UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 3, 2021
(Exact name of registrant as specified in its charter)
Commission file number 001-11406
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of principal executive offices, including zip code)
(978 ) 776-2000
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
KADANT INC.
Item 2.02 Results of Operations and Financial Condition.
On August 3, 2021, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended July 3, 2021. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 7.01 Regulation FD Disclosure.
On August 4, 2021, the Company will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended July 3, 2021. A copy of the slides that will be presented on the webcast and discussed in the conference call is furnished as Exhibit 99.2 to this Current Report on Form 8-K.
The information in Item 2.02 and Item 7.01 of this Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
| (d) Exhibits | ||||||||
| The following exhibits relating to Item 2.02 and Item 7.01 shall be deemed to be furnished and not filed. | ||||||||
| Exhibit | ||||||||
No. | Description of Exhibits | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
2
KADANT INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KADANT INC. | ||||||||
| Date: August 3, 2021 | By | /s/ Michael J. McKenney | ||||||
| Michael J. McKenney Executive Vice President and Chief Financial Officer | ||||||||
3
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 Record Results for Second Quarter 2021
WESTFORD, Mass., August 3, 2021 - Kadant Inc. (NYSE: KAI) reported its financial results for the second quarter ended July 3, 2021.
Second Quarter Financial Highlights with Records Achieved in Each of the Following Metrics
•Bookings increased 60% to $213 million.
•Revenue increased 28% to $196 million.
•Operating cash flow increased 101% to $44 million.
•Free cash flow increased 100% to $42 million.
•Net income increased 97% to $23 million.
•GAAP diluted EPS increased 96% to $1.96.
•Adjusted diluted EPS increased 90% to $2.01.
•Adjusted EBITDA increased 56% to $41 million and represented 21.1% of revenue.
•Backlog was $242 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
“Our global workforce once again executed extremely well in delivering significant value to our customers and record results for our stockholders,” said Jeffrey L. Powell, president and chief executive officer of Kadant Inc. “The broadening economic recovery has provided us with opportunities to grow our business and our results show that our efforts are working. Record revenue and solid operational execution led to strong adjusted EBITDA margin expansion across all our operating segments and we are well positioned for the second half of 2021.
“New order activity was driven by strong demand across all our operating segments and was particularly strong for our Industrial Processing segment. Our end markets continue to show signs of building momentum as we enter the second half of the year. As the economic recovery spreads to Europe and Asia, we are seeing increased customer optimism and believe the second half of 2021 will finish strong despite headwinds from supply chain constraints and inflationary pressure on material costs.”
Second Quarter 2021 compared to 2020
Revenue increased 28 percent to a record $195.8 million compared to $152.9 million in 2020. Organic revenue increased 21 percent, which excludes a seven percent increase from the favorable effect of foreign currency translation. Gross margin was 43.6 percent compared to 43.5 percent in 2020.
GAAP diluted earnings per share (EPS) increased 96 percent to a record $1.96 compared to $1.00 in 2020. Adjusted diluted EPS increased 90 percent to a record $2.01 compared to $1.06 in 2020. Adjusted diluted EPS excludes $0.05 of acquisition costs in 2021 and $0.03 of acquisition costs and $0.03 of restructuring costs in 2020. Net income increased 97 percent to $22.9 million compared to $11.6 million in 2020. Adjusted EBITDA increased 56 percent to a record $41.3 million and a record 21.1 percent of revenue compared to $26.6 million and 17.4 percent of revenue in the prior year quarter. Operating cash flow increased 101 percent to a record $44.4 million compared to $22.0 million in 2020.
| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 2 | |||||
Bookings increased 60 percent to a record $213.2 million compared to $133.0 million in 2020. Organic bookings increased 50 percent, which excludes a ten percent increase from the favorable effect of foreign currency translation.
Summary and Outlook
“As the U.S. continues its robust growth and other regions begin to show increasing economic momentum, we are well positioned to capitalize on opportunities wherever they may come next,” Mr. Powell continued. “We remain cautiously optimistic that our end market demand will continue to show strength while recognizing the growing risk the COVID-19 Delta variant and supply chain constraints present to near-term economic growth. Our revenue expectation for the year has increased due to our record bookings and backlog. Our acquisition of the Clouth Group of Companies in the third quarter will further strengthen our revenue performance for the year. Accordingly, we are increasing our revenue expectation to $783 to $793 million for 2021 from our previous range of $710 to $730 million.”
Conference Call
Kadant will hold a webcast with a slide presentation for investors on Wednesday, August 4, 2021, at 11:00 a.m. eastern time to discuss its second 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 3083302. 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 September 3, 2021.
