1217: A Sharper Portfolio, A Clearer Capital Story | with Brittany Cerwin, CFO, Middleby Corporation

0:00Support for CFO Thought Leader comes from OneStream, Trusted Data, Faster Decisions, and Salesforce. Explore new research on the future of finance and AI at Salesforce.com slash CFO Report. Hi, this is Mark Millman, CFO of Ascensus, and you are listening to the CFO Thought Leader podcast. This is episode 1217. Yeah, so we went from being three segments of one business. So we had a commercial side of our business, commercial restaurant equipment. We had a food processing side of our business and a residential kitchen equipment side of our business. And over the last 18 months, really our transformation was to separate the food processing business into its own standalone public company, which we just accomplished and executed at the beginning of July.

1:01So that's a process in and of itself of going through multi-year carve-out financial statement audit, recruiting and training a new corporate team to lead their finance and corporate infrastructure. And then while embarking on that transformation, we also executed the sale of 51 % of our investment in the residential business. We sold to a private equity firm, 26 North. Hi, it's Jack. On today's show, we speak with Brittany Serwin, CFO of Middleby Corporation.

1:47Sometimes strategy gets clearer when a company decides what it no longer needs to be. Middleby Corporation spent years building a portfolio across commercial food service, food processing, and residential kitchens. Now, after two major transactions, the company's more tightly focused on its commercial business. That changes more than the organizational chart. It changes the investor story, the capital allocation conversation, and perhaps most importantly, where management puts its attention. Brittany Serwin has spent 15 years inside Middlemeat. So she has watched the portfolio expand, and now she's helped it narrow.

2:33What does finance look like when a company suddenly has a much clearer field of view? Our talk with CFO Brittany Serwin begins after this.

2:50AI is changing the finance function, but how much business value is it actually delivering? According to new research from Salesforce, 90 % of finance leaders using AI report a positive return on investment. And as AI agents enter the picture, finance leaders are seeing opportunities to improve productivity, reduce costs, and strengthen forecasting. But there's another side to the story. CFOs are also confronting growing revenue complexity with more subscription, consumption-based, and hybrid business models to manage. And that raises an important question. How can finance leaders gain the visibility they need to make better decisions while putting AI to work?

3:40Salesforce explores these challenges and the opportunities ahead in its latest CFO research. Discover what finance leaders are saying about AI, revenue complexity, and the evolving CFO role. Visit salesforce.com slash CFO report. That's salesforce.com slash CFO report.

4:13Hello, CFO Brittany Serwin is with us. Brittany's finance journey began in public accounting at Grant Thornton before she joined Middleby Corporation in 2011. Over the next 15 years, she moved through financial reporting, controllership, and chief accounting officer roles before becoming CFO. Today, she brings that deep institutional perspective to a company reshaping its portfolio and sharpening its focus, giving her a distinctive vantage point on capital allocation growth in Middleby's next chapter. Brittany, welcome. Thank you. Thanks for having me, Jack. So I actually, I found your career journey refreshing.

5:01It sits in two volumes, like I say, at least that's my perspective. You can educate us. But take a look back for us. You know, where did this journey begin? Yeah, absolutely. So it really started building the foundation in public accounting. I love the fast pace of it. You're rotating from client to client, like every few weeks. But yet you're able to interact with CEOs, CFOs of these businesses and then at the same time sit in an audit room and learn and watch the partners build those relationships with the client and address the timelines or an accounting issue. So that's really where the foundation for my career started.

5:45And then when I started to think about a move into industry, I wanted to find somewhere where I wouldn't be siloed in my accounting journey. And so it's hard to imagine that was 15 years ago. But I found Middleby, which at the time was a global public company, strong financial background, a very lean corporate team. and still embarking on a growth strategy. So it really allowed me, and the role was a financial analyst. So it wasn't siloed or tied to external reporting or FP &A. It was broader across the corporate infrastructure. And in that first year at Middlebeat, they did 11 acquisitions. And so I knew this was my opportunity to really learn businesses, but also learn how to do that in a rapid fashion and ask questions.

6:45That's the way you're going to learn is always asking questions. And by stepping into a really lean team, I was able to help get the opportunity to build out that corporate team over time as we continue to grow and develop the people within there and the processes and systems that were around the financial reporting. And then as I kind of transitioned at Middleby, it was really when I moved more into that corporate controller role where I felt I got to step into more of that strategic kind of part of the role. Managing that audit relationship, more of those cross department initiatives across corporate.

