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): October 31, 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 October 31, 2023, Kadant Inc. (the “Company”) announced its financial results for the fiscal quarter ended September 30, 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 November 1, 2023, the Company will hold a webcast and conference call to discuss its financial results for the fiscal quarter ended September 30, 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: October 31, 2023 | 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 Third Quarter 2023 Results
Raises Revenue and Earnings Guidance
WESTFORD, Mass., October 31, 2023 - Kadant Inc. (NYSE: KAI) reported its financial results for the third quarter ended September 30, 2023.
Third Quarter Financial Highlights
•Revenue increased 9% to $244 million
•Operating cash flow increased 89% to $47 million
•Free cash flow increased 106% to $38 million
•Net income increased 12% to $31 million
•GAAP EPS increased 12% to $2.63
•Adjusted EPS increased 13% to a record $2.69
•Adjusted EBITDA increased 10% to a record $53 million and represented a record 21.6% of revenue
•Bookings decreased 1% to $210 million
•Backlog was $324 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. Free cash flow, adjusted EPS, adjusted EBITDA, adjusted EBITDA margin, and changes in organic revenue are non-GAAP financial measures that exclude certain items as detailed later in this press release under the heading “Use of Non-GAAP Financial Measures.”
Management Commentary
“We delivered another exceptional quarter with record adjusted EBITDA, record adjusted EBITDA margin, and record adjusted EPS,” said Jeffrey L. Powell, president and chief executive officer of Kadant Inc. “Our performance was driven by a combination of excellent execution across our operating segments and strong aftermarket parts revenue.
“While we have seen a general slowdown in manufacturing activity in most regions of the world, all of our operating segments achieved solid revenue performance and margin expansion. Growth in our Material Handling segment was particularly notable as we benefited from strong demand for both aftermarket parts and capital equipment leading to excellent financial results in the third quarter.”
Third Quarter 2023 Compared to 2022
Revenue increased nine percent to $244.2 million compared to $224.5 million in 2022. Organic revenue increased seven percent, which excludes a two percent increase from the favorable effect of foreign currency translation. Gross profit margin increased to 43.3 percent compared to 42.5 percent in 2022.
GAAP EPS increased 12 percent to $2.63 compared to $2.35 in 2022. Adjusted EPS increased 13 percent to a record $2.69 compared to $2.38 in 2022. Net income was $30.9 million, increasing 12 percent compared to $27.5 million in 2022. Adjusted EBITDA increased 10 percent to a record $52.7 million and represented a record 21.6 percent of revenue compared to $47.8 million and 21.3 percent in the prior year. Operating cash flow increased 89 percent to $47.0 million compared to $24.9 million in 2022. Free cash flow increased 106 percent to $38.1 million compared to $18.5 million in 2022.
Bookings decreased one percent to $209.6 million compared to $210.9 million in 2022. Organic bookings decreased two percent, which excludes a one percent increase from the favorable effect of foreign currency translation.
| Kadant Reports Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 2 | |||||
Summary and Outlook
“While industrial demand continues to moderate in response to a variety of macroeconomic challenges, we remain well positioned to finish the year strong and deliver record financial performance again in 2023,” continued Mr. Powell. “We are raising our revenue and earnings guidance for the full year and now expect revenue of $941 to $949 million in 2023, revised from our previous guidance of $925 to $940 million, GAAP EPS of $9.59 to $9.69, revised from our previous guidance of $9.11 to $9.31, and adjusted EPS of $9.65 to $9.75, revised from our previous guidance of $9.15 to $9.35. The 2023 adjusted EPS guidance excludes $0.03 of relocation costs and $0.03 of restructuring and impairment costs. For the fourth quarter of 2023, we expect GAAP EPS of $2.02 to $2.12 on revenue of $222 to $230 million.”
Conference Call
Kadant will hold a webcast with a slide presentation for investors on Wednesday, November 1, 2023, at 11:00 a.m. eastern time to discuss its third quarter financial performance, as well as future expectations. To listen to the call live and view the webcast, go to the “Investors” section of the Company’s website at www.kadant.com. Participants interested in joining the call’s live question and answer session are required to register by visiting https://register.vevent.com/register/BI7b729fe1fa4e4eb2b84ea92515a7e2f0 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 December 1, 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 third quarter results on its website at www.kadant.com under the “Investors” section.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation (organic revenue), adjusted operating income, adjusted net income, adjusted EPS, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, adjusted EBITDA margin, and free cash flow.
