WESTFORD, Mass., May 03, 2022 (GLOBE NEWSWIRE) -- Kadant Inc. (NYSE:KAI) reported its financial results for the first quarter ended April 2, 2022.

First Quarter Financial Highlights

Bookings increased 30% to a record $266 million.
Revenue increased 31% to a record $226 million.
Operating cash flow increased 24% to $24 million.
Free cash flow increased 24% to $21 million.
Net income was $41 million, including a $15 million after-tax gain on the sale of a facility.
GAAP diluted EPS increased 147% to $3.53.
Adjusted diluted EPS increased 49% to $2.28.
Adjusted EBITDA increased 41% to a record $46 million and represented 20.2% of revenue.
Backlog was a record $348 million.

Note: Percent changes above are based on comparison to the prior year period. Free cash flow, adjusted diluted 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 had an excellent start to 2022 with record bookings, revenue, and adjusted EBITDA in the first quarter," said Jeffrey L. Powell, president and chief executive officer of Kadant. "Strong demand continued across all operating segments with new order activity from both parts and capital contributing to record backlog at the end of the first quarter.

"Solid execution by our operations teams led to improved operating performance and record adjusted EBITDA despite ongoing supply chain constraints and inflationary pressures. Our global workforce once again delivered exceptional value to our customers who rely on our critical technologies and engineered systems to enable Sustainable Industrial Processing."

First Quarter 2022 compared to 2021

Revenue increased 31 percent to a record $226.5 million compared to $172.5 million in 2021. Organic revenue increased 22 percent, which excludes an 11 percent increase from acquisitions and a two percent decrease from the unfavorable effect of foreign currency translation. Gross margin was 43.4 percent compared to 43.9 percent in 2021.

GAAP diluted earnings per share (EPS) increased 147 percent to $3.53, which included a $1.30 gain on the sale of a facility, compared to $1.43 in 2021. Adjusted diluted EPS increased 49 percent to $2.28 compared to $1.53 in 2021. Adjusted diluted EPS excludes a $1.30 gain on the sale of a facility, $0.04 of acquisition-related costs, and $0.01 of impairment costs in 2022 and $0.10 of acquisition costs in 2021. Net income increased 149 percent to $41.2 million compared to $16.6 million in 2021. Adjusted EBITDA increased 41 percent to a record $45.8 million and represented 20.2 percent of revenue compared to $32.4 million and 18.8 percent of revenue in the prior year quarter. Operating cash flow increased 24 percent to $23.8 million compared to $19.1 million in 2021.

Bookings increased 30 percent to a record $266.1 million compared to $204.5 million in 2021. Organic bookings increased 22 percent, which excludes an 11 percent increase from acquisitions and a three percent decrease from the unfavorable effect of foreign currency translation.

Summary and Outlook

"We are encouraged by the strong start, and as a result, we are raising our guidance for the year," Mr. Powell continued. "Our record backlog has us positioned well, and we expect to generate record financial results while continuing to navigate supply chain challenges, economic headwinds, and growing socio-political uncertainties.

"We now expect revenue of $885 to $905 million in 2022, revised from our previous guidance of $870 to $890 million. We now expect to achieve GAAP diluted EPS of $10.05 to $10.25, revised from our previous guidance of $8.50 to $8.70. The revised 2022 guidance includes a $1.30 gain on the sale of a facility, $0.04 of acquisition-related costs, and a $0.01 impairment charge. Excluding these items, we now expect adjusted diluted EPS of $8.80 to $9.00, revised from our previous guidance of $8.55 to $8.75. The 2022 guidance includes a negative effect from foreign currency translation, lowering revenue guidance by $14 million and adjusted diluted EPS guidance by $0.14. For the second quarter of 2022, we expect GAAP diluted EPS of $1.86 to $1.96 on revenue of $215 to $220 million."

Conference Call

Kadant will hold a webcast with a slide presentation for investors on Wednesday, May 4, 2022, at 11:00 a.m. eastern time to discuss its first quarter performance, as well as future expectations. To access the webcast, including the slideshow and accompanying audio, go to www.kadant.com and click on "Investors." To listen to the webcast via teleconference, call 888-326-8410 within the U.S., or +1-704-385-4884 outside the U.S. and reference participant passcode 8582925. 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. An archive of the webcast presentation will be available on our website until June 3, 2022.

After the webcast, Kadant will post its updated general investor presentation incorporating the first 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 diluted 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. Revenue in the first quarter of 2022 included $20.0 million from acquisitions and a $3.9 million unfavorable foreign currency translation effect. Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude impairment costs, acquisition costs, amortization expense related to acquired profit in inventory and backlog, and certain gains or losses. 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 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.

