Kadant Inc

Good day and thank you for standing by. Welcome to the second quarter 2025 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 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, Daniel. Good morning, everyone, and welcome to Cadence Second Quarter 2025 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 28, 2024, 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 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 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 Cadent.com. Finally, I want 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 Paul, 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 second quarter results and discuss our business outlook for the second half of 2025. I'll begin by reviewing our operational highlights. I'm pleased to report that we had solid demand for aftermarket parts and a healthy increase in capital equipment orders during the second quarter. Overall market demand, particularly in North America, was near a historical high in the second quarter across all our operating segments. And our commercial teams did an excellent job at winning new business in a challenging environment. This performance against a backdrop of continued trade policy uncertainty and global trade tension is noteworthy. And I want to congratulate our management teams around the globe on their strong performance. Our operations continue to focus on meeting our customers' needs and implementing process improvements to increase productivity. As we will discuss this morning, our strong gross margin performance in the quarter is a result of these efforts. Turning next to slide six, I'd like to review our Q2 financial performance. Bookings in the second quarter increased 7% to $269 million, led by strong capital performance and stable demand for aftermarket parts. The capital project bookings were particularly encouraging to see as the economic environment remains at a high level of uncertainty. Revenue decreased 7% compared to the record revenue achieved in the second quarter of 2024. This decline was largely the result of softer capital orders in the back half of 2024, which led to fewer capital shipments in the first half of this year. Based on our high level of project activity, we expect sequential improvements in the coming quarters. Adjusted EBITDA was $52 million, down 15% from the then record in the prior year period. Our adjusted EPS was $2.31, down 18% compared to the second quarter of 2024. We have a growing backlog and expect strong bookings in the second half of 2025. Capital project activity remains good, but I want to note that the timing of these orders is less certain. This uncertainty is amplified by evolving U.S. trade policies and the ever-changing tariff environment. I'll provide more details on that when I review operating segments. I'll begin with our flow control segment. As you can see in slide seven, our flow control segment had solid bookings in the second quarter of 2025. We benefited from strong aftermarket demand while capital project activity was softer compared to the prior year period. Revenue in the second quarter increased 4% to 96 million, even as weaker manufacturing activity in Europe and China dampened our results. our aftermarket revenue remained strong in the second quarter and made up 75% of total revenue. Solid operating performance led to an adjusted EBITDA margin of 28.9%. As we look ahead to the second half of 2025, we expect demand to improve as the year progresses. That said, the frequently changing global trade discussions and tariff targets may impact capital investment activity. Before leaving this segment, I wanted to share that the integration of Dynamic Sailing Technologies, which was acquired in June of 2024, is now complete, and we are pleased to have this leading producer of fluid rotary unions and related flow control products fully integrated in Decatur. The diversity they bring to Decatur in terms of new markets and access to new customer segments greatly expands our opportunities as we pursue growth within our flow control operating segment. In our industrial processing segment, new order activity was up 9% compared to the same period last year to 105 million. This booking performance was led by a significant increase in capital orders for our wood processing equipment from three North American producers of engineered wood products. Revenue decreased 16% compared to the record revenue achieved in the second quarter of 2024. This decline was due entirely to weaker capital shipments, as our aftermarket parts business was up 7% compared to the second quarter of last year. Adjusted EBITDA and adjusted EBITDA margin declined due to lower revenue volume and the lack of operating leverage. Looking ahead to the second half of 2025, we expect capital project activity to strengthen in this segment, particularly within our fiber processing product line, where a number of large capital projects are in the pipeline. Turning now to our material handling segment, we had excellent bookings performance in the second quarter of $71 million. The 16% increase over the prior year period was led by our bulk material handling product line, and we had solid growth from our Beller product line. As was the case with our other two operating segments, weekly capital shipments were primarily contributor to a 6% decline in revenue in the second quarter. Business activity remained high with a number of larger capital projects under discussion, although the timing can be uncertain as to when these projects are executed. As I conclude my prepared remarks, I want to emphasize how pleased I am with our operations teams as they continue to execute their strategic initiatives to create and capture more value. Looking ahead to the second half of 2025, we believe industrial demand will strengthen relative to the first half of the year, especially once the global trade issues get worked out. Our backlog is improving 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. And with that said, I'm pleased to announce that shortly after the close of the quarter, we acquired Babini, a small company in Italy that manufactures dewatering equipment for the food and paper industry. We were a licensee for their technology for our upcycling business, and we are excited to have them join the Kaden family. I'll now turn the call back over to Mike for review of our financial performance in Q2 and our guidance outlook for the remainder of the year. Mike.