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): May 2, 2023
(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 May 2, 2023 , Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended April 1, 2023. 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 May 3, 2023, the Company will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended April 1, 2023. 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: | 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 First Quarter 2023 Results
Reports Record Bookings and Raises Earnings Guidance
WESTFORD, Mass., May 2, 2023 - Kadant Inc. (NYSE: KAI) reported its financial results for the first quarter ended April 1, 2023.
First Quarter Financial Highlights
•Bookings increased 3% to a record $275 million
•Operating cash flow increased 55% to $37 million
•Revenue increased 1% to $230 million
•Net income decreased 32% to $28 million
•GAAP EPS decreased 32% to $2.40
•Adjusted EPS increased 5% to a record $2.40
•Adjusted EBITDA increased 6% to $49 million and represented 21.1% of revenue
•Backlog was a record $393 million
Note: Percent changes above are based on comparison to the prior year period. All references to EPS are to our EPS as calculated on a diluted basis. 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 had an outstanding start to 2023 with record bookings, record adjusted EPS, and excellent cash flow,” said Jeffrey L. Powell, president and chief executive officer of Kadant Inc. “Strong demand for our aftermarket products led to record parts revenue despite the dampening effect of foreign currency translation and contributed to improved margin performance in the first quarter. I want to note that net income of $41 million in the first quarter of 2022 included a $15 million after-tax gain on the sale of a building related to the relocation of one of our Chinese facilities.
“Our operations teams executed extremely well throughout the first quarter with solid margin expansion across most operating segments while delivering exceptional value to our customers who rely on our technologies and engineered solutions to drive Sustainable Industrial Processing.”
First Quarter 2023 compared to 2022
Revenue increased one percent to $229.8 million compared to $226.5 million in 2022. Organic revenue increased five percent, which excludes a four percent decrease from the unfavorable effect of foreign currency translation. Gross profit margin increased to 44.4 percent compared to 43.4 percent in 2022.
GAAP EPS was $2.40 in 2023, decreasing 32 percent compared to $3.53 in 2022, which included a $1.30 gain on the sale of a building. Adjusted EPS increased five percent to a record $2.40 compared to $2.28 in 2022. Adjusted EPS in 2022 excludes a $1.30 gain on the sale of a building, $0.04 of acquisition-related costs, and $0.01 of impairment costs. Net income was $28.1 million in 2023, decreasing 32 percent compared to $41.2 million in 2022, which included an after-tax gain of $15.1 million on the sale of a building. Adjusted EBITDA increased six percent to $48.6 million and represented 21.1 percent of revenue compared to $45.8 million and 20.2 percent of revenue in the prior year. Operating cash flow increased 55 percent to $36.9 million compared to $23.8 million in 2022 due in part to a significant increase in customer deposits.
| Kadant Reports First Quarter 2023 Results | | ||||
| May 2, 2023 | |||||
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Bookings increased three percent to a record $274.5 million compared to $266.1 million in 2022. Organic bookings increased seven percent, which excludes a four percent decrease from the unfavorable effect of foreign currency translation.
Summary and Outlook
“The robust start to the year and our record backlog positions us well for strong performance in 2023,” Mr. Powell continued. “As a result, we are raising our guidance for the full year. We now expect revenue of $910 to $935 million in 2023, revised from our previous guidance of $900 to $925 million, and GAAP EPS of $8.82 to $9.07, revised from our previous guidance of $8.72 to $8.97. The 2023 guidance includes pre-tax relocation costs of $1.2 million, or $0.08 per diluted share, related to the relocation of one of our Chinese facilities. Excluding this expense, we now expect adjusted EPS of $8.90 to $9.15 in 2023, revised from our previous guidance of $8.80 to $9.05. For the second quarter of 2023, we expect revenue of $230 to $235 million, GAAP EPS of $2.01 to $2.11 and, excluding $0.04 per diluted share of relocation costs, adjusted EPS of $2.05 to $2.15.”
