Kadant Inc

Good day and thank you for standing by. Welcome to the CADENT third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael McKinney, Executive Vice President and Chief Financial Officer. Please go ahead.

Thank you, Amy. Good morning, everyone, and welcome to Caden's third quarter 2023 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 the 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 December 31st, 2022, 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 will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is contained in our third 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 want to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call, we're 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 Cadent's 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 third quarter results and discuss our outlook for the remainder of the year. I'll begin by reviewing our operational highlights. The third quarter was another record-setting performance benefiting from a combination of excellent execution across our operating segments and stronger than expected aftermarket parts revenue. This led to near record revenue and record adjusted EBITDA, record adjusted EBITDA margin, and record adjusted EPS in the third quarter. As has been the case throughout 2023, our operations teams around the globe delivered exceptional value for our customers in the most recent quarter, leading to excellent performance across our key financial metrics. I want to thank them for their outstanding work and the results they generated not only in the third quarter, but throughout the year. Turning next to slide six, I'd like to review our Q3 financial performance. As you can see on the slide, our Q3 performance was notably higher across most key metrics compared to Q3 of last year. Revenue was up 9% compared to the third quarter of 2022 to $244 million and benefited from record capital shipments and strong aftermarket parts business. Solid execution contributed to our record adjusted EBITDA of 53 million and a record EBITDA margin of 21.6%. All our operating segments delivered excellent adjusted EBITDA margin performance. Cash flows from operation and free cash flow were outstanding in the third quarter at 47 million and 38 million respectively, demonstrating the strength of our business model. As anticipated, bookings softened from the record-setting pace earlier this year and were essentially flat compared to the prior period. I'll review the performance of our operating segments next, beginning with our flow control segment. Capital project activity and solid aftermarket demand contributed revenue growth in our flow control segment, up 5% compared to Q3 of last year. Bookings were 83 million, down 2% due to weaker capital bookings compared to the prior period. Aftermarket parts bookings were up slightly in the third quarter and represented 71% of total revenue in this segment. Excellent execution in both the commercial and operational areas of the business led to solid adjusted EBITDA and an adjusted EBITDA margin of 29.7%. Many end markets in our flow control segment remain strong despite the general sluggishness found in the manufacturing sector. We continue to see good levels of project activity and are well positioned to win new business as these projects move forward although the timing is somewhat uncertain. In our industrial processing segment, revenues were up 9% to $94 million, led by record aftermarket parts business, which made up 60% of our total revenue in Q3. Adjusted EBITDA was up 9%, and our adjusted EBITDA margin was excellent at 23.8%. As anticipated, demand slowed in Q3 in response to producers taking market-related downtime. As was the case in our flow control segment, capital project activity and interest remain high across all product lines despite the economic headwinds. In our material handling segment, we experienced strong demand for both capital equipment and aftermarket parts. Revenue was up 15% to $59 million due to record capital revenue in the third quarter. All product lines in this segment contributed to this performance. Bookings in this segment were up 17% compared to the same period last year to 56 million. This growth was largely due to increased demand for our high-performance balers used to prepare recycled materials and post-consumer waste for secondary processing. Solid execution helped boost adjusted EBITDA by 33% and adjusted EBITDA margin by 300 basis points compared to the same period last year. While we expect demand to moderate in the near term, We continue to see growing business activity for our bulk material handling equipment and our billers, particularly in North America. As we look ahead to the remainder of 2023, we expect to finish the year with record results. We ended the third quarter with a large backlog and expect fourth quarter demand to be consistent with the prior quarter. Although we are seeing a lot of activity around capital projects, the timing of these projects is uncertain due to macroeconomic headwinds. And finally, our healthy balance and strong cash flow have us well positioned to pursue new opportunities. With that, I'll pass the call over to Mike for his review of our Q3 financial performance.