7:29enhancing our annual business review and budget process and starting to get those interactions with the audit committee, the board, and even opportunities to attend investor conferences and hear what people externally about Middleby are asking and wanting to know. Well, that's a great overview. I wonder, again, you didn't want to be siloed, but did you also have to be rather proactive as far as raising your hand? Like that sounds like a project I might enjoy. I mean, can you tell us something about who you were? Were you that type of person? I think you have to take initiatives. Coming from my audit background, I joined when they were going through their year-end audit.

8:20And one of the first things I saw as an opportunity was I was like, hey, I'd love to help create an audit binder for your 10K. It would help me learn how you build up the 10K. It would help the auditors and, you know, kind of force that relationship of me interacting with them. And so, you know, taking initiatives like that, where you see something that could be done to either improve efficiency, or something that you just want more insight into, it's always welcomed. And I think that's one of the perspectives over the years that I tried to carry on with me as we grew out. Our corporate team is that a fresh set of eyes and a new way of doing things is always welcome.

9:07Now, you might be faced with some resistance from time to time. Oh, yeah, we've tried that or we don't have time for that. But be persistent or, you know, give people that

9:17Brittany Cerwin: opportunity to have that voice.

9:22And, you know, one of the things I wanted to ask, and I should have asked it sooner, because you have this, you leave Grant Thornton, and I'm wondering if there was a executive recruiter involved in that at all. Maybe not. I was going to say how that person hasn't made a lot of money over the years from you, just given the fact you stayed put after you landed there. But what would you tell us? Or was it your network? How did you get Middleby on your radar? Yeah, so I think in public accounting, there's obviously some turnover in that industry. So you are usually a reference of either one of your managers or a peer over time when you're in public accounting.

10:03And so, you know, several of those recruiters that I had been references for other peers kind of kept me in mind. And for a long time, it was, no, I'm not interested. No, I'm not interested. And they kind of knew I was from out in the northwest suburbs of Chicago. And so, you know, when I found Middleby being where it was, that was one that kind of sparked my interest. So.

10:34Was there, you know, a belief that you had about finance leadership that perhaps has changed most over your 15 years there? First, you were observing the senior finance executives. Then you became one. Then you became the CFO. Your opinion of leadership, how did it maybe change? Yeah, I think it does evolve. I think in the beginning, you know, when we were building our team, it was really setting the expectations for what you expected in a role. Then as you grow in more of a leadership within the organization, we also have finance leads throughout our division. So you're not just leading the corporate team.

11:17You're also helping lead the finance organization. And so it becomes this balance of setting the expectations, but also starting to hold people accountable. And so, and you want to set that tone of, hey, these are the expectations I have of myself. but that I want of the people that are part of us as well. One of our key controls at Middleby is that any finance lead we hire throughout the organization, if they're the leader of that business in finance, they need to interview with the corporate team as well, not just the local leadership. So we really see them as an extension of our corporate team.

11:57Their impact makes our financials reliable externally. And so really instilling kind of that in people. So I think the leadership that changes is that you're having that tone of accountability with people and maybe challenging, kind of bringing back some of what you had in your audit days. questioning, having a little bit of skepticism when someone presents to you a forecast and really understanding kind of the assumptions that they used in that to understand how confident

12:31Brittany Cerwin: are they in that. So.

12:37Well, that's great. Thank you for those insights. We wonder, you mentioned when you provided an overview there, the investor relations chapter that sort of came to the end of at the end of your discussion point. I'm wondering, was that the, do you view that as the last box you were checking off as you entered senior leadership? I mean, where did that fit into your career journey? I don't think the box is ever finished being checked, right? I think you're consistently learning. I think in the finance world, there's always something new or challenging to learn. But I do think for me, middle B, maybe I had found my internal voice, but starting to find what that external voice looked like was definitely something that I needed an opportunity to develop.

13:30Also, I was used to kind of probably on the inside being the one asking the questions of our finance team, of our corporate team or other finance leaders. But now it was people asking us the questions and being prepared and understanding how to talk about the company in an external setting.

13:55Well, thank you for sharing your journey with us. You know, Middleby has changed significantly this year, along with your appointment, which came earlier this year. What does the company look like today? And where is the opportunity? We went from being three segments of one business. So we had a commercial side of our business, commercial restaurant equipment. We had a food processing side of our business and a residential kitchen equipment side of our business. And over the last 18 months, really our transformation was to separate the food processing business into its own standalone public company, which we just accomplished and executed at the beginning of July.

14:42So that's a process in and of itself of going through multi-year carve-out financial statement audit, recruiting and training a new corporate team to lead their finance and corporate infrastructure. And then while embarking on that transformation, we also executed the sale of 51 % of our investment in the residential business. We sold to a private equity firm, 26 North. And so through both of those transactions, now we are a commercially focused business. I think this allows us to tell a more clear story externally to investors. When you're with investors and have 30 minutes at an investor conference and you're trying to talk about three segments of a business that have so many different initiatives going on, so many wonderful brands that you want to highlight, it's a harder story to digest and tell.

