Welbilt, Inc.
Q1 2019 Earnings Call Transcript

Published: 12 May 2019

[Operator:]

Good morning. My name is Adam, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Welbilt, Inc. 2019 First Quarter Earnings Call and Webcast. All lines have been placed on mute to prevent any background noise and after the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Richard Sheffer, you may begin your conference.

[Richard Sheffer:]

Good morning, and welcome to Welbilt's 2019 First Quarter Earnings Call and Webcast. Joining me on the call today is Bill Johnson, our President and Chief Executive Officer; Marty Agard, our Chief Financial Officer; and Josef Matosevic, our Chief Operating Officer. Before we begin our discussion, I need to review our safe harbor statement with you. Any statements in this call regarding our business that are not historical facts are forward-looking statements, and our future results could differ materially from any expressed or implied projections or forward-looking statements made today. Our actual results may be affected by many important factors including risks and uncertainties identified in our press release and in our SEC filings. We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or other circumstances. Today's presentation and discussion will include both GAAP and non-GAAP measures. Please refer to our earnings release for our non-GAAP reconciliations and other important information regarding the use of non-GAAP financial measures. You can find a copy of the press release and the presentation slides for this earnings call in the Investor Relations section of our website, www.welbilt.com. Now I'd like to turn the call over to Bill.

[Bill Johnson:]

Thanks, Rich, and good morning. As you saw in today's earnings release and on Slide 3 of our presentation, we had a solid top line results in Q1, getting 2019 off to a good start. We delivered 7% growth in the quarter with 3.5% coming organically and another 6% from the Crem acquisition. Foreign currency translation was a 2% headwind. Operationally, the expected headwinds from material cost inflation and tariffs were the biggest drivers of our margin decrease. As we stated on last quarter's earnings call in February, we expected a soft start to the year as we were experiencing inflation and tariff pass-through increases from our vendors, along with a direct impact from Section 301 tariffs that began in last year's third quarter. We believe these impacts are primarily a first quarter event as we expect them to be mitigated by our March price increase during the balance of the year. I'll let Marty get into more details on our first quarter margin performance in his comments. Our Q1 adjusted net earnings were lower than prior year, primarily due to lower adjusted operating EBITDA, higher adjusted tax expense and higher interest expense driven by the increased debt year-over-year following the Crem acquisition last April by higher interest rates than last year. As previously discussed, when Welbilt exited the spin, we embarked on a Simplification and Right-Sizing plan. This initiative generated approximately 400 basis points of margin improvement was the first step in improving the operating performance of the company. Now that we have completed that chapter, it's time to get on with the next phase of our margin enhancement journey. I'd like to begin the discussion on the next phase by sharing a few preliminary thoughts on the recently completed operational review and our transformation program. We spent 8 weeks examining all aspects of our business with a focus on strategies for creating brand preference, manufacturing operations, regional distribution, procurements, engineering, KitchenCare and SG&A. We've confirmed that we have substantial short-, medium- and long-term opportunities to move our margin profile into the upper tier of our industry. We have formulated detailed plans to execute the program in short surges or waves to bring full focus and efforts to bear on a small number of opportunities in a short time frame before moving to the next opportunities. And we won't move on to the next opportunities until we have verified that we have not only implemented the changes but that the people at those locations have been fully trained and can demonstrate the ability to sustain the improvements. At our Investor Day next week, we'll discuss the short- and medium-term opportunities we plan to capture in the next 30 months in more detail, provide the cost to execute the programs and what our 2021 financial targets are. That's all we are prepared to share today on this topic, so please hold your questions on this until next Tuesday. With that, I'll turn the call over to Josef for a summary of our segment results.

