• Kadant Reports Third Quarter 2024 Results

    Source: Nasdaq GlobeNewswire / 29 Oct 2024 16:43:03   America/New_York

    WESTFORD, Mass., Oct. 29, 2024 (GLOBE NEWSWIRE) -- Kadant Inc. (NYSE: KAI) reported its financial results for the third quarter ended September 28, 2024.

    Third Quarter Financial Highlights

    • Revenue increased 11% to $272 million
    • Gross margin was 44.7%
    • Operating cash flow increased 12% to $52 million
    • Free cash flow increased 27% to $48 million
    • Net income increased 2% to $32 million
    • GAAP EPS increased 2% to $2.68
    • Adjusted EPS increased 6% to a record $2.84
    • Adjusted EBITDA was a record $63 million and represented a record 23.3% of revenue
    • Bookings increased 15% to $240 million

    Note: Percent changes above are based on comparison to the prior year period. All references to earnings per share (EPS) are to our EPS as calculated on a diluted basis. Free cash flow, adjusted EPS, adjusted EBITDA, adjusted EBITDA margin, and changes in organic revenue are non-GAAP financial measures that exclude certain items as detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”

    Management Commentary
    “We delivered another solid quarter with excellent operational execution leading to outstanding margin performance and record adjusted EPS,” said Jeffrey L. Powell, president and chief executive officer of Kadant Inc. “Recent acquisitions in our three operating segments contributed to our strong bookings performance, with robust new order activity in the Americas offsetting softer performance in Europe and Asia.

    “We had record aftermarket parts revenue, which contributed to our record adjusted EBITDA and record adjusted EBITDA margin performance. As one of our core strategic focus areas, it is encouraging to see this growth in our aftermarket parts business in a historically softer quarter. This and other initiatives to optimize our operations continue to enable us to capture greater value for our stakeholders and deliver exceptional results.”

    Third Quarter 2024 Compared to 2023
    Revenue increased 11 percent to $271.6 million compared to $244.2 million in 2023. Organic revenue decreased one percent, which excludes a 12 percent increase from acquisitions. Gross margin was 44.7 percent, including a 50 basis point decrease from acquisition-related costs, compared to 43.3 percent in 2023.

    Net income was $31.6 million, increasing two percent compared to $30.9 million in 2023. GAAP EPS increased two percent to $2.68 compared to $2.63 in 2023. Adjusted EPS increased six percent to a record $2.84 compared to $2.69 in 2023. Adjusted EPS in 2024 excludes $0.15 of acquisition-related costs. Adjusted EBITDA increased 20 percent to a record $63.3 million and represented a record 23.3 percent of revenue compared to $52.7 million and 21.6 percent of revenue in the prior year. Operating cash flow increased 12 percent to $52.5 million compared to $47.0 million in 2023. Free cash flow increased 27 percent to $48.3 million compared to $38.1 million in 2023.

    Bookings increased 15 percent to $240.3 million compared to $209.6 million in 2023. Organic bookings decreased two percent, which excludes a 17 percent increase from acquisitions.

    Summary and Outlook
    “Our solid performance the past three quarters has positioned us well to finish the year strong,” Mr. Powell continued. “We expect demand for our capital equipment to gain momentum as our customers prepare for 2025 projects even as the industrial manufacturing sectors in Europe and Asia continue to face significant headwinds. We are narrowing our revenue guidance for the full year to $1.047 to $1.055 billion in 2024, revised from our previous guidance of $1.045 to $1.065 billion, and now expect GAAP EPS of $9.25 to $9.45 in 2024, revised from our previous GAAP EPS guidance of $9.20 to $9.45. We are raising our adjusted EPS guidance for 2024 and now expect $9.93 to $10.13, revised from our previous guidance of $9.80 to $10.05. The 2024 adjusted EPS guidance excludes $0.68 of acquisition-related costs, revised from $0.60 of acquisition-related costs in our previous guidance. For the fourth quarter of 2024, we expect revenue of $252 to $260 million, GAAP EPS of $1.81 to $2.01 and, after excluding $0.09 of acquisition-related costs, adjusted EPS of $1.90 to $2.10.”

    Conference Call
    Kadant will hold a webcast with a slide presentation for investors on Wednesday, October 30, 2024, at 11:00 a.m. eastern time to discuss its third quarter financial performance, as well as future expectations. To listen to the call live and view the webcast, go to the “Investors” section of the Company’s website at www.kadant.com. Participants interested in joining the call’s live question and answer session are required to register by clicking here or selecting the Q&A link on our website to receive a dial-in number and unique PIN. It is recommended that you join the call 10 minutes prior to the start of the event. A replay of the webcast presentation will be available on our website through November 29, 2024.

