Kadant Inc

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2021 CADA Earnings Conference call. At this time, all participants' lines are in a listen-only mode. At this speaker's presentation, there will be a question-and-answer session. To ask your question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Michael McKinney, Executive Vice President and CFO. Thank you. Please go ahead.

Thank you, Ryan. Good morning, everyone, and welcome to Cadence First Quarter 2021 Earnings Call. With me on the call today is Jeff Powell, our President and Chief Executive Officer. Before we begin, let me read our Safe Harbor Statement. Various remarks that we may make today about Cadence future plans and expectations, financial and operating results, and prospects are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation and those discussed under the heading Risk Factors in our annual report on Form 10-K for the fiscal year ended January 2, 2021, and subsequent filings with the Securities and Exchange Commission. In addition, Any forward-looking statements we make during this webcast represent our views and estimates only as of today. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views or estimates change. During this webcast, we'll refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is contained in our first quarter earnings press release and the slides presented on the webcast and discussed in the conference call, which are available in the investor section of our website at www.cadent.com. Finally, I wanted to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call, we are referring to each of these measures as calculated on a diluted basis. With that, I'll turn the call over to Jeff Powell, who will give you an update on Cadence business and future prospects. Following Jeff's remarks, I'll give an overview of our financial results for the quarter, and we will then have a Q&A session.

Jeff? Thanks, Mike. Hello, everyone. Thank you for joining us this morning to review our first quarter results and discuss our business outlook for 2021. I'll begin by discussing our operational highlights and our first quarter financial performance. We had a great start to 2021 with high demand for our parts consumables, which led to record bookings in the first quarter. Our businesses executed well and generated strong cash flows, further improving our liquidity position. Capital project activity was robust, and this was especially true in our industrial processing segment, which had another great quarterly performance. I'll provide more details on that when I review our operating segments. Overall, our healthy balance sheet and strong cash flows have us positioned well to capitalize on future growth opportunities. Q1 was an excellent quarter for us, with one of the more notable highlights being our record bookings performance, beating the previous record set just last quarter. While we believe our first quarter bookings reflect some amount of pent-up demand, the record setting start to the year is encouraging. Our Q1 bookings were up 16% compared to the same period last year to $204 million, led by our industrial processing segment. Strong demand led to an 11% sequential increase in parts consumables bookings, which were a new record at $133 million in Q1. Revenue was up 8% compared to the first quarter of 2020, while parts revenue was up 12%. A favorable product mix and solid execution contributed to boosting our adjusted EBITDA margins to 18 percent, while our free cash flow was up nearly four times to 17 million compared to the same period last year. Overall, we benefited from strengthening industrial activity, especially in North America and Europe. Our business has executed well, and our global workforce continued to safely meet our customers' needs despite challenging circumstances in many areas of the world. All three of our operating segments experienced increased business activity and improved revenue performance sequentially and year over year. Flow control segment had record bookings in the first quarter with a strong contribution from parts and consumables. Bookings and revenue were both up 12% compared to the same period last year, and parts made up 72% of total revenue in the first quarter. A favorable product mix combined with improved operating leverage led to a 21% increase in adjusted EBITDA compared to Q1 of 2020 and an adjusted EBITDA margin of 28%. The strong start to the year is expected to continue through the second quarter with demand moderating as the year progresses as our customers normalize their inventory. We continue to believe market conditions will strengthen as COVID-19 vaccines become more widely available and vaccination rates improve. Our industrial processing segment continued to experience strong demand for our wood processing equipment, with bookings in this segment up 32% compared to the prior year. Strong in-market demand for wood products, particularly OSB and dimensional lumber, continued throughout the quarter as U.S. housing starts surged 37% in March compared to March 2020, and is at the highest level since June of 2006. Revenue in this segment increased 7% to $69 million with parts and consumables leading the growth up 19% compared to the same period last year. A favorable product mix and good execution led to 150 basis point improvement in our adjusted EBITDA margin. We are seeing increasing activity in the packaging markets, and shortly after the quarter closed, we booked an OCC system order in China for approximately $17 million. This combined with the record backlog we had at the end of the first quarter positions us well for the remainder of the year. Moving to our material handling segment, we continue to see relatively stable order activity. European markets are beginning to recover, and activity in North America, particularly in the food sector, is improving. Altogether, this led to our third consecutive quarter bookings increase in Q1 to 42 million, and just shy of beating our record bookings set in the first quarter of 2020. Revenue in the first quarter was up 6% to $40 million, and parts consumables revenue made up 60% of total revenue. Capital bookings in our material handling segment were up slightly compared to the same period last year and are above pre-pandemic levels. Based on our business activity increasing over the last few quarters, we believe our material handling segment has solid potential in the secondary material handling and recycling sector. particularly in Europe and impending infrastructure investments in the U.S. As we look ahead to the second quarter of 2021 and the full year, we are seeing signs of improved project activity and increased ability to visit our customers in certain regions. Our solid balance sheet combined with strong cash flows have us well positioned to capitalize on opportunities that may emerge with improving global economy. We're encouraged to see our customers have learned a new way to conduct business as they deal with the challenges of the pandemic. That said, variability in vaccine distribution and accessibility combined with surging infection rates in some areas present a great amount of uncertainty in the global economic recovery and the timing of capital orders. I'd like to pass the call over to Mike now for review of our Q1 financial performance.