KAI - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2021 Kadant Inc. Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Michael McKenney, Executive Vice President and CFO. Thank you. Please go ahead.

Michael McKenney

Ryan. you, Thank and Call. everyone, Kadant’s Quarter First Good welcome Earnings XXXX morning, to With Jeff today and call me the on is Officer. Chief Powell, Executive President our

our materially year the forward-looking Before the the are future ended report and Factors provisions Securities subsequent and plans harbor are expectations, in as factors, known statements financial safe our results statements we fiscal me and harbor results of under make cause for on may and various we filings and Litigation and with those heading purposes Risk Form and including operating actual of remarks presentation the prospects to under may beginning from Kadant’s these Private important Various discussed XXXX. annual of statements to the result Reform differ that Commission. January our safe our forward-looking for at risks about today Securities and begin, XXXX, let forward-looking the These XX-K outlined statement. X, subject slide Act unknown read a those that of Exchange uncertainties

only addition, webcast represent estimates during any make today. as this of forward-looking and views In our statements we

the specifically forward-looking update at While elect change. if estimates we so, may to our disclaim to even some future, point do statements obligation in we any views or

are principles. generally to accounting non-GAAP comparable These measures measures non-GAAP the directly the www.kadant.com. accepted prepared on earnings reconciliation our non-GAAP contained measures. Investors accordance and to in slides release financial conference available this webcast GAAP webcast, we’ll with some presented section most the refer discussed During is at first are not of the in of and quarter financial in A the website in press measures our call, which the

when a basis. give measures on Kadant’s each I’ll that calculated you an With future to are and turn on the or on and share EPS call, to to earnings refer diluted Jeff this as to update of will adjusted I wanted these prospects. who EPS call GAAP over per note we we Finally, referring business that, Powell,

our session. Jeff’s give and Q&A Following I’ll results Jeff? a we overview for quarter, then will financial have an the remarks, of

Jeff Powell

everyone. record quarter Thank review with and financial our and business this outlook in discuss the Thanks, us highlights first XXXX. quarter for morning a our by to operational to led Mike. parts to for bookings XXXX We our you discussing and joining performance. demand great start consumables, results Hello, for quarter. had I’ll begin first our first high our which

has balance and especially previous more on the bookings growth have healthy quarter quarter. our QX was the cash flows project highlights opportunities. our Our in more record well and of just on well another strong great sheet for and business strong executed cash generated future flows, last performance, excellent set true this robust, with operating Overall, one us positioned us review our I when that Capital was our record beating I’ll segments. to segment, Processing was being which details notable had Industrial improving capitalize liquidity an quarterly performance. our further provide activity position.

we of record-setting year While amount the start first some quarter to encouraging. demand, reflect our pent-up is believe the bookings

benefited same was XX%, adjusted while increase period million demand up to new contributed by nearly bookings, Europe. a were A to we consumables cash EBITDA XX% to industrial compared compared XX% Xx to and year from XXXX, boosting activity, up led Our $XX while America mix parts QX. QX and Processing Revenue sequential XX%. margins million, especially up Overall, quarter first in the same Industrial $XXX flow execution an bookings at in $XXX our led were compared million North strengthening and of revenue to X% parts to was product the period free the favorable Strong last to our in to record our was last up segment. year. solid which

period The product last operating year, in with favorable to the executed meet circumstances in led quarter. improved EBITDA both revenue activity and start in an and a customers revenue the through and bookings parts to strong adjusted of a as our to first XX%. the EBITDA record our compared A has continue experienced adjusted year up up revenue continued the moderating margin expected Flow XXXX to performance is despite progresses with year increased compared operating from All the quarter increase demand our and XX% to and normalize inventory. second of global Control improved parts QX the challenging sequentially needs safely year-over-year. total Our segment workforce the leverage, customers’ of were quarter their combined world. our Bookings of segments mix, with well of many business as and XX% made contribution X business XX% to first consumables. in areas had same strong and

will continue and improve. become as market conditions vaccines rates to strengthen COVID-XX vaccination We believe available more widely