[Josef Matosevic:]

Thank you, Bill, and good morning, everyone. I will make a few comments on our top line results within the segment. Starting on Slide 4 with EMEA. Third-party net sales increased 41.8%. Organic net sales increased 25%, while the Crem acquisition contributed 25.4% growth. We again benefited from a rollout with a large chain customer this quarter, but that has largely run its course. We saw increased sales of Merrychef high-speed ovens with a large chain better Frymaster fryers and Garland grills sales in the region, higher Convotherm sales in the marine sector in Germany and Netherlands, and improved Multiplex beverage sales. KitchenCare aftermarket sales also increased in EMEA. Moving to Slide 5. Third-party net sales in APAC increased 20.1% in the first quarter. Organic net sales increased 11%, while the Crem acquisition contributed 12.4% growth. We had stronger sales through large chains of Garland grills. While general market sales were down slightly, we did have strong sales of Merrychef ovens in the channel. We also saw growth in both KitchenCare aftermarket sales and Fabristeel project sales. Looking at Americas on Slide 6. Third-party net sales decreased 3.7% with organic net sales decreasing 3.1%. We had a good start to the year in the general market as sales increased with the majority of our buying group customers. The strongest growth came from NexGen as we are beginning to see the sales ramp up. This helped to partially offset tough comps from last year's large chain rollouts. KitchenCare aftermarket sales decreased due to additional consolidation at the end-customer level, which caused some short-term disruption in ordering from the affected dealers. We believe this will be short-lived, and we don't foresee the same level of extended disruption that we experienced last year. From a product standpoint, we saw stronger sales of Multiplex beverage equipment, especially on our new automated fresh blend smoothie machines and an increase in Manitowoc Ice machine sales. Sales of Frymaster fryers, Delfield refrigeration and Garland grills were also down due to last year's large chain rollouts. I will now let Marty get into the operating details for the quarter and our 2019 outlook. Marty?

[Marty Agard:]

Thanks, Josef, and good morning, everyone. First, it's great to join the Welbilt team, and I look forward to working with them and our investors and analysts. Josef covered the top line comments, so let me start with some comments on the adjusted operating EBITDA margin drivers shown on Slide 7. Before I discuss the specifics, I'd like to point out that we've updated some of the categories to better reflect how we want to discuss the business going forward. The order follows the P&L, revenue-oriented drivers, then cost and gross margin drivers, then SG&A, and lastly, what I think of as non-organic in this quarter, Crem and FX. The idea is actually to provide more transparency here to help us all see where and how our transformation program contributes over the next 30 months along with other natural business dynamics that influence our margins. Now to the quarter itself. Looking at volume mix and net pricing, all 3 of these components were positive. The net pricing contribution is related to last June's price increase that we put through due to the Section 232 tariffs and rising freight costs. The price increase that we put through in March came too late in the quarter to provide any benefit, but are kicking in during the second quarter. Material costs, including tariffs, were a combined 260-basis-point headwind. Slightly more than half of this reflects cost increases and pass-through tariff costs from our vendors and some residual of the higher costs experienced in Q4 as that production made its way through inventory. The balance came from the direct impacts from the Section 301 tariffs that began in the third quarter of 2018. Moving to SG&A. The primary drivers here were higher marketing costs related to the biannual NAFEM trade show that was held in February, higher third-party commissions and a few other smaller items. If you're reading the face of the income statement, SG&A is also elevated by the inclusion of the transformation program investment not included in adjusted operating EBITDA and the inclusion of Crem. Some of the items mentioned above were seasonal or periodic in nature and the deleveraging should abate as we proceed through the year. The last item to comment on is the 70-basis-point headwind from FX and Crem. Crem accounted for 40 of the 70-basis-point headwind, and we have now lapped the acquisition, so this will be embedded in our prior year comparisons going forward and will no longer be a callout item. Moving to Slide 8. Free cash flow was a $68.9 million use of cash. Seasonally, we normally use cash in the first quarter as it's the smallest sales and profit quarter of the year, and we have a few lumpy cash outflows that occur. Exacerbating the seasonal effect were the investment in the transformation program and timing-related reductions in accounts payable. We expect free cash flow to be positive for the remainder of the year. Our overall debt balance increased by $148.8 million. This is primarily due to the termination of our off-balance-sheet accounts receivable securitization facility during the quarter. That facility had a balance of $96.9 million at the end of 2018. And with the termination, cash receipts related to the program were retained to pay off the securitization facility balance, creating a build in working capital funded by our revolver. Effectively, that off-balance-sheet debt has moved on to our balance sheet via the increase in our revolver borrowings. At this time, we are not intending to enter into a replacement securitization program. Finally, on Slide 9, I'd like to make a few comments on the 2019 guidance that we've reiterated in today's earnings release. Beginning with sales, we expect to grow organically by 2% to 5% in 2019. We're expecting growth in all 3 regions with stronger growth in EMEA and APAC. In EMEA, we expect higher general market sales to drive the growth with continued momentum from our Merrychef and Convotherm ovens. The benefit from some large chain rollouts that helped the last 2 quarters have mostly run their course, and we aren't expecting that level of contribution from large chains over the balance of 2019. In APAC, we also expect higher general market sales with continued market penetration by our Merrychef and Convotherm ovens and our Frymaster fryers. In the Americas, we're expecting modest growth as we had tough comps in the first half from the large chain rollouts in 2018. We expect higher sales in the general market with improving conditions in the dealer channel, benefits of the continued ramp-up of sales to NexGen and the effect of the March price increase. Our adjusted operating EBITDA margin is expected to be between 18.5% and 19.5% even with the low first quarter. We expect volume mix and net pricing to be positive by 225 to 275 basis points in 2019 as our March price increase begins to materialize in our results and KitchenCare shakes off its slow start and begins to grow over the balance of the year. We expect material costs and tariffs to have a considerably lower year-over-year impact the balance of the year, given we begin to anniversary the tariffs in Q3 and have now fully sold through the higher cost production from the lag of the fourth quarter. We expect other manufacturing to range from neutral to contributing plus 50 basis points of benefit. We used to separately call out Simplification and Right-Sizing initiatives as a separate category, but as per my earlier comments, we are retiring that today. Rather than gather up and set aside program benefits like those, I'd like to articulate the key margin drivers

