KAI - Earnings call transcript Q4 2021

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Operator

Thank you for standing by, and welcome to the Fourth Quarter 2021 Kadant Inc. Earnings Conference Call. [Operator Instructions] As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Michael McKenney, Executive Vice President and Chief Financial Officer. Please go ahead.

Michael McKenney

Jonathan. you, Thank and Year everyone, Kadant's Quarter Fourth Good Earnings welcome Call. Full XXXX and morning, to With the and Chief me our Executive Powell, on Officer. call today Jeff is President

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

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

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

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

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

Jeffrey Powell

everyone. capital segments for and discuss Mike. I several about all year discuss well-executed we records. had aftermarket the more Good bookings operating among activity morning pandemic, our results Despite the to solid finish demand to exceptional fourth backlog. Thanks, segments. of record strong outlook constraints results financial I'll flow The and provide was year. and about another brought you project our macroeconomic us our across the joining Thank this review activity headwinds, fourth a chain this full business Hello, for our record an XXXX. details quarter to cash other quarter and operating uncertainties quarter generated and and robust led supply when by

balance sheet we finished year Our as on develop. capitalize to opportunities the new well positioned remains they and healthy,

be towards winner XXXX, our XXXX efforts recognized sustainability Business magazine of a as of by for processing. reduce waste named processing, our of rewarding industrial helping as we sustainability honored driving the it a element also customers the that to generate We producing year. for were most yield a value more inputs, focus we what our with many of a or As know, particularly and second our industrial America's refer fiber, strategic Newsweek proposition. At responsible role SEAL were It's to selected work and one while play less. as you our product water. technologies Award fewer advance category. the This in environmental major energy Sustainability And pivotal be more consuming companies sustainable with their end initiatives initiatives sustainable and in consecutive is innovations of to is

Turning now performance. and X financial to QX Slide our

new in metric million. significant achieved the we metrics financial can QX fourth a and our of had XXXX increases every You compared up to record all quarter shown essentially across of revenue in $XXX to was key records XX% see the slide.

Excluding acquisitions revenue year. the favorable XX% and FX, last the was impact up period same of to compared

which excellent margin revenue a in pressures operating on Our despite up our adjusted material aftermarket $XX the parts performance million flow segments constraints. continuing chain margin was ongoing $XXX million. operating to record QX. our our to EBITDA operating performance cash adjusted XX% Improved record EBITDA of drove delivered to inflationary and supply XX.X%, All contributed

and performance, respectively. which adjusted EPS performance exceptional XXXX. up the throughout next, beginning economic year continued I'll at momentum earnings quarterly contributed and record were to Strong XX%, an of Slide review EPS GAAP The QX year the XX% Our full X.

While and compared general record revenue feeling at $XXX of year. prior a new challenges million, while XX% increased we a pandemic-focused shifted labor income the issues to up the the from in to supply from year our XX% regions our most reached world. inflation, chain, million, a to Full primarily of net demand record solid experienced customers and $XX availability optimism increasing

a adjusted in at set diluted per XXXX prior EPS the As $X.XX exceeding share. result, increased to $X.XX, record

Day of around As in At EBITDA EBITDA XXXX record free pleased that million. adjusted and many in $XXX XX%. full adjusted with our flow cash we XX.X%. recall, record flow we was adjusted $XXX I'm set to cash margin year of our to operating you margin March margin million EBITDA goal this of contributed will XX% Investor time, of achieved event at This of an XXXX. say our our

they customers. proud for our work they Our the these innovative for do to under as serve workforce employees of exceptionally continue have circumstances. to done and challenging performed our well extremely I'm around deserves the globe credit tremendous results

like to segments. I'd operating Next, X our our performance review in

Organic revenue revenue. revenue, last total with the parts recent Our acquisitions the acquisition. quarter, which to Flow fourth $XX year. Control same record excludes from segment FX, million compared period revenue a our continued X% XX% increased an its upward solid to Revenue and trend up XX% contributions in made aftermarket of increased

improvement this margins than lower integration which acquired of our going while control quarter other third we flow initiatives of time is currently XX/XX in includes, is the across number margin XXXX outlined which are business, their have operating businesses companies, our initiatives, management at the implementing of the we as our planned. segments. of among a our acquisition. items, other Our operating launched This at

We expected are excited is of coming the about this acquisition make years. the contributions to in

and the chain half globe. markets be in challenges We continues XXXX influenced expect we our solid parts. to remain demand both business aftermarket ahead, the first for fundamental activity believe capital drivers Looking by end of of though the strong, around the supply show

our segment. Industrial to Processing now Turning

experience processing and both demand wood our strong to for continue for We capital equipment, parts.

