on protecting the health and safety of our employees and have been fortunate to have experienced very few COVID-19 cases worldwide. With the tools we have developed as part of our Transformation Program, we were able to improve productivity in our plants compared to prior year levels. We did have a few plants that were closed sporadically throughout the quarter due to local restrictions and to balance demand with production. We also continued to reduce material costs - both through negotiating price reductions with new and existing suppliers and by executing VAVE initiatives. We remain committed to delivering the savings identified in our Transformation Program through continued productivity improvements and further reductions of material costs in excess of current inflationary pressures."

"We made progress on several strategic initiatives in the fourth quarter. We shipped more equipment with common controllers and worked to incorporate these controllers into additional brands. Our newest version of KitchenConnect®, our open cloud solution for the foodservice industry that improves efficiency, reduces costs and enhances food quality, was well received in the market and multiple chains have expressed an interest in adopting KitchenConnect into their operations. The launch of our new mid-tier Convotherm® maxx™ line of combi ovens in the EMEA and APAC markets exceeded our expectations. We have several new product launches across multiple product lines planned for 2021 that we are equally excited about including the new Merco® automated contactless pickup lockers that are expected to be available over the next couple of months. We are continuing to focus resources on innovations that are likely to see increased demand due to the public's heightened awareness of contagious diseases, such as ghost kitchens and enhanced sanitation features within our equipment."

"Our fourth quarter results again demonstrate the momentum we are gaining as a company in the execution of our strategy. I am very proud of this team and remain confident that we will deliver the 500 basis points of margin improvement while delevering our balance sheet when business conditions return to pre-COVID levels," concluded Johnson.

2021 Guidance

Due to the COVID-19 pandemic and the resulting impact on the commercial foodservice industry and uncertainty of demand for our products, we are only providing guidance related to our 2021 first quarter sales expectations, which we expect to decrease between 11 and 16 percent from the prior year. We do not plan to reinstate additional guidance until macroeconomic and commercial foodservice industry conditions have sufficiently stabilized.

For earnings history and earnings-related data on Welbilt (WBT) click here.

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