Kadant(KAI)2022-08-06 12:14Financial Data and Key Metrics Changes - Revenue increased by 13% year-over-year, driven by strong aftermarket demand and capital order shipments [10] - Adjusted EBITDA reached a record $46 million, up 11% from $41.3 million in Q2 2021, with an adjusted EBITDA margin of 20.7% [24] - Diluted EPS was $2.24, an increase from $1.96 in Q2 2021, exceeding the high end of guidance by $0.28 [23][29] Business Line Data and Key Metrics Changes - Flow Control segment saw bookings and revenue increase by 36% and 20% respectively, with aftermarket parts revenue making up 73% of total revenue [13] - Industrial Processing segment bookings rose 8% to $110 million, with revenue increasing 2% to $84 million, affected by unfavorable foreign currency translation [15] - Material Handling segment revenue increased by 23% to $52 million, with capital bookings up 93% year-over-year [17][18] Market Data and Key Metrics Changes - Bookings increased by 25% to $266 million, with strong contributions from North America and Europe [11] - The strengthening U.S. dollar negatively impacted reported bookings by $10 million [12] - The company experienced healthy demand across all markets, particularly in North America and Europe [11] Company Strategy and Development Direction - The company aims to capitalize on opportunities arising from a record backlog and robust cash flow [21] - Focus on sustainable industrial processing solutions to drive long-term growth [103] - The company is diversifying geographically and across markets to mitigate cyclicality in demand [61] Management's Comments on Operating Environment and Future Outlook - Management anticipates a moderation in industrial demand as consumer demand slows due to central bank actions to control inflation [20] - The company remains well-positioned to weather economic slowdowns, with strong fundamentals in end markets [103] - Concerns exist regarding potential impacts from geopolitical tensions and supply chain challenges [37] Other Important Information - SG&A expenses increased to $55.3 million, reflecting costs from acquisitions and foreign currency translation effects [22] - The company raised its full-year revenue guidance to $890 million to $905 million, while maintaining adjusted diluted EPS guidance of $8.80 to $9 [35] Q&A Session Summary Question: Revenue guidance for Q3 and dynamics in the second half - Management noted a loss of $31 million in revenue due to foreign currency translation, impacting Q3 and Q4 forecasts [46] Question: Parts and consumables margin versus capital equipment - Management explained that parts and consumables can adjust prices more quickly compared to capital equipment, which is more exposed to inflationary pressures [49] Question: Expectations for booking activities in the second half - Management indicated a potential moderation in bookings but noted that discussions with customers remain strong [56] Question: Risks associated with the housing market and industrial processing - Management acknowledged a potential slowdown in the housing market but emphasized strong underlying demand [75] Question: Impact of energy prices on capital project activity - Management highlighted that high energy prices in Europe are driving demand for more efficient processing equipment [97]