preparation project Our occur million, associated in XXXX that which included so booked reported a may quarter. prudent reversal current hold it was we in capital from bookings third to the and were The booking million on has thought remove not a $XX it stock recently project put with $XX backlog. been of our

in year X% the compared execution a up and EBITDA margin. made XXX were Parts capital $XXX continue revenue same the this QX and point up Revenue total led good for of last capacity in business their our and as add invest year-over-year operations. $XX increased period operating upgrading to orders surge. our to driving customers basis revenue in fourth improvement leverage million to was quarter. with in million Improved XX% adjusted segment New to XX% this

in solid capital active XXXX, we we continue strong in systems the as was project our fully to continue despite in Looking centers our of invest are this distribution ahead municipalities, said, terms to segment, segment steel and Handling new and moderate for new dramatic the to In or high-performance our parts. their supply this profitability the gains box be the activity be to year. wood projects many plants very Material in to That demand expect achieved for expect in as facilities. Demand aftermarket will processing operational costs unpredictability we sellers of chain. and increases

Our of segment, parts fourth XX% $XX fourth our significantly in million, XX% acquisition to made to in revenue results. up recent total and increased revenue. this quarter Balemaster the Revenue quarter contributed

segment was revenue to capital Excluding Bookings $XX due million. flat strong Material quarter. revenue record Handling lower year XX% a our compared FX, prior in increased our a to acquisition and relatively QX to

with our acquisition, activity While to parts this continue. increase recent up benefited demand project expected solid capital organic and XX% were bookings from

believe in bulk segment particularly ahead are will XXXX, with we material as the plans. this strengthen we Looking the capital already handling, executed, projects to experiencing U.S. spending where are activity year and associated progresses infrastructure business increased

project we ongoing ahead first the year, As production and expect this to healthy, of to maintain activity full we look is XXXX quarter momentum. and the industrial

and chain inflationary challenges responses uncertainty of the policy some the half However, introduce in pressure do to year. latter supply

the performance to us now review year and well year. to financial Our and generate financial this robust for deliver our I'd record opportunities on cash backlog the capitalize as Mike Mike? to ability that expect our to record we may over performance of call positioned pass outlook flows emerge XXXX. have and unfolds, like for again to

Michael McKenney

start records. quarter margins quarter XX.X% fourth Thank basis to notable Consolidated in fourth of included XXXX, I'll XX.X% of gross key XXX financial some points. compared down quarter, you, from which some Jeff. metrics fourth our in the with were XXXX the

benefits fourth related acquisitions, the lowered margins by consolidated gross increased quarter gross basis XXXX, basis Our of profit margins by the XX Balemaster inventory acquired government of the In fourth XX negatively Clouth amortization which gross quarter consolidated points. assistance and were XXXX of consolidated in margins affected to by points. the and

were points of Excluding a the items, consolidated impact gross higher XX from due basis capital down revenue. to both these mix margins

in of were increase XXXX of Fourth XX% in increased XXXX, capital million fourth business remaining our to XXXX decreased due increased and million to the million associated fourth of million increase in in $XX.X acquisition-related SG&A to million expenses and -- conditions. quarter in XXXX. quarter percentage quarter parts incentive the $X.X fourth with in Industrial $XX.X The segment. quarter Processing XXXX our overall of compared compared revenue SG&A is SG&A $XX.X at $X.X and acquisitions million higher expense XX% $X.X significantly to a million revenue due fourth the in XXXX which in of compensation the of revenue improved to compared from an Our includes primarily the fourth SG&A to $X.X of quarter consumables an totaled total prior increase in quarter costs, of the year.

to the compared XXXX XX.X% expenses revenue, of XX.X% period. year in percentage decreased fourth a prior to of quarter in SG&A the As

GAAP $X, reaching For fourth XXXX. quarter to fourth compared our history, the exceeded quarter in EPS the in the XXXX $X.XX in our first time quarterly $X.XX diluted of

in acquired in which GAAP remaining, reserves a asset costs amortization ceramic acquisition-related our of in EPS backlog the includes of tax tax with of business. approximately in restructuring will our $X.XX turn uncertain amortization fourth and diluted XX.X% blade the of been costs, of quarter profit amortization of impairment acquired discrete acquisition-related and included acquisition of includes sale to of positions rate costs amortization benefits Clouth in Tax into The in an gain options. $X.XX benefit the building. $X.XX $X.XX of there $X.XX exercise $X.XX XXXX reversal other awarded employee charge tax $X.X profit to $X.XX $X.XX associated costs. recently and tax in $X.XX of and backlog fourth of related and previously acquisition stock with was Our on has manufacturing a or includes Europe inventory, acquired the completed, is $X.XX in quarter XXXX. and inventory consolidation restructuring a related a associated costs in the the $X.XX million costs, of The the

have items, these rate tax been our Excluding XX.X%. would

For in were margins gross XX.X% XXXX. XX.X% to the year, full XXXX compared

XXXX amortization government compared reduced which assistance in XX.X%. profit inventory, margins were the both of basis and gross XX Excluding points up to XX.X% by XX periods, basis gross benefits points margins to and