Shortly after the webcast, Kadant will post its updated general investor presentation incorporating the second 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 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.
Revenue in the second quarter of 2021 included a $11.6 million favorable foreign currency translation effect. Revenue in the first six months of 2021 included a $17.6 million favorable foreign currency translation effect and $0.5 million from an acquisition. We present increases or decreases in organic revenue, which excludes the effect of acquisitions and foreign currency translation, to provide investors insight into underlying revenue trends.
| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 3 | |||||
Our non-GAAP financial measures exclude restructuring costs, acquisition costs, and amortization expense related to acquired backlog. Free cash flow presents cash flow from operations excluding capital expenditures. 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, or none at all.
Second Quarter
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•Pre-tax acquisition costs of $0.6 million in 2021 and $0.4 million in 2020.
•Pre-tax restructuring costs of $0.5 million in 2020.
Adjusted net income and adjusted diluted EPS exclude:
•After-tax acquisition costs of $0.6 million in 2021 and $0.3 million ($0.4 million net of tax of $0.1 million) in 2020.
•After-tax restructuring costs of $0.3 million ($0.5 million net of tax of $0.2 million) in 2020.
Free cash flow is calculated as cash flow from operations less:
•Capital expenditures of $2.1 million in 2021 and $0.9 million in 2020.
First Six Months
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•Pre-tax acquisition costs of $1.9 million in 2021 and $0.4 million in 2020.
•Pre-tax restructuring costs of $0.5 million in 2020.
•Pre-tax expense related to amortization of acquired backlog of $0.1 million in 2021.
Adjusted net income and adjusted diluted EPS exclude:
•After-tax acquisition costs of $1.7 million ($1.9 million net of tax of $0.2 million) in 2021 and $0.3 million ($0.4 million net of tax of $0.1 million) in 2020.
•After-tax restructuring costs of $0.3 million ($0.5 million net of tax of $0.2 million) in 2020.
•After-tax expense related to amortization of acquired backlog of $0.1 million in 2021.
Free cash flow is calculated as cash flow from operations less:
•Capital expenditures of $4.3 million in 2021 and $3.6 million in 2020.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.
| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 4 | |||||
| Financial Highlights (unaudited) | ||||||||||||||||||||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| Consolidated Statement of Income | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||||||||
| Revenue | $ | 195,811 | $ | 152,860 | $ | 368,274 | $ | 311,987 | ||||||||||||||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||||||||||||||||||
| Cost of revenue | 110,493 | 86,412 | 207,241 | 177,216 | ||||||||||||||||||||||||||||
| Selling, general, and administrative expenses | 49,267 | 45,073 | 98,698 | 90,665 | ||||||||||||||||||||||||||||
| Research and development expenses | 3,041 | 2,798 | 5,898 | 5,874 | ||||||||||||||||||||||||||||
| Restructuring costs | — | 456 | — | 456 | ||||||||||||||||||||||||||||
| 162,801 | 134,739 | 311,837 | 274,211 | |||||||||||||||||||||||||||||
| Operating Income | 33,010 | 18,121 | 56,437 | 37,776 | ||||||||||||||||||||||||||||
| Interest Income | 56 | 37 | 121 | 88 | ||||||||||||||||||||||||||||
| Interest Expense | (1,066) | (1,931) | (2,177) | (4,390) | ||||||||||||||||||||||||||||
| Other Expense, Net | (24) | (31) | (48) | (63) | ||||||||||||||||||||||||||||
| Income Before Provision for Income Taxes | 31,976 | 16,196 | 54,333 | 33,411 | ||||||||||||||||||||||||||||
| Provision for Income Taxes | 8,949 | 4,474 | 14,510 | 9,033 | ||||||||||||||||||||||||||||
| Net Income | 23,027 | 11,722 | 39,823 | 24,378 | ||||||||||||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | (163) | (115) | (398) | (240) | ||||||||||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 22,864 | $ | 11,607 | $ | 39,425 | $ | 24,138 | ||||||||||||||||||||||||
| Earnings per Share Attributable to Kadant: | ||||||||||||||||||||||||||||||||
| Basic | $ | 1.97 | $ | 1.01 | $ | 3.41 | $ | 2.11 | ||||||||||||||||||||||||
| Diluted | $ | 1.96 | $ | 1.00 | $ | 3.39 | $ | 2.09 | ||||||||||||||||||||||||
| Weighted Average Shares: | ||||||||||||||||||||||||||||||||
| Basic | 11,579 | 11,482 | 11,566 | 11,457 | ||||||||||||||||||||||||||||