15:49And now the focus is being on the commercial side. We also have that clear path of capital allocation. Because each of the businesses were in a different stage of their evolution. So the commercial side of our business is the most mature in terms of where the platform is and its acquisition growth over time. The food processing side of the business, when we spun that into its own public company, they're still on their growth structure or a growth kind of pattern of acquiring. It's more of a fragmented business. So as only, you know, 20 or so percent of our business, when we would do acquisition, it might not make as much sense to the outside world.

16:34One of our segments doing an acquisition, having as much impact as it could as a standalone. And so what that means for us now internally, it's really focusing on execution of our investor strategy that we put out there on Investor Day. Over the years, we've really invested in and part of our DNA has been innovation. It'll be prides itself on the equipment that's out there that we're selling to our customers. it's usually solving a challenge that they face. And it's high technology equipment that has a big value story to the customers. And over time, as we've built up to the platform and invested in our sales strategy, we're more solution selling to the customers.

17:26We're not having one brand sell this piece of equipment. We're able to sell them a solution in their kitchen. It crosses everything from cooking and warming, whether it's a fryer or range, now to ice and beverage. And so one of the things when you work at Middleby, and almost anyone could tell you this, you have this instinct anytime you're ordering at a fast food restaurant to look across the counter to see if you see one of your brands. Or you go to a restaurant and you look around the corner to see if you can peek into that kitchen. and know in most places that you encounter, there's at least one piece of metal bee equipment that's helping, you know, transform your experience.

18:09Brittany Cerwin: We kind of see ourselves as the heart of the kitchen.

18:16Let me just quickly recap. It is such a busy year then. I mean, you've spun off the food processing, you've reduced the residential kitchen ownership, and now you're focused on this commercial arena. As you explained it, solution selling is what's big. Are you telling us that's where the capital is being allocated in these types of solution selling in this realm that one would think they need different tools to sell, they need different marketing? What would you tell us when it comes to capital allocation in this new area? Capital allocation strategy. We want to first kind of invest back into our core operations.

19:01That's really our first focus. And then driving value back to our shareholders is our second focus. Opportunistically and strategically over time, there could be more acquisitions, but that would be the third wheel of our capital allocation story. When we think about our customers' capital investment, which is, you know, doing, you at the speed of their business, we really see ourselves being alongside of them in that R &D journey as to where they're going now. And that's why over the last few years, what we've highlighted is really the investment for us in our go-to-market strategies and really making, strengthening our relationships across the sales channel, bringing us closer and, you know, more upfront with our customers.

19:55So that as we're looking at our R &D roadmap, it's along with their strategy. So one of the things you hear about a lot nowadays is all these companies investing in or having limited time offers featured around all this customization around beverage. And that's why we're really excited as we continue to expand and invest in new equipment to solve and to help be part of

20:23Brittany Cerwin: that transformation for our customers.

20:29So help us understand what we'd like to try to provide a photograph of the revenue model in, in commercial food service. What best explains how Middleby Middleby makes money equipment demand replacement cycles aftermarket parts, something else. And which part tells you the most about the business? So I think there's components of all of that. You know, as we laid out at Investor Day, our kind of three-year growth strategy, you know, yes, it's tied to the restaurant industry and new units being developed and global expansion. But again, replacement is also something. We talk about that quite a bit because you think about what happened during COVID and the number of restaurants that were out there and how restaurants with inflation and other cost impacts that affect them sometimes might make a more short term decision to do a repair rather than to replace and see the benefits over time of efficiency, a new piece of a business.

21:46because they see that higher price tag. And so that's where we really want to be connected to our customers so that they see the ROI strategy and can help the franchisees and the operators to really see the value in the equipment and what it can do to help solve their problems. I would say the other part to our growth strategy you mentioned on it is the aftermarket. So we also highlighted how that's one of the biggest challenges that a restaurant operator faces. If your piece of equipment is down that cooks your main piece of food, you're not, they're not making any business. So uptime is very important to them and connectivity to the service agents.

22:32And so that's one of the areas in our three-year journey that we're focused on, about refining our after sales support network and making them more connected to Middleby and really making sure that we show our customers how invested we are in that aftermarket and sales support, which will help us sell more equipment. When they have confidence in our network behind there and the education and the training that we will invest in those partners of ours, it really helps sell the equipment along there when you can do it all the way from the sale

23:11Brittany Cerwin: and know that we're with them all the way through the end journey.