Conference Call
Kadant will hold a webcast with a slide presentation for investors on Wednesday, May 3, 2023, at 11:00 a.m. eastern time to discuss its first quarter 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 https://register.vevent.com/register/BI5460a20d17494285a9d7a96d76fe2266 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 June 2, 2023.
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 first quarter results on its website at www.kadant.com under the “Investors” section.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation (organic revenue), adjusted operating income, adjusted net income, adjusted 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 first quarter of 2023 included a $7.4 million unfavorable foreign currency translation effect. Our other non-GAAP financial measures exclude impairment costs, acquisition costs, amortization expense related to acquired profit in inventory and backlog, and certain gains or losses, 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
| Kadant Reports First Quarter 2023 Results | | ||||
| May 2, 2023 | |||||
Page 3 | |||||
decision-making and for compensation purposes. We also believe this information is responsive to investors' requests and gives them an additional measure of our performance.
The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for the results of operations prepared in accordance with GAAP. In addition, the non-GAAP financial measures included in this press release have limitations associated with their use as compared to the most directly comparable GAAP measures, in that they may be different from, and therefore not comparable to, similar measures used by other companies.
First Quarter
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•Pre-tax gain on the sale of a facility of $20.2 million in 2022.
•Pre-tax acquisition costs of $0.1 million in 2022.
•Pre-tax indemnification asset reversal of $0.6 million in 2022.
•Pre-tax impairment costs of $0.2 million in 2022.
•Pre-tax expense related to amortization of acquired profit in inventory and backlog of $0.5 million in 2022.
Adjusted net income and adjusted EPS exclude:
•After-tax gain on the sale of a facility of $15.1 million ($20.2 million net of tax of $5.1 million) in 2022.
•After-tax acquisition costs of $0.1 million in 2022.
•After-tax impairment costs of $0.1 million ($0.2 million net of tax of $0.1 million) in 2022.
•After-tax expense related to amortization of acquired profit in inventory and backlog of $0.4 ($0.5 million net of tax of $0.1 million) in 2022.
Free cash flow is calculated as operating cash flow less:
•Capital expenditures of $4.5 million in 2023 and $2.9 million in 2022.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in this press release.
| Kadant Reports First Quarter 2023 Results | | ||||
| May 2, 2023 | |||||
Page 4 | |||||
| Financial Highlights (unaudited) | ||||||||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Consolidated Statement of Income | April 1, 2023 | April 2, 2022 | ||||||||||||||||||
| Revenue | $ | 229,758 | $ | 226,480 | ||||||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||||||
| Cost of revenue | 127,712 | 128,269 | ||||||||||||||||||
| Selling, general, and administrative expenses | 58,562 | 59,168 | ||||||||||||||||||
| Research and development expenses | 3,370 | 3,078 | ||||||||||||||||||
| Gain on sale and other costs, net (b) | — | (20,008) | ||||||||||||||||||
| 189,644 | 170,507 | |||||||||||||||||||
| Operating Income | 40,114 | 55,973 | ||||||||||||||||||
| Interest Income | 299 | 102 | ||||||||||||||||||
| Interest Expense | (2,370) | (1,234) | ||||||||||||||||||
| Other Expense, Net | (21) | (22) | ||||||||||||||||||
| Income Before Provision for Income Taxes | 38,022 | 54,819 | ||||||||||||||||||