[Operator:]

[Operator Instructions] And your first question comes from David MacGregor of Longbow Research.

[David MacGregor:]

Just a couple of questions. First of all, on the Americas. I think with regard to the chain business, the challenging compare was pretty well understood. You guys had communicated that pretty effectively, but how do you see 2Q growth or drag there? And how should we think about chains growth or drag for the full year? I've a follow-up.

[Bill Johnson:]

Yes. So the chain business, as we said earlier, was going to be a challenge for us in the first half, but we -- and we certainly saw that in Q1. There is a little bit of -- there's some rollouts happening in Q2 that will help, and we're -- we know those are going in Q2. For the year, the quick QSR segment, we continue to see and are positive about it. But we had those really large rollouts in the first half of '18 that really the general market helped us overcome -- it will help us overcome in the first half and then our pricing strategy will kick in as well.

[David MacGregor:]

Okay. And then the second question just on mix. You called mix out as a positive. I guess which stands somewhat in contrast with observations you've made on past calls about customers mixing down, I wondered if you could just elaborate on what you're seeing there? And that would be great.

[Bill Johnson:]

Yes. So when we look at the mix, we look at both on the portfolio side and then on the good, better, best. I would say that this is more of a portfolio mix where we've seen really good on the hot-side. We had a strong quarter on the hot-side. And so it's more about the portfolio mix than it is about kind of the good, better, best position.

[David MacGregor:]

Is the mix down in response to pricing still an issue? And what does that mean given you've got another price increase that you're just launching into the market now?

[Bill Johnson:]

No, I wouldn't say -- I think it's a very positive pricing environment right now. I think it's -- people are expecting it. The market has seen everybody come out with price increases. So I think it's -- I don't think that it's a surprise to anybody.

[Operator:]

Your next question comes from Jeff Hammond of KeyBanc.

[Jeff Hammond:]

So just want to go through the moving pieces and how you're thinking about the EBITDA margin guide because it looks like you just rebucketed everything differently. So can you just talk about what's changed? I think you said last time price cost was neutral, and you're kind of now moving pricing into a different bucket. And then I think you had Simplification and Right-Sizing as a plus -- a big positive. And I'm just wondering where that falls out. And I don't know if SG&A is a higher headwind than it was before.