| Diluted | 11,650 | 11,552 | 11,631 | 11,530 | ||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Adjusted Net Income and Adjusted Diluted EPS (a) | July 3, 2021 | July 3, 2021 | June 27, 2020 | June 27, 2020 | ||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 22,864 | $ | 1.96 | $ | 11,607 | $ | 1.00 | ||||||||||||||||||||||||
| Adjustments for the Following: | ||||||||||||||||||||||||||||||||
| Restructuring Costs, Net of Tax | — | — | 332 | 0.03 | ||||||||||||||||||||||||||||
| Acquisition Costs, Net of Tax (b) | 557 | 0.05 | 297 | 0.03 | ||||||||||||||||||||||||||||
| Amortization of Acquired Backlog, Net of Tax (c) | 21 | — | 20 | — | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 23,442 | $ | 2.01 | $ | 12,256 | $ | 1.06 | ||||||||||||||||||||||||
| Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| July 3, 2021 | July 3, 2021 | June 27, 2020 | June 27, 2020 | |||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 39,425 | $ | 3.39 | $ | 24,138 | $ | 2.09 | ||||||||||||||||||||||||
| Adjustments for the Following: | ||||||||||||||||||||||||||||||||
| Restructuring Costs, Net of Tax | — | — | 332 | 0.03 | ||||||||||||||||||||||||||||
| Acquisition Costs, Net of Tax (b) | 1,730 | 0.15 | 297 | 0.03 | ||||||||||||||||||||||||||||
| Amortization of Acquired Backlog, Net of Tax (c) | 65 | 0.01 | 26 | — | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 41,220 | $ | 3.54 | $ | 24,793 | $ | 2.15 | ||||||||||||||||||||||||
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| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 5 | |||||
| Three Months Ended | Increase Excluding FX (a,d) | |||||||||||||||||||||||||||||||
| Revenue by Segment | July 3, 2021 | June 27, 2020 | Increase | |||||||||||||||||||||||||||||
| Flow Control | $ | 70,762 | $ | 51,365 | $ | 19,397 | $ | 15,610 | ||||||||||||||||||||||||
| Industrial Processing | 82,681 | 65,673 | 17,008 | 10,795 | ||||||||||||||||||||||||||||
| Material Handling | 42,368 | 35,822 | 6,546 | 4,972 | ||||||||||||||||||||||||||||
| $ | 195,811 | $ | 152,860 | $ | 42,951 | $ | 31,377 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 64% | 64% | ||||||||||||||||||||||||||||||
| Six Months Ended | Increase | Increase Excluding Acquisition and FX (a,d) | ||||||||||||||||||||||||||||||
| July 3, 2021 | June 27, 2020 | |||||||||||||||||||||||||||||||
| Flow Control | $ | 134,516 | $ | 108,514 | $ | 26,002 | $ | 20,585 | ||||||||||||||||||||||||
| Industrial Processing | 151,835 | 130,382 | 21,453 | 11,704 | ||||||||||||||||||||||||||||
| Material Handling | 81,923 | 73,091 | 8,832 | 5,903 | ||||||||||||||||||||||||||||
| $ | 368,274 | $ | 311,987 | $ | 56,287 | $ | 38,192 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 66 | % | 65% | |||||||||||||||||||||||||||||
| Three Months Ended | Increase | Increase Excluding FX (d) | ||||||||||||||||||||||||||||||
| Bookings by Segment | July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||||||||||
| Flow Control | $ | 71,819 | $ | 49,361 | $ | 22,458 | $ | 18,660 | ||||||||||||||||||||||||
| Industrial Processing | 101,899 | 53,144 | 48,755 | 40,412 | ||||||||||||||||||||||||||||
| Material Handling | 39,447 | 30,471 | 8,976 | 7,212 | ||||||||||||||||||||||||||||
| $ | 213,165 | $ | 132,976 | $ | 80,189 | $ | 66,284 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 60% | 71% | ||||||||||||||||||||||||||||||
| Six Months Ended | Increase | Increase Excluding Acquisition and FX (d) | ||||||||||||||||||||||||||||||
| July 3, 2021 | June 27, 2020 | |||||||||||||||||||||||||||||||
| Flow Control | $ | 147,818 | $ | 117,105 | $ | 30,713 | $ | 24,733 | ||||||||||||||||||||||||
| Industrial Processing | 188,505 | 118,982 | 69,523 | 56,664 | ||||||||||||||||||||||||||||
| Material Handling | 81,331 | 72,506 | 8,825 | 5,568 | ||||||||||||||||||||||||||||
| $ | 417,654 | $ | 308,593 | $ | 109,061 | $ | 86,965 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 62% | 68% | ||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| Business Segment Information | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||||||||
| Gross Margin: | ||||||||||||||||||||||||||||||||
| Flow Control | 52.8% | 53.5% | 53.0% | 53.2% | ||||||||||||||||||||||||||||
| Industrial Processing | 40.1% | 40.9% | 40.3% | 39.7% | ||||||||||||||||||||||||||||
| Material Handling | 34.9% | 33.8% | 34.8% | 34.7% | ||||||||||||||||||||||||||||
| 43.6% | 43.5% | 43.7% | 43.2% | |||||||||||||||||||||||||||||