XXXX. of XX% to million $XXX.X XXXX, XXXX. revenue $XX.X in were increase an $XXX.X in compared of and XXXX percentage to million parts or million consumables in in Our expenses XX% compared was XX% SG&A

costs and $X.X in to our As SG&A $X of XXXX and a acquisition-related $X We of XXXX and in in million had from respectively. percentage XX.X% revenue, XXXX, XXXX compared in to million XXXX. SG&A acquisitions of XX.X% decreased expenses million incurred

was of in currency and XXXX, foreign we there addition, assistance million. $X.X In benefits an translation effect had unfavorable a of reduction $X.X million government in

increase primarily Excluding $X.X or these incentive were XXXX, items, SG&A in to X% to expenses all compensation. an up compared due million

up Our $X.XX EPS XXXX. XXXX, in $X.XX XX% in a record compared GAAP diluted to was

restructuring of of GAAP benefit in EPS Our XXXX and costs, $X.XX $X.XX in $X.XX diluted costs, includes from a tax items $X.XX the on building. a acquisition-related the gain discrete sale

related attributable quarter a million addition, of results In tax assistance or of adjusted of in the income our to pretax product employee strong $X.XX In income $X.X record XX% segment, tax EBITDA to revenue XXXX. in million of programs net of wood net or Processing to increased XX.X% retention XXXX, pretax compared $X.XX revenue the processing due XX.X% of fourth million to the of million pandemic in our quarter line. XXXX Industrial $XX.X XXXX to or to included $X.X our government or compared led performance $XX.X of by fourth

For million or was record XXXX a $XXX.X XX.X% of EBITDA or XX.X% the revenue full year, of EBITDA $XXX.X to adjusted compared million of adjusted revenue.

million. in free flow far operating flows operations generating XXXX, million record and $XX Our demonstrates strength was around fourth and excellent a of exceeding exceptional world. record quarter from the prior our of cash Operating $XX.X in cash was flows quarterly our performance continued cash the

XX% was compared flow was XXXX. the of XXXX, and XX% fourth quarter operating For $XX.X in compared of cash quarter record from up million our to the cash full to XXXX set prior million, a in record XXXX. XX% $XXX.X fourth up the Free year, increasing flow

full paid was uses the year, for $XX.X $XX.X had For non-operating in a XX% million. notable million fourth stock. from cash prior and repaid XXXX. XXXX million debt, of up XX% free the dividend compared XXXX expenditures our on $X.X our in quarter of We to cash set paid of $XXX.X record million, capital and common several $X.X of million We flow

$X.X We manufacturer in small acquisition million stock also the paid India. preparation a of for

net debt. $XXX and $XXX million full acquisitions, of the repaid our year, For we of acquired, million cash paid for

EPS $X.XX. share restructuring quarter earnings $X.XX of increase of and relates costs was $X.XX $X.XX from programs gross These outstanding acquisitions amortization intangible to $X.XX XXXX me per due due and and diluted prior by XXXX $X.XX in of acquired asset lower the compared In $X.XX our favorable $X.XX EPS all increases $X.XX. results The diluted lower the quarter U.S. adjusted diluted the Let to fourth partially currency $X.XX expenses, expense. to following; GAAP quarter. adjusted in of interest dollar. $X.XX was and higher of higher per weighted of the year, recurring fourth weakening XXXX, due to included quarter in I the diluted was quarter government to quarter to of $X.XX, revenue, due diluted the received charge for In just EPS $X.XX $X.XX, to and assistance The $X.XX to in lower earnings $X.XX due of an margins, to was due of consists adjusted quarter XXXX were XXXX, the categories due Collectively, higher $X.XX share tax a shares difference operating offset due mentioned in the rate. to average impairment EPS of last year's the foreign fourth GAAP fourth of backlog the turn a compared fourth of was translation effect to the $X.XX. fourth to

tax favorable backlog $X. $X.XX higher benefits effect just of amortization The Slide to was $X.XX our XXXX We diluted expense. to a restructuring share EPS the and and diluted XXXX. XXXX share reduction benefit diluted $X.XX from from to asset diluted from $X.XX and translation earnings and our higher by $X.XX full foreign XXXX, of $X.XX offset impairment acquired were operating consists adjusted The $X.XX tax interest a outstanding a recurring GAAP in for the on reported EPS increase included diluted relates partially $X.XX a to $X.XX revenue, from earnings higher reported was assistance higher an increases government results acquisitions, in discrete of in We from $X.XX. categories rate. costs GAAP $X.XX. These and difference turning EPS to $X.XX our margins $X.XX, our mentioned, average acquisition non-controlling all XXXX, due $X.XX compared $X.XX, of lower from year following; of interest XX. $X.XX, I $X.XX currency gross operating of in results costs adjusted $X.XX programs, $X.XX in XXXX from the weighted lower intangible of per from in was adjusted per of of of from $X.XX from Collectively, EPS Now expense, charge shares of the higher expenses, of

million, of the a in fourth to from compared at starting payable and of million capital days end the the our less end driven was of down days at to of quarter million the percentage the let's higher payable. metrics, was and in is conversion XXX principally X.X% the decreased to from in in cash a liquidity prior of debt, inventory of days XXXX third revenue of third in cash plus as turn Now XX.X% the XXXX at the Working accounts days that subtracting sequentially by the XXXX. days Cash number end end the fourth of a quarter The XXX of of Slide XXXX XXXX, on to the decrease days quarter days end in taking conversion XXXX. XX. calculated XXXX at accounts by quarter XXX of was fourth $XXX.X Net at debt in $XX of XXXX. measure, receivables decrease $XXX.X compares and in year and XX.X% of quarter

