Q2 2025 Performance - Bookings increased by 7% to $269.4 million compared to $251.7 million in Q2 2024[11] - Revenue decreased by 7.1% to $255.3 million compared to $274.8 million in Q2 2024[11] - Net income decreased by 16.4% to $26.2 million compared to $31.3 million in Q2 2024[11] - Adjusted EBITDA decreased by 15.2% to $52.4 million compared to $61.8 million in Q2 2024[11] - Free cash flow increased by 58.1% to $36.5 million compared to $23.1 million in Q2 2024[11] Segment Performance - Flow Control revenue increased by 4% to $95.9 million, while bookings decreased by 1.1% to $93.1 million[15] - Industrial Processing revenue decreased by 16.4% to $95.9 million, but bookings increased by 9% to $105.4 million[20] - Material Handling revenue decreased by 6.4% to $63.4 million, but bookings increased by 16.5% to $70.9 million[25] Financial Position - Cash, cash equivalents, and restricted cash increased to $97.2 million[42] - Debt decreased to $247.2 million[42] Guidance - The company expects FY 2025 revenue of $1.020 to $1.040 billion[46]

Core Viewpoint - Kadant Inc. reported a decrease in revenue and net income for the second quarter of 2025 compared to the same period in 2024, but showed strong cash flow and an increase in bookings, indicating a solid demand for its products and services [3][4][5][6][8]. Financial Performance - Revenue decreased by 7% to $255.3 million from $274.8 million in 2024, with organic revenue down 8% [4][10]. - Net income fell by 16% to $26.2 million compared to $31.3 million in 2024, with GAAP EPS decreasing by 17% to $2.22 [5][10]. - Adjusted EPS decreased by 18% to $2.31, excluding acquisition-related costs [5][10]. - Adjusted EBITDA decreased by 15% to $52.4 million, representing 20.5% of revenue, down from 22.5% in 2024 [6][10]. Cash Flow and Bookings - Operating cash flow increased by 44% to $40.5 million compared to $28.1 million in 2024 [6][10]. - Free cash flow rose by 58% to $36.5 million from $23.1 million in 2024 [6][10]. - Bookings increased by 7% to $269.4 million from $251.7 million in 2024, with organic bookings up 6% [7][10]. Outlook - The company maintains its revenue guidance for the full year, expecting revenue between $1.020 billion and $1.040 billion and adjusted EPS between $9.05 and $9.25 [8]. - For the third quarter of 2025, revenue is expected to be between $256 million and $263 million, with GAAP EPS projected between $2.12 and $2.22 [8]. Segment Performance - The Flow Control segment reported revenue of $95.9 million, up from $92.3 million in 2024, while the Industrial Processing segment saw a decline to $95.9 million from $114.8 million [21][24]. - The Material Handling segment's revenue decreased to $63.4 million from $67.7 million [21][24]. Company Overview - Kadant Inc. is a global supplier of technologies and engineered systems that drive Sustainable Industrial Processing, with approximately 3,500 employees in 20 countries [28].

Financial Data and Key Metrics Changes - Revenue in Q1 2025 declined by 4% compared to the same period last year, primarily due to weaker capital shipments in the Industrial Processing segment [10][20] - Free cash flow increased by 15% to $19 million in Q1 2025 compared to $16.6 million in Q1 2024 [21] - Adjusted EBITDA decreased by 8% to $48 million, with an adjusted EBITDA margin of 20%, down from 21% in the prior year [20][10] - GAAP EPS decreased by 3% to $2.04, while adjusted EPS decreased by 12% to $2.10, exceeding the high end of guidance by $0.05 [20][10] Business Line Data and Key Metrics Changes - In the Flow Control segment, bookings increased by 6% to $100 million, with Q1 revenue up 7% to $92 million, driven by strong demand for aftermarket parts [11] - The Industrial Processing segment saw a revenue decline of 15% to $90 million, primarily due to a significant drop in capital shipments, although aftermarket parts revenue made up a record 80% of total revenue in this segment [12][13] - The Material Handling segment experienced stable demand for aftermarket parts, with revenue slightly up to $57 million, while overall bookings remained flat [14][15] Market Data and Key Metrics Changes - Aftermarket parts bookings represented 74% of total bookings, reaching a record $190 million, benefiting from a large installed base [10] - The geopolitical climate and trade policy uncertainties have created a challenging environment, impacting customer decision-making and capital project timing [6][29] Company Strategy and Development Direction - The company is focused on adapting to changing economic circumstances and exploring alternative supply sources in response to tariffs [6][7] - Despite uncertainties, the company remains confident in its ability to deliver value and maintain strong free cash flow [16][17] - The revised guidance for 2025 reflects anticipated revenue of $1.02 billion to $1.04 billion, down from previous estimates due to tariff impacts and delayed capital orders [29][30] Management's Comments on Operating Environment and Future Outlook - Management noted that while there is strong demand for aftermarket parts, the uncertainty surrounding tariffs has delayed capital equipment orders [9][28] - The company believes it is well-positioned to respond to changes in trade policy while continuing to support customers [7][16] - Management expressed confidence that the underlying fundamentals of the markets remain strong despite current challenges [16][17] Other Important Information - Gross margin in Q1 2025 was 46.1%, the highest since 2017, up 150 basis points from the previous year [18] - The effective tax rate for Q1 was 24.3%, including benefits from equity awards [20] - The company has a healthy balance sheet with $133 million of borrowing capacity available under its revolving credit facility [24] Q&A Session Summary Question: What is the outlook for deferred orders and project activity? - Management indicated that while there is a pause in project timing, discussions and activity levels remain strong, with no significant cancellations observed [35][37] Question: How are tariffs impacting capital projects? - Management noted that while tariffs have created uncertainty, they do not expect a large number of projects to be canceled, although some may be delayed [49][50] Question: What is the expected mix of parts versus capital sales? - The company anticipates a continued strong performance in parts and consumables, with expectations for capital revenues to improve in the second half of the year [66][67] Question: How is the company addressing tariff-related cost increases? - Management is implementing surcharges and exploring alternative suppliers to mitigate the impact of tariffs, aiming for cost neutrality by the end of the year [73][75]