[Marty Agard:]

Yes. This is Marty. I'll help a little bit. So what we've done is we've sorted out the pricing and mix, which often is kind of driving up a price feel to it and put those together in a price and mix and did not net cost against those. So that's a pretty clean number. You see the year-over-year gains from the mid-last year's price increase. And then you'll see some more lift in the second quarter as the March price increase kicks in. And you'll see some mix, it's moving around in there. And for this quarter anyway, my comments were -- it's about half from pricing and about half from sort of those mix effects. And we'll provide some color to that going forward. And then on the cost side, that material cost is going to be more about tariffs and inflation, commodity-oriented things, and we'll keep that pretty clean, and to the extent we get into some Simplification and Right-Sizing or the new transformation program that gets into some opportunity there, that should show some savings in that area to the extent we get into, again, sourcing strategies and so forth. So that will be a clean view of our cost related to materials. Manufacturing will pick up things like overhead absorption, footprint work that may still have opportunity to the extent we run well or inefficiently labor and overhead-wise, you'll see that kind of on a cleaner basis there. And then SG&A will be a bit more -- there's some variable nature of SG&A, there's also a leverage effect in terms of the sales pace in a given quarter. SG&A as a percent of sales can move around a fair amount. So that's what you'll see there. So that's kind of the breakdown. The only real change, I think, in there is maybe breaking SG&A and other manufacturing out and then leaving any simplification and streamlining stuff that we might have separately kind of collected, leaving that in the area that it would affect, whether that's material. This might be pricing because there will be some opportunities around revenue that come from that program or some of the manufacturing costs, which also will be implicated by that.

[Jeff Hammond:]

Okay. Great. And then I think you showed Delfield being weak. I know that's a new brand within the NexGen. Can you just speak to that? And then maybe just talk about how NexGen is progressing? What do you think the incremental -- or the contribution or incremental contribution from NexGen is going to be in '19? And how that one was kind of NexGen full run rate?

[Bill Johnson:]

Yes, sure. So Delfield was one of the brands that had -- last year, the rollout had a significant impact on the Delfield numbers in the first half of '18. So they were a major component to that. And I will say NexGen is doing a great job of moving volume to us. We have seen that volume come. It's as expected, and they are continuing to ramp that up. And we'll continue to see that ramp up through the rest of the year. But as expected, doing exactly what they said they would do.

[Jeff Hammond:]

Is there a way to think about what the NexGen contribution would be this year?

[Bill Johnson:]

We don't really give out the magnitude of it, but it's enough that when we look at the first half, it helps us really close the gap from those rollouts that we had last year.

[Jeff Hammond:]

Okay. Great. And then just finally, KitchenCare has kind of been a source of weakness. And we thought there was an easier comp, and I think you're expressing some confidence that it gets better. Can you just kind of button up how we get comfortable that KitchenCare is no longer a drag? Thanks.

[Bill Johnson:]

Yes. So KitchenCare was up in both EMEA and APAC. Where we saw a little bit of drag in the first quarter was in the Americas and that had to do with some field service kind of consolidation at the distributor dealer -- distributor level. And so there's a little bit of overhang from when they consolidate the distribution channel. And -- but I'll say that our partners here are doing an excellent job of converting generics to OEM parts. We see that as a real growth driver going forward. We're working hard with our partners in this field. We have seen this start to come back. So we think that throughout the rest of the year, we should see it improve.

[Jeff Hammond:]

Okay. Thanks guys.

[Bill Johnson:]

Yeah.

[Operator:]

And your next question comes from Mig Dobre of R.W. Baird. Your line is now open.

[Mig Dobre:]

Yes, thank you. Good morning, everyone. I would like to start with free cash flow if we can. Can you maybe help us better understand the impact of this securitization change on the accounts receivable drag in the quarter? What was specific to that? Maybe a little more color as to what happened with accounts payable that was also a little bit unusual? I'm looking to understand how you're thinking about free cash flow for the full year? We'll just start there.