    Prior to the call, our earnings release and the slides used in the webcast presentation will be filed with the Securities and Exchange Commission and will be available at www.sec.gov. After the webcast, Kadant will post its updated general investor presentation incorporating the third quarter results on its website at www.kadant.com under the “Investors” section.

    Use of Non-GAAP Financial Measures
    In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation (organic revenue), adjusted operating income, adjusted net income, adjusted EPS, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, and free cash flow.

    We use organic revenue to understand our trends and to forecast and evaluate our financial performance and compare revenue to prior periods. Organic revenue excludes revenue from acquisitions for the four quarterly reporting periods following the date of the acquisition and the effect of foreign currency translation. Revenue in the third quarter of 2024 included $30.5 million from acquisitions and an unfavorable foreign currency translation effect of $0.9 million compared to the third quarter of 2023. Revenue in the first nine months of 2024 included $82.3 million from acquisitions and an unfavorable foreign currency translation effect of $2.4 million compared to the first nine months of 2023. Our other non-GAAP financial measures exclude amortization expense related to acquired profit in inventory and backlog, acquisition costs, relocation costs, restructuring and impairment costs, and other income or expense, as indicated. Collectively, these items are excluded as they are not indicative of our core operating results and are not comparable to other periods, which have differing levels of incremental costs, expenditures or income, or none at all. Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt repayments, as well as for other investing and financing activities.

    We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business, operating results, or future outlook. We believe that the inclusion of such measures helps investors gain an understanding of our underlying operating performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts and to the performance of our competitors. Such measures are also used by us in our financial and operating decision-making and for compensation purposes. We also believe this information is responsive to investors' requests and gives them an additional measure of our performance.

    The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for the results of operations or cash flows prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this press release have limitations associated with their use as compared to the most directly comparable GAAP measures, in that they may be different from, and therefore not comparable to, similar measures used by other companies.

    Third Quarter

    Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:

    • Pre-tax amortization of acquired profit in inventory and backlog of $1.9 million in 2024.
    • Pre-tax acquisition costs of $0.5 million in 2024.
    • Pre-tax indemnification asset provision of $0.2 million in 2024 and $0.1 million in 2023.
    • Pre-tax relocation costs of $0.5 million in 2023.
    • Pre-tax restructuring and impairment costs of $0.4 million in 2023.

    Adjusted net income and adjusted EPS exclude:

    • After-tax amortization of acquired profit in inventory and backlog of $1.4 million ($1.9 million net of tax of $0.5 million) in 2024.
    • After-tax acquisition costs of $0.4 million ($0.5 million net of tax of $0.1 million) in 2024.
    • After-tax relocation costs of $0.4 million ($0.5 million net of tax of $0.1 million) in 2023.
    • After-tax restructuring and impairment costs of $0.3 million ($0.4 million net of tax of $0.1 million) in 2023.

    Free cash flow is calculated as operating cash flow less:

    • Capital expenditures of $4.2 million in 2024 and $8.8 million in 2023.

    First Nine Months

    Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:

    • Pre-tax amortization of acquired profit in inventory and backlog of $6.2 million in 2024.
    • Pre-tax acquisition costs of $2.5 million in 2024.
    • Pre-tax indemnification asset provision of $0.2 million in 2024 and pre-tax indemnification asset reversal of $0.1 million in 2023.
    • Pre-tax relocation costs of $0.6 million in 2023.
    • Pre-tax restructuring and impairment costs of $0.4 million in 2023.

    Adjusted net income and adjusted EPS exclude:

    • After-tax amortization of acquired profit in inventory and backlog of $4.7 million ($6.2 million net of tax of $1.5 million) in 2024.
    • After-tax acquisition costs of $2.1 million ($2.5 million net of tax of $0.4 million) in 2024.
    • After-tax relocation costs of $0.5 million ($0.6 million net of tax of $0.1 million) in 2023.
    • After-tax restructuring and impairment costs of $0.3 million ($0.4 million net of tax of $0.1 million) in 2023.

    Free cash flow is calculated as operating cash flow less:

    • Capital expenditures of $15.4 million in 2024 and $22.1 million in 2023.

    Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.