prior as A XXXX. good and segment March strong consumables to XXXX point Processing XXX and demand segment in to mix for demand adjusted particularly surged this year. products, Strong OSB starts lumber, our $XX June same is basis with continued for housing our up Industrial margin. of in the million March led the since product U.S. increased XX% XX% in at parts improvement bookings to dimensional last wood EBITDA up quarter compared segment the equipment compared this XX% to compared with the execution continued X% wood in growth, end leading throughout to and experience level Our processing and Revenue the market to highest year. favorable period

record shortly backlog for the of the quarter, increasing we the with us China seeing OCC of we for in had quarter end million. year. This, first are positions order the at system packaging activity an And remainder the the We well $XX booked closed, markets. after combined in the approximately

Moving activity sector, third particularly consecutive and QX record increase and in beginning Material year of Handling to European XX% consumables the levels. revenue. revenue slightly see Material is activity up the relatively segment shy improving. our to Based U.S. led in last to set the America, few last to solid we beating Capital food and in potential on material $XX order Handling recycling Revenue infrastructure $XX in markets activity. to and handling this are X% in quarter million, in our above particularly just Altogether, Material we in our were XXXX. first compared segment to parts North our recover of segment, was continue first stable our made increasing are and quarter bookings to and has million Handling pre-pandemic investments believe of period quarters, up bookings business the in in the bookings Europe and the in pending our secondary quarter over same the sector, up total

regions. ahead second we seeing the certain to XXXX activity look full in signs ability our and the we of of are year, quarter visit customers As to project and improved increased

us global strong Our opportunities solid combined may that the with economy. capitalize to improving on balance cash with well flows, have positioned emerge sheet,

in as way global in financial of of pass our We a the like over performance. and Mike? are infection a the with the learned vaccine new capital and a rates QX of some business in encouraged I’d conduct customers surging now said, combined review for to to deal distribution to pandemic. challenges they areas, with our variability amount the present accessibility, have uncertainty see orders. recovery great to the economic call Mike of timing That

Michael McKenney

compared XX.X% overall financial quarter key quarter. to increase parts some which up higher XXXX. first with was consumables points of the Consolidated projects. first represented in XX.X% higher start first of in metrics basis XX% in I’ll margins This of Jeff. XXXX, XX% the on from margins year XXXX prior you, in and and were first percentage revenue gross Thank due our quarter the revenue, XXX to achieved compared to a capital the quarter of of

was $XX.X XXXX revenue government quarter in SG&A had of million represented basis of in million of a also of and the $XX.X by compared quarter first in from the of XXXX contribution quarter first quarter of We $X.X points SG&A and translation programs. gains, first in transactional which There in currency expenses to currency unfavorable modest assistance periods. XX.X% the foreign first XXXX; lowered SG&A were XX the million both million expenses XXXX. increased effect, which expenses $X.X an by

has XXXX. Our EBITDA Adjusted compared $XX.X $X.X million in million compared of diluted in compared to million of cash our the revenue quarter operating $XX.X free to XX% flow $X.X quarter, weak This represents of XX.X% with first quarter EPS operating uses -- flow first a quarter performance to XXXX increased due up XXXX. XXXX despite both first to the first first a being being pay the by first for the able debt and weakest of million. XXXX quarter XXXX. start quarter highest We first cash quarter of year, had nonoperating the notable down Historically, our been quarter were first revenue was the $X.XX Control Operating million cash segment. in XX% for the quarter Flow cash of several importantly, the performance. of $XX.X or quarter of first strong to to we or XX% Most the in in typically the of in was in strong weakest $X.XX flows.