First Quarter

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

Pre-tax gain on the sale of a facility of $20.2 million in 2022.
Pre-tax acquisition costs of $0.1 million in 2022 and $1.3 million in 2021.
Pre-tax indemnification asset reversal of $0.6 million in 2022.
Pre-tax impairment costs of $0.2 million in 2022.
Pre-tax expense related to amortization of acquired profit in inventory and backlog of $0.5 million in 2022 and $0.1 million in 2021.

Adjusted net income and adjusted diluted EPS exclude:

After-tax gain on the sale of a facility of $15.1 million ($20.2 million net of tax of $5.1 million) in 2022.
After-tax acquisition costs of $0.1 million in 2022 and $1.2 million ($1.3 million net of tax of $0.1 million) in 2021.
After-tax impairment costs of $0.1 million ($0.2 million net of tax of $0.1 million) in 2022.
After-tax expense related to amortization of acquired profit in inventory and backlog of $0.4 million ($0.5 million net of tax of $0.1 million) in 2022.

Free cash flow is calculated as operating cash flow less:

Capital expenditures of $2.9 million in 2022 and $2.3 million in 2021.

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
Consolidated Statement of Income			April 2, 2022			April 3, 2021
Revenue			$	226,480		$	172,463
Costs and Operating Expenses:
	Cost of revenue			128,269			96,748
	Selling, general, and administrative expenses			59,168			49,431
	Research and development expenses			3,078			2,857
	Gain on sale and other expense, net (b)			(20,008	)		—
				170,507			149,036
Operating Income				55,973			23,427
Interest Income				102			65
Interest Expense				(1,234	)		(1,111	)
Other Expense, Net				(22	)		(24	)
Income Before Provision for Income Taxes				54,819			22,357
Provision for Income Taxes				13,378			5,561
Net Income				41,441			16,796
Net Income Attributable to Noncontrolling Interest				(249	)		(235	)
Net Income Attributable to Kadant			$	41,192		$	16,561

Earnings per Share Attributable to Kadant:
		Basic	$	3.54		$	1.43
		Diluted	$	3.53		$	1.43

Weighted Average Shares:
		Basic		11,630			11,553
		Diluted		11,655			11,612

		Three Months Ended						Three Months Ended
Adjusted Net Income and Adjusted Diluted EPS (a)		April 2, 2022			April 2, 2022			April 3, 2021		April 3, 2021
Net Income and Diluted EPS Attributable to Kadant, as Reported		$	41,192		$	3.53		$	16,561	$	1.43
Adjustments for the Following, Net of Tax:
	Gain on Sale (b)		(15,143	)		(1.30	)		—		—
	Acquisition Costs		59			0.01			1,173		0.10
	Impairment Costs		135			0.01			—		—
	Acquired Profit in Inventory and Backlog Amortization (c,d)		387			0.03			44		—
Adjusted Net Income and Adjusted Diluted EPS (a)		$	26,630		$	2.28		$	17,778	$	1.53

	Three Months Ended								Increase Excluding Acquisitions and FX (a,e)
Revenue by Segment	April 2, 2022			April 3, 2021			Increase		Increase Excluding Acquisitions and FX (a,e)
Flow Control	$	85,826		$	63,754		$	22,072	$	11,227
Industrial Processing		93,085			69,154			23,931		25,186
Material Handling		47,569			39,555			8,014		1,484
	$	226,480		$	172,463		$	54,017	$	37,897

Percentage of Parts and Consumables Revenue		65	%		68	%

	Three Months Ended						Increase		Increase Excluding Acquisitions and FX (e)
Bookings by Segment	April 2, 2022			April 3, 2021			Increase		Increase Excluding Acquisitions and FX (e)
Flow Control	$	100,111		$	75,999		$	24,112	$	13,378
Industrial Processing		106,344			86,606			19,738		21,149
Material Handling		59,640			41,884			17,756		9,467
	$	266,095		$	204,489		$	61,606	$	43,994

Percentage of Parts and Consumables Bookings		60	%		65	%

		Three Months Ended
Business Segment Information		April 2, 2022			April 3, 2021
Gross Margin:
	Flow Control		52.4	%		53.3	%
	Industrial Processing		38.6	%		40.5	%
	Material Handling		36.4	%		34.7	%
			43.4	%		43.9	%

Operating Income:
	Flow Control	$	21,725		$	15,446
	Industrial Processing		38,159			11,106
	Material Handling		5,844			4,169
	Corporate		(9,755	)		(7,294	)
		$	55,973		$	23,427

Adjusted Operating Income (a,f):
	Flow Control	$	21,569		$	16,443
	Industrial Processing		18,726			11,193
	Material Handling		6,561			4,443
	Corporate		(9,755	)		(7,294	)
		$	37,101		$	24,785