| Provision for Income Taxes | 9,763 | 13,378 | ||||||||||||||||||
| Net Income | 28,259 | 41,441 | ||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | (184) | (249) | ||||||||||||||||||
| Net Income Attributable to Kadant | $ | 28,075 | $ | 41,192 | ||||||||||||||||
| Earnings per Share Attributable to Kadant: | ||||||||||||||||||||
| Basic | $ | 2.40 | $ | 3.54 | ||||||||||||||||
| Diluted | $ | 2.40 | $ | 3.53 | ||||||||||||||||
| Weighted Average Shares: | ||||||||||||||||||||
| Basic | 11,681 | 11,630 | ||||||||||||||||||
| Diluted | 11,694 | 11,655 | ||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
Adjusted Net Income and Adjusted Diluted EPS (a) | April 1, 2023 | April 1, 2023 | April 2, 2022 | April 2, 2022 | ||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 28,075 | $ | 2.40 | $ | 41,192 | $ | 3.53 | ||||||||||||||||||||||||
| Adjustments for the Following, Net of Tax: | ||||||||||||||||||||||||||||||||
| Gain on Sale (b) | — | — | (15,143) | (1.30) | ||||||||||||||||||||||||||||
| Acquisition Costs | — | — | 59 | 0.01 | ||||||||||||||||||||||||||||
| Impairment Costs | — | — | 135 | 0.01 | ||||||||||||||||||||||||||||
| Acquired Profit in Inventory and Backlog Amortization (c,d) | — | — | 387 | 0.03 | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 28,075 | $ | 2.40 | $ | 26,630 | $ | 2.28 | ||||||||||||||||||||||||
| Three Months Ended | Increase (Decrease) Excluding FX (a,e) | |||||||||||||||||||||||||||||||
| Revenue by Segment | April 1, 2023 | April 2, 2022 | Increase (Decrease) | |||||||||||||||||||||||||||||
| Flow Control | $ | 89,521 | $ | 85,826 | $ | 3,695 | $ | 6,250 | ||||||||||||||||||||||||
| Industrial Processing | 83,542 | 93,085 | (9,543) | (5,720) | ||||||||||||||||||||||||||||
| Material Handling | 56,695 | 47,569 | 9,126 | 10,140 | ||||||||||||||||||||||||||||
| $ | 229,758 | $ | 226,480 | $ | 3,278 | $ | 10,670 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 66% | 65% | ||||||||||||||||||||||||||||||
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| Kadant Reports First Quarter 2023 Results | | ||||
| May 2, 2023 | |||||
Page 5 | |||||
| Three Months Ended | Increase (Decrease) | Increase (Decrease) Excluding FX (e) | ||||||||||||||||||||||||||||||
| Bookings by Segment | April 1, 2023 | April 2, 2022 | ||||||||||||||||||||||||||||||
| Flow Control | $ | 104,556 | $ | 100,111 | $ | 4,445 | $ | 7,556 | ||||||||||||||||||||||||
| Industrial Processing | 96,274 | 106,344 | (10,070) | (5,182) | ||||||||||||||||||||||||||||
| Material Handling | 73,689 | 59,640 | 14,049 | 15,263 | ||||||||||||||||||||||||||||
| $ | 274,519 | $ | 266,095 | $ | 8,424 | $ | 17,637 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 60% | 60% | ||||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Business Segment Information | April 1, 2023 | April 2, 2022 | ||||||||||||||||||
| Gross Profit Margin: | ||||||||||||||||||||
| Flow Control | 53.3% | 52.4% | ||||||||||||||||||
| Industrial Processing | 40.6% | 38.6% | ||||||||||||||||||
| Material Handling | 36.1% | 36.4% | ||||||||||||||||||
| Consolidated | 44.4% | 43.4% | ||||||||||||||||||
| Operating Income: | ||||||||||||||||||||
| Flow Control | $ | 24,189 | $ | 21,725 | ||||||||||||||||
| Industrial Processing (b) | 15,967 | 38,159 | ||||||||||||||||||
| Material Handling | 9,287 | 5,844 | ||||||||||||||||||
| Corporate | (9,329) | (9,755) | ||||||||||||||||||
| $ | 40,114 | $ | 55,973 | |||||||||||||||||
| Adjusted Operating Income (a,f): | ||||||||||||||||||||
| Flow Control | $ | 24,189 | $ | 21,569 | ||||||||||||||||
| Industrial Processing | 15,967 | 18,726 | ||||||||||||||||||
| Material Handling | 9,287 | 6,561 | ||||||||||||||||||
| Corporate | (9,329) | (9,755) | ||||||||||||||||||
| $ | 40,114 | $ | 37,101 | |||||||||||||||||