[Marty Agard:]

Yes. It's Marty here. So the first thing on the securitization, as we were collecting receivables, we needed to apply those against the securitization program. That's roughly $100 million. So by not having the regular flow of receivables going through that program, we had to built it up on our balance sheet as I said in our prepared remarks. So besides bringing the debt onto the balance sheet, not such a big impact, it does pollute the GAAP-based cash flow statement's a little hard to read, but I think the footnotes and stuff should get you through that, really not such a big impact. We did build some inventory in the quarter and then we had some payables that we carried into the year, and we were just more aggressive in terms of getting those paid back down and taking advantage of cash discounts, and so forth. So that was probably the one more timing-oriented thing in nature. And then we did spend some money on the transformation program and had a little bit higher SG&A and some of the, what I call, the earnings-based, cash-earnings based impacts. As we think about the next 3 quarters, we will see stronger EBITDA for sure, and we won't have those working capital drags on AAP or inventory, and we see considerably stronger free cash flow going forward.

[Mig Dobre:]

Okay. I guess I understand that part, but I'm wondering, and obviously, there's quite a bit of leverage on your balance sheet, so free cash flow matters. When you're looking at your net income guidance and you're thinking about the free cash flow for the year, how should we think either free cash flow as a percentage of sales or free cash flow versus net income?

[Marty Agard:]

Yes, I think free cash flow as a percent of net income feels like a good measure for us. Yes, I don't know if you're looking for a specific number or...

[Mig Dobre:]

I am looking for a specific number. Can you share that?

[Marty Agard:]

Yes, I think not specific to the individual quarters, but I would say, onetime to net income kind of free cash flow feels like a metric we'll be shooting for, yes.

[Mig Dobre:]

Okay. And then I think this EBITDA margin breakdown or bridge, if you would, is really helpful, so I appreciate all that detail. But I just want to make sure I understand the buckets correctly. When we're looking at your material costs and tariffs, so you're expecting this to be a 75- to 125-basis-point drive for your full year. In Q1, you were 260 basis points. So essentially, we're talking about improvement here in subsequent quarters of, call it, nearly 200 basis points. Now I think I recall you saying that 130 basis points of the 260 in Q1 were related to tariffs. So how, what's the progression in terms of how we're kind of lapping these comparisons? Do we sort of have a similar drag in Q2 and then starting with Q3 this goes away? And then also related to this, the remaining, call it, 60, 70 basis points of improvement, where is that coming from?

[Marty Agard:]

Yes, good questions. Let me help unpack the 260 basis points, and in the context of the guidance, I think it will help. So in my prepared remarks, I made reference to this. Let me start with the smaller half of the 260, which is the Section 301 tariffs, it's started in July. So those will continue as a headwind in the second quarter and then should be anniversaried in the third quarter. Taking the larger half and splitting that roughly in half, I'll call the first large quarter, if you will, inflationary pressures and pass-through tariffs of the 232 variety that came at us through our vendors and that, while it kind of set in over some period of time, I would say, will anniversary itself close to the fourth quarter of this year. So it will run a little bit longer as a headwind. And then the last of those, what I call, large quarters really traces back to some of the issues we had in the fourth quarter that led to higher cost in our inventory and that flowed through. Those issues were resolved kind of operationally in the fourth quarter, but we still had some inventory that had those higher costs that came through in the first quarter. And those have run their course, and so that piece of this will step to our favor kind of in the second quarter and forward. So this thing will go from a 260-basis-point headwind in the first quarter to considerably less than that in the second to probably neutral in the back half and potentially even favorable as we compare against the tougher fourth quarter from 2018. So that's how this thing goes from 260 basis points in the first quarter to something like 125 on the year that we talk about, the 75 to 125 basis points that we talk about the full year guidance on Slide 9. Okay?

[Mig Dobre:]

That's super helpful. And my last question, I want to ask about basically the same dynamic with volume mix and net pricing. There's basically a better than a 60, call it, a 60 to 80 bps improvement as the year progresses. Now obviously, I know that pricing is coming through to help. I'm just wondering if that's all price that we're talking about here or if there's something else moving around in that mix or...