in million $X.X our expenditures, XXXX. vesting the $X.X capital million flow $X.X related XXXX for withholding on the awards. compared Free common to paid paid a $XX.X cash to million payments in dividend and quarter We quarter stock stock tax also $X.X of million paid million first in was of first the of

quarter. quarter and compared EPS me first in XXXX our results in were to GAAP next Let adjusted the the $X.XX quarter Both our of diluted $X.XX XXXX. first EPS the to for of turn

government tax benefit with tax higher I awards of the for of and first to I tax anticipated The due benefit due to of which first interest our in March. remaining that rate equity XXXX than lower outstanding first February a the revenue, related the shown vesting increases the $X.XX due in and of due of in quarter chart, of to XXXX to due of percentages, diluted XXXX effective consists in $X.XX $X.XX $X.XX $X.XX due due to higher to $X.XX $X.XX higher weighted were As the interest higher quarter divesting to our quarter offset These mention in XXXX first an be partially call, gross of quarters associated would tax expense, noted operating a due included lower to to also the noncontrolling quarter to shares rate the XX.X%, expense. like for the the by EPS assistance following: tax $X.XX equity programs increase awards. adjusted average likely lower due costs, was $X.XX higher to to would compared margin rate.

would the Excluding this of rate categories included just the Collectively currency first translation mentioned I of in of of year the was first benefit, the compared in tax to foreign all dollar. been have XXXX quarter to quarter weakening $X.XX the effect U.S. favorable XX%. the last due a

on Looking Slide at our XX. liquidity metrics

in quarter XXXX. of calculate days capital the XXX XX.X% cash to plus subtracting fourth the taking lower number we quarter days in days first revenue first first and by accounts to inventory quarters Our in first compared as was payable, by was accounts both of of XX.X% of XXXX in a increase percentage was end and end at the a days, receivables payable. This of in Working of in driven XXXX. compared of conversion at the the the which days quarter of XXXX XXX

we that of debt, quarter first sequentially debt to decreased pattern to to or calculated XXXX. the agreement, and In of million our quarter with the X.XX X.X $XX end million lower quarter end of of at less were of the quarter, paying leverage of the at continued XXXX. further credit of the compared end ratio, the X% the cash, in of net X.XX to down our at end debt our at is first our XXXX first the Our $XXX first and accordance able XXXX

capacity the in of of or XXXX. compared expense end million first quarter million million our we credit quarter of decreased At $XXX available million to XX% interest XXXX borrowing in had matures XXXX, XXXX. revolving the December under in to quarter facility, of the Our the first first which of $X.X $X.X $X.X

restrictions bookings activity first the the still certain quarter economic parts an XXXX, of in is continued to Travel have our in uncertainty about have world we experienced regions. of excellent to recovery visitation timing and certain there interact of an on with impact customers. While our in ability the

this at comments directional formal this provide to XXXX guidance Given we versus full continue time. uncertainty, for will

increase As On we and February, quarter capital bookings we first the resulting in overall parts of if revenue could the of Jeff in indicated in anticipate in demand an of XXXX million end periods. $XXX of the conditions both call market quarter his XX% XXXX, last noted in comments, and continue, experienced be We XXXX of our the to range. or the that X% and continued fourth high anticipate now to we end that for increase we that record that revenue from our of strong will surpass range, projects in in million I $XXX at in that in the XXXX. consumables high

million increase $XXX year we to for million. result, range updating a to As $XXX XX% to an the are XX% our revenue of to

operator first COVID-XX half improving the of that be second the the half review likely That anticipate these turn into year year more our As half I see to note how strongest. our the I rollout insight We second for last of and of conditions call, quarter XX% will Operator? directional current half business the first provide likely come course, XX%, I in be half in to the XXXX. concludes in we session. being the call Q&A now as business hope at is would financials, year. predicated approximately vaccination XX% back our help the than over with anticipate weighted the This, still capital environment. below comments of the my we gross and the year second the the margins the noted also we towards and being mix the fourth becomes second the will stronger of half of the above for will in on revenue in heavily

Operator

the Davidson. of [Operator comes Kurt Instructions] Yinger line question from Our first from D.A.

Kurt Yinger

the How start you we into slipping And couple should about a out bookings. about wanted of that the projects capital thinking thinking be some frame? XXXX-type another are sustainability Is materializing kind bookings over XXXX of strong next just Obviously, here. of of to these quarters? the into the I equipment late on really performance time levels of timing how these revenue?