| Capital Expenditures: | ||||||||||||||||||||
| Flow Control | $ | 1,404 | $ | 525 | ||||||||||||||||
| Industrial Processing | 2,579 | 1,952 | ||||||||||||||||||
| Material Handling | 462 | 384 | ||||||||||||||||||
| Corporate | 24 | 7 | ||||||||||||||||||
| $ | 4,469 | $ | 2,868 | |||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
| Cash Flow and Other Data | April 1, 2023 | April 2, 2022 | ||||||||||||||||||
| Operating Cash Flow | $ | 36,866 | $ | 23,768 | ||||||||||||||||
| Less: Capital Expenditures | (4,469) | (2,868) | ||||||||||||||||||
| Free Cash Flow (a) | $ | 32,397 | $ | 20,900 | ||||||||||||||||
| Depreciation and Amortization Expense | $ | 8,446 | $ | 9,445 | ||||||||||||||||
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| Kadant Reports First Quarter 2023 Results | | ||||
| May 2, 2023 | |||||
Page 6 | |||||
| Balance Sheet Data | April 1, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash, Cash Equivalents, and Restricted Cash | $ | 85,507 | $ | 79,725 | ||||||||||||||||||||||||||||
| Accounts Receivable, net | 131,268 | 130,297 | ||||||||||||||||||||||||||||||
| Inventories | 179,199 | 163,672 | ||||||||||||||||||||||||||||||
| Contract Assets | 12,389 | 14,898 | ||||||||||||||||||||||||||||||
| Property, Plant, and Equipment, net | 120,274 | 118,855 | ||||||||||||||||||||||||||||||
| Intangible Assets | 171,396 | 175,645 | ||||||||||||||||||||||||||||||
| Goodwill | 387,890 | 385,455 | ||||||||||||||||||||||||||||||
| Other Assets | 81,221 | 81,334 | ||||||||||||||||||||||||||||||
| $ | 1,169,144 | $ | 1,149,881 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Accounts Payable | $ | 57,939 | $ | 58,060 | ||||||||||||||||||||||||||||
| Debt Obligations | 180,147 | 199,219 | ||||||||||||||||||||||||||||||
| Other Borrowings | 1,760 | 1,942 | ||||||||||||||||||||||||||||||
| Other Liabilities | 244,993 | 235,089 | ||||||||||||||||||||||||||||||
| Total Liabilities | 484,839 | 494,310 | ||||||||||||||||||||||||||||||
| Stockholders' Equity | 684,305 | 655,571 | ||||||||||||||||||||||||||||||
| $ | 1,169,144 | $ | 1,149,881 | |||||||||||||||||||||||||||||
| Three Months Ended | ||||||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (a) | April 1, 2023 | April 2, 2022 | ||||||||||||||||||
| Consolidated | ||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 28,075 | $ | 41,192 | ||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | 184 | 249 | ||||||||||||||||||
| Provision for Income Taxes | 9,763 | 13,378 | ||||||||||||||||||
| Interest Expense, Net | 2,071 | 1,132 | ||||||||||||||||||
| Other Expense, Net | 21 | 22 | ||||||||||||||||||
| Operating Income | 40,114 | 55,973 | ||||||||||||||||||
| Gain on Sale (b) | — | (20,190) | ||||||||||||||||||
| Acquisition Costs | — | 76 | ||||||||||||||||||
| Indemnification Asset Reversal (g) | — | 575 | ||||||||||||||||||
| Impairment Costs | — | 182 | ||||||||||||||||||
| Acquired Backlog Amortization (c) | — | 703 | ||||||||||||||||||
| Acquired Profit in Inventory Amortization (d) | — | (218) | ||||||||||||||||||
| Adjusted Operating Income (a) | 40,114 | 37,101 | ||||||||||||||||||
| Depreciation and Amortization | 8,446 | 8,742 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 48,560 | $ | 45,843 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 21.1% | 20.2% | ||||||||||||||||||
| Flow Control | ||||||||||||||||||||
| Operating Income | $ | 24,189 | $ | 21,725 | ||||||||||||||||
| Acquisition Costs | — | 62 | ||||||||||||||||||
| Acquired Profit in Inventory Amortization (d) | — | (218) | ||||||||||||||||||
| Adjusted Operating Income (a) | 24,189 | 21,569 | ||||||||||||||||||
| Depreciation and Amortization | 2,279 | 2,347 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 26,468 | $ | 23,916 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 29.6% | 27.9% | ||||||||||||||||||