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| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 6 | |||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| Business Segment Information (continued) | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||||||||
| Operating Income: | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 19,324 | $ | 10,260 | $ | 34,770 | $ | 23,590 | ||||||||||||||||||||||||
| Industrial Processing | 17,301 | 10,639 | 28,434 | 20,075 | ||||||||||||||||||||||||||||
| Material Handling | 5,592 | 3,593 | 10,035 | 7,727 | ||||||||||||||||||||||||||||
| Corporate | (9,207) | (6,371) | (16,802) | (13,616) | ||||||||||||||||||||||||||||
| $ | 33,010 | $ | 18,121 | $ | 56,437 | $ | 37,776 | |||||||||||||||||||||||||
| Adjusted Operating Income (a,e): | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 19,563 | $ | 10,716 | $ | 36,006 | $ | 24,046 | ||||||||||||||||||||||||
| Industrial Processing | 17,301 | 11,074 | 28,494 | 20,510 | ||||||||||||||||||||||||||||
| Material Handling | 5,619 | 3,593 | 10,062 | 7,735 | ||||||||||||||||||||||||||||
| Corporate | (8,843) | (6,371) | (16,137) | (13,616) | ||||||||||||||||||||||||||||
| $ | 33,640 | $ | 19,012 | $ | 58,425 | $ | 38,675 | |||||||||||||||||||||||||
| Capital Expenditures: | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 368 | $ | 337 | $ | 702 | $ | 1,158 | ||||||||||||||||||||||||
| Industrial Processing | 1,191 | 211 | 2,995 | 1,675 | ||||||||||||||||||||||||||||
| Material Handling | 495 | 283 | 616 | 681 | ||||||||||||||||||||||||||||
| Corporate | 5 | 80 | 5 | 83 | ||||||||||||||||||||||||||||
| $ | 2,059 | $ | 911 | $ | 4,318 | $ | 3,597 | |||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| Cash Flow and Other Data | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||||||||
| Operating Cash Flow | $ | 44,386 | $ | 22,039 | $ | 63,478 | $ | 28,208 | ||||||||||||||||||||||||
| Less: Capital Expenditures | (2,059) | (911) | (4,318) | (3,597) | ||||||||||||||||||||||||||||
| Free Cash Flow (a) | $ | 42,327 | $ | 21,128 | $ | 59,160 | $ | 24,611 | ||||||||||||||||||||||||
| Depreciation and Amortization Expense | $ | 7,716 | $ | 7,576 | $ | 15,402 | $ | 15,174 | ||||||||||||||||||||||||
| Balance Sheet Data | July 3, 2021 | January 2, 2021 | ||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash, Cash Equivalents, and Restricted Cash (f) | $ | 158,144 | $ | 66,640 | ||||||||||||||||||||||||||||
| Accounts Receivable, net | 106,791 | 91,540 | ||||||||||||||||||||||||||||||
| Inventories | 114,316 | 106,814 | ||||||||||||||||||||||||||||||
| Unbilled Revenue | 6,481 | 7,576 | ||||||||||||||||||||||||||||||
| Property, Plant, and Equipment, net | 81,757 | 84,642 | ||||||||||||||||||||||||||||||
| Intangible Assets | 151,582 | 160,965 | ||||||||||||||||||||||||||||||
| Goodwill | 350,271 | 351,753 | ||||||||||||||||||||||||||||||
| Other Assets | 60,134 | 57,641 | ||||||||||||||||||||||||||||||
| $ | 1,029,476 | $ | 927,571 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Accounts Payable | $ | 44,087 | $ | 32,264 | ||||||||||||||||||||||||||||
| Debt Obligations | 268,722 | 227,963 | ||||||||||||||||||||||||||||||
| Other Borrowings | 5,003 | 5,511 | ||||||||||||||||||||||||||||||
| Other Liabilities | 180,538 | 164,928 | ||||||||||||||||||||||||||||||
| Total Liabilities | 498,350 | 430,666 | ||||||||||||||||||||||||||||||
| Stockholders' Equity | 531,126 | 496,905 | ||||||||||||||||||||||||||||||
| $ | 1,029,476 | $ | 927,571 | |||||||||||||||||||||||||||||
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| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 7 | |||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (a) | July 3, 2021 | June 27, 2020 | July 3, 2021 | June 27, 2020 | ||||||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 22,864 | $ | 11,607 | $ | 39,425 | $ | 24,138 | ||||||||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | 163 | 115 | 398 | 240 | ||||||||||||||||||||||||||||
| Provision for Income Taxes | 8,949 | 4,474 | 14,510 | 9,033 | ||||||||||||||||||||||||||||
| Interest Expense, Net | 1,010 | 1,894 | 2,056 | 4,302 | ||||||||||||||||||||||||||||
| Other Expense, Net | 24 | 31 | 48 | 63 | ||||||||||||||||||||||||||||
| Operating Income | 33,010 | 18,121 | 56,437 | 37,776 | ||||||||||||||||||||||||||||
| Restructuring Costs | — | 456 | — | 456 | ||||||||||||||||||||||||||||
| Acquisition Costs (b) | 603 | 407 | 1,901 | 407 | ||||||||||||||||||||||||||||