    Financial Highlights (unaudited)        
    (In thousands, except per share amounts and percentages)  
               
        Three Months Ended Nine Months Ended
    Consolidated Statement of Income September 28,
    2024    		 September 30,
    2023    		 September 28,
    2024    		 September 30,
    2023
    Revenue $271,614  $244,182  $795,354  $718,993 
    Costs and Operating Expenses:        
     Cost of revenue 150,175   138,456   441,066   404,671 
     Selling, general, and administrative expenses 69,043   57,889   209,352   176,441 
     Research and development expenses 3,409   3,324   10,621   10,102 
     Other costs —   969   —   1,043 
        222,627   200,638   661,039   592,257 
    Operating Income  48,987   43,544   134,315   126,736 
    Interest Income  407   438   1,386   1,053 
    Interest Expense  (5,516)  (2,107)  (15,386)  (6,722)
    Other Expense, Net  (16)  (20)  (48)  (62)
    Income Before Provision for Income Taxes  43,862   41,855   120,267   121,005 
    Provision for Income Taxes  11,964   10,816   31,810   31,761 
    Net Income  31,898   31,039   88,457   89,244 
    Net Income Attributable to Noncontrolling Interests  (312)  (175)  (891)  (571)
    Net Income Attributable to Kadant $31,586  $30,864  $87,566  $88,673 
               
    Earnings per Share Attributable to Kadant:        
      Basic $2.69  $2.64  $7.46  $7.58 
      Diluted $2.68  $2.63  $7.44  $7.57 
               
    Weighted Average Shares:        
      Basic  11,745   11,706   11,737   11,697 
      Diluted  11,780   11,740   11,763   11,719 
               


       Three Months Ended Three Months Ended
    Adjusted Net Income and Adjusted Diluted EPS (a)September 28,
    2024    		 September 28,
    2024    		 September 30,
    2023    		 September 30,
    2023
    Net Income and Diluted EPS Attributable to Kadant, as Reported $31,586 $2.68 $30,864 $2.63
    Adjustments, Net of Tax:        
     Acquired Profit in Inventory and Backlog Amortization  1,432  0.12  —  —
     Acquisition Costs  398  0.03  —  —
     Relocation Costs  —  —  401  0.03
     Restructuring and Impairment Costs  —  —  295  0.03
    Adjusted Net Income and Adjusted Diluted EPS (a)$33,416 $2.84 $31,560 $2.69
              
       Nine Months Ended Nine Months Ended
     September 28,
    2024    		 September 28,
    2024    		 September 30,
    2023    		 September 30,
    2023
    Net Income and Diluted EPS Attributable to Kadant, as Reported $87,566 $7.44 $88,673 $7.57
    Adjustments, Net of Tax:        
     Acquired Profit in Inventory and Backlog Amortization  4,730  0.40  —  —
     Acquisition Costs  2,126  0.18  —  —
     Relocation Costs  —  —  457  0.04
     Restructuring and Impairment Costs  —  —  295  0.03
    Adjusted Net Income and Adjusted Diluted EPS (a)$94,422 $8.03 $89,425 $7.63
                


        Three Months Ended   Increase (Decrease)
    Excluding Acquisitions and FX (a,b)
    Revenue by Segment  September 28,
    2024    		 September 30,
    2023    		 Increase 
    Flow Control $97,521  $90,798  $6,723 $1,721 
    Industrial Processing  110,696   94,220   16,476  2,077 
    Material Handling  63,397   59,164   4,233  (6,001)
        $271,614  $244,182  $27,432 $(2,203)
               
    Percentage of Parts and Consumables Revenue  65%  61%    
               
        Nine Months Ended Increase
    		 Increase (Decrease)
    Excluding Acquisitions and FX (a,b)
      September 28,
    2024    		 September 30,
    2023    		  
    Flow Control $276,493  $276,048  $445 $(6,053)
    Industrial Processing  331,310   267,729   63,581  19,309 
    Material Handling  187,551   175,216   12,335  (16,787)
        $795,354  $718,993  $76,361 $(3,531)
               
    Percentage of Parts and Consumables Revenue  65%  63%    
               
        Three Months Ended Increase
    		 Increase (Decrease)
    Excluding Acquisitions and FX (b)
    Bookings by Segment September 28,
    2024    		 September 30,
    2023    		  
    Flow Control $88,981  $83,005  $5,976 $(3,756)
    Industrial Processing  89,319   70,441   18,878  5,258 
    Material Handling  62,005   56,158   5,847  (5,063)
        $240,305  $209,604  $30,701 $(3,561)
               
    Percentage of Parts and Consumables Bookings  72%  67%    
               
        Nine Months Ended 
    Increase
    		 Decrease Excluding Acquisitions and FX (b)
      September 28,
    2024    		 September 30,
    2023    		  
    Flow Control $277,749  $275,862  $1,887 $(9,894)
    Industrial Processing  275,910   246,006   29,904  (12,472)
    Material Handling  186,798   177,482   9,316  (20,298)
        $740,457  $699,350  $41,107 $(42,664)
               