23:18We wonder also about your visibility into the business. and primarily revenue visibility. Before revenue shows up, which operating signals might give you the clearest read on demand? I mean, which one do you trust earliest? So a couple of things that we probably look at more frequently is same-store sales or restaurant traffic to kind of indicate that, new unit builds.

23:49Brittany Cerwin: But also for us, it's kind of the order pattern as well. So making sure that we're understanding the cadence underneath our brands and our businesses to their order patterns really give us visibility into sales timing.

24:10We want to touch on AI in this business. Where is automation or AI creating measurable value for Middleby customers today? So there's a couple areas I think we're embarking just like everyone else on our AI journey. I think on our service transformation that I've been talking about, that's coming with us developing a platform that will allow visibility to us of where our equipment is and see it all the way post that warranty period. And really connect our service agents and us seeing the same piece of data on that equipment in a full lifecycle view. So we're using a lot of AI tools to help us develop that.

24:56You'll see us, you know, on our digital marketing journey, we've invested in chatbots and our newly launched Middleby Shop to help educate those people shopping on the web and outside of maybe the traditional commercial restaurant equipment channels that were out there under brick and mortar or feet on the street. And so we've really invested there heavily. I think we continue to invest in that as we're looking at our back office support in terms of system development, in terms of financial analysis. Obviously, it's not that it's necessarily going to replace roles or responsibilities, but it's going to make those people in those seats able to focus on more value add and analysis and really expand and take away maybe some of those day-to-day or more mundane processes.

26:00I just want to return to growth for a little bit. With Middleby now more sharply focused, what part of the growth model is still hardest to predict? Where we've been honest and where we are focused is really on our operational excellence journey. So one of the things that we're very proud of and I spoke of before was our go-to-market strategy and how that's led us for the last two quarters here to have strong organic growth in still what you would define as a mixed or a challenged industry. And now we're focused on really putting our focus back into our operations and enhancing and embedding those principles of lean manufacturing.

26:50How do we make making the equipment and our operations more simple? SKU rationalization, product teardown to get value, and really being able to focus on our capabilities that we can control to expand margins. And so again, it starts at the top with making sure that everyone knows this is a focus of ours, and that we've built up capabilities and resources internally to support our divisions on this journey and so that we're building that as we start to roll this out through the platform so that we learn as we you know learn what has worked best at this division in terms of the cages or here's some other things to focus on

27:47well as we've learned middle b has grown through both acquisitions and innovation and it has this new sort of portfolio uh has this new portfolio changed the investment mindset wondering if you can reflect on what earns investment now if i think about kind of the investments that we've done in the commercial platform historically. For the last few years, it's really been focused on technology investments, building up our IoT capabilities, because as we see, it's becoming just as important to the customers to be able to have that visibility to the equipment or other things about it. What's driving their decision making?

28:40Is it savings across energy? Is it really uptime? Is it some of the input costs like at a fryer on the oil usage? So really making sure that we're investing in that across our platform. So one of the things we embarked upon a few years ago was we bought a controls company and it helped us develop and implement a common control platform across our Middleby pieces of equipment. So that as you operate a Pitco fryer or as you operate a Taylor Next Gen grill, while the buttons and the features are different, that look and feel of the user interface is very similar and it's built on a common platform.

29:27And so having those capabilities and in-house technology within Middleby has allowed us to then leverage that as we continue on building new innovation and bringing new products

29:41Brittany Cerwin: to market.

29:46Well, it's great chatting with you at this moment in time. We're going to ask you to look back again, and we're wondering if you could supply us with a finance strategic moment. You might only have to go back to last week. I don't know, but it could have happened 10 years ago. But what comes to mind when we ask for a finance strategic moment? Yeah, so I talked a little bit already about our platform transformation this year. And so that hands down would be one of the most strategic moments as we looked to how do you have multi-faceted projects of that size going on in a finance department while still, you know, executing on a day-to-day strategy.

30:32But one I wanted to take you back to a little earlier in time was Middleby had embarked upon kind of putting in place a new consolidation tool a few years back. And every consolidation tool that you see, there's all bells and whistles and modules that get you excited about implementing. But once we had implemented it for our financial consolidation and forecasting process, we pivoted that to focus on our sales reporting. So we interact across a lot of buying groups. We sell to a lot of chain customers that are very known. And then we also use a third-party sales network. And we're a decentralized organization in the fact that not everyone's on a common ERP system.

