Document

EX-99.1 2 kaiform8kex991q324.htm KAI FORM 8-K EXHIBIT 99.1 10-29-2024 EARNINGS RELEASE Document

Exhibit 99.1


						PRESS RELEASE

			KADANT INC.
			One Technology Park Drive
			Westford, MA 01886 USA
			Tel: +1 978-776-2000
			www.kadant.com

Kadant Reports Third Quarter 2024 Results

WESTFORD, Mass., October 29, 2024 - 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.


Kadant Reports Third Quarter 2024 Results
October 29, 2024
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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 visiting https://register.vevent.com/register/BI4bcfaa23a4ec40f7925041800a6135e0 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

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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.

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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

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	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%

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		Three Months Ended				Nine Months Ended
Additional Segment Information (continued)		September 28, 2024		September 30, 2023		September 28, 2024		September 30, 2023
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

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		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%

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		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
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;

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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:

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