Jeff Powell

complex think have for our capital for I we some I really the look bigger, think you when cycles this at short of the So in unit for of capital, the mentioned kind before, production cycles we more systems. longer

this that being that lot was that the the first are be expect we of would this but and a So year, things -- booked in said, a will of shipped quarter lot built year.

year. expect second to early will So of we it’ll half get to the it some always a the be of next would year, calendar year in it think tends gets the I in percentage But into large -- but does. that booked shipped It slip be in probably, year. the

Michael McKenney

That’s be And quarter out, why I to would pointing that, fourth why add Kurt. component we’re a to -- expect quite of the I’m strong. we

Jeff Powell

during fourth although continued we little year, most last see in recovery obviously happened that the a As as quarter mean, last that’s sustainability, and of very did of I far now. there think the I was year,

bit There’s happen, projects I think year there’s demand. that just normal which then happen. a of And likely of going did activity that still little to were occur that there’s will pent-up the not kind yearly level. last

of kind on I try could they year pretty think to recover level of capital from good activity this the be year us year. for projects the last as So a slow

Kurt Yinger

slowdown might terms by customer demand you’d business kind normalize maybe in little here really half. Flow was sounded felt bit you to point the the half? I of of in then, in generate where only where pent-up guess, you type second kind the kind that Okay. Control area the excess first and a And it of would a like segment, of see that Is inventories area

Jeff Powell

Yes.

I down Obviously, think customers lot inventories a a our happened. couple of of year. last things their have some ran

operating will our rates. you some the and But of most function are that. So of have of of a kind rebuilding parts consumables

the rates. around to to recover the we of to to would expect as rates normal the of So operating hand-in-hand level tends economies returning use with kind world operating the go see and that improve, start

Michael McKenney

I side parts Kurt, Flow bookings Yes. -- on on the really say, The front. control benefited the consumables and segment would the

Kurt Yinger

it. Got

then just And Okay. on margins.

maintained but more that? that the impact you So so capital that to or last that how something a be will of in expansion you it are the your that’s headwind, thoughts this And gross margin kind about outlook kind of sounds you like around equipment on year margin does drive the mix EBITDA of talked gross second kind thinking the of a quarter. ability How the terms Is EBITDA year? about there. half much margin issue not of line,

Michael McKenney

exactly more of It’s you’re headwind. Kurt. right, margin a Yes, gross

will margins improve. actually operating Our

you’re So correct assumption. in that

through -- margins. year, see you’ll improvement EBITDA we as You’ll the our see on go

Kurt Yinger

just Okay. for Makes then one last sense. me. And

the a really spot sheet, On here. in balance obviously, good

You’ve had same from I time, a lot guess multiples would have M&A. of quite a value that success bit. up historically moved creating At the

just about put it’s kind work and of sheet the ability how affecting here. to your how balance that you’re So curious thinking to

Jeff Powell

mentioned, I has happen. story, year There same that that call activity a we’ve the flow deal of last that kind going on substantially. the deals So and last level the market was quarter didn’t were think, the business to Again, right? has planning it’s increased of lot increased in

of deals, deal normally of got -- you’ve and flow got just backlog, annual to that So see. pent-up we that that then so speak, the kind you’ve

development are active. business quite our people So

it free been while. and high essentially for You’re unlimited that Money in a right supply, seems high. valuations are is They’ve like.

being mean always pretty we’ve valuations So up. been good. that driven said, it has I

custodians they’re and -- I and to we in see privately relationships us develop companies, tend businesses. their buy where owned think the becoming value of they we them with

fair strategy. that work at in good traditionally we to and we had, continue success companies reasonable valuation, think, getting very a so a have valuation, And I

Kurt Yinger

to Okay. up think unevenness that strength how done some about markets And the of change the you in I core the acquisition kind recovery that products forest expanding of markets, end something fit you in of maybe you’ve already that. mean past? opportunities just that like follow could does and with in terms some given on with in of do bolt-on versus what opportunities Syntron your