$X.X $X.X Our decreased XXXX. interest XX% $X.X in compared XXXX million expense to in or million million to

from fourth given calculated X.XX Quite at $XXX paid quarter ratio, in end of million accomplishment our as XXXX, XXXX. leverage fourth of XXXX. was for net an the cash agreement, X.XX% we the acquisitions down quarter that defined the Our of credit in acquired in

XXXX. for guidance our review I'll Now

$X.XX. $XXX $XXX the our of amortization guidance acquired quarter guidance adjusted EPS for first to the the XXXX first excludes to $X.XX backlog. million million, is and is for from $X diluted This revenue Our of quarter

that should our flow guidance the to acquired $XXX excludes here due could from For full several backlog. guidance million variability timing to there results $X.XX the the EPS of capital factors, and $XXX $X.XX be order is in $X.XX I some and to adjusted quarterly and for caution of our diluted shipments. the variability year, revenue choppiness including the and million, is of year full our amortization

currency approximately the to other due includes EPS diluted our include impact could $X.XX translation China's of tensions revenue and of adjusted challenges, impact and zero-COVID U.S. XXXX guidance unfavorable addition, of the strengthening In risks dollar. strengthening The guidance policy. chain on supply U.S. foreign dollar, geopolitical on that $XX the million an

and the inventory profit programs, anticipate Excluding came XXXX in from at assistance gross margins And will XXXX. amortization to and gross this level of the for our be close to benefit we XX.X%. XX% government at XX.X% margins in

of will of approximately $X.X of be million. revenue will rate R&D be a revenue, and expense $X.X be XX% We will As tax we recurring XXXX. our in to expect XX.X%, anticipate we XXXX. net SG&A And to XX% interest X.X% anticipate percentage expense million approximately approximately approximately in

Our of the benefit than rate from anticipate the which equity of the remaining a be recurring tax vesting may little tax a awards. lower first in 'XX quarters, receiving we quarter

We of in expect in spending depreciation and $XX And approximately anticipate amortization revenue. X% million will be be will CapEx $XX to we million approximately XXXX. XXXX

stock you in help In provided, the XXXX, to to I for in line. guidance we XXXX. addition starting acquired us preparation outline business I CapEx In grow to our product a just another project want China

manufacturing that business that acquired commercial has When well. we time, the acquired was are we facility. you aware, business, very facility in of its the At many area. performed As the

residential. which become our the located the area this growing, is in city is facility more around has As business

operations. our result, to asked local relocate a us the government As has manufacturing

the with earlier The the agreement. from the XXXX. sale most project the sells the X% and Proceeds facility believe for on anticipate the XX% quarter XX existing CapEx a in anticipated our in incurred. agreed-to-sell first incurred in agreement, in Currently the We and the selling be government the for final transaction existing of $XX when or of facility U.S. proceeds large facility in the of the XXXX, government first to effect. years. the will new move build In quarter approximately EPS negotiating quarter this local payment and an government GAAP to next be gain costs years, buy with we agreed-upon over from XXXX. of have million, the several all to will we is will price. for X be reached next being the facility the occurs, received, the relocation the when same the effective paid XXXX. facility the for of effective date likely been the within CapEx the of down fourth The and and down the a is of When an local additional adjusted the numbers years The goes payment which due months. this a of result from the on give city. results. will become the be We payment X first date, new over price property gain discussing into we accounting And facility an this excluded has I related sale will the will diluted this at our quarter with costs the agreement will into will To be local estimate of remaining government of that pay at this our will

guidance we purposes, of costs GAAP forward related be want over to and Q&A financials, CapEx for as to for the to I U.S. XXXX a end the of For facility give numbers. to folks day, proceeds session. basis, does is my new the the not the we on selling all received that Operator? CapEx the facility now make that our once color include proceeds cash old point it key CapEx transaction. of and on wanted offset reflected and the our the from this also I old project. this regular received turn the The in aware will EPS of the I back operator also go will by at call be be the cost That related new each review clear to will quarter facility our CapEx the facility, will the sale. concludes I from

Operator

first Our line John from from comes of Franzreb question the Sidoti.

John Franzreb

a into that just is higher so, A dovetails quarter. or of common if this I'm Actually, equipment emerging trend? talking spending if by what either capital great this you on this projects been has deferred that about. from on how season much? by about Congratulations you're theme you're think kind curious reporting labor benefiting And availability.