We use organic revenue to understand our trends and to forecast and evaluate our financial performance and compare revenue to prior periods. Organic revenue excludes revenue from acquisitions for the four quarterly reporting periods following the date of the acquisition and the effect of foreign currency translation. Revenue included a favorable foreign currency translation effect of $3.9 million in the third quarter of 2023 compared to the third quarter of 2022 and an unfavorable foreign currency translation effect of $5.8 million in the first nine months of 2023 compared to the first nine months of 2022. Our other non-GAAP financial measures exclude relocation costs, restructuring and impairment costs, acquisition costs, amortization expense related to acquired profit in inventory and backlog, and other income or expense, as indicated. Collectively, these items are excluded as they are not indicative of our core operating results and are not comparable to other periods, which have differing levels of incremental costs, expenditures or income, or none at all. Additionally, we use free cash flow in order to provide insight on our ability to generate cash for acquisitions and debt repayments, as well as for other investing and financing activities.
We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our core business, operating results, or future outlook. We believe that the inclusion of such measures helps investors gain an understanding of our underlying operating performance and future prospects, consistent with how management measures and forecasts our performance, especially when comparing such results to previous periods or forecasts and to the performance of our competitors. Such measures are also used by us in our financial and operating decision-making and for compensation purposes. We also believe this information is responsive to investors' requests and gives them an additional measure of our performance.
| Kadant Reports Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 3 | |||||
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.
Third Quarter
Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:
•Pre-tax acquisition costs of $0.4 million in 2022.
•Pre-tax indemnification asset provision of $0.1 million in 2023.
•Pre-tax relocation costs of $0.5 million in 2023.
•Pre-tax restructuring and impairment costs of $0.4 million in 2023 and in $0.1 million in 2022.
Adjusted net income and adjusted EPS exclude:
•After-tax acquisition costs of $0.3 million ($0.4 million net of tax of $0.1 million) in 2022.
•After-tax relocation costs of $0.4 million ($0.5 million net of tax of $0.1 million) in 2023.
•After-tax restructuring and impairment costs of $0.3 million ($0.4 million net of tax of $0.1 million) in 2023 and $0.1 million in 2022.
Free cash flow is calculated as operating cash flow less:
•Capital expenditures of $8.8 million in 2023 and $6.4 million in 2022.
First Nine Months
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 indemnification asset reversal of $0.1 million in 2023 and $0.6 million in 2022.
•Pre-tax relocation costs of $0.6 million in 2023.
•Pre-tax restructuring and impairment costs of $0.4 million in 2023 and $0.3 million in 2022.
•Pre-tax acquisition costs of $0.5 million and 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 relocation costs of $0.5 million ($0.6 million net of tax of $0.1 million) in 2023.
•After-tax restructuring and impairment costs of $0.3 million ($0.4 million net of tax of $0.1 million) in 2023 and $0.2 million ($0.3 million net of tax of $0.1 million) in 2022.
•After-tax acquisition costs of $0.3 million ($0.5 million net of tax of $0.2 million) and after-tax expense related to amortization of acquired profit in inventory and backlog of $0.4 million ($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 $22.1 million in 2023 and $16.2 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 Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 4 | |||||
| Financial Highlights (unaudited) | ||||||||||||||||||||||||||||||||