Capital Expenditures:
	Flow Control	$	525		$	334
	Industrial Processing		1,952			1,804
	Material Handling		384			121
	Corporate		7			—
		$	2,868		$	2,259

		Three Months Ended
Cash Flow and Other Data		April 2, 2022			April 3, 2021
Operating Cash Flow		$	23,768		$	19,092
Less: Capital Expenditures			(2,868	)		(2,259	)
Free Cash Flow (a)		$	20,900		$	16,833

Depreciation and Amortization Expense		$	9,445		$	7,686

Balance Sheet Data		April 2, 2022		January 1, 2022
Assets
Cash, Cash Equivalents, and Restricted Cash		$	88,971	$	94,161
Accounts Receivable, net			125,919		117,209
Inventories			143,583		134,356
Contract Assets			8,978		8,626
Property, Plant, and Equipment, net			105,851		107,989
Intangible Assets			192,426		199,343
Goodwill			394,414		396,887
Other Assets			84,124		73,641
		$	1,144,266	$	1,132,212
Liabilities and Stockholders' Equity
Accounts Payable		$	67,762	$	59,250
Debt Obligations			243,377		264,597
Other Borrowings			4,479		4,917
Other Liabilities			228,910		237,832
	Total Liabilities		544,528		566,596
	Stockholders' Equity		599,738		565,616
		$	1,144,266	$	1,132,212

		Three Months Ended
Adjusted Operating Income and Adjusted EBITDA Reconciliation (a)		April 2, 2022			April 3, 2021
Consolidated
	Net Income Attributable to Kadant	$	41,192		$	16,561
	Net Income Attributable to Noncontrolling Interest		249			235
	Provision for Income Taxes		13,378			5,561
	Interest Expense, Net		1,132			1,046
	Other Expense, Net		22			24
	Operating Income		55,973			23,427
	Gain on Sale (b)		(20,190	)		—
	Acquisition Costs		76			1,298
	Indemnification Asset Reversal (g)		575			—
	Impairment Costs		182			—
	Acquired Backlog Amortization (c)		703			60
	Acquired Profit in Inventory Amortization (d)		(218	)		—
	Adjusted Operating Income (a)		37,101			24,785
	Depreciation and Amortization		8,742			7,626
	Adjusted EBITDA (a)	$	45,843		$	32,411
	Adjusted EBITDA Margin (a,h)		20.2	%		18.8	%

Flow Control
	Operating Income	$	21,725		$	15,446
	Acquisition Costs		62			997
	Acquired Profit in Inventory Amortization (d)		(218	)		—
	Adjusted Operating Income (a)		21,569			16,443
	Depreciation and Amortization		2,347			1,572
	Adjusted EBITDA (a)	$	23,916		$	18,015
	Adjusted EBITDA Margin (a,h)		27.9	%		28.3	%

Industrial Processing
	Operating Income	$	38,159		$	11,106
	Gain on Sale (b)		(20,190	)		—
	Indemnification Asset Reversal (g)		575			—
	Impairment Costs		182			—
	Acquisition Costs		—			27
	Acquired Backlog Amortization (c)		—			60
	Adjusted Operating Income (a)		18,726			11,193
	Depreciation and Amortization		3,274			3,338
	Adjusted EBITDA (a)	$	22,000		$	14,531
	Adjusted EBITDA Margin (a,h)		23.6	%		21.0	%

Material Handling
	Operating Income	$	5,844		$	4,169
	Acquisition Costs		14			274
	Acquired Backlog Amortization (c)		703			—
	Adjusted Operating Income (a)		6,561			4,443
	Depreciation and Amortization		3,096			2,686
	Adjusted EBITDA (a)	$	9,657		$	7,129
	Adjusted EBITDA Margin (a,h)		20.3	%		18.0	%

Corporate
	Operating Loss	$	(9,755	)	$	(7,294	)
	Depreciation and Amortization		25			30
	EBITDA (a)	$	(9,730	)	$	(7,264	)

(a)	Represents a non-GAAP financial measure.

(b)	Includes a $20,190 gain on the sale of a Chinese facility in our Industrial Processing segment pursuant to a relocation plan.

(c)	Represents intangible amortization expense associated with acquired backlog.

(d)	Represents income within the cost of revenue associated with amortization of acquired profit in inventory.

(e)	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.

(f)	See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation."

(g)	Represents an indemnification asset reversal related to the release of tax reserves associated with uncertain tax positions.

(h)	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 3,000 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 January 1, 2022 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; health epidemics; 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 in our tax provision or exposure to additional tax liabilities; 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; economic conditions and regulatory changes caused by the United Kingdom's exit from the European Union; 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; substitution of an alternative index for LIBOR; 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

or

Media Contact Information:

Wes Martz, 269-278-1715

media@kadant.com

Kadant Reports First Quarter 2022 Results