[Marty Agard:]

Yes, let me do the same thing because there's no question that our guidance calls going from a 13% adjusted EBITDA margin to something north of 20%, so that we can settle in on that full year level. So this is -- this will be a real progression. If I take them in order on Slide 9 in the guidance section there, volume mix and net pricing going to 225 to 275 basis points. It was 190 basis points in the first quarter. And we do have this March price increase that's rolling through. So -- and frankly, we'll probably, again from the transformation program, be able to find a little bit more revenue opportunities. So we feel good about that continuing to be a significant contribution, and in fact, it's a bit of an expanding contribution year-over-year going forward. The material costs coming down from 260 to the 75 to 125, I just covered. From a manufacturing cost standpoint, it was a 10-basis-point headwind in the first quarter, and we think that's something in the same range going forward, we called it 0 to plus 50. And again that -- the first quarter did reflect a little of the fourth quarter's hangover, so we can point at that and say, yes, we expect that to be better going forward. On SG&A, it had a little bit of seasonal stuff. It's a soft quarter sales-wise, and the spending was a little bit heavier, and so it contributed to the headwind. While we expect, through the year, the year-over-year step to be a little bit of a drag, sequentially, comparing the first quarter to the second, third and fourth, SG&A as a percent of sales dips down significantly, 300-basis-point type of range, and that's the same pattern you would have seen in 2018. So that is a big part of going from a 13 to sort of a 20 kind of percent EBITDA margin as that SG&A leverage in the first quarter has really suffered from that. And then lastly, on FX and Crem, that 70-basis-point first quarter headwind. If you think about Crem, it's first still facing some of the integration challenges. It’s really only inorganic comparison point is this first quarter because it really -- we closed in the middle of April last year, and so by second quarter, mostly it will be an even comparison point. And then on FX, again, the big currency move really was through the first quarter of last year. It has been in the same ZIP Code as it is now in the quarters 2 through 4. So we also feel like that headwind has generally been the combination of FX and Crem is really a first quarter phenomena, and that's why we say it goes from a 70-basis-point headwind to something between 50 and 0 with currency always being a bit of that unknown. So when you add all that stuff together, that's how you go from a 13.3% adjusted EBITDA margin to something in the 20%, 21% range and get us to the guidance on the year.

[Mig Dobre:]

Really helpful. Thank you so much.

[Operator:]

Your next question comes from Larry de Maria from William Blair. Larry, your line is open.

[Larry De Maria:]

Hi thanks, good morning everybody. That color was really helpful. I guess, what I just don't fully understand just yet is kind of the quarter from revenue perspective was pretty good, but obviously, the profits trailed. So what was different in terms of your expectations given you knew about material costs, you knew about the chain rollouts, the KitchenCare. So what was so adverse as to what was planned from when you obviously talked to us in mid-February?

[Marty Agard:]

Well. It's Marty here, and I'll offer some comments. I wasn't here, but I did listen to the call. And what I would tell you is we don't want to guide quarter-by-quarter, but we did try to set some low expectations and some of you probably picked that up a little more clearly, but we were trying to signal this kind of slow start. So I would say the short answer is not a lot has changed relative to our plans and that's why we reiterate the guidance the way we did.

[Larry De Maria:]

So did it work out as you planned?

[Bill Johnson:]

Yes. This is Bill. Yes, I mean the quarter played out pretty close to what we had planned. I would say we knew on the revenue side of things that we had some lift coming from NexGen, the increase there. We knew we had the headwinds from some of the QSR rollouts. Mix was favorable, and we knew that. So I mean, look, there's always a little thing here or there that creeps into the quarter that nicks you. But by and large, it was as we expected, and as we look at the year going forward, we're convinced that our guidance is sound.

[Larry De Maria:]

Okay. Secondly, 2 kind of quick questions. Were there any kind of prebuy ahead of the price increases? And sorry if I missed this, but is there a year-end debt target?