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| Kadant Reports First Quarter 2023 Results | | ||||
| May 2, 2023 | |||||
Page 7 | |||||
| Three Months Ended | ||||||||||||||||||||
| Adjusted Operating Income and Adjusted EBITDA Reconciliation (continued) (a) | April 1, 2023 | April 2, 2022 | ||||||||||||||||||
| Industrial Processing | ||||||||||||||||||||
| Operating Income | $ | 15,967 | $ | 38,159 | ||||||||||||||||
| Gain on Sale (b) | — | (20,190) | ||||||||||||||||||
| Indemnification Asset Reversal (g) | — | 575 | ||||||||||||||||||
| Impairment Costs | — | 182 | ||||||||||||||||||
| Adjusted Operating Income (a) | 15,967 | 18,726 | ||||||||||||||||||
| Depreciation and Amortization | 2,972 | 3,274 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 18,939 | $ | 22,000 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 22.7% | 23.6% | ||||||||||||||||||
| Material Handling | ||||||||||||||||||||
| Operating Income | $ | 9,287 | $ | 5,844 | ||||||||||||||||
| Acquisition Costs | — | 14 | ||||||||||||||||||
| Acquired Backlog Amortization (c) | — | 703 | ||||||||||||||||||
| Adjusted Operating Income (a) | 9,287 | 6,561 | ||||||||||||||||||
| Depreciation and Amortization | 3,176 | 3,096 | ||||||||||||||||||
| Adjusted EBITDA (a) | $ | 12,463 | $ | 9,657 | ||||||||||||||||
| Adjusted EBITDA Margin (a,h) | 22.0% | 20.3% | ||||||||||||||||||
| Corporate | ||||||||||||||||||||
| Operating Loss | $ | (9,329) | $ | (9,755) | ||||||||||||||||
| Depreciation and Amortization | 19 | 25 | ||||||||||||||||||
| EBITDA (a) | $ | (9,310) | $ | (9,730) | ||||||||||||||||
| (a) | Represents a non-GAAP financial measure. | |||||||||||||||||||
| (b) | Includes a $20.2 million pre-tax gain on the sale of a manufacturing facility in China in the three months ended April 2, 2022 in our Industrial Processing segment pursuant to a relocation plan. | |||||||||||||||||||
| (c) | Represents intangible amortization expense associated with acquired backlog. | |||||||||||||||||||
| (d) | Represents income within cost of revenue associated with amortization of acquired profit in inventory. | |||||||||||||||||||
| (e) | Represents the increase (decrease) resulting from the conversion of current period amounts reported in local currencies into U.S. dollars at the exchange rate of the prior period compared to the U.S. dollar amount reported in the prior period. | |||||||||||||||||||
| (f) | See reconciliation to the most directly comparable GAAP financial measure under "Adjusted Operating Income and Adjusted EBITDA Reconciliation." | |||||||||||||||||||
| (g) | Represents an indemnification asset reversal related to the release of tax reserves associated with uncertain tax positions. | |||||||||||||||||||
| (h) | Calculated as adjusted EBITDA divided by revenue in each period. | |||||||||||||||||||
About Kadant
Kadant Inc. is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing. The Company’s products and services play an integral role in enhancing efficiency, optimizing energy utilization, and maximizing productivity in process industries. Kadant is based in Westford, Massachusetts, with approximately 3,100 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
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| Kadant Reports First Quarter 2023 Results | | ||||
| May 2, 2023 | |||||
