Welbilt (WBT) Tops Q1 EPS by 5c, Revenues Beat

Welbilt (NYSE: WBT) reported Q1 EPS of $0.08, $0.05 better than the analyst estimate of $0.03. Revenue for the quarter came in at $316.8 million versus the consensus estimate of $291.19 million.

2021 First Quarter Highlights (1)

• Net sales were $316.8 million, a decrease of 3.7 percent from the prior year; Organic Net Sales (a non-GAAP measure) decreased 6.0 percent from the prior year
• Earnings from operations were $31.5 million compared to $0.6 million in the prior year; as a percentage of net sales, earnings from operations were 9.9 percent compared to 0.2 percent in the prior year
• Adjusted Operating EBITDA (a non-GAAP measure) was $49.8 million compared to $45.5 million in the prior year; Adjusted Operating EBITDA margin was 15.7 percent compared to 13.8 percent in the prior year
• Net earnings were $7.9 million compared to a net loss of $15.1 million in the prior year; Adjusted Net Earnings (a non-GAAP measure) were $11.9 million compared to Adjusted Net Earnings of $1.4 million in the prior year
• Diluted net earnings per share was $0.06 compared to diluted net loss per share of $0.11 in the prior year; Adjusted Diluted Net Earnings Per Share (a non-GAAP measure) was $0.08 compared to Adjusted Diluted Net Earnings Per Share of $0.01 in the prior year
• Net cash used in operating activities was $16.4 million, compared to net cash used in operating activities of $72.5 million in last year's first quarter; Free Cash Flow (a non-GAAP measure) was a use of $21.1 million compared to a use of $78.1 million in last year's first quarter

Summarizing Welbilt's first quarter performance, Bill Johnson, Welbilt's President and CEO, stated, "First quarter Third-party Net Sales and Organic Net Sales grew in the Americas for the first time since the beginning of the COVID-19 pandemic, which drove a smaller-than-expected decrease in net sales this quarter compared to last year's first quarter. We are pleased that our Adjusted Operating EBITDA and Adjusted Operating EBITDA margin exceeded last year's levels despite the dilutive effect of the sales decline, and that our Free Cash Flow was a substantially smaller use of cash than either of the last two year's first quarters. Both of these are attributable to the improvements we have made to date as part of our Business Transformation Program ("Transformation Program") and through the cost containment actions we put in place last year that are continuing to benefit us. Industry conditions are gradually improving with the rollout of COVID-19 vaccines and the lifting of restrictions in some locations, although improvements are uneven globally. We are continuing to closely monitor the recovery and will adjust our costs and investments accordingly."

Additional Management Commentary

"We are extremely pleased with our first 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 over last year with improved demand for replacement equipment and stronger rollout activity by large chains across many of our brands. General market sales had their smallest decline since the pandemic began and KitchenCare aftermarket sales increased in the Americas. EMEA also saw year-over-year growth from strategic QSRs. Both general market and KitchenCare aftermarket sales remained down in the quarter due to the widespread COVID-19 restrictions in the region. APAC net sales decreased slightly in the first quarter primarily due to continued weakness in the general market and lower Fabristeel project sales. QSR and KitchenCare aftermarket sales were comparable to last year's first quarter. By country, sales increased in China and Australia again this quarter but remain weak in Southeast Asia. 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 accelerates in more regions globally, 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 improving absorption of fixed costs due to higher net sales in the Americas and benefits from our Transformation Program, allowed us to deliver an Adjusted Operating EBITDA margin of 15.7 percent in the first quarter. With the tools we have developed as part of our Transformation Program, the productivity levels in our plants are improved compared to prior year levels. We did have a few plants that were closed temporarily in the quarter, first during the winter storms in February and then later in March due to the shortage of some materials following those storms. All of these plants were back open by early April. We are continuing to experience rising commodity prices, longer lead times and inflation from our parts suppliers, and continued logistics inefficiencies. We were able to offset the effect of these pressures in the first quarter with our Transformation Program procurement activities through negotiated price reductions with new and existing suppliers and by executing VAVE initiatives. In addition, we implemented our annual price increases during the quarter which will also help us offset the effect of these inflationary pressures as we move through the second quarter."

"We made progress on several strategic initiatives in the first 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, continues to see rapid growth in the number of connected devices and multiple chains have expressed an interest in adopting KitchenConnect into their operations. We have several new product launches across multiple product lines that will be discussed at today's virtual trade show that include the new Merco® Order Pickup Solutions, powered by Apex, which are automated contactless pickup lockers that are expected to be available over the next couple of months. We are also featuring AeroTherm™ portable air purifiers, powered by Trotec, and Nuovair roll-in blast chillers, both of which we announced earlier this week. All three of these are examples of new products that provide enhanced sanitation solutions for our customers," concluded Johnson.

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

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