Jeffrey Powell

certainly, think when was a in the globe. through I year there Well, slowdown in the capital project was prior really raging activity pandemic

And to up so that some back of has started again.

there we as packaging. businesses. -- with eases. of remain would associated think benefiting wood been home, But are demand, markets a our there the lot deliveries housing lot which I are So arrangements, -- associated driven that. has particular require people certainly In in has have boom that are shifts the say, that that particular, to our And driving from the which likely our with also pandemic pandemic more needing processing the at-home housing a working from different I

I I probably goods, I activity a on shift capital in with But executing come combination those, the of projects along we're capital early way project in both that's that -- the we live the of social place have work. a in. we it's the say, think stages, consume these taken it's of would So think some and and side. way

amount catching runway, fair I of a up. think, so on there's left still And

John Franzreb

expectations? XX% in target our remarks And your kind achieve this the original curious, year it. you achieved early? support happened expect in prepared of Or this EBITDA said Jeff, Investor outperformed that something you've mentioned it has XXXX Got to that your Day. you I'm often did you

Jeffrey Powell

that in years. Well, in our And in I third the this and we one, we first it of plan 'XX. some second metrics years was did achieved out one think X put X-year kind we've X the

all still So goal. hit further EBITDA -- met targets haven't the we targets to do revenue -- yet. I share X We've that We're the before for -- work margin goal, approaching of end will out the them we some we're of or some not to is the unusual we but per met years. there. the still earnings our have it's us of point the many

And solid set years achieving. people so pleased divisions results the our believe some try to which initiative, program that a for towards And have us we ago implemented, started this. drive we're that also quite that certainly we and helping us. that's has can goals goals, been that really implementing with while, The ambitious in XX/XX we delivered for but and

Some made have been been acquisitions to of the profitable acquisitions. extremely accretive They've we've that. very

really think, internal it's initiatives through been a leverage, just some and cost of So increased operating I combination, acquisitions. XX/XX accretive

we'll we're the And so plan. it's And course, even our to of plan, pleased that EBITDA with next a achieved it. further a goal -- through we plan think go the and most X-year metrics, set of issue new once margin we've to decrease appropriate will up. We'll

John Franzreb

I Got guess I'll queue. in And get the last back it. it. one question, Got

higher and segments? X review commodity with you Just input the about of companies manage could how board. kind higher other across pricing your if input affecting I and across just costs business costs wonder costs you

Jeffrey Powell

about things there structure, decentralized believe out and place. the teams local of on we our quickly are Yes. structured they're many is there very changes great Well, our conditions that on focused the to the take ground to and respond one very are

to So trying sourcing you if manage manager procurement or that's things will, manager globally. there's no corporate,

changing. have XX around the ground are conditions We see basically changes as they making real units that major in on world time the the operating

staying on same-store a our prove kind a the on of it that's fact up of structure so side, And that's basis -- issues. was just actual that and of And job actually is control pricing local of side. real-time times required making, pandemic, points side the So during served decentralized And management move crisis, one through actually little the us. good work the locally. us for shown really quickly And example very obviously by on to able speaking, the really through of well. in we people sourcing generally ahead to our it, said, -- that's XX that the hard gross But so like from the on were benefits that's sale cost allowed positive a us believe time of real And they've really making bit. done just benefits I margin that's year, this great really we strong this there's conditions based decisions teams decisions where XX it.

John Franzreb

now? are at long? going if lag price there So right you And so, equilibrium on? still a cost is how Or

Jeffrey Powell

others there. on are still moderate -- Well, had commodities still There through some some it the new system. -- there areas I in put the in starting the are a would and are to constraints that speaking, that's we've of are kind working generally depends little what that say, to there the where chain but are commodity. supply bit, pricing

Some takes or longer that agreements took some existing off. than kind have you before took inflation we of And supply you more. signed that of because that might year set the projects for prices others over, a also, have

costs, to as I pricing keep really us possible minimize our the to we our focused low thing say more would to customers. we're for So there's on But can our as still costs trying important that increases some the price work down the system. is through so

Operator

Chris Howe comes Our from the next Research. of from question line Barrington

Chris Howe

influence to outlook, it may the Well, that puts that the talked and many you takes about outlook. relates as

the timing reversal? playing line? half in based see the perhaps second we gross continuing margin versus takes tell How that and uncertainty shipments. into you out about Can and the of take last regarding talk Or certainly year, this the first of capital also on early orders? a there's year, and versus half to the perhaps is with the on too leverage timing it context operating you As put puts it past

Michael McKenney

would over which I fourth interestingly have I course, first enough, relatively at I'd -- the there's Chris, kind stands of point last If quarter. a that half second revenue out may expect the me, the of numbers revenue our the change. and -- looking guidance, split you X, in the it looking quarter, I that big the be say second the our is to as believe quarter the we'll our latter third same. say Well, will half, the year, that if year, first of those And it lead middle quarter, do between But margins I better. I that our your year looks be equilibrium to would half, to is have of pressure today. about where just in will on like the highest the view different it -- if But the picture, at and lay I points,

pressure on by operating than margin And capital And will second we will first start year. looking go in into Our that performance. in as I'm will that's the put shipments primarily abate to the better our be latter half. that quarter half performance some driven at the of the

split operating So second first revenue, second the I revenue the the line will half, relatively in believe, better top perform, compared first and half but the of even half, -- to on metrics half. performance year