| (In thousands, except per share amounts and percentages) | ||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| Consolidated Statement of Income | September 30, 2023 | October 1, 2022 | September 30, 2023 | October 1, 2022 | ||||||||||||||||||||||||||||
| Revenue | $ | 244,182 | $ | 224,510 | $ | 718,993 | $ | 672,639 | ||||||||||||||||||||||||
| Costs and Operating Expenses: | ||||||||||||||||||||||||||||||||
| Cost of revenue | 138,456 | 129,154 | 404,671 | 383,034 | ||||||||||||||||||||||||||||
| Selling, general, and administrative expenses | 57,889 | 53,153 | 176,441 | 167,640 | ||||||||||||||||||||||||||||
| Research and development expenses | 3,324 | 3,245 | 10,102 | 9,574 | ||||||||||||||||||||||||||||
| Gain on sale and other costs, net (b) | 969 | 72 | 1,043 | (19,936) | ||||||||||||||||||||||||||||
| 200,638 | 185,624 | 592,257 | 540,312 | |||||||||||||||||||||||||||||
| Operating Income | 43,544 | 38,886 | 126,736 | 132,327 | ||||||||||||||||||||||||||||
| Interest Income | 438 | 271 | 1,053 | 650 | ||||||||||||||||||||||||||||
| Interest Expense | (2,107) | (1,721) | (6,722) | (4,321) | ||||||||||||||||||||||||||||
| Other Expense, Net | (20) | (19) | (62) | (60) | ||||||||||||||||||||||||||||
| Income Before Provision for Income Taxes | 41,855 | 37,417 | 121,005 | 128,596 | ||||||||||||||||||||||||||||
| Provision for Income Taxes | 10,816 | 9,746 | 31,761 | 33,075 | ||||||||||||||||||||||||||||
| Net Income | 31,039 | 27,671 | 89,244 | 95,521 | ||||||||||||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | (175) | (184) | (571) | (672) | ||||||||||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 30,864 | $ | 27,487 | $ | 88,673 | $ | 94,849 | ||||||||||||||||||||||||
| Earnings per Share Attributable to Kadant: | ||||||||||||||||||||||||||||||||
| Basic | $ | 2.64 | $ | 2.36 | $ | 7.58 | $ | 8.14 | ||||||||||||||||||||||||
| Diluted | $ | 2.63 | $ | 2.35 | $ | 7.57 | $ | 8.12 | ||||||||||||||||||||||||
| Weighted Average Shares: | ||||||||||||||||||||||||||||||||
| Basic | 11,706 | 11,662 | 11,697 | 11,651 | ||||||||||||||||||||||||||||
| Diluted | 11,740 | 11,700 | 11,719 | 11,681 | ||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | September 30, 2023 | September 30, 2023 | October 1, 2022 | October 1, 2022 | ||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 30,864 | $ | 2.63 | $ | 27,487 | $ | 2.35 | ||||||||||||||||||||||||
| Adjustments, Net of Tax: | ||||||||||||||||||||||||||||||||
| Acquisition Costs | — | — | 276 | 0.02 | ||||||||||||||||||||||||||||
Relocation Costs | 401 | 0.03 | — | — | ||||||||||||||||||||||||||||
Restructuring and Impairment Costs | 295 | 0.03 | 72 | 0.01 | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 31,560 | $ | 2.69 | $ | 27,835 | $ | 2.38 | ||||||||||||||||||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, 2023 | September 30, 2023 | October 1, 2022 | October 1, 2022 | |||||||||||||||||||||||||||||
| Net Income and Diluted EPS Attributable to Kadant, as Reported | $ | 88,673 | $ | 7.57 | $ | 94,849 | $ | 8.12 | ||||||||||||||||||||||||
| Adjustments, Net of Tax: | ||||||||||||||||||||||||||||||||
| Gain on Sale (b) | — | — | (15,143) | (1.30) | ||||||||||||||||||||||||||||
Acquisition-Related Costs | — | — | 722 | 0.06 | ||||||||||||||||||||||||||||
Relocation Costs | 457 | 0.04 | — | — | ||||||||||||||||||||||||||||
Restructuring and Impairment Costs | 295 | 0.03 | 207 | 0.02 | ||||||||||||||||||||||||||||
| Adjusted Net Income and Adjusted Diluted EPS (a) | $ | 89,425 | $ | 7.63 | $ | 80,635 | $ | 6.90 | ||||||||||||||||||||||||
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| Kadant Reports Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 5 | |||||
| Three Months Ended | Increase Excluding FX (a,e) | |||||||||||||||||||||||||||||||
| Revenue by Segment | September 30, 2023 | October 1, 2022 | Increase | |||||||||||||||||||||||||||||
| Flow Control | $ | 90,798 | $ | 86,880 | $ | 3,918 | $ | 1,175 | ||||||||||||||||||||||||
| Industrial Processing | 94,220 | 86,085 | 8,135 | 8,145 | ||||||||||||||||||||||||||||
| Material Handling | 59,164 | 51,545 | 7,619 | 6,402 | ||||||||||||||||||||||||||||
| $ | 244,182 | $ | 224,510 | $ | 19,672 | $ | 15,722 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 61% | 63% | ||||||||||||||||||||||||||||||