31:18So as we want to gather data across sales reporting, Warhat historically was done via Excel template and consolidation, sending emails back and forth through an Excel template. And so there was manual processes as part of that. And so really what we did is we empowered our team to leverage our consolidation tool to automate that process with our division. and what I knew early on is I was part of that sales recording journey of making it more timely, of getting the reports out there and I thought, wow, I had really made the process part of my own but really a strategic moment was empowering our team to now take that part of our business that every time a leader gets one of those monthly reports in their inbox, they're opening it right away because it's strategic information that helps them see the strength of the business, where to focus on coming up, and where do they need to lean into some of those relationships that they have.

32:25And so empowering our team to roll that out across the platform from the consolidation view was kind of one of the strategic moments that I think really helped our business from an internal perspective, but those reports are shared externally with our partners as well. And so the investment in the time that we carved out to do that has really helped in those relationships as well. And so I think it was also a learning for me in how delegation and seeing the exposure that our team had and in getting to, you know, interact with the division, interact with senior management as they built out that process and also build those relationships across our sales channels kind of motivated me more than me being the owner of that task, but watching them succeed.

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34:51Well, thank you. Thank you for that. We're going to jump to our mentoring round where we want you to, we want to ask you about networking, to be honest, because here you are. You explained how you never wanted to be siloed in terms of the types of work and projects you were involved in. But you're within one company. And we wonder, now as a leader, you want to continue to grow as well. So, I mean, has networking played a role in your career? Within our organization has played a part, getting to know our finance leaders, getting to know our president, and kind of continuing those networks that I have from public accounting.

35:36People that you worked with in public accounting, there's a handful that maybe stay in that career lifelong, but there are a lot that go out in the industry. Being able to pick up that phone and bounce an idea off of them, or in the instance for me where we went through some transformational items and we needed some either finance support or technical support, being able to call those that are still in those public accounting seats. or as we embarked upon implementing a new regulation. So OSC 606 back in the day was a huge project for everyone. So leaning on my network to understand what is the right firm to help us through an implementation like that.

36:22And so it's very interesting to see how full circle things are and people that you interacted with over time are still in your network. But I do look forward to even further, you know, advancing my network. So now having more exposure to our board directors and the financial leads that they've worked with over the years and seeing great success and growth and development, helping, you know, me transform and continue to grow Middleby's financial reporting in the future. Nice. Thank you. Thank you for that. We always like to ask our guests to reflect a little on the personal side for us. You've been there 15 years.

37:03Your colleagues know everything about you, but there must be something, something that's escaped them. they don't know about me uh my i am from a small town 10 minutes from our global headquarters so that's one of the things maybe you know you think you live in outside of the suburbs of chicago you'll for sure work for a big chicago-based company and you know maybe be away from home this has brought me to a five to ten minute drive back to my parents house my kids are going back to the same school that I went to as a kid. So it brought me back to my roots as well. So that's one of the things that I love about Middleby, a large global public company, but still has me close to my roots.

37:49Thank you for that. What about a book or a resource? It doesn't have to be a business book or maybe it's something streaming. I don't know. Yeah. So the Let Them Theory by Mel Robbins is one that we listen to. We have a women's group here at Middleby. We started with, there is a, it's called Women in Food Service Forum, WFF. And what it did is, Middleby started our journey there. One of our board of directors members was one of the original members of that group. And what it's done is it's kind of created within Middleby, a women's network where we get together. We might have a book club. We might do a networking event.

38:35It really allows to do cross-department, cross-division networking with people that you may not interact with all the time. And really kind of allows people to tell their story. And the Let Them Theory was one of the books that we read in our book club. And I think a lot of people in their career journeys, you're worried about what people think. And you're worried about, am I doing the right things? And so it really focuses on what can you control? Let other people think about you what they want. It's really more important what you're seeing of yourself. Do you feel that you gave it your all? Do you feel that you controlled that relationship to the best of your ability?

39:18So that's one that stays close to me all the time. Great, great, great insight there for us. Thank you for that. We're up to our final question, which is when we ask you to look forward for the coming 12 months, we wonder what your priorities are as a CFO. What would those be? Yeah, so I think one that I like to remind people of right now is Middleby's gone through this transformation journey. So reminding our people of the wins that we've had. Not that you want to necessarily slow down, but leverage that momentum as we're kind of motivating people and being part of this standalone company and showing people what we accomplished together over these last 18 months.

40:05My part as the CFO is to help make sure that the strategy is clear, both internally and externally. And that we're all focused and have visibility to achieving those targets that we put out there externally. And how are we moving towards those? What are the challenges and obstacles we're facing? But then how are we going to move through that? and so I think that's part of my goal is to help tell the story but also to create and instill that financial stability and help drive that shareholder return to our investors. Brittany Serwin, thank you for joining us on CFO Thought Leader. Thanks for having me, Jack.

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