Chris Howe

Okay. Perfect. And for just Jeff. question here throw a

you last synergistic had see of mentioned into the place What combination? just of of development margin the You growth think as call, improvement practices. or for whether business. mentioned the and and best opportunity, I further for on type of we kind their Can opportunities of product context opportunity potential consider in sharing integration you the the that's detail? initiatives the you this the business for Clouth across leverage

Jeffrey Powell

for we're kind Yes. so that -- play pretty pioneering share, are strong in There's And some The these is them we're it's doing that's heavily challenging. know, are starting out several but a of levers had in that guys of as -- work, we area. now right to very there actually we investing business market that take and ceramics always a you -- that available pooling. one it's always

of moved doing to first we impairment the We're down were in of ceramics business them. associated that that Mike facilities, of -- we're we things shutting is our over taking that. did the process the So doing some we one mentioned our charges with and

we that's that are going from. did immediately, guys we'll we're which So to together. benefit then something the doing almost get And

of meeting up here a strategy kind global coming in We few have our weeks.

those few members, to And we before year weeks take so that benefits throughout of think to exist together and years, in years progress And year work team senior of a all of This Cleaning this will see fair to the here have Doctoring, details a start week the achievable, and management will and for these a be see of the really X so amount it the through the synergies getting the is Filtration which we'll kind product a ceramics them. -- there's business, consolidating work to doable. big initiatives, similar had development going would and you'll on between will of too. expect tell XX/XX do, next very to -- a importantly, rationalizing we we'll first. we're I our X you we the business, but couple the expect then or tackle impact that what full the very and benefits And

Operator

from Kurt from comes question D.A. Yinger next Davidson. of line the Our

Kurt Yinger

ones could what's customers I the at you time stage start orders chain, out X kind wanted going Just expect some of later just for to coming on do mean, back to an in lines. pushing mean, that you on supply be quick are given I this issue dates? Or year? me. at project off all I and to

Jeffrey Powell

-- clearly, challenges there's Well, everywhere. there's

think always so was supply that other possibility. decision on their There's this really I work. put considerations, that's hold do impacted I on while I to tell right that a the is hold would chain some was that looking mentioned the issue. a you put thing And they customer at not project now

and on the quarter. really, better to that's projects. of in a shape around given the it depend could It ship Obviously, got any we market produced little which bit on little in stuff put part and be shipping things something that's So would a we're timing world, seeing than affect think, and I on that, their is shipped have in sold world. current a halfway

you, always next Friday, it's the -- a the in a it's honest one. quarter. ships on is Monday timing quarter, slips to timing be a of shipments So it at capital something our then into the If the I'll with If business. end in on challenge

manage that closely. something that's and we watch So

not We've I from this is weeks weeks that's a of and possible. mentioned or want it's has that So now today had now you anything possible been it that, do it hey, delayed. X other than to possibility. or X project I from one to because say, But that ship that

some It's have can We a belief in that certainly and and to accentuated these logistics, that some these the little work as as latter of It of the times. year start our half an times, these as issue particular, bit progresses the improve is it's good of be will it that backlogs the beginning the will it under start at our our won't the itself out. in be of much year of hope during transportation to year. side

Kurt Yinger

Got it.

some any as -- are seems helpful. it's rates That's healthy. very well, -- lumpy challenge still foresee Okay. operating But it a Market was sorry, lapping solid. these XXXX given comps, just that presume? parts consumables and and do but environment seems like then be can side, very challenges capital And necessarily you sometimes how not the as as of strong I

Jeffrey Powell

Yes. It's a funny thing.

consumables capital, course, equipment, we off new it throw install parts. as capital really, to and of Our starts

capital time, would shelves. out putting some, last might there year an capital and say, that people their lot We're equipment equipment pent-up restocked we of over consumes awful experienced And parts. so I have while been demand as

take capital a may there high -- long said, would the as So operating that be as our the run, drives because as I little our I stay rates over equipment, place. of, bit But consumables. say, moderation cap long could our

our of high, a parts consumables stay rates are operating that. function kind As of

the would few see a we're we over of the consume out lot that next of years parts. they putting as As expect to now, benefits capital right

it So but an if it's easier really we capital that the we've be drives parts parts. sell leased a business, could without capital, selling would joke that the

Kurt Yinger

Right, right.

I just strong. of market year and Asia And American Europe at looking helpful rebounding a revenue very reminder. North this mean lastly, XXXX. the is even very then geographies. That's But nicely Okay. in grew off terms of

you As start bit? slow you be XXXX, might markets of areas any a or of momentum into look strongest directional see terms think commentary kind in that will think to you

Michael McKenney

I'd say, -- see that in was it the Kurt, -- again that geographies. very year XXXX we And was across did all we'll really we're good anticipating a XXXX.

Operator

comes question the next Liptak of from Walter Our from line Seaport.