| Nine Months Ended | Increase | Increase Excluding FX (a,e) | ||||||||||||||||||||||||||||||
| September 30, 2023 | October 1, 2022 | |||||||||||||||||||||||||||||||
| Flow Control | $ | 276,048 | $ | 257,926 | $ | 18,122 | $ | 18,181 | ||||||||||||||||||||||||
| Industrial Processing | 267,729 | 263,572 | 4,157 | 10,313 | ||||||||||||||||||||||||||||
| Material Handling | 175,216 | 151,141 | 24,075 | 23,634 | ||||||||||||||||||||||||||||
| $ | 718,993 | $ | 672,639 | $ | 46,354 | $ | 52,128 | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Revenue | 63% | 64% | ||||||||||||||||||||||||||||||
| Three Months Ended | Increase (Decrease) | Increase (Decrease) Excluding FX (e) | ||||||||||||||||||||||||||||||
| Bookings by Segment | September 30, 2023 | October 1, 2022 | ||||||||||||||||||||||||||||||
| Flow Control | $ | 83,005 | $ | 84,902 | $ | (1,897) | $ | (4,007) | ||||||||||||||||||||||||
| Industrial Processing | 70,441 | 77,878 | (7,437) | (7,210) | ||||||||||||||||||||||||||||
| Material Handling | 56,158 | 48,093 | 8,065 | 6,848 | ||||||||||||||||||||||||||||
| $ | 209,604 | $ | 210,873 | $ | (1,269) | $ | (4,369) | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 67% | 68% | ||||||||||||||||||||||||||||||
| Nine Months Ended | Increase (Decrease) | Increase (Decrease) Excluding FX (e) | ||||||||||||||||||||||||||||||
| September 30, 2023 | October 1, 2022 | |||||||||||||||||||||||||||||||
| Flow Control | $ | 275,862 | $ | 282,360 | $ | (6,498) | $ | (5,470) | ||||||||||||||||||||||||
| Industrial Processing | 246,006 | 294,105 | (48,099) | (41,145) | ||||||||||||||||||||||||||||
| Material Handling | 177,482 | 166,408 | 11,074 | 10,850 | ||||||||||||||||||||||||||||
| $ | 699,350 | $ | 742,873 | $ | (43,523) | $ | (35,765) | |||||||||||||||||||||||||
| Percentage of Parts and Consumables Bookings | 65% | 62% | ||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| Business Segment Information | September 30, 2023 | October 1, 2022 | September 30, 2023 | October 1, 2022 | ||||||||||||||||||||||||||||
| Gross Profit Margin: | ||||||||||||||||||||||||||||||||
| Flow Control | 52.2% | 51.6% | 52.3% | 52.3% | ||||||||||||||||||||||||||||
| Industrial Processing | 39.5% | 39.3% | 39.8% | 38.8% | ||||||||||||||||||||||||||||
| Material Handling | 35.7% | 32.3% | 36.2% | 34.8% | ||||||||||||||||||||||||||||
| Consolidated | 43.3% | 42.5% | 43.7% | 43.1% | ||||||||||||||||||||||||||||
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| Kadant Reports Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 6 | |||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| Business Segment Information (continued) | September 30, 2023 | October 1, 2022 | September 30, 2023 | October 1, 2022 | ||||||||||||||||||||||||||||
| Operating Income: | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 24,246 | $ | 22,874 | $ | 74,256 | $ | 67,306 | ||||||||||||||||||||||||
| Industrial Processing (b) | 19,023 | 17,550 | 51,968 | 70,994 | ||||||||||||||||||||||||||||
| Material Handling | 10,345 | 6,945 | 30,006 | 21,490 | ||||||||||||||||||||||||||||
| Corporate | (10,070) | (8,483) | (29,494) | (27,463) | ||||||||||||||||||||||||||||
| $ | 43,544 | $ | 38,886 | $ | 126,736 | $ | 132,327 | |||||||||||||||||||||||||
| Adjusted Operating Income (a,f): | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 24,680 | $ | 23,356 | $ | 74,690 | $ | 67,632 | ||||||||||||||||||||||||
| Industrial Processing | 19,558 | 17,550 | 52,577 | 51,561 | ||||||||||||||||||||||||||||
| Material Handling | 10,295 | 6,945 | 30,133 | 22,207 | ||||||||||||||||||||||||||||
| Corporate | (10,070) | (8,483) | (29,494) | (27,463) | ||||||||||||||||||||||||||||
| $ | 44,463 | $ | 39,368 | $ | 127,906 | $ | 113,937 | |||||||||||||||||||||||||
| Capital Expenditures: | ||||||||||||||||||||||||||||||||
| Flow Control | $ | 1,195 | $ | 868 | $ | 3,889 | $ | 2,424 | ||||||||||||||||||||||||
| Industrial Processing (h) | 7,299 | 4,654 | 16,007 | 11,679 | ||||||||||||||||||||||||||||
| Material Handling | 350 | 854 | 2,170 | 2,081 | ||||||||||||||||||||||||||||
| Corporate | 4 | — | 28 | 7 | ||||||||||||||||||||||||||||