    Percentage of Parts and Consumables Bookings  71%  65%    
                 


        Three Months Ended Nine Months Ended
    Additional Segment Information September 28,
    2024    		 September 30,
    2023    		 September 28,
    2024    		 September 30,
    2023
    Gross Margin:        
      Flow Control  51.8%  52.2%  52.9%  52.3%
      Industrial Processing  44.0%  39.5%  42.3%  39.8%
      Material Handling  35.0%  35.7%  36.2%  36.2%
      Consolidated  44.7%  43.3%  44.5%  43.7%
             
    Operating Income:        
      Flow Control $24,281  $24,246  $69,521  $74,256 
      Industrial Processing  25,969   19,023   70,060   51,968 
      Material Handling  8,793   10,345   25,522   30,006 
      Corporate  (10,056)  (10,070)  (30,788)  (29,494)
        $48,987  $43,544  $134,315  $126,736 
               
    Adjusted Operating Income (a,c):        
      Flow Control $25,671  $24,680  $72,146  $74,690 
      Industrial Processing  26,539   19,558   72,776   52,577 
      Material Handling  9,019   10,295   28,809   30,133 
      Corporate  (10,056)  (10,070)  (30,788)  (29,494)
        $51,173  $44,463  $142,943  $127,906 
               
    Capital Expenditures:        
      Flow Control $1,894  $1,195  $5,729  $3,889 
      Industrial Processing  1,209   7,299   5,943   16,007 
      Material Handling  1,074   350   3,737   2,170 
      Corporate  8   4   21   28 
        $4,185  $8,848  $15,430  $22,094 
               
        Three Months Ended Nine Months Ended
    Cash Flow and Other Data September 28,
    2024    		 September 30,
    2023    		 September 28,
    2024    		 September 30,
    2023
    Operating Cash Flow $52,478  $46,967  $103,375  $106,311 
    Capital Expenditures  (4,185)  (8,848)  (15,430)  (22,094)
    Free Cash Flow (a) $48,293  $38,119  $87,945  $84,217 
               
    Depreciation and Amortization Expense $12,775  $8,234  $36,505  $24,917 


    Balance Sheet DataSeptember 28,
    2024    		 December 30,
    2023
    Assets   
    Cash, Cash Equivalents, and Restricted Cash$89,734 $106,453
    Accounts Receivable, net 154,965  133,929
    Inventories 169,252  152,677
    Contract Assets 14,534  8,366
    Property, Plant, and Equipment, net 174,559  140,504
    Intangible Assets 292,211  159,286
    Goodwill 493,105  392,084
    Other Assets 100,980  82,366
       $1,489,340 $1,175,665
    Liabilities and Stockholders' Equity   
    Accounts Payable$50,536 $42,104
    Debt Obligations 324,501  109,086
    Other Borrowings 1,931  1,789
    Other Liabilities 249,586  246,446
     Total Liabilities 626,554  399,425
     Stockholders' Equity 862,786  776,240
       $1,489,340 $1,175,665
          


      Three Months Ended Nine Months Ended
    Adjusted Operating Income and Adjusted EBITDA Reconciliation (a)  September 28,
    2024    		 September 30,
    2023    		 September 28,
    2024    		 September 30,
    2023
    Consolidated        
      Net Income Attributable to Kadant $31,586  $30,864  $87,566  $88,673 
      Net Income Attributable to Noncontrolling Interests  312   175   891   571 
      Provision for Income Taxes  11,964   10,816   31,810   31,761 
      Interest Expense, Net  5,109   1,669   14,000   5,669 
      Other Expense, Net  16   20   48   62 
      Operating Income  48,987   43,544   134,315   126,736 
      Acquired Profit in Inventory Amortization (d)  1,205   —   4,065   — 
      Acquired Backlog Amortization (e)  687   —   2,181   — 
      Acquisition Costs  469   —   2,533   — 
      Indemnification Asset (Provision) Reversal, Net (f)  (175)  (50)  (151)  127 
      Relocation Costs  —   535   —   609 
      Restructuring and Impairment Costs  —   434   —   434 
      Adjusted Operating Income (a)  51,173   44,463   142,943   127,906 
      Depreciation and Amortization  12,088   8,234   34,324   24,917 
      Adjusted EBITDA (a) $63,261  $52,697  $177,267  $152,823 
      Adjusted EBITDA Margin (a,g)  23.3%  21.6%  22.3%  21.3%
               