Jeff Powell

could our look we the in what operating we kind the a call value strategic for of X strategic that would in kind in our the in about. and that bolt-ons, and then all or standalones any new deal be always we at something in segments, flow of would of I X probably it create move areas have, future. or we we that -- searching a looking we buckets: And strategic opportunities a of X, operating because majority kind we’re us. we Well, see of would of some mentioned platform acquisitions we’re doesn’t the time, think segment wouldn’t if into And for tends the But most that area and that say, again segments. say That mean to we standalones. will of we those strategic X I opportunities at centers the bolt-ons the the activity we and first for that at new given around find know we you

our our one to necessarily and doing just redirect kind a growth. maintain there segments is long-term activities wouldn’t view focus a long-term try of time when business to we be because of So tends period We a on development and well. quite of our the resources

Operator

have question Chris the next from Howe line from our we And Barrington. is of

Chris Howe

by encouraged very guidance, that. the with off Starting

of to on accelerate the the you segment, And above in this that, about million perhaps and are $XXX your outside potential potential get the you range? Can what increasing and specifically, kind the talk guidance to recovery to go are that should Material current to in what year? seeing or a that takes business that guidance? of that million, confidence revenue assumptions up expectations. puts it for what More $XXX beyond ahead of increased that the for Handling quarter underlie following balance You

Jeff Powell

Yes.

aware, periods challenging are the has forecast. been this obviously try of more to you as one of Chris, to time So

think, pandemic, We’re the would right? North and is there’s particular, And and quite job while world global, I in very that America doing, We’re of are, in -- I other recovering a say, the U.S., good behind parts from international. further there’s still the struggling.

And particularly we really that’s to with understand forecasting. in trying footprint, on it is our going challenging a find international from so everything

our nature and overpromise. So trying -- and and conservative that of to be traditional not

because it So in is And to we I of think, come the the economies did going expectations half. the of to second record how are bookings. quarter increase -- really down, robust second our the

a lot half. say quite hear in they think will You economists strong second the be of things

Assuming would better. -- start the is starts to the that they the around normally and vaccination with a I But there’s globally of to to world deal much now open to from potential uncertainty, than catch-up the rest for it’s more up, business world. right do there we have say,

around very And for for to it’s to continue potentially right so now. upside the if forecast a it’s here. world Is real everybody just there some the task difficult But economies us challenging the Sure. strengthen?

set at to just we’re so our where point. and that expectations apply of we’re we and seeing normal this And looking at are what to trying

Material as -- sectors the say, down It most, slowly and were was it goes, clients would in of have lot one shut are where reopening. we few far the were the As a of the impacted by I was shutdowns. Handling

We as will well stimulus the at all economy don’t know one. fiscal the be the to that last directed potential to that as think nice the for now going and going at, nice at to general help economy housing, growth to pace that be and segment, there. going in seem it’s is just steady the in quite strengthening exactly just kind an -- there’s seen where we’ll out steady think large going for normal this nice operating a to course, But seen with driver it’s it’s level which benefit of help. that’s the of this package, particular of And time. how from particular, -- X us then, the would strong which to People we’ve continues there’s a also quarters, And infrastructure we that. as we’ve in So returns be as bookings. on housing

with think business hopefully growth continue just to we kind of that’s -- be a So steady some that will there’s potential. stable and

Chris Howe

Okay. seem bookings as current quarter-to-quarter assume in there’s too continuing the And much sequentially market. a processing, the in been that material trend quarter. shift it to fair wood It to relates that quarter. moving to there performance that good I is Is doesn’t of say?

