Kadant Reports Third Quarter 2024 Results

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 2023Revenue 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 MeasuresIn 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

 

$