[Josef Matosevic:]

No. Surprisingly, Larry, there was not, but there was no prebuying any significant way that we would usually see so...

[Marty Agard:]

And on the debt target, we will talk next week about -- I'll show some projections and how we expect to delever. And so I'll kind of save the thunder for that one, if you don't mind. But we do expect to bring it down from where sit now at the end of the first quarter.

[Larry De Maria:]

Okay. That's fair enough. And then just last question from me. I think you guys rolled out Crem here in North America or at least have started to. Just curious so are you taking orders? What's the reaction and? And what kind of expectations should we think about Crem moving forward?

[Bill Johnson:]

Yes, so we're in the process of -- we showed Crem at NAFEM. We'll also be at NRA with the product lines. We're introducing fully automatic line called our Unity line. And we will plan on taking orders in that in the second, starting in the second quarter. So we're going through, we're finishing up the registration and testing and certification process, but we'll be ready to take orders during the second quarter.

[Larry de Maria:]

And that will go right through your existing channel, right, or you have to go direct relationships on that?

[Bill Johnson:]

No, it will go through our channel partners. It will go through our channel partners completely.

[Operator:]

And your next question comes from Jamie Clement of Buckingham.

[Jamie Clement:]

I was noticing, I was wondering if you could kind of take us through kind of what the demand environment looked like through the first quarter? And specifically, did you all notice the same kind of soft start to January that perhaps some of your peers have already mentioned publicly?

[Bill Johnson:]

Yes, I mean, January started off a little slower. It started to pick up. We probably had some advantages in terms of share gains that maybe some of the competitors didn't have that helped us in the quarter. So we're excited about that. And we continue to see that ramp come exiting the quarter and our order intake continues to be as expected and supporting our forecast.

[Jamie Clement:]

Now it sounds like the answer to this is no, but I just want to be clear. But in terms of, say, you didn't notice any significant pre-buying ahead of your price increase, obviously, the timing of industry price increases with your competitors was not the same timing as yours. Did you notice any distortion in terms of your perception of your own sales levels relative to that phenomenon?

[Bill Johnson:]

No, I mean, we decoupled pricing and value. We have people that prefer our brands. We go to market that way. And we decouple costing from that equation. So I would say, look, we performed as expected. The teams, the sales and marketing teams delivered along with our channel partners, delivered the growth we wanted, and we're happy about that.

[Operator:]

And your next question comes from Walter Liptak of Seaport Global.

[Walter Liptak:]

I realize that you want to save the thunder for the Analyst Day, but wanted to get, see if I could get a clarifier on your opening comments about the next phase stocks. And I think you mentioned that you wanted to be at the upper tier of the industry, and so I wondered, do you mean upper tier of the publically traded companies or kind of all in commercial foodservice?

[Marty Agard:]

Yes, so it's, we tend to look at it, in our peer group, as the publicly traded companies.

[Walter Liptak:]

Okay. That's great. And then the Americas region, the organic is down, understanding what that may be about. But I wonder about the timing of that tough comp. Is that something where we would have organics that continue to be tough in the full first half and then turning more positive in the back half on that easier comp? Or are there large customers that rolled off already in the first quarter?

[Marty Agard:]

Yes, no, I mean, there's, a large chunk of it hit us in the first quarter. And we have some of the strength of the general market as we said. The general market and we believe KitchenCare will rebound for the rest of the year. And look, it's hard to predict these rollouts, and we have some nice things in the works for the second half that hopefully materialize. We have some roll-off in the second quarter that we know will materialize. So I would say, we kind of took our lumps on the QSR headwinds in the first quarter. And going forward, that general market and KitchenCare should really offset any of the remaining pieces of it.

[Walter Liptak:]

Okay. Great. And if I could just have a follow-on to that. The -- I wondered about the international customer funnel. We've heard a lot about macro things with international slowing, but your large customer projects look pretty good this quarter. Where does the funnel look like internationally from those large customers or from other large customers?