Jeff Powell

Well, doing our incredibly customers the well. -- are

the than seen our their they’re ever release you’ve made money life. If earnings from customers, more in making they’ve

So doing. in a that business say remain operating would that rates like, that are and have the consumables very parts and this it’s I and say I would operating high. them going a there’s bit tends that high takes the foreseeable time amazing in they’re a always pretty But for it of look what capital quarter they’re little they future, in to as bit quite in of rates to high a the that. very And variability then segment, order little go go. may absorb X we and to

to their we So business them our think customers continue. back -- reinvest we high because want reoccurring expect improve resources they a base doing I we have that in have in that’s general be revenue And the our the mean, to with then to to partnered that. would And is it. always which there we’re quite I successful quite orders, capital

that through flows we’ll that the from think rates for that. the do we business So consistent operating driver us kind that. is of But really, and the benefit

Chris Howe

the I’d other -- rates But that? concern to question comment India a seem completely. we’re something infection away Asia, on there, any doesn’t last not be about. going It like that’s concern, and talk but and seeing of to you obviously can parts something or My in

Jeff Powell

Sure.

week India, those we We and we of they’re management able as possible. work And of. can’t It is and morning as that. see which, So clients And time imagine, toughest to conduct countries, that, sure to people people safe challenging. working business. daily. our out this always try serve a course, the you did -- I in is think corner A our first them we’re every that that might with having as maybe make or group. to we track them right get track you on of review are to now, foremost, as lot best they returning the

was saw the I morning. in journal I So encouraged. this that

the to So, Europe. is see that. in is to I was vaccination -- Europe improve rate encouraged starting

figure this. One manage impressed the through things this how through our we’ve get a They and way working to are economies to that out by can work somehow of to the customers able different ways, been is do All the forced the as all, very challenging that to see in good, quite fact as can there’s we’ve considering been you even regions the world. they’re still some in around bookings, by so. with

So I would is say, every region different.

the right challenged market It’s us. an to obviously but India and It’s we’ll quite that We’re slowly growing kind improve expect, And progresses, vaccination of largest conditions the an meet work are and our now the as this to that and world. areas -- is our things of those market important improve rate some market, there. -- biggest. probably way markets, it’s year not modifying see we are there important us. around it is But not the to we will most in major our

Operator

Instructions] of This is [Operator new a question. from Liptak Walter we do the line have Seaport. And from

Walter Liptak

couple follow-ups. to of wanted ask just I a

third? fourth the strongest. production on the about discussion into increasing fourth could detail First, quarter if of the I in the way quarter could a little is about more stronger, that levels knowing is. quarter, orders a be pulling the the third why bit of there the that being wonder And go some you into

Michael McKenney

Yes.

going it’s we’re those be had but the and fourth, are every fourth. it’s of I capital to There’s shipping think, bookings and -- little takes bit -- function towards first very in a quarter. we Walt, and puts good weighted heavily really, And booking more in the always third quarter. the the fourth a

or pushed is XXXX. quarter third certainly may possible even out it some the pulled So into first the into that get

Walter Liptak

Okay. Great. margin to Was All the on inflation-related? reason had And right. the make headwinds. gross gross follow-up margin. that the understood that a I then I wanted sure

Jeff Powell

half first be mix the capital. business a No. mix and function of of parts and half, towards the weighted the No, the second be it’s it consumables; is and will of heavily to going in towards the the in strictly where favorable year, more

So a function just of mix.

Walter Liptak

think I any are wonder about hit pressures of discussion chain. those operations things some heard topical don’t if of by the getting I some and issues. I And the supply you’re like inflationary

Jeff Powell

I watching I and we’re that that, mean everybody see closely. starting Yes. think is to

kind we Of course, up with our project project-by-project basis. our cost activity, build of

work the which So time the the our that’s contain inflationary account be more And hard at may we the that into something our of last Flow is you when to gone and try XX those, in has times X/X that we occurring changes quoting to steel say, of We project. take customers any closely. gone to the "Look, watch up impact. that and months. are you’re have kind has Stainless consumables, back up." parts go On materials there business, in to our cost

there your some monitor. it’s cost we watch to are customers that about. and something inflation closely and talk So have definitely go you to components But that

Walter Liptak

sort But related not be to to timing any impact of of inflation or on your to availability it going parts? All Okay. gross an like related right. there’s margin projects sounds of