    Flow Control        
      Operating Income $24,281  $24,246  $69,521  $74,256 
      Acquired Profit in Inventory Amortization (d)  728   —   963   — 
      Acquired Backlog Amortization (e)  629   —   882   — 
      Acquisition Costs  71   —   637   — 
      Indemnification Asset (Provision) Reversal, Net (f)  (38)  —   143   — 
      Restructuring and Impairment Costs  —   434   —   434 
      Adjusted Operating Income (a)  25,671   24,680   72,146   74,690 
      Depreciation and Amortization  2,981   2,277   7,561   6,785 
      Adjusted EBITDA (a) $28,652  $26,957  $79,707  $81,475 
      Adjusted EBITDA Margin (a,g)  29.4%  29.7%  28.8%  29.5%
               
    Industrial Processing        
      Operating Income $25,969  $19,023  $70,060  $51,968 
      Acquired Profit in Inventory Amortization (d)  477   —   2,062   — 
      Acquisition Costs  154   —   842   — 
      Indemnification Asset Provision (f)  (61)  —   (188)  — 
      Relocation Costs  —   535   —   609 
      Adjusted Operating Income (a)  26,539   19,558   72,776   52,577 
      Depreciation and Amortization  5,204   2,906   15,458   8,823 
      Adjusted EBITDA (a) $31,743  $22,464  $88,234  $61,400 
      Adjusted EBITDA Margin (a,g)  28.7%  23.8%  26.6%  22.9%
               
    Material Handling        
      Operating Income $8,793  $10,345  $25,522  $30,006 
      Acquired Profit in Inventory Amortization (d)  —   —   1,040   — 
      Acquired Backlog Amortization (e)  58   —   1,299   — 
      Acquisition Costs  244   —   1,054   — 
      Indemnification Asset (Provision) Reversal, Net (f)  (76)  (50)  (106)  127 
      Adjusted Operating Income (a)  9,019   10,295   28,809   30,133 
      Depreciation and Amortization  3,891   3,034   11,269   9,254 
      Adjusted EBITDA (a) $12,910  $13,329  $40,078  $39,387 
      Adjusted EBITDA Margin (a,g)  20.4%  22.5%  21.4%  22.5%
               
    Corporate        
      Operating Loss $(10,056) $(10,070) $(30,788) $(29,494)
      Depreciation and Amortization  12   17   36   55 
      EBITDA (a) $(10,044) $(10,053) $(30,752) $(29,439)
               
    (a)Represents a non-GAAP financial measure.
               
    (b)Represents the increase (decrease) resulting from the exclusion of acquisitions and from the conversion of current period amounts reported in local currencies into U.S. dollars at the exchange rate of the prior period compared to the U.S. dollar amount reported in the prior period.
               
    (c)See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."
               
    (d)Represents amortization expense within cost of revenue associated with acquired profit in inventory.
               
    (e)Represents intangible amortization expense associated with acquired backlog.
               
    (f)Represents the provision for or reversal of indemnification assets related to the establishment or release of tax reserves associated with uncertain tax positions.
               
    (g)Calculated as adjusted EBITDA divided by revenue in each period.
               

    About Kadant
    Kadant Inc. is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing®. The Company’s products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries. Kadant is based in Westford, Massachusetts, with approximately 3,500 employees in 20 countries worldwide. For more information, visit www.kadant.com. 

    Safe Harbor Statement
    The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements that involve a number of risks and uncertainties, including forward-looking statements about our future financial and operating performance, demand for our products, and economic and industry outlook. These forward-looking statements represent our expectations as of the date of this press release. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those set forth under the heading "Risk Factors" in Kadant’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to adverse changes in global and local economic conditions; the variability and difficulty in accurately predicting revenues from large capital equipment and systems projects; our acquisition strategy; levels of residential construction activity; reductions by our wood processing customers of their capital spending or production of oriented strand board; changes to the global timber supply; development and use of digital media; cyclical economic conditions affecting the global mining industry; demand for coal, including economic and environmental risks associated with coal; failure of our information systems or breaches of data security and cybertheft; implementation of our internal growth strategy; supply chain constraints, inflationary pressure, price increases and shortages in raw materials; competition; changes to tax laws and regulations; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; loss of key personnel and effective succession planning; protection of intellectual property; climate change; adequacy of our insurance coverage; global operations; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; changes to government regulations and policies around the world; compliance with government regulations and policies and compliance with laws; environmental laws and regulations; environmental, health and safety laws and regulations impacting the mining industry; our debt obligations; restrictions in our credit agreement and note purchase agreement; soundness of financial institutions; fluctuations in our share price; and anti-takeover provisions.

    Contacts
    Investor Contact Information:
    Michael McKenney, 978-776-2000
    IR@kadant.com 

    Media Contact Information:
    Wes Martz, 269-278-1715
    media@kadant.com 


    Primary Logo

Share on,