Kadant Reports Second Quarter 2023 Results

WESTFORD, Mass., Aug. 01, 2023 (GLOBE NEWSWIRE) -- Kadant Inc. (: KAI) reported its financial results for the second quarter ended July 1, 2023.

Second Quarter Financial Highlights

• Revenue increased 11% to a record $245 million
• Bookings decreased 19% to $215 million
• Operating cash flow increased 20% to $22 million
• Net income increased 14% to $30 million
• GAAP EPS increased 13% to $2.54
• Adjusted EPS increased 13% to a record $2.54
• Adjusted EBITDA increased 12% to a record $52 million and represented 21.0% of revenue
• Backlog was $363 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 another well-executed quarter with record revenue, record adjusted EBITDA, and record adjusted EPS,” said Jeffrey L. Powell, president and chief executive officer of Kadant Inc. “Record aftermarket revenue combined with strong capital business made for an excellent quarter.

“Our operations teams around the globe continued to deliver exceptional value for our customers and executed well, as shown by our improved operating leverage. Despite the macroeconomic headwinds and general slowdown in industrial activity, we achieved excellent results in the second quarter.”

Second Quarter 2023 Compared to 2022
Revenue increased 11 percent to a record $245.1 million compared to $221.6 million in 2022. Organic revenue increased 12 percent, which excludes a one percent decrease from the unfavorable effect of foreign currency translation. Gross profit margin increased to 43.5 percent compared to 43.3 percent in 2022.

GAAP and adjusted EPS both increased 13 percent to $2.54 in 2023 compared to $2.24 in 2022. Net income was $29.7 million in 2023, increasing 14 percent compared to $26.2 million in 2022. Adjusted EBITDA increased 12 percent to a record $51.6 million and represented 21.0 percent of revenue compared to $46.0 million and 20.7 percent in the prior year. Operating cash flow increased 20 percent to $22.5 million compared to $18.8 million in 2022.

Bookings decreased 19 percent to $215.2 million compared to $265.9 million in 2022. Organic bookings decreased 18 percent, which excludes a one percent decrease from the unfavorable effect of foreign currency translation.

Summary and Outlook
“We expect industrial demand to continue at current levels and with our excellent start to the year and strong backlog, we are well positioned for record performance in 2023,” Mr. Powell continued. “We are raising our revenue and earnings guidance for the full year and now expect revenue of $925 to $940 million in 2023, revised from our previous guidance of $910 to $935 million, and GAAP EPS of $9.11 to $9.31, revised from our previous guidance of $8.82 to $9.07. The 2023 guidance includes pre-tax relocation costs of $0.6 million, or $0.04 per diluted share, related to the relocation of one of our Chinese facilities. Excluding this expense, we now expect adjusted EPS of $9.15 to $9.35 in 2023, revised from our previous guidance of $8.90 to $9.15. For the third quarter of 2023, we expect revenue of $229 to $236 million, GAAP EPS of $2.15 to $2.25 and, excluding $0.04 per diluted share of relocation costs, adjusted EPS of $2.19 to $2.29.”

Conference Call
Kadant will hold a webcast with a slide presentation for investors on Wednesday, August 2, 2023, at 11:00 a.m. eastern time to discuss its second 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 here or selecting the Q&A link on our website to receive a dial-in number and unique PIN. It is recommended that you join the call 10 minutes prior to the start of the event. A replay of the webcast presentation will be available on our website through September 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 second quarter results on its website at www.kadant.com under the “Investors” section.

Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use certain non-GAAP financial measures, including increases or decreases in revenue excluding the effect of acquisitions and foreign currency translation (organic revenue), adjusted operating income, adjusted net income, adjusted 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 an unfavorable foreign currency translation effect of $2.3 million in the second quarter of 2023 and $9.7 million in the first six months of 2023. 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 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.

Second Quarter

Adjusted operating income, adjusted EBITDA, and adjusted EBITDA margin exclude:

• Pre-tax indemnification asset reversal of $0.2 million in 2023.
• Pre-tax relocation costs of $0.1 million in 2023.

Adjusted net income and adjusted EPS exclude:

• After-tax relocation costs of $0.1 million in 2023.
  

Free cash flow is calculated as operating cash flow less:

• Capital expenditures of $8.8 million in 2023 and $6.9 million in 2022.
  

First Six 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 acquisition costs of $0.1 million in 2022.
• Pre-tax indemnification asset reversal of $0.2 million in 2023 and $0.6 million in 2022.
• Pre-tax relocation costs of $0.1 million in 2023 and 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 relocation costs of $0.1 million in 2023 and 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 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 $13.2 million in 2023 and $9.8 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.