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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 31, 2022 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to adverse changes in global and local economic conditions; the variability and difficulty in accurately predicting revenues from large capital equipment and systems projects; health epidemics and pandemics; our acquisition strategy; levels of residential construction activity; reductions by our wood processing customers of their capital spending or production of oriented strand board; changes to the global timber supply; development and use of digital media; cyclical economic conditions affecting the global mining industry; demand for coal, including economic and environmental risks associated with coal; failure of our information systems or breaches of data security and cybertheft; implementation of our internal growth strategy; supply chain constraints, inflationary pressure, price increases and shortages in raw materials; competition; changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; loss of key personnel and effective succession planning; protection of intellectual property; climate change; adequacy of our insurance coverage; global operations; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; 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
or
Media Contact Information:
Wes Martz, 269-278-1715
media@kadant.com
###
First Quarter 2023 Business Review May 3, 2023 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 our expectations as of May 2, 2023. 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 31, 2022 and subsequent filings with the Securities and Exchange Commission. These include risks and uncertainties relating to adverse changes in global and local economic conditions; the variability and difficulty in accurately predicting revenues from large capital equipment and systems projects; health epidemics and pandemics; our acquisition strategy; levels of residential construction activity; reductions by our wood processing customers of their capital spending or production of oriented strand board; changes to the global timber supply; development and use of digital media; cyclical economic conditions affecting the global mining industry; demand for coal, including economic and environmental risks associated with coal; failure of our information systems or breaches of data security and cybertheft; implementation of our internal growth strategy; supply chain constraints, inflationary pressure, price increases and shortages in raw materials; competition; changes in our tax provision or exposure to additional tax liabilities; our ability to successfully manage our manufacturing operations; disruption in production; future restructurings; loss of key personnel and effective succession planning; protection of intellectual property; climate change; adequacy of our insurance coverage; global operations; policies of the Chinese government; the variability and uncertainties in sales of capital equipment in China; currency fluctuations; 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. 2KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 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 EPS (earnings per share), adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), adjusted EBITDA margin, adjusted operating income, and free cash flow. All references to EPS are to our EPS as calculated on a diluted basis. 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 first quarter 2023 earnings press release issued May 2, 2023, 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. 3 KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
BUSINESS REVIEW Jeffrey L. Powell, President & CEO 4 KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
Operational Highlights • Strong demand continued into the first quarter leading to record bookings • Solid execution by our businesses led to record adjusted EPS* • Cash flow reached a new historical high for a first quarter KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. . 5
