KADANT INC. 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.
KAI 3Q23 BUSINESS REVIEW- NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. | 2 |
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.
KAI 3Q23 BUSINESS REVIEW- NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. | 3 |
BUSINESS REVIEW
Jeffrey L. Powell, President & CEO
KAI 3Q23 BUSINESS REVIEW- NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. | 4 |
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
($ 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 | $210.9 | -0.6% |
HIGHLIGHTS
- Strong revenue performance driven by record capital shipments and robust parts business
- Excellent operating execution led to record adjusted EPS* and adjusted EBITDA*
- Industrial demand impacted by economic headwinds
KAI 3Q23 BUSINESS REVIEW- NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. | 6 |
Flow Control
($ 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 | $25.6 | +5.4% |
Adjusted EBITDA Margin* | 29.7% | 29.4% | +30 bps |
HIGHLIGHTS
• Capital project activity and |
aftermarket demand contributed to |
solid revenue performance in Q3 |
• Strong operating performance led to |
($ in millions)
BOOKINGS
excellent adjusted EBITDA* |
• Ongoing project activity although |
$104.6 | ||||
$84.9 | $78.8 | $88.3 | $83.0 | |
3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 |
timing somewhat uncertain |
KAI 3Q23 BUSINESS REVIEW- NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. | 7 |
Industrial Processing
($ 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 | $20.7 | +8.7% |
Adjusted EBITDA Margin* | 23.8% | 24.0% | -20 bps |
HIGHLIGHTS
• Record aftermarket parts revenue |
and strong capital sales led to |
excellent revenue performance |
• Producers continue to take market- |
related downtime to balance supply |
($ in millions)
BOOKINGS
impacting aftermarket parts demand |
$96.3 | ||||
$77.9 | $84.1 | $79.3 | ||
$70.4 | ||||
3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 |
• Capital project activity remains |
relatively high across all product |
lines despite macro headwinds |
KAI 3Q23 BUSINESS REVIEW- NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. | 8 |
Material Handling
($ 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 | $10.0 | +32.9% |
Adjusted EBITDA Margin* | 22.5% | 19.5% | +300 bps |
BOOKINGS
($ in millions)
$73.7 | ||||
$52.5 | $56.2 | |||
$48.1 | $47.6 | |||
3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 |
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. | 9 |
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
KAI 3Q23 BUSINESS REVIEW- NOVEMBER 2023 | © 2023 KADANT INC. ALL RIGHTS RESERVED. | 10 |
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Kadant Inc. published this content on 01 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 November 2023 12:56:12 UTC.
