Kadant Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Revenue increased 15% year-over-year to a record $313.2 million (from $271.6 million in Q3 2025).
• Organic revenue increased 4%, excluding an 11% contribution from acquisitions.
• Gross margin decreased 50 basis points to 44.7% (from 45.2% in Q3 2025).
• Net income increased 27% to $35.1 million (from $27.7 million in Q3 2025).
• GAAP EPS increased 26% to $2.96 (from $2.35 in Q3 2025).
• Adjusted EPS increased 21% to a record $3.64 (from $3.01 in Q3 2025).
• Adjusted EBITDA increased 24% to a record $71.7 million (from $58.0 million in Q3 2025), representing 22.9% of revenue.
• Operating cash flow increased 33% to a record $62.9 million (from $47.3 million in Q3 2025).
• Free cash flow increased 32% to a record $58.1 million (from $44.1 million in Q3 2025).
• Bookings increased 22% to $291.1 million (from $238.4 million in Q3 2025).
• Organic bookings increased 10%, excluding a 12% contribution from acquisitions.
• Capital expenditures for the quarter were $4.8 million.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance raised to $1.195 billion to $1.210 billion (previously $1.190 billion to $1.210 billion).
• Full-year 2026 GAAP EPS guidance raised to $9.88 to $10.03 (previously $9.78 to $10.03).
• Full-year 2026 Adjusted EPS guidance raised to $12.58 to $12.73 (previously $12.43 to $12.68).
• Q4 2026 revenue guidance is $287 million to $302 million.
• Q4 2026 GAAP EPS guidance is $2.01 to $2.16.
• Q4 2026 Adjusted EPS guidance is $2.67 to $2.82.
• Management expects aftermarket demand to remain stable and activity to show some improvement in the remainder of the year.
• Timing of large capital orders continues to be influenced by economic and geopolitical uncertainty.

Business Segments and Product Lines:

• Flow Control: Revenue increased to $102.4 million (from $94.8 million); organic revenue growth was positive. Gross margin was 53.0%.
• Industrial Processing: Revenue increased to $143.4 million (from $106.4 million); organic revenue growth was positive. Gross margin was 42.0%.
• Material Handling: Revenue decreased to $67.4 million (from $70.3 million); organic revenue decreased. Gross margin was 37.9%.
• Parts and consumables revenue represented 70% of total revenue in Q3 2026.
• Parts and consumables bookings represented 72% of total bookings in Q3 2026.

Market and Competitive Landscape:

• Revenue growth was driven by acquisitions (11% of total revenue growth) and organic growth (4%).
• Foreign currency translation had a favorable effect of $0.6 million on Q3 2026 revenue.
• Management highlighted the strength of the aftermarket business as a key driver.

Risks and Challenges:

• Gross margin decreased 50 basis points compared to the prior year.
• Material Handling segment experienced a decline in both reported and organic revenue.
• Large capital orders remain subject to economic and geopolitical uncertainty.

Management Commentary and Tone:

• CEO Jeffrey L. Powell described the quarter as "exceptional," noting record results across revenue, adjusted EPS, and cash flow.
• Management expressed confidence that the company is "well positioned for a strong finish to the year" due to aftermarket strength and operational excellence.
• Management projects a "record-setting 2026" based on strong year-to-date performance.

Other Key Points:

• Adjusted EPS excludes $0.56 per share of intangible asset amortization and $0.11 per share of acquisition-related costs for the quarter.
• Adjusted EBITDA excludes $8.8 million in intangible asset amortization, $1.3 million in profit in inventory and backlog amortization, $0.5 million in acquisition costs, and includes a $0.3 million indemnification asset reversal.
• Balance sheet cash, cash equivalents, and restricted cash increased to $138.6 million as of October 3, 2026, from $122.7 million as of January 3, 2026.
• Debt obligations increased to $453.1 million as of October 3, 2026, from $372.7 million as of January 3, 2026.
• Goodwill increased to $658.1 million as of October 3, 2026, from $555.6 million as of January 3, 2026.
• Capital expenditures for the first nine months of 2026 included $5.8 million for the purchase of a previously leased manufacturing facility.
• Kadant has approximately 4,000 employees in 22 countries.