Kadant Inc

Good day, and thank you for standing by. Welcome to the fourth quarter and full year 2024 Cadent 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 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, Daniel. Good morning, everyone. Welcome to Cadence fourth quarter and full year 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 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 December 30, 2023, and subsequent filing for 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 our 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 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 fourth quarter and full year 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 cadent.com. Finally, I wanted to note that when we refer to gap 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 the year and we will then have a Q&A session. Jeff?

Thanks, Mike. Hello, everyone. Thank you for joining us this morning to review our fourth quarter and full-year results and discuss our business outlook for 2025. I'm pleased to report the fourth quarter was a solid finish to a record-setting year for Cadence. Despite the continued economic headwinds in many regions, industrial activity in the fourth quarter was relatively stable, both year-over-year and sequentially. we had another well-executed quarter, which led to solid margin performance and strong cash flow in the fourth quarter. At the end of 2024, we were honored once again for our sustainability efforts and named by Newsweek Magazine as one of America's most responsible companies. This marks the fifth consecutive year of being included on this list, and it's rewarding to be recognized for our efforts in this area. With that, I'd like to review our Q4 financial performance. Fourth quarter performance benefited from stable demand throughout the second half of the year, and the acquisitions we completed in 2024 led to revenue and bookings growth of 8% and 10%, respectively. Adjusted EBITDA was up 8% compared to the same period last year, and our adjusted EBITDA margin was 20.3%. Solid execution by our operations teams around the world played an important role in delivering value to our customers and driving our operating performance in the fourth quarter. Our Q4 cash flow was strong at $52 million. Overall, the fourth quarter financial performance contributed to record full-year financial results, which I will review next with slide seven. Stable demand and a strong backlog fueled record revenue performance of $1.05 billion in fiscal 2024, with aftermarket parts making up 66 percent of our total revenue. Adjusted EPS increased to a record $10.28, exceeding the prior record set last year at $10.04 per share. Our full-year adjusted EBITDA was a record $230 million and a record 21.8% of revenue. Our strategic focus on improving our margin performance through internal initiatives, people development, and customer-focused innovations delivered results across a variety of metrics. Our workforce around the globe performed exceptionally well throughout a challenging year, and I am proud of our employees for the innovative work they have done and continue to do to serve our customers. Next, I'd like to review our performance in our three operating segments. I'll begin with our flow control segment. Q4 revenue increased 8% to $95 million, with strong performance in North America offsetting weaker performance in Europe. Aftermarket parts revenue was up 12%, compared to the prior period and made up 71% of total revenue. Adjusted EBITDA was up 15% and adjusted EBITDA margin increased 170 basis points to 28.7% in the fourth quarter compared to the same period last year. While bookings were up compared to the same period last year, softness in manufacturing sectors persisted in most regions, particularly during the second half of 2024. We believe the long-term market trends impacting industrial markets such as decarbonization, automation, and a focus on energy savings, will continue to drive new opportunities for growth, though business activity continues to be influenced by geopolitical and microeconomic challenges around the globe. Turning now to our industrial processing segment, our performance in the fourth quarter was strong, despite slower activity in some of our end markets. Revenue increased 17% to $101 million, compared to the same period last year led by contributions from our recent acquisition and capital shipments of our fiber processing equipment. Aftermarket parts revenue was up 24% and represented 67% of total revenue in the fourth quarter. Adjusted EBITDA margins declined 150 basis points compared to the prior year, largely due to lower capital equipment margins. Looking ahead to 2025, we expect demand for our capital equipment to strengthen, particularly in our wood processing product line. where capital project activity was relatively soft in 2024. In our material handling segment, Q4 revenue declined 4 percent to $62 million compared to the then-record fourth quarter of 2023 when we made the final shipment of a large capital order for the world's most technologically advanced bulk material conveying system. Aftermarket parts revenue was strong and represented 61 percent of total revenue of the quarter. The invested EBITDA margin declined 130 basis points compared to the prior year. This decline was largely attributed to the decrease in operating leverage associated with lower capital revenue. Looking ahead to 2025, we believe this segment will benefit from planned infrastructure projects as well as the modernization of assets in the recycling and waste management sectors, particularly in the second half of the year. As we look ahead to 2025, project activity is looking more favorable as the year progresses, and demand for aftermarket parts has been stable as we enter the year. The strong and likely strength in U.S. dollar is expected to negatively impact our foreign currency translation, particularly if the industrial activity rebound is stronger in Europe and Asia relative to the U.S. Our balance sheet is in great shape, and our ability to generate robust cash flows have us well positioned to capitalize on opportunities that may emerge as the year unfolds. and we will work to deliver a solid financial performance again this year. With that, I'd like to pass the call over to Mike for his review of our financial performance and our outlook for 2025. Mike. Thank you, Jeff.