| Acquired Backlog Amortization (c) | 27 | 28 | 87 | 36 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 33,640 | 19,012 | 58,425 | 38,675 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 7,689 | 7,548 | 15,315 | 15,138 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 41,329 | $ | 26,560 | $ | 73,740 | $ | 53,813 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,g) | 21.1 | % | 17.4 | % | 20.0 | % | 17.2 | % | ||||||||||||||||||||||||
| Flow Control | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 19,324 | $ | 10,260 | $ | 34,770 | $ | 23,590 | ||||||||||||||||||||||||
| Acquisition Costs (b) | 239 | — | 1,236 | — | ||||||||||||||||||||||||||||
| Restructuring Costs | — | 456 | — | 456 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 19,563 | 10,716 | 36,006 | 24,046 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 1,568 | 1,579 | 3,140 | 3,165 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 21,131 | $ | 12,295 | $ | 39,146 | $ | 27,211 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,g) | 29.9 | % | 23.9 | % | 29.1 | % | 25.1 | % | ||||||||||||||||||||||||
| Industrial Processing | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 17,301 | $ | 10,639 | $ | 28,434 | $ | 20,075 | ||||||||||||||||||||||||
| Acquisition Costs (b) | — | 407 | — | 407 | ||||||||||||||||||||||||||||
| Acquired Backlog Amortization (c) | — | 28 | 60 | 28 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 17,301 | 11,074 | 28,494 | 20,510 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 3,403 | 3,126 | 6,741 | 6,287 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 20,704 | $ | 14,200 | $ | 35,235 | $ | 26,797 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,g) | 25.0 | % | 21.6 | % | 23.2 | % | 20.6 | % | ||||||||||||||||||||||||
| Material Handling | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 5,592 | $ | 3,593 | $ | 10,035 | $ | 7,727 | ||||||||||||||||||||||||
| Acquired Backlog Amortization (c) | 27 | — | 27 | 8 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 5,619 | 3,593 | 10,062 | 7,735 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 2,682 | 2,795 | 5,368 | 5,592 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 8,301 | $ | 6,388 | $ | 15,430 | $ | 13,327 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,g) | 19.6 | % | 17.8 | % | 18.8 | % | 18.2 | % | ||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||||||||
| Operating Loss | $ | (9,207) | $ | (6,371) | $ | (16,802) | $ | (13,616) | ||||||||||||||||||||||||
| Acquisition Costs (b) | 364 | — | 665 | — | ||||||||||||||||||||||||||||
| Adjusted Operating Loss (a) | (8,843) | (6,371) | (16,137) | (13,616) | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 36 | 48 | 66 | 94 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | (8,807) | $ | (6,323) | $ | (16,071) | $ | (13,522) | ||||||||||||||||||||||||
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| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 8 | |||||
| (a) | Represents a non-GAAP financial measure. | |||||||||||||||||||||||||||||||
| (b) | Represents transaction costs associated with our acquisitions. The results by segment for the first quarter of 2021 have been recast to reflect acquisition costs incurred. | |||||||||||||||||||||||||||||||
| (c) | Represents intangible amortization expense associated with acquired backlog. | |||||||||||||||||||||||||||||||
| (d) | Represents the increase (decrease) resulting from the exclusion of an acquisition 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. | |||||||||||||||||||||||||||||||
| (e) | See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation." | |||||||||||||||||||||||||||||||
| (f) | Includes restricted cash of $84.2 million at the end of the second quarter of 2021 used to fund our third quarter acquisition of Clouth. | |||||||||||||||||||||||||||||||
| (g) | Calculated as adjusted EBITDA divided by revenue in each period. | |||||||||||||||||||||||||||||||
About Kadant
Kadant Inc. is a global supplier of high-value, critical components and engineered systems used in process industries worldwide. The Company’s products, technologies, and services play an integral role in enhancing process efficiency, optimizing energy utilization, and maximizing productivity in resource-intensive industries. Kadant is based in Westford, Massachusetts, with approximately 2,800 employees in 21 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 2, 2021 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to the impact of the COVID-19 pandemic on our operating and financial results; 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; price increases or shortages of 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.