Q1 2023 Performance 6 ($ in millions, except per share amounts) Q1 23 Q1 22 Change Revenue $229.8 $226.5 +1.4% Net Income $28.1 $41.2 -31.8% Adjusted EBITDA* $48.6 $45.8 +5.9% Adjusted EBITDA Margin* 21.1% 20.2% +90 bps EPS $2.40 $3.53 -32.0% Adjusted EPS* $2.40 $2.28 +5.3% Operating Cash Flow $36.9 $23.8 +55.1% Bookings $274.5 $266.1 +3.2% HIGHLIGHTS • Record bookings performance despite unfavorable FX • Aftermarket parts made up 66% of Q1 revenue; up 4% to a record $152 million • Strong operating performance led to record adjusted EPS* and excellent adjusted EBITDA* and cash flow KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
$100.1 $97.3 $84.9 $78.8 $104.6 1Q22 2Q22 3Q22 4Q22 1Q23 7 ($ in millions) Q1 23 Q1 22 Change Revenue $89.5 $85.8 +4.3% Bookings $104.6 $100.1 +4.4% Adjusted EBITDA* $26.5 $23.9 +10.7% Adjusted EBITDA Margin* 29.6% 27.9% +170 bps HIGHLIGHTS • Strong aftermarket demand and capital project activity drove record bookings • Excellent execution led to record adjusted EBITDA* in the first quarter • End markets remain healthy despite continued uncertainty in the macroeconomy ($ in millions) KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. BOOKINGS Flow Control
8 ($ in millions) Q1 23 Q1 22 Change Revenue $83.5 $93.1 -10.3% Bookings $96.3 $106.3 -9.5% Adjusted EBITDA* $18.9 $22.0 -13.9% Adjusted EBITDA Margin* 22.7% 23.6% -90 bps HIGHLIGHTS • Demand for capital equipment softened in Q1 relative to the strong prior year period • Healthy demand for aftermarket parts represented 65% of total Q1 revenue • Mill operating rates remain solid while market-related downtime is being taken to balance supply KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. Industrial Processing $106.3 $109.9 $77.9 $84.1 $96.3 1Q22 2Q22 3Q22 4Q22 1Q23 BOOKINGS ($ in millions)
9 ($ in millions) Q1 23 Q1 22 Change Revenue $56.7 $47.6 +19.2% Bookings $73.7 $59.6 +23.6% Adjusted EBITDA* $12.5 $9.7 +29.1% Adjusted EBITDA Margin* 22.0% 20.3% +170 bps HIGHLIGHTS • Robust demand for our bulk material handling equipment and baling systems • Business activity remains healthy with record revenue and bookings in Q1 • Excellent execution by our operations teams led to record adjusted EBITDA* KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. Material Handling $59.6 $58.7 $48.1 $52.5 $73.7 1Q22 2Q22 3Q22 4Q22 1Q23 BOOKINGS ($ in millions)
Business Outlook • Project activity continues to be good despite global macroeconomic headwinds • Industrial demand expected to moderate as the year progresses, particularly in the second half • Record backlog in the first quarter positions us well for strong performance in 2023 10KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
FINANCIAL REVIEW Michael J. McKenney, EVP & CFO KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 11
Q1 2023 Financial Performance ($ in millions, except per share amounts) Q1 23 Q1 22 Gross Margin 44.4% 43.4% SG&A % of Revenue 25.5% 26.1% Operating Income $40.1 $56.0 Net Income $28.1 $41.2 Adjusted EBITDA* $48.6 $45.8 EPS $2.40 $3.53 Adjusted EPS* $2.40 $2.28 HIGHLIGHTS • Adjusted EBITDA margin* of 21.1% • Operating cash flow of $36.9 million • Free cash flow* of $32.4 million • Net debt of $96.4 million; leverage ratio1 of 0.64 KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 12
Key Consolidated Financial Metrics KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 13 $23.8 $18.8 $24.9 $35.2 $36.9 $20.9 $11.9 $18.5 $23.2 $32.4 FREE CASH FLOW* OPERATING CASH FLOW 1Q22 2Q22 3Q22 4Q22 1Q23 CASH FLOW ($ in millions) $45.8 $46.0 $47.8 $49.5 $48.6 $41.2 $26.2 $27.5 $26.1 $28.1 20.2% 20.7% 21.3% 21.3% 21.1% NET INCOME ADJUSTED EBITDA* ADJ. EBITDA MARGIN* 1Q22 2Q22 3Q22 4Q22 1Q23 ($ in millions) 43.4% 43.3% 42.5% 43.1% 44.4% 1Q22 2Q22 3Q22 4Q22 1Q23 26.1% 25.0% 23.7% 24.5% 25.5% 1Q22 2Q22 3Q22 4Q22 1Q23 GROSS MARGIN SG&A ADJUSTED EBITDA* CASH FLOW ($ in millions) ($ in millions)