Walter Liptak

about the will projects capital be talking were for When more ask yet, a could hearing in seasonality parts the I'm on quarter. wonder and follow-on. year wonder bookings now? second maybe go half, still just what as don't a And in the your second I that maybe Is come just you you might it you the opposed capital it those understand out backlog how right I far in? and your more first as orders. have does bit mix talk about help us the this more to little -- XXXX if visibility just shipments

Michael McKenney

into say, small right now I'd Yes. Walt, million. Well, a There XXXX. is piece at of actually backlog $XXX that that, our is that's going

but So the I -- won't throughout spread year. the is say it's throughout year. evenly, spread it's it

visibility quarters tends our good out. think I to X be pretty

visibility front, little So have the -- what's at to margin capital front. to half to And question, I I say, the year. if half, what a happen low half -- the would towards have the of think range the more your in year to we the to challenge range. the of on the capital predict look end what in XX half on bit margins probably the out I'm first margin we'll going good average in XX.X. second towards And in we But -- first higher the range, year And that of the second a I of million. the towards on see the I half. for is of that And first guided end of that $XX then shipments at the the looking

Walter Liptak

putting guys about thinking like was just it Clouth you through goods line? below margin it are It an Great. and Is gross to helps. margin those cost is that that that -- reported, Okay. that some sold. headwind you to Balemaster sounds flowing ongoing amortization wonder, hit margin? Yes, typically, in of the gross I gross there expense, are sounds understanding the the be ongoing that guys through. like going And expense

Michael McKenney

going That's through EBITDA what's number The margins. and in And No. inventory. want the is acquired finished the cost profit what and at that, see you line that. goods you'll of look that, our Walt, sold for in basically called the we to and -- table pretax

turns. business, have amortized gets that the and a -- fair that's to you inventory everything, value acquire So including do when the a you inventory as then

now do behind us. -- have is We that So

Walter Liptak

understand, Okay. purchase those were I accounting costs.

Michael McKenney

the And actually cost goods of not that through SG&A, amortization, other sold. through goes

Walter Liptak

it. Got Okay.

sense. Okay. That more makes

those And been that with guidance this you've inflation I going bookings if keep you the already right have able or happened? dealing on appreciate those does for that's you inflation How have to orders Okay. of some the the got how now, prices Or been up? booked, just -- are cover adjust the the that with gross margin, can and sticking XXXX. you

Michael McKenney

Yes. It's That the Well, about XXXX. parts talking throughout us been those much quick course, easier for -- and times. we've cycle have on essentially this orders of front. consumables very

currently. the what react say arrangements we to priced risk changes make I So is in window can to for. of we're time. where you'd so that adjustments. surcharge we've larger quotation projects, may they're the is good tried have input would on is cost we the very, But reduce And currently. area majority do capital period that be more for to have extended very On able some the The an backlog

the limit in to place order, or nonetheless, to that. or backlog quote and say, we'll face will customer we'll costs be input it's and capital that But -- we'll be the can has get within we into a increase, the -- have expires. the material month exposure, -- to So can goods

Walter Liptak

Okay. All right.

the of just going? good. things happening Sounds we their there? last could if talked continuation or bit about that then us are just what's down things that. it And one. this haven't I shut Is just policies China much update maybe about have guys too how you on call, And Last quarter, heard you a little COVID logistics. an give wonder a

Jeffrey Powell

rate their well, They're but getting managed doing China world country still Yes. infection policy. it they've real there. things some really And pretty the challenges to out the maintaining this only is introduce actually pandemic does zero-COVID in that. that's of

down of of an think still Now The But I challenge. has things still ongoing like see a get, containers, mentioned progresses challenge. ports down bit earlier, of to the managing risk, can. a best things right That's say reasonably risk. year well, as will at of Again, on But that month. would is continue the we're progresses. city that. -- it's things hoping haven't I imports that we're now, we're and and a The we schedules that to outbreak from still would going managing hard the the I we're an unknown mean course, get as -- for adjusted a port relief or we're major But it's shut are our everybody shut adjusted we're hoping that. they we've or you as a congested. to year that little delivery they're they the I outbreak kind something, recently improve that

Walter Liptak

for All right. final Great. And one maybe -- final me. just one

Just a follow-up.

across are of projects? products keep CapEx do higher wood thinking if rising slowdown projects this see from you're those strong little potential processing about funnel and it sort Or And on environment, the little going we bit for of still like you interest a you a wood could I were how rate rates? they the sounds board. of seeing. talking were bit risk And that projects talk just capital the wonder forward? about You if the

Jeffrey Powell

quite quite quite Housing at index high, back interesting. it's still Wood is December, again, Well, to X.X and starts record high. was and still levels. composite the were January, it very pricing, they're November of high X.X, X.X so that in up course, the not

good still making -- they're So still and price on are customers good there's very it. -- demand. the our

'XX So to taken that capacity the that some in keep 'XX, was there was crash, offline. in need you mind

has level even less than then, back a in And demand some stronger demand come that capacity. so cases, to and little it back was

much amount of And so doesn't There's prices coming see it take online. go capacity up. a to new fair

climate But construction pricing. you highest the that. frame, are has of that America. initiative primer see mean to industrials highest Masonry that wood more done if of I there's a as the and of mind carbon rest it's North to really more of keep footprints, greenhouse houses or part use And is to globally, what of think this The there. in so interesting of out does migrating to not in wood. built other thing frame, Well, the has the footprint tick world, any tradition one gas out the of