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| Kadant Reports 2021 Second Quarter Results | | ||||
| August 3, 2021 | |||||
Page 9 | |||||
Contacts
Investor Contact Information:
Michael McKenney, 978-776-2000
IR@kadant.com
or
Media Contact Information:
Wes Martz, 269-278-1715
media@kadant.com
###
Second Quarter 2021 Business Review August 4, 2021 Exhibit 99.2
Forward-Looking Statements The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This presentation 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 Kadant’s expectations as of August 4, 2021. 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 2, 2021 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to the impact of the COVID-19 pandemic on our operating and financial results; 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; price increases or shortages of 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. 2KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Use of Non-GAAP Financial Measures In addition to the financial measures prepared in accordance with U.S. 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 diluted EPS (earnings per share), adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), adjusted EBITDA margin, adjusted operating income, and free cash flow. Specific non-GAAP financial measures have been marked with an * (asterisk) within this presentation. A reconciliation of those numbers to the most directly comparable GAAP financial measures is shown in the Appendix and in our second quarter earnings press release issued August 3, 2021, which is available in the Investors section of our website at investor.kadant.com under the heading News Releases. 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 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 presentation 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 presentation 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. 3KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
BUSINESS REVIEW Jeffrey L. Powell, President & CEO 4KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Q2 2021 Operational Highlights • Robust demand across all segments and solid execution by our businesses led to record bookings, revenue, EPS, and operating cash flow • Capital project activity and aftermarket parts and consumables demand benefited from the broadening economic recovery • Global supply chain logistical issues continue to be a challenge 5KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Q2 2021 Performance 6 Q2 21 Q2 20 Change Revenue $195.8 $152.9 +28.1% Net Income $22.9 $11.6 +97.0% Adjusted EBITDA* $41.3 $26.6 +55.6% Adjusted EBITDA Margin* 21.1% 17.4% +370 bps Diluted EPS $1.96 $1.00 +96.0% Adjusted Diluted EPS* $2.01 $1.06 +89.6% Operating Cash Flow $44.4 $22.0 +101.4% Free Cash Flow* $42.3 $21.1 +100.3% Bookings $213.2 $133.0 +60.3% HIGHLIGHTS • Record revenue and bookings performance • Aftermarket parts and consumables revenue was up 28% and made up 64% of Q2 revenue • Strong adjusted EBITDA margin* expansion across all operating segments • Record operating cash flow and free cash flow* ($ in millions, except per share amounts) KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Flow Control 7 $ in millions Q2 21 Q2 20 Change Revenue $70.8 $51.4 +37.8% Bookings $71.8 $49.4 +45.5% Adjusted EBITDA* $21.1 $12.3 +71.9% Adjusted EBITDA Margin* 29.9% 23.9% +600 bps HIGHLIGHTS • Record revenue and strong bookings performance benefited from strong demand from end markets • Parts and consumables revenue made up 65% of total Q2 revenue • Improved operating leverage led to record adjusted EBITDA* with solid adjusted EBITDA margin* improvement ($ in millions) KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. $49.4 $49.6 $61.9 $76.0 $71.8 2Q20 3Q20 4Q20 1Q21 2Q21 BOOKINGS