[Bill Johnson:]

Yes. So again, these are all kind of lumpy things that happened in EMEA, in particular. In the first quarter, we had very nice rollouts with a couple of chains that you saw the growth there. That won't continue into the second quarter, but we knew that going into the planning process and into our guidance when we built the plan. So we're sticking by our plans for both EMEA and APAC in terms of total year growth. So it wasn't kind of a bluebird that flew in, that we didn't know that it was going to happen. We knew these things were in play, and so they're built into our guidance.

[Operator:]

[Operator instructions] Your next question comes from George Godfrey of C.L. King.

[George Godfrey:]

I just want to come back to the securitization of the receivables. Can you explain again why you chose not to sell or securitize more versus keeping it on your balance sheet? And what factors go into determining how much you securitize or sell each quarter?

[Marty Agard:]

Well, the simple fact is that the program offered a marginal cost of funds kind of savings, but had a lot of operational and administrative headaches to it. And with the change in the accounting standard that made it run through the cash flow statement the way it did, it just made the auditing difficult as well. So on balance, it just become a marginal program, and we did upsize the credit facility and the revolver to allow to handle this comfortably enough. And so it just didn't feel like an effective program any longer.

[George Godfrey:]

Okay. So if I look at the days sales outstanding historically, it's been somewhere in the mid-20s, maybe high 20s. This quarter, it looks like, by my math, it's about 52%. But that should be the new level of days sales outstanding we should expect going forward?

[Marty Agard:]

I want to say yes, but I am -- I haven't done all those calculations myself to really know if there's anything that's not quite at a run rate yet. I think our terms of sale are shorter than that in the U.S., but probably longer than that internationally, so there could be some blended. That doesn't sound surprising to me, but I'd like to maybe get another quarter closed without the securitization in place before I told you that was exactly right.

[Operator:]

And your last question does come from David MacGregor of Longbow Research. David, your line is open.

[David MacGregor:]

Yeah thanks. Just a couple of follow-ups. In the Americas, U.S. was up slightly, but other Americas was down by about third. So what happened there? And what was the EBITDA impact? And then also, I guess, in the Americas, to what extent first quarter revenues benefit from a carryover of cold-side orders from the fourth quarter? Thanks.

[Richard Sheffer:]

David, this is Rich. I don't think we disclosed anything specific within the Americas U.S. versus other countries. So we tend to look at it as one region. So I don't -- we're struggling to come up with an answer, but I don't think we ever said that. The U.S. was great, and Canada, Mexico were soft. I think it's a blended region.

[David MacGregor:]

I think, Rich, in your press release, you break out net sales by geographic area, and you draw the distinction between U.S. and other Americas. And that's where the observation comes from.

[Richard Sheffer:]

Okay. So those do not reflect intercompany eliminations. So I'd hesitate to draw any conclusions from that.

[David MacGregor:]

All right. Okay. And then just to what -- I mean, you had some supply channel issues back in the fourth quarter. I'm just wondering to what extent first quarter revenues benefit from the carryover on the cold-side orders?

[Marty Agard:]

Yes, there really wasn't any benefit from carryover from the...

[Bill Johnson:]

Now we were able to source our compressors in Q4. So we really didn't have lost sales really in Q4 that would have been caught up in Q1 related to that.

[David MacGregor:]

Okay. Thanks very much.

[Operator:]

And we have no further questions at this time. So I'll turn the call back over to the presenters.

[Bill Johnson:]

To conclude today's call, I want to reiterate that I believe Welbilt has the right strategy to focus on profitable growth and can drive significantly more dollars to the bottom line. We expect to drive our profitable growth by improving our go-to-market approach to drive more dollars to sales and by improving operations and therefore, margins. The operational review we recently completed as part of our transformation program allowed us to develop concrete action plans in achievable time lines to capture that opportunity. I have confidence in this team to continue delivering profitable growth and delevering the balance sheet. I'm excited for the opportunity to share our plans with you at our Investor Day on May 14. This concludes today's 2019 First Quarter Earnings Call. Thanks again for joining us this morning, and have a great day.

[Operator:]

And this does conclude today's call. You may now disconnect.