Jeff Powell

mean I availability. so watching the I don’t cost. think we’re on

down -- it’s That’s year. is we’re come Our But metal, something and forecast closely. remainder -- or definitely forecasted biggest right now. peaked is to the watching the the kind of cost it it’s futures of some of

seeing. are what on and increases, divisions are We seeing our based managing it some they’re

Walter Liptak

some can one an I an me, with how for been give fan level have at And XX-XX. just that? wonder the Great. XX-XX, know doing what of to a on you’re you big Have and you factories us update training, All guys all this then point And XX/XX last us that’s going. your developing had give idea of maybe Okay. I of right. if

Jeff Powell

Yes.

I that of XX/XX middle So think, total, the a we or either implementing have implemented divisions X in have it. of

So X/X of we’re probably way through only the our company.

next We the X planned. have

second of those of here up in be year. Some will the starting the half

it our as go then resource are their to implement a our they that businesses, management and companies. the we in become other to of it we’re And trying to help accelerate the more able program, do implementation. So in implement senior through more

accelerating. think, I that’s, something is it So

quite we’re businesses and set them. had think going results seeing. we’re it, some with excited to are we what on. And good see pleased success new of great we’re from the far, about We So early

We seeing it and to we’ve taking some committed already, globally. are

-- impactful. implement faster it’s we just accelerate, because how we how do do it’s now we’re focusing it So on

seeing We’re from good results it. some

Operator

Chevy next [Operator from line comes Eubank from Our Instructions] of Bobby the question Chase Trust.

Bobby Eubank

at Congratulations continued terms concerns any strong there’s markets orders, semiconductor see. a M&A, just some I but follow-up. component capital be looking as of the projects, of on a heavy on questions. nice assume the to new record, A you any there? prior follow-up to in that your And may not

Jeff Powell

lot mean you’re in right. We don’t a I semiconductors. have

Of have low course, we our of total -- buy. very of manage amount control that our kind it’s dollar PLCs very, a and that equipment. But material manage systems our

get to concerns We particular may that heard be buy something doesn’t -- not as systems. of of inability at earlier it But not now, about things want it’s So than there I’ve our may some mean divisions. to challenges. to have any right or control we

I area. as it tends of to with earlier, M&A the I always Flow far have we in discussions in Control a we’re companies, mentioned, areas. and we lot of all and be always as -- activity, So the like looking mean as I think,

at you’ll business look our our is, profitable you As far, see most Flow by Control our numbers, business.

great in. a that’s we’re So market

there. in out are there you acquire us. down -- segments, challenge And makes And so frankly, our them that for all there the to can X looking get is always, at. always But nice it always looking sense comes you -- we’re that valuation a of we’re add opportunities can at businesses

to add value some have believe value and whatever we that buy. can We to bring we

we if was And and would family. Kadant value that it how part the of of at so business the increase business constantly we’re okay, saying, looking

The wood looking in wood areas. we’re So we the market highest sector, all sector. processing have in our share

now So just there’s in are that’s to that of add challenging share to are that great fits very strategic there. we for the But businesses there at a wood areas because of high -- in probably that just would then such have in most be market we’re kind with. not we’re that’s the lot out one we that looking are there the business something involved sector us. And adjacent

those, always we’re So at looking too.

Bobby Eubank

management it pulling to company Is do you want that but that Or of consider with products, would for that’s opportunity -- really term that before you’re the that near spend time much something you great would how larger term? would wood out? an that of trigger? timber addition kind you acquisitions, to a much team mass and deals the looking be for Is in the then some at is close longer And XXXX?