| $ | 8,848 | $ | 6,376 | $ | 22,094 | $ | 16,191 | |||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| Cash Flow and Other Data | September 30, 2023 | October 1, 2022 | September 30, 2023 | October 1, 2022 | ||||||||||||||||||||||||||||
| Operating Cash Flow | $ | 46,967 | $ | 24,897 | $ | 106,311 | $ | 67,462 | ||||||||||||||||||||||||
| Less: Capital Expenditures (h) | (8,848) | (6,376) | (22,094) | (16,191) | ||||||||||||||||||||||||||||
| Free Cash Flow (a) | $ | 38,119 | $ | 18,521 | $ | 84,217 | $ | 51,271 | ||||||||||||||||||||||||
| Depreciation and Amortization Expense | $ | 8,234 | $ | 8,456 | $ | 24,917 | $ | 26,387 | ||||||||||||||||||||||||
| Balance Sheet Data | September 30, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash, Cash Equivalents, and Restricted Cash | $ | 79,053 | $ | 79,725 | ||||||||||||||||||||||||||||
| Accounts Receivable, net | 140,075 | 130,297 | ||||||||||||||||||||||||||||||
| Inventories | 164,346 | 163,672 | ||||||||||||||||||||||||||||||
| Contract Assets | 12,113 | 14,898 | ||||||||||||||||||||||||||||||
| Property, Plant, and Equipment, net | 128,738 | 118,855 | ||||||||||||||||||||||||||||||
| Intangible Assets | 161,034 | 175,645 | ||||||||||||||||||||||||||||||
| Goodwill | 384,317 | 385,455 | ||||||||||||||||||||||||||||||
| Other Assets | 84,428 | 81,334 | ||||||||||||||||||||||||||||||
| $ | 1,154,104 | $ | 1,149,881 | |||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||
| Accounts Payable | $ | 44,286 | $ | 58,060 | ||||||||||||||||||||||||||||
| Debt Obligations | 127,535 | 199,219 | ||||||||||||||||||||||||||||||
| Other Borrowings | 1,704 | 1,942 | ||||||||||||||||||||||||||||||
| Other Liabilities | 246,662 | 235,089 | ||||||||||||||||||||||||||||||
| Total Liabilities | 420,187 | 494,310 | ||||||||||||||||||||||||||||||
| Stockholders' Equity | 733,917 | 655,571 | ||||||||||||||||||||||||||||||
| $ | 1,154,104 | $ | 1,149,881 | |||||||||||||||||||||||||||||
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| Kadant Reports Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 7 | |||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
Adjusted Operating Income and Adjusted EBITDA Reconciliation (a) | September 30, 2023 | October 1, 2022 | September 30, 2023 | October 1, 2022 | ||||||||||||||||||||||||||||
| Consolidated | ||||||||||||||||||||||||||||||||
| Net Income Attributable to Kadant | $ | 30,864 | $ | 27,487 | $ | 88,673 | $ | 94,849 | ||||||||||||||||||||||||
| Net Income Attributable to Noncontrolling Interest | 175 | 184 | 571 | 672 | ||||||||||||||||||||||||||||
| Provision for Income Taxes | 10,816 | 9,746 | 31,761 | 33,075 | ||||||||||||||||||||||||||||
| Interest Expense, Net | 1,669 | 1,450 | 5,669 | 3,671 | ||||||||||||||||||||||||||||
| Other Expense, Net | 20 | 19 | 62 | 60 | ||||||||||||||||||||||||||||
| Operating Income | 43,544 | 38,886 | 126,736 | 132,327 | ||||||||||||||||||||||||||||
| Gain on Sale (b) | — | — | — | (20,190) | ||||||||||||||||||||||||||||
| Acquisition Costs | — | 410 | — | 486 | ||||||||||||||||||||||||||||
Indemnification Asset (Provision) Reversals (g) | (50) | — | 127 | 575 | ||||||||||||||||||||||||||||
Relocation Costs | 535 | — | 609 | — | ||||||||||||||||||||||||||||
Restructuring and Impairment Costs | 434 | 72 | 434 | 254 | ||||||||||||||||||||||||||||
| Acquired Backlog Amortization (c) | — | — | — | 703 | ||||||||||||||||||||||||||||
| Acquired Profit in Inventory Amortization (d) | — | — | — | (218) | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 44,463 | 39,368 | 127,906 | 113,937 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 8,234 | 8,456 | 24,917 | 25,684 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 52,697 | $ | 47,824 | $ | 152,823 | $ | 139,621 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,i) | 21.6% | 21.3% | 21.3% | 20.8% | ||||||||||||||||||||||||||||
| Flow Control | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 24,246 | $ | 22,874 | $ | 74,256 | $ | 67,306 | ||||||||||||||||||||||||
| Acquisition Costs | — | 410 | — | 472 | ||||||||||||||||||||||||||||
