Kadant Inc

good day and thank you for standing by welcome to the q2 2024 cadent earnings conference call at this time all participants are in a listen-only mode please be advised that today's conference is being recorded after the speaker's presentation there will be a question and answer session to ask a question please press star 1 1 on your telephone and wait for your name to be announced to withdraw your question please press star 1 1 again i would not like to hand the conference over to your speaker today Michael McKinney, Executive Vice President and Chief Financial Officer.

Thank you, Josh. Good morning, everyone, and welcome to CADEN's second quarter 2024 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 CADEN's future plans and expectations financial and operating results, and prospects are forward-looking statements for purposes of 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 30, 2023, 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 non-GAAP financial measures to the most directly comparable GAAP measures is contained in our second 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'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 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 second quarter results and discuss our business outlook for the second half of 2024. I'll begin by reviewing our operational highlights for the second quarter. I'm pleased to report we had another well-executed quarter with record demand for aftermarket parts combined with strong capital business leading to record revenue, record adjusted EBITDA, and record adjusted EPS. Our acquisitions made in the first half of the year are performing well, and integration efforts are on track. Overall market demand, particularly in North America, remained solid in the second quarter across all operating segments. Turning next to slide six, I'd like to review our Q2 financial performance. We achieved a number of financial records in the second quarter, driven by our recent acquisitions and strong capital shipments. Revenue increased 12 percent to a record $275 million, while organic revenue, which excludes acquisitions and the impact of foreign currency translations, was $250 million. Strong execution contributed to a record-adjusted EBITDA of $62 million and represented a record 22.5 percent of revenue in the second quarter. Record aftermarket parts revenue combined with strong performance in capital shipments contributed to the solid margin expansion of 150 basis points. Our adjusted EPS was also a record at $2.81. Despite sluggish industrial demand in Europe and Asia, second quarter bookings increased 17% compared to the same period last year. Organic bookings were up 5% and in line with our growth expectations. We have a healthy backlog and expect bookings in the second half of 2024 to be comparable to the first half of the year. Capital project activity remains good, but the timing of these orders is less certain. I'll provide more detail on this when I review our operating segments. I will begin with our flow control segment. As you can see on slide seven, our flow control segment had solid bookings in the second quarter of 2024. We benefited from strong aftermarket demand and contributions from our DSTI acquisition. Organic bookings were up 5%. Revenue in the second quarter declined 4%, from the previous period record of 96 million as business activity was dampened by weaker manufacturing activity in Europe and China. Our aftermarket parts revenue remained strong in the second quarter and made up 72 percent of total revenue. Solid operating performance led to an adjusted EBITDA margin of 29.2 percent. The integration of DSTI, which was acquired at the beginning of June, has been going well. and we are honored to have this leading producer of fluid row reunions and related flow control products now a part of Cadent. As we look ahead to the second half of 2024, we expect demand to follow its historical pattern and moderate slightly in the second half. As many of you know, the first half of the year is typically our strongest in terms of bookings as our customers prepare for and execute annual spring maintenance shutdowns. Overall, the fundamentals of our end markets remain healthy and we are well positioned to capitalize on new products and opportunities. Our industrial processing segment benefited from our acquisition of KeyKnife, completed in the first quarter, as well as the strong bookings performance in prior quarters leading to record second quarter revenue of $115 million, up 28% compared to the same period last year. Organic revenue was up 13% led by growth in our wood processing product line. Bookings also benefited from our recent acquisition and were up 22% compared to the second quarter of last year. Organic bookings were up 5%. Strong operating leverage boosted adjusted EBITDA margin 350 basis points to 25.7%. Looking ahead to the second half of 2024, we expect capital project activity to strengthen across all product lines in this segment. In our material handling segment, we achieved record revenue of $68 million in the second quarter with solid contributions from our acquisition of KWS, a leading manufacturer of screw conveyors and related bulk material handling equipment. Aftermarket's demand for our high-performance balers and bulk material handling equipment was also notable in the second quarter. Bookings in our material handling segment were up 28% compared to the same period last year due in part to the KWS acquisition. Excluding this acquisition, newer activity was up 6%, led by strong bookings in our Baylor product line. The record-setting revenue combined with solid execution by our businesses in this segment led to a record-adjusted EBITDA margin of 23.2% in the second quarter. We remain encouraged by the number of infrastructure projects underway and additional projects being planned, resulting from the significant amounts of public investment at the federal and state level. Even though the timing of capital orders can shift, we expect demand in the second half of the year to be comparable to the levels we've experienced in the first half. As I conclude my prepared remarks, I want to emphasize how pleased we are with the integration process of our recent acquisitions and how our operations teams around the globe are executing strategic initiatives to create and capture more value. Looking ahead to the second half of 2024, The persistent economic headwinds lead us to believe demand for industrial products will be similar to the first half of the year. That said, our backlog is healthy and we are well positioned to capitalize on new opportunities that may emerge as the year unfolds due to our ability to generate strong cash flows. We are raising the low end of our adjusted EPS guidance and expect to deliver strong financial performance again this year. And with that, I'll turn the call over to Mike for a review of our financial performance in Q2 and our guidance outlook for the remainder of the year.