$53.1 $59.9 $94.8 $86.6 $101.9 2Q20 3Q20 4Q20 1Q21 2Q21 Industrial Processing 8 $ in millions Q2 21 Q2 20 Change Revenue $82.7 $65.7 +25.9% Bookings $101.9 $53.1 +91.7% Adjusted EBITDA* $20.7 $14.2 +45.8% Adjusted EBITDA Margin* 25.0% 21.6% +340 bps HIGHLIGHTS • Demand for wood products and packaging remained strong throughout the second quarter • Strong capital project activity in China led to record bookings in Q2 • Consistently high operating rates continued to drive demand for parts • Volume and product mix contributed to the strong adjusted EBITDA margin* improvement BOOKINGS ($ in millions) KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
$30.5 $33.8 $39.9 $41.9 $39.4 2Q20 3Q20 4Q20 1Q21 2Q21 Material Handling 9 $ in millions Q2 21 Q2 20 Change Revenue $42.4 $35.8 +18.3% Bookings $39.4 $30.5 +29.5% Adjusted EBITDA* $8.3 $6.4 +29.9% Adjusted EBITDA Margin* 19.6% 17.8% +180 bps HIGHLIGHTS • Demand from Europe led to record revenue in Q2 • Aftermarket parts made up 60% of total Q2 revenue • Solid execution and improved operating leverage led to margin improvement • Capital activity remains healthy going into the second half of 2021 BOOKINGS ($ in millions) KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
Business Outlook • Demand expected to remain strong in the second half of 2021 • Healthy levels of industrial activity are expected to reflect the broadening economic recovery, particularly in Europe and Asia • An increase in COVID-19 infections attributed to the Delta variant is leading to growing uncertainty and could decelerate an economic recovery • Well-positioned to capitalize on new business opportunities 10KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
FINANCIAL REVIEW Michael J. McKenney, EVP & CFO KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 11
Q2 2021 Financial Performance Q2 21 Q2 20 Gross Margin 43.6% 43.5% SG&A % of Revenue 25.2% 29.5% Operating Income $33.0 $18.1 Net Income $22.9 $11.6 Adjusted EBITDA* $41.3 $26.6 Diluted EPS $1.96 $1.00 Adjusted Diluted EPS* $2.01 $1.06 HIGHLIGHTS • Adjusted EBITDA margin* of 21.1% • Operating cash flow of $44.4 million • Free cash flow* of $42.3 million • Net debt of $116 million; leverage ratio1 of 1.71 ($ in millions, except per share amounts) KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 12
$21.1 $22.6 $38.1 $16.8 $42.3 2Q20 3Q20 4Q20 1Q21 2Q21 FREE CASH FLOW* OPERATING CASH FLOW 17.4% 19.4% 19.1% 18.0% 21.1% 2Q20 3Q20 4Q20 1Q21 2Q21 29.5% 28.4% 28.1% 28.7% 25.2% 2Q20 3Q20 4Q20 1Q21 2Q21 43.5% 44.2% 44.1% 43.9% 43.6% 2Q20 3Q20 4Q20 1Q21 2Q21 Key Consolidated Financial Metrics CASH FLOW $22.0 $24.4 $40.3 GROSS MARGIN $44.4($ in millions) SG&A ADJUSTED EBITDA MARGIN* $19.1 (as a % of revenue) KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 13
2Q20 to 2Q21 Adjusted Diluted EPS* KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 14 $1.06 $1.15 $0.08 $0.05 ($0.27) ($0.04) ($0.02) $2.01 REVENUE 2Q20 ADJ EPS* GROSS MARGIN INTEREST EXPENSE OPERATING EXPENSE GOV’T PROGRAMS CHANGE IN SHARES 2Q21 ADJ EPS*
Key Liquidity Metrics $ in millions Q2 21 Q1 21 Q2 20 Cash, cash equivalents, and restricted cash $158.1 $66.7 $60.9 Debt $268.7 $217.3 $277.5 Lease obligations $5.0 $5.2 $5.6 Net Debt $115.6 $155.8 $222.2 Leverage ratio1 1.71 1.50 2.01 Working capital % LTM revenue2 12.7% 15.1% 14.8% Cash conversion days3 109 123 128 • Net debt decreased 48% from Q2 2020 • Paid down $27 million of debt in the second quarter of 2021 • Our liquidity remains solid with over $400 million in borrowing capacity • Approximately $141 million under our revolving credit facility; an additional uncommitted $150 million • Up to $115 million through our note purchase agreement KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 15
Financial Outlook for 2021 16KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. • Revenue of $783 to $793 million, up 23% to 25% over 2020 • Gross margin of 42.5% • SG&A at 26% of revenue • Interest expense up $0.5 million in second half of 2021
Questions & Answers To ask a question, please call 888-326-8410 within the U.S. or +1 704-385-4884 outside the U.S. and reference 308 3302. Please mute the audio on your computer. KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 17
2021 Key Priorities 18 MEET OUR CUSTOMERS’ NEEDS ACCELERATE OUR REVENUE GROWTH MAINTAIN STRONG CASH FLOW CAPITALIZE ON NEW OPPORTUNITIES KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED.