Restructuring and Impairment Costs | 434 | 72 | 434 | 72 | ||||||||||||||||||||||||||||
| Acquired Profit in Inventory Amortization (d) | — | — | — | (218) | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 24,680 | 23,356 | 74,690 | 67,632 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 2,277 | 2,229 | 6,785 | 6,873 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 26,957 | $ | 25,585 | $ | 81,475 | $ | 74,505 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,i) | 29.7% | 29.4% | 29.5% | 28.9% | ||||||||||||||||||||||||||||
| Industrial Processing | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 19,023 | $ | 17,550 | $ | 51,968 | $ | 70,994 | ||||||||||||||||||||||||
| Gain on Sale (b) | — | — | — | (20,190) | ||||||||||||||||||||||||||||
Indemnification Asset Reversal (g) | — | — | — | 575 | ||||||||||||||||||||||||||||
Relocation Costs | 535 | — | 609 | — | ||||||||||||||||||||||||||||
Impairment Costs | — | — | — | 182 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 19,558 | 17,550 | 52,577 | 51,561 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 2,906 | 3,122 | 8,823 | 9,476 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 22,464 | $ | 20,672 | $ | 61,400 | $ | 61,037 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,i) | 23.8% | 24.0% | 22.9% | 23.2% | ||||||||||||||||||||||||||||
| Material Handling | ||||||||||||||||||||||||||||||||
| Operating Income | $ | 10,345 | $ | 6,945 | $ | 30,006 | $ | 21,490 | ||||||||||||||||||||||||
| Acquisition Costs | — | — | — | 14 | ||||||||||||||||||||||||||||
Indemnification Asset (Provision) Reversal (g) | (50) | — | 127 | — | ||||||||||||||||||||||||||||
| Acquired Backlog Amortization (c) | — | — | — | 703 | ||||||||||||||||||||||||||||
| Adjusted Operating Income (a) | 10,295 | 6,945 | 30,133 | 22,207 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 3,034 | 3,083 | 9,254 | 9,262 | ||||||||||||||||||||||||||||
| Adjusted EBITDA (a) | $ | 13,329 | $ | 10,028 | $ | 39,387 | $ | 31,469 | ||||||||||||||||||||||||
| Adjusted EBITDA Margin (a,i) | 22.5% | 19.5% | 22.5% | 20.8% | ||||||||||||||||||||||||||||
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| Kadant Reports Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 8 | |||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| Adjusted Operating Income and Adjusted EBITDA Reconciliation (continued) (a) | September 30, 2023 | October 1, 2022 | September 30, 2023 | October 1, 2022 | ||||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||||||||
| Operating Loss | $ | (10,070) | $ | (8,483) | $ | (29,494) | $ | (27,463) | ||||||||||||||||||||||||
| Depreciation and Amortization | 17 | 22 | 55 | 73 | ||||||||||||||||||||||||||||
| EBITDA (a) | $ | (10,053) | $ | (8,461) | $ | (29,439) | $ | (27,390) | ||||||||||||||||||||||||
| (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 nine months ended October 1, 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 the provision for or reversal of indemnification assets related to the establishment or release of tax reserves associated with uncertain tax positions. | |||||||||||||||||||||||||||||||
| (h) | Includes $2.5 million and $5.8 million in the three and nine months ended September 30, 2023, respectively, and $2.2 million and $5.4 million in the three and nine months ended October 1, 2022, respectively, related to the construction of a new manufacturing facility in China. | |||||||||||||||||||||||||||||||
| (i) | 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 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
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| Kadant Reports Third Quarter 2023 Results | | ||||
| October 31, 2023 | |||||
Page 9 | |||||
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
###
Third Quarter 2023 Business Review November 1, 2023
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 October 31, 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 3Q23 BUSINESS REVIEW– NOVEMBER 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, adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA), adjusted EBITDA margin, adjusted operating income, and free cash flow. All references to EPS (earnings per share) 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 third quarter 2023 earnings press release issued October 31, 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 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