Financial Data and Key Metrics Changes - Revenue in Q1 2025 declined by 4% compared to the same period last year, primarily due to weaker capital shipments in the Industrial Processing segment [11][18] - Adjusted EBITDA decreased by 8% to $48 million, with an adjusted EBITDA margin decline of 100 basis points compared to the prior year [11][20] - Free cash flow increased by 15% to $19 million in Q1 2025 compared to $16.6 million in Q1 2024 [21] Performance by Business Segment - **Flow Control Segment**: Bookings increased by 6% to $100 million, with Q1 revenue up 7% to $92 million, driven by strong demand for aftermarket parts [12][13] - **Industrial Processing Segment**: Q1 revenue declined by 15% to $90 million, largely due to a significant drop in capital shipments, although aftermarket parts revenue made up a record 80% of total revenue in this segment [14][15] - **Material Handling Segment**: Revenue was slightly up to $57 million, with aftermarket parts comprising 65% of Q1 revenue, despite a decline in capital equipment demand [15][16] Market Data and Key Metrics Changes - Aftermarket parts bookings represented 74% of total bookings, reaching a record $190 million in Q1 2025 [11] - The company noted that the geopolitical climate and trade policy uncertainties have introduced transitory headwinds, particularly affecting capital project timing [12][16] Company Strategy and Industry Competition - The company is exploring alternative supply sources to mitigate the impact of tariffs and is well-positioned to respond to changes in trade policy [6][7] - Management emphasized the importance of maintaining high levels of customer support while navigating the challenges posed by tariffs and geopolitical uncertainties [7][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver value despite ongoing uncertainties, highlighting strong fundamentals in the markets served [16][17] - The company anticipates that the second half of 2025 will be significantly stronger than the first half, with expectations for improved capital order activity [30][31] Other Important Information - The effective tax rate for Q1 was 24.3%, influenced by tax benefits related to equity awards [20] - The company revised its full-year 2025 revenue guidance to $1.02 billion to $1.04 billion, down from previous estimates due to tariff impacts and delays in capital orders [29][30] Q&A Session Summary Question: What is the outlook for deferred orders and project activity? - Management indicated that while there is a pause in project activity due to tariffs, discussions and quote activity remain strong, with no significant project cancellations observed [36][40] Question: How does the company view the impact of tariffs on capital projects? - Management noted that while tariffs have caused delays, they do not expect a significant number of projects to be canceled, emphasizing the need for customers to eventually invest in new equipment [52][56] Question: What is the expected mix of parts versus capital sales for the year? - The company anticipates a parts and consumables revenue percentage of around 69% for the year, with expectations for improved capital revenues in the second half [67][69]

Core Viewpoint - Kadant Inc. reported its first quarter financial results for 2025, showing a decrease in revenue and net income, but strong demand for aftermarket parts and healthy free cash flow despite geopolitical uncertainties [3][4][5][8]. Financial Highlights - Revenue decreased by 4% to $239.2 million compared to $249.0 million in 2024, with organic revenue down 5% [4][9]. - Net income was $24.1 million, a decrease of 3% from $24.7 million in 2024, and GAAP EPS decreased by 3% to $2.04 [5][9]. - Adjusted EPS fell by 12% to $2.10 compared to $2.38 in 2024, excluding acquisition-related costs [5][9]. - Adjusted EBITDA decreased by 8% to $47.9 million, representing 20% of revenue, down from 21% in 2024 [6][9]. - Free cash flow increased by 15% to $19.0 million compared to $16.6 million in 2024 [6][9]. Bookings and Demand - Bookings increased by 3% to $256.2 million compared to $248.4 million in 2024, with organic bookings up 2% [7][9]. - The company experienced record demand for aftermarket parts, contributing to strong margin performance [3][8]. Outlook - The company revised its 2025 revenue guidance to $1.020 to $1.040 billion, down from $1.040 to $1.065 billion, and GAAP EPS guidance to $8.97 to $9.17, revised from $9.63 to $9.98 [8]. - Incremental tariff costs are estimated to be $5 to $6 million for 2025, impacting the financial outlook [8].