2Q21 ADJ EPS* 2Q22 ADJ EPS* KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 1Q22 to 1Q23 Adjusted EPS* 14 $2.28 $0.17 $0.09 $(0.06) $(0.05) $(0.03) $2.40 1Q22 ADJ EPS* GROSS MARGIN REVENUE INTEREST EXPENSE TAX PROVISION OPERATING EXPENSES 1Q23 ADJ EPS*
Key Liquidity Metrics KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 15 ($ in millions) Q1 23 Q4 22 Q1 22 Cash, cash equivalents, and restricted cash $85.5 $79.7 $89.0 Debt $180.1 $199.2 $243.4 Lease obligations $1.8 $1.9 $4.5 Net Debt $96.4 $121.4 $158.9 Leverage ratio1 0.64 0.74 1.16 Working capital % LTM revenue2 15.6% 13.9 % 10.8 % Cash conversion days3 136 126 104
Guidance KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 16 • FY 2023 revenue of $910 to $935 million, revised from $900 to $925 million • FY 2023 GAAP EPS of $8.82 to $9.07, revised from $8.72 to $8.97 • FY 2023 adjusted EPS* of $8.90 to $9.15, revised from $8.80 to $9.05 • Q2 2023 revenue of $230 to $235 million • Q2 2023 GAAP EPS of $2.01 to $2.11 • Q2 2023 adjusted EPS* of $2.05 to $2.15
Questions & Answers To participate in the live Q&A session, please go to investor.kadant.com and click on the Q&A session link to receive a dial-in number and unique PIN. Please mute the audio on your computer. KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 17
2023 Key Priorities 18 ENABLE SUSTAINABLE INDUSTRIAL PROCESSING DELIVER EXCEPTIONAL STAKEHOLDER VALUE PROVIDE STRONG CASH FLOW CAPITALIZE ON NEW OPPORTUNITIES KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
INVESTOR RELATIONS CONTACT Michael McKenney, 978-776-2000 IR@kadant.com MEDIA RELATIONS CONTACT Wes Martz, 269-278-1715 media@kadant.com May 3, 2023
APPENDIX First Quarter 2023 Business Review KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 20
Revenue by Customer Location ($ in thousands) Q1 23 Q1 22 Change Change Excluding FX* North America $132,453 $124,336 $8,117 $9,833 Europe 54,157 58,366 (4,209) (1,027) Asia 27,770 31,987 (4,217) (2,168) Rest of World 15,378 11,791 3,587 4,032 Total $229,758 $226,480 $3,278 $10,670 KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 21
Adjusted EPS Reconciliation Q1 23 Q1 22 EPS, as Reported $2.40 $3.53 Adjustments, Net of Tax Gain on Sale — (1.30) Acquisition Costs — 0.01 Impairment Costs — 0.01 Acquired Profit in Inventory and Backlog Amortization — 0.03 Adjusted EPS* $2.40 $2.28 Adjusted EPS (earnings per share) is a non-GAAP financial measure. KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 22 ($ in thousands) Q1 23 Q1 22 Operating Cash Flow $36,866 $23,768 Less Capital Expenditures (4,469) (2,868) Free Cash Flow* $32,397 $20,900 Free cash flow is a non-GAAP financial measure. Free Cash Flow Reconciliation
Adjusted EBITDA Reconciliation Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA in a given period by revenue in the same period. ($ in thousands) Q1 23 Q1 22 Net Income Attributable to Kadant $28,075 $41,192 Net Income Attributable to Noncontrolling Interest 184 249 Provision for Income Taxes 9,763 13,378 Interest Expense, Net 2,071 1,132 Other Expense, Net 21 22 Gain on Sale — (20,190) Acquisition Costs — 76 Indemnification Asset Reversal — 575 Impairment Costs — 182 Acquired Backlog Amortization — 703 Acquired Profit in Inventory Amortization — (218) Depreciation and Amortization 8,446 8,742 Adjusted EBITDA* $48,560 $45,843 Adjusted EBITDA Margin* 21.1% 20.2% KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 23
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 May 2, 2023. 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 $50 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. KAI 1Q23 BUSINESS REVIEW–MAY 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 24