Kadant(KAI) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Earnings Overview Financial Highlights Kadant Inc. reported a decrease in revenue and net income for Q2 2025 compared to Q2 2024, but saw strong increases in bookings and cash flow, with improved gross margin despite declining EPS and EBITDA metrics Second Quarter 2025 Financial Highlights (YoY Change) | Metric | Q2 2025 Value | Change vs. Q2 2024 | | :-------------------------- | :---------------- | :----------------- | | Revenue | $255.3 million | ↓ 7% | | Organic Revenue | N/A | ↓ 8% | | Gross Margin | 45.9% | ↑ 150 bps | | Net Income | $26.2 million | ↓ 16% | | GAAP EPS | $2.22 | ↓ 17% | | Adjusted EPS | $2.31 | ↓ 18% | | Adjusted EBITDA | $52.4 million | ↓ 15% | | Adjusted EBITDA Margin | 20.5% | ↓ 200 bps | | Operating Cash Flow | $40.5 million | ↑ 44% | | Free Cash Flow | $36.5 million | ↑ 58% | | Bookings | $269.4 million | ↑ 7% | | Organic Bookings | N/A | ↑ 6% | | Ending Backlog | $299 million | N/A | Management Commentary Jeffrey L. Powell, President and CEO, highlighted strong cash flow and a solid improvement in capital equipment bookings for the second quarter, attributing the bookings growth to customer preference for Kadant's equipment and technologies in driving sustainable value - Kadant achieved strong cash flow and a solid improvement in capital equipment bookings in Q2 2025[5] - The increase in bookings, particularly in the current environment of evolving trade policies, demonstrates customer preference for Kadant's equipment and technologies to drive sustainable value[5] Detailed Financial Performance Consolidated Income Statement Analysis Kadant's consolidated income statement for Q2 and the first six months of 2025 shows a decline in revenue, operating income, and net income compared to the prior year periods, despite a slight increase in selling, general, and administrative expenses Consolidated Statement of Income (Three Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change | | :---------------------------------- | :------------------ | :------------------ | :----- | | Revenue | $255,267 | $274,765 | ↓ $19,498 | | Cost of revenue | $138,225 | $152,878 | ↓ $14,653 | | Selling, general, and administrative expenses | $73,941 | $70,004 | ↑ $3,937 | | Research and development expenses | $3,724 | $3,482 | ↑ $242 | | Operating Income | $39,377 | $48,401 | ↓ $9,024 | | Net Income Attributable to Kadant | $26,159 | $31,291 | ↓ $5,132 | | Diluted EPS Attributable to Kadant | $2.22 | $2.66 | ↓ $0.44 | Consolidated Statement of Income (Six Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change | | :---------------------------------- | :------------------ | :------------------ | :----- | | Revenue | $494,477 | $523,740 | ↓ $29,263 | | Operating Income | $74,963 | $85,328 | ↓ $10,365 | | Net Income Attributable to Kadant | $50,222 | $55,980 | ↓ $5,758 | | Diluted EPS Attributable to Kadant | $4.26 | $4.76 | ↓ $0.50 | Segmental Performance Kadant's segments showed mixed performance in Q2 2025, with Flow Control experiencing revenue growth, while Industrial Processing and Material Handling saw revenue declines; bookings increased in Industrial Processing and Material Handling but decreased in Flow Control, and gross margins improved across all segments Revenue by Segment In Q2 2025, Flow Control revenue increased, while Industrial Processing and Material Handling revenues decreased, with organic revenue changes showing a similar trend Revenue by Segment (Three Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | Increase (Decrease) | Increase (Decrease) Excluding Acquisitions and FX | | :-------------------- | :------------------ | :------------------ | :------------------ | :------------------------------------------------ | | Flow Control | $95,947 | $92,290 | $3,657 | $2,168 | | Industrial Processing | $95,937 | $114,753 | $(18,816) | $(19,271) | | Material Handling | $63,383 | $67,722 | $(4,339) | $(5,327) | | Total | $255,267 | $274,765 | $(19,498) | $(22,430) | | Percentage of Parts and Consumables Revenue | 71% | 63% | ↑ 8% | N/A | Revenue by Segment (Six Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | Increase (Decrease) | Increase (Decrease) Excluding Acquisitions and FX | | :-------------------- | :------------------ | :------------------ | :------------------ | :------------------------------------------------ | | Flow Control | $188,388 | $178,972 | $9,416 | $2,948 | | Industrial Processing | $185,461 | $220,614 | $(35,153) | $(32,775) | | Material Handling | $120,628 | $124,154 | $(3,526) | $(4,608) | | Total | $494,477 | $523,740 | $(29,263) | $(34,435) | | Percentage of Parts and Consumables Revenue | 73% | 66% | ↑ 7% | N/A | Bookings by Segment Q2 2025 saw increased bookings in Industrial Processing and Material Handling, while Flow Control experienced a slight decrease, resulting in a 7% overall increase in total bookings year-over-year Bookings by Segment (Three Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | Increase (Decrease) | Increase (Decrease) Excluding Acquisitions and FX | | :-------------------- | :------------------ | :------------------ | :------------------ | :------------------------------------------------ | | Flow Control | $93,055 | $94,098 | $(1,043) | $(2,191) | | Industrial Processing | $105,374 | $96,714 | $8,660 | $8,575 | | Material Handling | $70,946 | $60,910 | $10,036 | $8,842 | | Total | $269,375 | $251,722 | $17,653 | $15,226 | | Percentage of Parts and Consumables Bookings | 67% | 71% | ↓ 4% | N/A | Bookings by Segment (Six Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | Increase (Decrease) | Increase (Decrease) Excluding Acquisitions and FX | | :-------------------- | :------------------ | :------------------ | :------------------ | :------------------------------------------------ | | Flow Control | $193,042 | $188,768 | $4,274 | $(3,121) | | Industrial Processing | $197,740 | $186,591 | $11,149 | $14,074 | | Material Handling | $134,811 | $124,793 | $10,018 | $8,307 | | Total | $525,593 | $500,152 | $25,441 | $19,260 | | Percentage of Parts and Consumables Bookings | 70% | 70% | 0% | N/A | Gross Margin by Segment All segments, Flow Control, Industrial Processing, and Material Handling, reported an increase in gross margin percentage for both the three and six months ended June 28, 2025, contributing to a consolidated gross margin improvement Gross Margin by Segment (Three Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 | 2024 | Change | | :-------------------- | :--- | :--- | :----- | | Flow Control | 53.8% | 53.0% | ↑ 0.8% | | Industrial Processing | 42.6% | 41.3% | ↑ 1.3% | | Material Handling | 38.7% | 37.8% | ↑ 0.9% | | Consolidated | 45.9% | 44.4% | ↑ 1.5% | Gross Margin by Segment (Six Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 | 2024 | Change | | :-------------------- | :--- | :--- | :----- | | Flow Control | 53.6% | 53.4% | ↑ 0.2% | | Industrial Processing | 43.3% | 41.5% | ↑ 1.8% | | Material Handling | 38.2% | 36.8% | ↑ 1.4% | | Consolidated | 46.0% | 44.5% | ↑ 1.5% | Operating Income by Segment Flow Control's operating income increased in Q2 and YTD 2025, while Industrial Processing and Material Handling experienced declines in operating income for the same periods, with corporate operating loss remaining relatively stable Operating Income by Segment (Three Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change | | :-------------------- | :------------------ | :------------------ | :----- | | Flow Control | $24,443 | $23,530 | ↑ $913 | | Industrial Processing | $15,486 | $24,092 | ↓ $8,606 | | Material Handling | $9,939 | $11,188 | ↓ $1,249 | | Corporate | $(10,491) | $(10,409) | ↓ $82 | | Consolidated | $39,377 | $48,401 | ↓ $9,024 | Operating Income by Segment (Six Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 (in thousands) | 2024 (in thousands) | Change | | :-------------------- | :------------------ | :------------------ | :----- | | Flow Control | $47,195 | $45,240 | ↑ $1,955 | | Industrial Processing | $32,318 | $44,091 | ↓ $11,773 | | Material Handling | $17,474 | $16,729 | ↑ $745 | | Corporate | $(22,024) | $(20,732) | ↓ $1,292 | | Consolidated | $74,963 | $85,328 | ↓ $10,365 | Cash Flow and Balance Sheet Data Kadant demonstrated strong cash generation in Q2 2025, with significant increases in operating and free cash flow, while the balance sheet shows an increase in total assets, primarily driven by goodwill and inventories, and decreased debt obligations Cash Flow Data (Three Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change | | :-------------------------- | :------------------ | :------------------ | :----- | | Operating Cash Flow | $40,482 | $28,066 | ↑ $12,416 | | Capital Expenditures | $(3,968) | $(4,974) | ↑ $1,006 | | Free Cash Flow | $36,514 | $23,092 | ↑ $13,422 | | Depreciation and Amortization Expense | $12,069 | $11,991 | ↑ $78 | Cash Flow Data (Six Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change | | :-------------------------- | :------------------ | :------------------ | :----- | | Operating Cash Flow | $63,317 | $50,897 | ↑ $12,420 | | Capital Expenditures | $(7,804) | $(11,245) | ↑ $3,441 | | Free Cash Flow | $55,513 | $39,652 | ↑ $15,861 | | Depreciation and Amortization Expense | $24,082 | $23,730 | ↑ $352 | Balance Sheet Data (June 28, 2025 vs. December 28, 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change | | :-------------------------------- | :------------------ | :------------------ | :----- | | Cash, Cash Equivalents, and Restricted Cash | $97,188 | $95,946 | ↑ $1,242 | | Accounts Receivable, Net | $152,574 | $142,462 | ↑ $10,112 | | Inventories | $168,588 | $146,092 | ↑ $22,496 | | Goodwill | $497,824 | $479,169 | ↑ $18,655 | | Total Assets | $1,484,514 | $1,430,345 | ↑ $54,169 | | Debt Obligations | $247,219 | $286,504 | ↓ $39,285 | | Total Liabilities | $547,221 | $572,217 | ↓ $24,996 | | Stockholders' Equity | $937,293 | $858,128 | ↑ $79,165 | Summary and Outlook Full Year and Third Quarter 2025 Guidance Kadant is maintaining its full-year revenue and adjusted EPS guidance, expecting stronger bookings in the second half of 2025, and has provided specific guidance for the third quarter of 2025, with revised GAAP EPS guidance for the full year - Kadant expects stronger bookings in the second half of 2025 and continued stable demand for aftermarket parts[11] 2025 Financial Guidance | Metric | Full Year 2025 Guidance | Previous Guidance | Q3 2025 Guidance | | :-------------------- | :---------------------- | :---------------- | :--------------- | | Revenue | $1.020 - $1.040 billion | Maintained | $256 - $263 million | | Adjusted EPS | $9.05 - $9.25 | Maintained | $2.13 - $2.23 | | GAAP EPS | $8.89 - $9.09 | $8.97 - $9.17 (Revised) | $2.12 - $2.22 | | Acquisition-related costs (FY) | $0.16 (Excluded from Adj. EPS) | $0.08 (Revised) | N/A | | Acquisition-related costs (Q3) | N/A | N/A | $0.01 (Excluded from Adj. EPS) | Non-GAAP Financial Measures Use and Definition of Non-GAAP Measures Kadant utilizes several non-GAAP financial measures to provide supplemental information on its core operating performance, excluding items not indicative of core business results, while acknowledging these measures are supplemental and not superior to GAAP - Kadant uses non-GAAP measures including organic revenue, adjusted operating income, adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted EBITDA margin, and free cash flow[14] - These non-GAAP measures exclude items such as revenue from acquisitions, foreign currency translation effects, amortization expense related to acquired profit in inventory and backlog, acquisition costs, and other income or expense, as they are not indicative of core operating results[15][18][20] - Free cash flow is used to provide insight into the company's ability to generate cash for acquisitions, debt repayments, and other investing/financing activities[15] - Non-GAAP measures are considered supplemental and not superior to or a substitute for GAAP results, and may not be comparable to similar measures used by other companies[17] Reconciliation of Non-GAAP Measures Detailed reconciliations are provided to bridge GAAP financial measures to their corresponding non-GAAP counterparts, illustrating specific adjustments for items like acquired profit amortization and acquisition costs for both quarterly and year-to-date periods Adjusted Net Income and EPS Reconciliation The reconciliation for Q2 and YTD 2025 shows adjustments for after-tax amortization of acquired profit in inventory and backlog, and after-tax acquisition costs, leading to higher adjusted net income and EPS compared to GAAP figures Adjusted Net Income and Adjusted Diluted EPS Reconciliation (Three Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (Net Income in thousands) | 2025 (Diluted EPS) | 2024 (Net Income in thousands) | 2024 (Diluted EPS) | | :------------------------------------------ | :----------------------------- | :----------------- | :----------------------------- | :----------------- | | Net Income and Diluted EPS Attributable to Kadant, as Reported | $26,159 | $2.22 | $31,291 | $2.66 | | Adjustments, Net of Tax: | | | | | | Acquired Profit in Inventory and Backlog Amortization | $170 | $0.01 | $929 | $0.08 | | Acquisition Costs | $903 | $0.08 | $798 | $0.07 | | Adjusted Net Income and Adjusted Diluted EPS | $27,232 | $2.31 | $33,018 | $2.81 | Adjusted Net Income and Adjusted Diluted EPS Reconciliation (Six Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (Net Income in thousands) | 2025 (Diluted EPS) | 2024 (Net Income in thousands) | 2024 (Diluted EPS) | | :------------------------------------------ | :----------------------------- | :----------------- | :----------------------------- | :----------------- | | Net