BUSINESS REVIEW Jeffrey L. Powell, President & CEO 4 KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
Operational Highlights • Excellent execution by our businesses led to record-setting results in Q3 • Record adjusted EBITDA*, adjusted EBITDA margin*, and adjusted EPS* • Healthy balance sheet positions us well to capitalize on new opportunities KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. . 5
Q3 2023 Performance 6 ($ in millions, except per share amounts) Q3 23 Q3 22 Change Revenue $244.2 $224.5 +8.8% Net Income $30.9 $27.5 +12.3% Adjusted EBITDA* $52.7 $47.8 +10.2% Adjusted EBITDA Margin* 21.6% 21.3% +30 bps EPS $2.63 $2.35 +11.9% Adjusted EPS* $2.69 $2.38 +13.0% Operating Cash Flow $47.0 $24.9 +88.6% Free Cash Flow* $38.1 $18.5 +105.8% Bookings $209.6 $210.9 -0.6% HIGHLIGHTS • Strong revenue performance driven by record capital shipments and robust parts business • Excellent operating execution led to record adjusted EPS* and adjusted EBITDA* • Industrial demand impacted by economic headwinds KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
$84.9 $78.8 $104.6 $88.3 $83.0 3Q22 4Q22 1Q23 2Q23 3Q23 7 ($ in millions) Q3 23 Q3 22 Change Revenue $90.8 $86.9 +4.5% Bookings $83.0 $84.9 -2.2% Adjusted EBITDA* $27.0 $25.6 +5.4% Adjusted EBITDA Margin* 29.7% 29.4% +30 bps HIGHLIGHTS • Capital project activity and aftermarket demand contributed to solid revenue performance in Q3 • Strong operating performance led to excellent adjusted EBITDA* • Ongoing project activity although timing somewhat uncertain ($ in millions) KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. BOOKINGS Flow Control
8 ($ in millions) Q3 23 Q3 22 Change Revenue $94.2 $86.1 +9.4% Bookings $70.4 $77.9 -9.5% Adjusted EBITDA* $22.5 $20.7 +8.7% Adjusted EBITDA Margin* 23.8% 24.0% -20 bps HIGHLIGHTS • Record aftermarket parts revenue and strong capital sales led to excellent revenue performance • Producers continue to take market- related downtime to balance supply impacting aftermarket parts demand • Capital project activity remains relatively high across all product lines despite macro headwinds KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. Industrial Processing $77.9 $84.1 $96.3 $79.3 $70.4 3Q22 4Q22 1Q23 2Q23 3Q23 BOOKINGS ($ in millions)
9 ($ in millions) Q3 23 Q3 22 Change Revenue $59.2 $51.5 +14.8% Bookings $56.2 $48.1 +16.8% Adjusted EBITDA* $13.3 $10.0 +32.9% Adjusted EBITDA Margin* 22.5% 19.5% +300 bps HIGHLIGHTS • Strong revenue performance led by capital equipment shipments across all product lines • Excellent execution led to solid margin expansion and adjusted EBITDA* performance • Business activity and outlook for the U.S. aggregates market and the recycling market remain positive KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. Material Handling $48.1 $52.5 $73.7 $47.6 $56.2 3Q22 4Q22 1Q23 2Q23 3Q23 BOOKINGS ($ in millions)
Business Outlook • Industrial demand expected to stabilize around current levels • Macroeconomic headwinds create uncertainty with capital project timing • Our healthy balance sheet positions us well for new opportunities and growth • Expecting to generate record results in fiscal 2023 10KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
FINANCIAL REVIEW Michael J. McKenney, EVP & CFO KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 11
Q3 2023 Financial Performance ($ in millions, except per share amounts) Q3 23 Q3 22 Gross Margin 43.3% 42.5% SG&A % of Revenue 23.7% 23.7% Operating Income $43.5 $38.9 Net Income $30.9 $27.5 Adjusted EBITDA* $52.7 $47.8 EPS $2.63 $2.35 Adjusted EPS* $2.69 $2.38 HIGHLIGHTS • Adjusted EBITDA margin* of 21.6% • Operating cash flow of $47.0 million • Free cash flow* of $38.1 million • Net debt of $50.2 million; leverage ratio1 of 0.38 KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 12