And many over seen from because will that won't estimates a next there products And Masonry climate and of believe away meet could migration be without to migration away and be there's wood drive years. really the able the construction continual it. concrete demand beginning and initiatives a so believe brick just we I they for the wood-based we've to

products. around So do are And trying it's to able people these interesting targets the quite houses going to to they to build see as on have. what carbon by to gas just footprint Masonry happens greenhouse it continuing high they respond be of world going

Operator

comes Chase question the Eubank Chevy Trust. from from of line next Our Bobby

Bobby Eubank

Two One, between the for you quarter? Mike, to price and difference able you. questions split the volume are in for the out organic revenue XX%

Michael McKenney

No, as Bobby. units. and XX -- Jeff That been -- units Jeff the by the price say, varied quite you have have heard we increases operating

give I So a split I honestly that. couldn't you could say on good that

Bobby Eubank

meaningful But contributor you revenue? Okay. price it's is fair a think say to organic to that

Jeffrey Powell

margins contributor. the of that to Fair price I a is are mean, same. say kind

obviously down, hasn't it up. it -- hasn't So but gone gone

Bobby Eubank

down pulling out step And million even one then book-to-bill the Right. the from $XX Yes. project. that

we in you feels the discussions expectations we -- the the if of Are feel the little XXXX and for how business at we're outlook from cycle, there's As can just from and But tone half of customers that of look hitting XX it do a look a with rest early? kind customers lot the out second market, your look those of your tease like? what's units, kind of and order customers? them year, peak through kind the a if across you of it

Jeffrey Powell

always talking capital Mike think, is for you think back of I I when prior projects year. the particularly half tough questions, on mentioned, us, the were as visibility for

quite Asia surprise in bookings And in wouldn't in geographically half, have we that year. some strong tell year. diverse, our bit. project and it us would back it's because right look, quite solid and We so a that we're varies a last that the quite front the America, instance, is half. strong say, year in would if I for were it continue The visibility to through for activity I now, see Asia, say decent would this little level, harder. North I really you bookings

so some. They middle. I but having It's last activity Europe, of as kind And moderate would And possible a the then they're very good in year, it's they possible. say improved might now.

say I guess, it if And think, we difficult, is to So -- year. I is can really money, I would the keep North is Asia it had Europe up. that think very tell forecast America, there? going kind the to back I customers strong, steady. of prices can our you I making question are And All half are the of in good it's

If mentioned prices you of look itself. I the as lumber, at

look you in prices increases of If the they there. put several price at boxes,

us. that our So invest in well, normally, I think over the their customers benefits customers they And businesses doing are well. do time, and when

Bobby Eubank

do a If sense. have on the of cash a does clearly free like? Not a focus but lot can call, what I follow-up, so. do acquisition congratulations a look on to flow, strong this Makes capacity pipeline

Jeffrey Powell

couple is as flow level far Yes. mentioned I as mean, calls, strong. think last the of the as deal activity I on quite we

busy So group our with out we point to The corporate issue quite maintain always that we us, try development is that. discipline. our with

It's strategic create fit. good fit things things make passed kind some think unlimited at now. chasing a and There's money free that a sense. didn't We've deals. challenge. of value out It's a price for a on is is good out money say and some on finding right really We've passed some challenge. of we that there something that always also and the we a think And us We that's strategic we weren't so there just availability. valuation-wise can lot always with

companies, quite owned with And we cases. years. had time they even that privately a companies negotiations we've and and for in typically price or many often known buy We things so for long high some buy relationships

-- that at that under strategy. our you follow If in they acquisitions most look of that

XXX given pointed couple got of we we've We're to And a time, XXX to meets find companies. can at as the we're And sheet that our hundred. something any out, criteria, following it. you do or so balance talking if

standpoint. not constrained a way from in So we're capital financing or any

but at challenge it's a and good are And strategic finding when our people things to a fit hard hard is predict are always it, Our that come. value. they'll good working

Operator

Powell, today's conclude Officer does this to Jeffrey program. Director. of And Instructions] the hand question-and-answer Executive back I'd the Chief like [Operator session to President, program and

Jeffrey Powell

you, Thank Jonathan.

you with to thank all a record-setting of to our up sustainable year industrial drive So these today, want a and takeaways. just customers' customers' our effort employees meet credit achieving Kadant, want will world a to meeting lot And focus for I our was In tireless that technologies deserve needs. leave needs our the results. we before for the I continue for wrapping XXXX, of really solutions of processing. call to XXXX employees innovative on with around and really couple

stay take our and to our and to today, business is exceptional joining model. for health in look Kadant’s cornerstone value the stakeholders XXXX. and With please excellent, you financial to forward generate free safe. strong of Our us flow delivering we that, ability for care cash I thank want And remains

Operator

conference. Thank gentlemen, for program. and participation ladies your in the today's you, conclude This does

disconnect, may day. good You now

Kadant (KAI) 17 Feb 222021 Q4 Earnings call transcript