Jeff Powell

going on Well, We discussions had on. the always going during have discussions pandemic. we

development -- always at We’re opportunities. our always out is business looking team

time. happen, could any that So frankly, at

you our As at much -- operation. our have larger we we far try as look if there’s to lumber technologies, business, to to technologies that and products a are impactful tend quite unique the tend

turnkey for business in entire has big would, and construction likely supplier it. involved installation an a instance, we model. of piece a get our to which not mill, being So never That’s

-- a that of quality really the business. from of Our and flows kind key, that have impact that of a business model high-tech And consumable ones the production the the is it. having piece nice and a cost really products ideally, and business spares input cost

tends to where kind that we focus. So of be

Operator

we the follow-up of And D.A. from a do from Davidson. have Kurt line Yinger

Kurt Yinger

to period? are higher-level terms increase kind mean, seeing. appetite of of along all guess, growth of time paper, customers prices I of And supply seeing their trajectory conviction a lumber it, in does with I doesn’t that kind mean organic I there respond increasing the to demand we’re rapidly spending? these starting conversations a the to from impact your what question. to really you’re much capital as pulp commodities or OSB multiyear business the for seem over your around pretty Is really be flex to Just incremental

Jeff Powell

thing. just of crash interesting price lumber, ‘XX, This the destroyed an lumber industry, occurred by It’s a of look think how in ‘XX. again. has somewhat gone getting topical that’s I new If very at from it prices it’s heard record as Well, hit because particularly, probably yesterday, we really you -- really much the housing that the up. remnant homebuilding is they’re

the I down [ph] about is about is of record is demand production back less, X from the level. think high level, And I XX% is X XX yet production capacity to kind XX% which read the XX [ph]. that near

this back that. capacity of kind at you have where demand you’ve So below production got have mismatch near-record well levels, you that and is

supply so no therefore, surprise hit and prices And record outstripping is far that levels. it’s these have demand

will of or one I things, Now two will of course, you’ll supply will demand either increase, both. think see and moderate happen,

think see those OSB, meet more see next they’re X% a X forecasting for and know grow globally, online I to moderate years. greater bit, I particular, think in the demand saw it report just I needs. I that you’ll capacity maybe little a than you’ll year come probably that will a

for there’s demand or but be profitable going of lumber. going years. there’s like for healthy most be to side strong demand record looks there the the a that the on several lead demand it believe estimates work be would we’re It the levels very seeing not should customers. housing to the on our nice, be for And now OSB dimensional record next So prices, you very the may to solid,

see to that. So going I think you’re

waste, sources things ban that the waste in. you On course, happened. primary waste really paper, which the had almost away import a But been of one completely. the was of pandemic OCC time, things of same at office side, kick distorted because, have went there’s few The the Chinese

that So paper ton $XX course, of price high. range, seeing you’re is waste the now, the of kind grade your were you looking had on a It’s lot -- is at what to in which the same depending time. occurring right reasonably we’re of dynamics a actually But at. what $XX for

packaging. when really delivery the So into ban nicely demand pandemic play. first In shortage. from home high particular packaging places, it’s some back Obviously, the Chinese for course, There’s grades. that during increased market fiber a lows kind of went the it at was the come of there’s for demand

And so said things because home the people that think, I everything, in used up convenient, that And spurred, that accordingly to I’ve and get delivery, home fashion -- at that’s pandemic they being prices accounts economical. think have it’s some the to continue I set delivered and that. find will go before for responded one will once to the probably it’s

pandemic. post will so that And predicting most the experts are continue I think of

of And activity so a to we’re lot meet those packaging seeing around needs.

Operator

further in And questions time, queue. at there this are no

Jeff Powell

Well, right. operator. All thank you,

Before with up today, call few to the just leave you takeaways. a wrapping want I

Like work our new and the employees the we of ways. our customers, pandemic. have health in First, to our priority top we well-being work through as remains learned

focus on core our needs As growth customers’ in immediate we revenue the accelerate our ahead we we crisis, seek meeting look and beyond as health our continue will to markets.

the is health stronger financial began. liquidity position and when Our today excellent, than is our crisis

strong And around forward of economies improvement cornerstone of thank and call want the model. we Our safe. flow stronger ability look business to generate a remains we to to that, today, world, you free cash much stay and our I please the continuing XXXX. And the a expect for with the joining

Operator

And this does conclude today’s call.

You disconnect. may all

Kadant (KAI) 9 May 212021 Q1 Earnings call transcript