Key Consolidated Financial Metrics KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 13 $24.9 $35.2 $36.9 $22.5 $47.0 $18.5 $23.2 $23.2 $13.7 $38.1 FREE CASH FLOW* OPERATING CASH FLOW 3Q22 4Q22 1Q23 2Q23 3Q23 CASH FLOW ($ in millions) $47.8 $49.5 $48.6 $51.6 $52.7 $27.5 $26.1 $28.1 $29.7 $30.9 21.3% 21.3% 21.1% 21.0% 21.6% NET INCOME ADJUSTED EBITDA* ADJ. EBITDA MARGIN* 3Q22 4Q22 1Q23 2Q23 3Q23 ($ in millions) 42.5% 43.1% 44.4% 43.5% 43.3% 3Q22 4Q22 1Q23 2Q23 3Q23 23.7% 24.5% 25.5% 24.5% 23.7% 3Q22 4Q22 1Q23 2Q23 3Q23 GROSS MARGIN SG&A ADJUSTED EBITDA* CASH FLOW ($ in millions) ($ in millions)
2Q21 ADJ EPS* 2Q22 ADJ EPS* KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 3Q22 to 3Q23 Adjusted EPS* 14 $2.38 $0.53 $0.13 $0.01 $(0.33) $(0.02) $(0.01) $2.69 3Q22 ADJ EPS* REVENUE GROSS MARGIN TAX PROVISION OPERATING EXPENSES INTEREST EXPENSE CHANGE IN SHARES 3Q23 ADJ EPS*
Key Liquidity Metrics KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 15 ($ in millions) Q3 23 Q2 23 Q3 22 Cash, cash equivalents, and restricted cash $79.1 $70.2 $75.1 Debt $127.5 $155.1 $207.9 Lease obligations $1.7 $1.8 $1.8 Net Debt $50.2 $86.7 $134.6 Leverage ratio1 0.38 0.51 0.94 Working capital % LTM revenue2 15.4% 16.7% 12.8% Cash conversion days3 138 138 130
Guidance KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 16 • FY 2023 revenue of $941 to $949 million, revised from $925 to $940 million • FY 2023 GAAP EPS of $9.59 to $9.69, revised from $9.11 to $9.31 • FY 2023 adjusted EPS* of $9.65 to $9.75, revised from $9.15 to $9.35 • Q4 2023 revenue of $222 to $230 million • Q4 2023 GAAP EPS of $2.02 to $2.12
Questions & Answers To participate in the live Q&A session, please go to investor.kadant.com and click on the Q&A session link to receive a dial-in number and unique PIN. Please mute the audio on your computer. KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 17
2023 Key Priorities 18 ENABLE SUSTAINABLE INDUSTRIAL PROCESSING DELIVER EXCEPTIONAL STAKEHOLDER VALUE PROVIDE STRONG CASH FLOW CAPITALIZE ON NEW OPPORTUNITIES KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED.
INVESTOR RELATIONS CONTACT Michael McKenney, 978-776-2000 IR@kadant.com MEDIA RELATIONS CONTACT Wes Martz, 269-278-1715 media@kadant.com November 1, 2023
APPENDIX Third Quarter 2023 Business Review KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 20
Revenue by Customer Location ($ in thousands) Q3 23 Q3 22 Change Change Excluding FX* North America $133,780 $126,699 $7,081 $7,520 Europe 66,491 57,409 9,082 4,855 Asia 27,393 26,953 440 1,002 Rest of World 16,518 13,449 3,069 2,345 Total $244,182 $224,510 $19,672 $15,722 KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 21 Q3 23 Q3 22 Flow Control 68 % 69 % Industrial Processing 60 % 61 % Material Handling 53 % 57 % Consolidated 61 % 63 % Percentage of Parts and Consumables Revenue
Adjusted EPS Reconciliation Q3 23 Q3 22 EPS, as Reported $2.63 $2.35 Adjustments, Net of Tax Acquisition Costs — 0.02 Relocation Costs 0.03 — Restructuring and Impairment Costs 0.03 0.01 Adjusted EPS* $2.69 $2.38 Adjusted EPS (earnings per share) is a non-GAAP financial measure. KAI 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 22 ($ in thousands) Q3 23 Q3 22 Operating Cash Flow $46,967 $24,897 Less Capital Expenditures (8,848) (6,376) Free Cash Flow* $38,119 $18,521 Free cash flow is a non-GAAP financial measure. Free Cash Flow Reconciliation
Adjusted EBITDA Reconciliation Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA in a given period by revenue in the same period. ($ in thousands) Q3 23 Q3 22 Net Income Attributable to Kadant $30,864 $27,487 Net Income Attributable to Noncontrolling Interest 175 184 Provision for Income Taxes 10,816 9,746 Interest Expense, Net 1,669 1,450 Other Expense, Net 20 19 Acquisition Costs — 410 Indemnification Asset Provision (50) — Relocation Costs 535 — Restructuring and Impairment Costs 434 72 Depreciation and Amortization 8,234 8,456 Adjusted EBITDA* $52,697 $47,824 Adjusted EBITDA Margin* 21.6% 21.3% KAI 3Q23 BUSINESS REVIEW– NOVEMBER 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 October 31, 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 3Q23 BUSINESS REVIEW– NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. 24