INVESTOR RELATIONS CONTACT Michael McKenney, 978-776-2000 IR@kadant.com MEDIA RELATIONS CONTACT Wes Martz, 269-278-1715 media@kadant.com August 4, 2021
APPENDIX Second Quarter 2021 Business Review KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 20
Adjusted Diluted EPS Reconciliation Q2 21 Q1 21 4 Q2 20 Diluted EPS, as reported $1.96 $1.43 $1.00 Restructuring Costs, Net of Tax - - 0.03 Acquisition Costs, Net of Tax 0.05 0.10 0.03 Adjusted Diluted EPS* $2.01 $1.53 $1.06 Free Cash Flow Reconciliation $ in thousands Q2 21 Q2 20 Operating Cash Flow $44,386 $22,039 Less Capital Expenditures (2,059) (911) Free Cash Flow* $42,327 $21,128 Adjusted diluted EPS (earnings per share) is a non-GAAP financial measure. Free cash flow is a non-GAAP financial measure. KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 21
Adjusted EBITDA Reconciliation Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA in a given period by revenue in the same period. $ in thousands Q2 21 Q1 21 4 Q2 20 Net Income Attributable to Kadant $22,864 $16,561 $11,607 Net Income Attributable to Noncontrolling Interest 163 235 115 Provision for Income Taxes 8,949 5,561 4,474 Interest Expense, Net 1,010 1,046 1,894 Other Expense, Net 24 24 31 Restructuring Costs - - 456 Acquisition Costs 603 1,298 407 Acquired Backlog Amortization 27 60 28 Depreciation and Amortization 7,689 7,626 7,548 Adjusted EBITDA* $41,329 $32,411 $26,560 Adjusted EBITDA Margin* 21.1% 18.8% 17.4% KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 22
Select Segment Information (with Q1 2021 recast) $ in thousands Q2 21 Q1 21 4 Q2 20 Flow Control $19,563 $16,443 $10,716 Industrial Processing 17,301 11,193 11,074 Material Handling 5,619 4,443 3,593 Corporate (8,843) (7,294) (6,371) 33,640 $24,785 $19,012 Operating Income Adjusted Operating Income* KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 23 $ in thousands Q2 21 Q1 21 4 Q2 20 Flow Control $21,131 $18,015 $12,295 Industrial Processing 20,704 14,531 14,200 Material Handling 8,301 7,129 6,388 Corporate (8,807) (7,264) (6,323) $41,329 $32,411 $26,560 Adjusted EBITDA* $ in thousands Q2 21 Q1 21 4 Q2 20 Flow Control $19,324 $15,446 $10,260 Industrial Processing 17,301 11,133 10,639 Material Handling 5,592 4,443 3,593 Corporate (9,207) (7,595) (6,371) $33,010 $23,427 $18,121
Revenue by Customer Location $ in thousands Q2 21 Q2 20 Change Change Excl. Acquisition and FX* North America $106,767 $88,718 $18,049 $14,631 Europe 55,827 37,916 17,911 12,489 Asia 24,729 16,237 8,492 6,229 Rest of World 8,488 9,989 (1,501) (1,972) TOTAL $195,811 $152,860 $42,951 $31,377 KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 24
Notes PRESENTATION NOTES • All references to EPS (earnings per share) are to our EPS as calculated on a diluted basis. • Percent change in slides 6-9 is calculated using actual numbers reported in our press release dated August 3, 2021. FOOTNOTES 1) Leverage ratio is calculated by dividing total debt by EBITDA. For purposes of this calculation, EBITDA is calculated by adding or subtracting certain items from Adjusted EBITDA, as required by our amended and restated credit facility (“Credit Facility”). Our Credit Facility defines total debt as debt less worldwide cash of up to $30 million. 2) Working capital is defined as current assets less current liabilities, excluding cash and debt. LTM is defined as last 12 months. 3) Cash conversion days is based on days in receivables plus days in inventory less days in accounts payable. 4) Non-GAAP financial measures and the results by segment for the first quarter of 2021 have been recast to reflect acquisition costs incurred of $1.3 million or $0.10 per diluted share. KAI 2Q21 BUSINESS REVIEW–AUGUST 2021 | © 2021 KADANT INC. ALL RIGHTS RESERVED. 25