Income and Diluted EPS Attributable to Kadant, as Reported | $50,222 | $4.26 | $55,980 | $4.76 | | Adjustments, Net of Tax: | | | | | | Acquired Profit in Inventory and Backlog Amortization | $466 | $0.04 | $3,298 | $0.28 | | Acquisition Costs | $1,218 | $0.10 | $1,728 | $0.15 | | Adjusted Net Income and Adjusted Diluted EPS | $51,906 | $4.40 | $61,006 | $5.19 | Adjusted Operating Income and EBITDA Reconciliation Consolidated and segmental reconciliations for Q2 and YTD 2025 detail adjustments to operating income for acquired profit/backlog amortization, acquisition costs, and indemnification asset provisions, leading to adjusted operating income and adjusted EBITDA figures, with adjusted EBITDA margins decreasing across all segments and consolidated Consolidated Adjusted Operating Income and Adjusted EBITDA Reconciliation (Three Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Operating Income | $39,377 | $48,401 | | Acquired Profit in Inventory Amortization | $24 | $529 | | Acquired Backlog Amortization | $202 | $695 | | Acquisition Costs | $908 | $940 | | Indemnification Asset (Provision) Reversal | $0 | $(66) | | Adjusted Operating Income | $40,511 | $50,499 | | Depreciation and Amortization | $11,867 | $11,296 | | Adjusted EBITDA | $52,378 | $61,795 | | Adjusted EBITDA Margin | 20.5% | 22.5% | Consolidated Adjusted Operating Income and Adjusted EBITDA Reconciliation (Six Months Ended June 28, 2025 vs. June 29, 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Operating Income | $74,963 | $85,328 | | Acquired Profit in Inventory Amortization | $35 | $2,860 | | Acquired Backlog Amortization | $581 | $1,494 | | Acquisition Costs | $1,245 | $2,064 | | Indemnification Asset (Provision) Reversal | $(29) | $24 | | Adjusted Operating Income | $76,795 | $91,770 | | Depreciation and Amortization | $23,501 | $22,236 | | Adjusted EBITDA | $100,296 | $114,006 | | Adjusted EBITDA Margin | 20.3% | 21.8% | Adjusted EBITDA Margin by Segment (Three Months Ended June 28, 2025 vs. June 29, 2024) | Segment | 2025 | 2024 | Change | | :-------------------- | :--- | :--- | :----- | | Flow Control | 28.9% | 29.2% | ↓ 0.3% | | Industrial Processing | 22.2% | 25.7% | ↓ 3.5% | | Material Handling | 21.8% | 23.2% | ↓ 1.4% | Additional Information About Kadant Kadant Inc. is a global supplier of technologies and engineered systems focused on Sustainable Industrial Processing, aiming to enhance efficiency, optimize energy utilization, and maximize productivity in process industries, operating globally with approximately 3,500 employees across 20 countries - Kadant Inc. is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing[31] - The company's products and services enhance efficiency, optimize energy utilization, and maximize productivity in process industries[31] - Kadant has approximately 3,500 employees in 20 countries worldwide[31] Safe Harbor Statement This section serves as a 'Safe Harbor' statement under the Private Securities Litigation Reform Act of 1995, indicating that the press release contains forward-looking statements subject to various known and unknown risks and uncertainties that could cause actual results to differ materially from expectations - The press release contains forward-looking statements regarding future financial and operating performance, product demand, and economic outlook[31] - These statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially, as detailed in Kadant's Annual Report on Form 10-K and subsequent SEC filings[31] - Key risk factors include adverse changes in global economic conditions, variability in capital equipment projects, acquisition strategy, supply chain constraints, and currency fluctuations[31] Conference Call Details Kadant will host a webcast and conference call on July 30, 2025, at 11:00 a.m. Eastern Time, for investors to discuss its second-quarter financial performance and future expectations, with details provided for accessing the live webcast and registering for the Q&A session - Kadant will hold a webcast with a slide presentation for investors on Wednesday, July 30, 2025, at 11:00 a.m. Eastern Time[12] - The webcast will discuss second-quarter financial performance and future expectations, accessible via the 'Investors' section of kadant.com[12] - Participants for the live Q&A session need to register online to receive a dial-in number and unique PIN[12] Contacts Contact information is provided for investor relations and media inquiries - Investor Contact: Michael McKenney, 978-776-2000, IR@kadant.com[34] - Media Contact: Wes Martz, 269-278-1715, media@kadant.com[34]