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		Increase (Decrease) Excluding Acquisitions and FX (a,b)
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			Increase		Increase (Decrease) Excluding Acquisitions and FX (a,b)
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			Increase		Increase (Decrease) Excluding Acquisitions and FX (b)
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			Increase		Decrease Excluding Acquisitions and FX (b)
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 Data		September 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