Third Quarter 2016 Business Review
Jonathan W. Painter, President & CEO
Michael J. McKenney, Senior Vice President & CFO
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Forward-Looking Statements
The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This
presentation and our accompanying commentary contains forward-looking statements that involve a number of risks and
uncertainties, including forward-looking statements about our expected future financial and operating performance, demand
for our products, economic and industry outlook, and pending orders. We do not recognize pending orders as bookings until
the purchase order is signed and the associated down payments are received. The timing and receipt of these items are
subject to a number of uncertainties, and there can be no assurance that we will be able to finalize a pending order, record
bookings, or recognize revenues on pending orders. Our actual results may differ materially from these forward-looking
statements as a result of various important factors, including those set forth under the heading "Risk Factors" in Kadant’s
annual report on Form 10-K for the year ended January 2, 2016 and subsequent filings with the Securities and Exchange
Commission. These include risks and uncertainties relating to adverse changes in global and local economic conditions; the
variability and difficulty in accurately predicting revenues from large capital equipment and systems projects; the variability
and uncertainties in sales of capital equipment in China; the effect of currency fluctuations on our financial results; our
customers’ ability to obtain financing for capital equipment projects; changes in government regulations and policies; oriented
strand board market and levels of residential construction activity; development and use of digital media; price increases or
shortages of raw materials; dependence on certain suppliers; international sales and operations; economic conditions and
regulatory changes caused by the United Kingdom’s likely exit from the European Union; disruption in production; our
acquisition strategy; our internal growth strategy; competition; soundness of suppliers and customers; our effective tax rate;
future restructurings; soundness of financial institutions; our debt obligations; restrictions in our credit agreement; loss of key
personnel; reliance on third-party research; protection of patents and proprietary rights; failure of our information systems or
breaches of data security; fluctuations in our share price; and anti-takeover provisions. We undertake no obligation to publicly
update any forward-looking statement, whether as a result of new information, future events, or otherwise.
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Use of Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), we use
certain non-GAAP financial measures, including increases or decreases in revenues excluding the effect of acquisitions and
foreign currency translation, adjusted operating income, adjusted net income, adjusted diluted EPS, adjusted earnings before
interest, taxes, depreciation, and amortization (adjusted EBITDA), and adjusted EBITDA margin.
A reconciliation of those numbers to the most directly comparable U.S. GAAP financial measures is shown in our 2016 third
quarter earnings press release issued November 1, 2016, which is available in the Investors section of our website at
www.kadant.com under the heading Recent News.
We believe that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures,
provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative
of our core business, operating results, or future outlook. We believe that the inclusion of such measures helps investors to gain
an understanding of our underlying operating performance and future prospects, consistent with how management measures
and forecasts our performance, especially when comparing such results to previous periods or forecasts and to the performance
of our competitors. Such measures are also used by us in our financial and operating decision-making and for compensation
purposes. We also believe this information is responsive to investors' requests and gives them an additional measure of our
performance.
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
BUSINESS REVIEW
Jonathan W. Painter
President & CEO
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Third Quarter Strategic Highlights
• Solid quarter across a broad range of metrics
• Strong profitability and cash flows
• Bookings levels impacted by weak industrial markets
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Q3 2016 Financial Highlights
($ Millions, except per share amounts) Q3 2016 Q3 2015 % CHANGE3 EXCL. FX3
Revenue $105.5 $91.9 14.8% 15.9%
Gross Margin 45.6% 47.5% n.m. n.m.
Net Income1 $9.2 $8.6 5.9% 8.9%
Adjusted EBITDA1, 2 $16.2 $15.3 6.0% 8.1%
Adjusted EBITDA/Revenue1, 2 15.3% 16.6% n.m. n.m.
Diluted EPS1 $0.82 $0.78 5.1% 7.7%
Adjusted Diluted EPS1, 2 $0.81 $0.78 3.8% 6.4%
Bookings $94.8 $98.8 -4.1% -3.1%
Cash Flow1 $15.5 $15.9 -2.6% n.m.
1 Net income, diluted EPS, adjusted diluted EPS, adjusted EBITDA, and cash flow are from continuing operations.
2 Adjusted EBITDA, adjusted EBITDA margin, and adjusted diluted EPS are non-GAAP financial measures that exclude certain items as detailed in our Q3 2016 earnings release dated
November 1, 2016.
3 Percent change calculated using actual numbers reported in our Q3 2016 earnings release dated November 1, 2016.
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
FX Translation and Acquisition Impact
Q3 2016, $ in millions except EPS Revenue Adjusted EPS4 Bookings
Parts & Consumables
Revenue
Parts & Consumables
Bookings
As Reported $105.5 $0.81 $94.8 $61.4 $63.7
Growth1 14.8% 3.8% -4.1% -2.7% 4.9%
Growth excluding FX2 15.9% 6.4% -3.1% -1.7% 6.0%
Growth excluding FX and Acquisitions3 1.1% -7.7% -16.3% -8.0% -0.9%
1 Growth is the year-over-year percent change between the current period and the comparable prior period.
2 Represents the year-over-year percent change excluding the impact of current period versus prior period exchange rates.
3 Represents the year-over-year percent change excluding the impact of acquisitions and current period versus prior period exchange rates. Acquired businesses
are classified above as Acquisitions for the first four quarters after acquisition.
4 Adjusted diluted EPS is a non-GAAP financial measure that excludes certain items as detailed in our Q3 2016 earnings press release issued November 1, 2016.
Nine Months 2016 Revenue Adjusted EPS3 Bookings
Parts & Consumables
Revenue
Parts & Consumables
Bookings
As Reported $313.9 $2.41 $289.9 $194.1 $190.3
Growth1 11.1% 10.0% -3.6% 0.1% -0.4%
Growth excluding FX2 13.5% 15.5% -1.3% 2.4% 2.0%
Growth excluding FX and Acquisitions3 3.3% 5.5% -10.3% -2.2% -2.7%
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Bookings and Revenues
US$ (millions)
1 Reported Q415 bookings were $76 million, which included new orders of $92 million and a booking reversal of $16 million.
1
$0
$20
$40
$60
$80
$100
$120
Bookings Booking Reversal Revenues
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Parts and Consumables Bookings and Revenues
US$ (millions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
Bookings Revenues
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Geographic Revenue Contribution
North
America
61%
Europe
18%
Asia
14%
ROW
7%
North
America
50%
Europe
27%
Asia
14%
ROW
9%
2015 Nine-Months Revenue 2016 Nine-Months Revenue
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
North America Bookings and Revenues
US$ (millions)
$0
$10
$20
$30
$40
$50
$60
$70
$80
Bookings Revenues
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Europe Bookings and Revenues
US$ (millions)
$0
$5
$10
$15
$20
$25
$30
$35
Bookings Revenues
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Asia Bookings and Revenues
US$ (millions)
1 Reported Q415 Asia bookings were negative $6 million, which included new orders of $10 million and a booking reversal of $16 million.
1
-$10
-$5
$0
$5
$10
$15
$20
$25
$30
$35
$40
Bookings New Orders Revenues
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Rest-of-World Bookings and Revenues
US$ (millions)
$0
$2
$4
$6
$8
$10
$12
$14
$16
Bookings Revenues
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Guidance
• FY 2016 GAAP diluted EPS of $2.76 to $2.82
• FY 2016 adjusted diluted EPS of $2.99 to $3.05
• FY 2016 revenue of $412 to $416 million
• Q4 2016 GAAP diluted EPS of $0.57 to $0.63
• Q4 2016 revenue of $98 to $102 million
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
FINANCIAL REVIEW
Michael J. McKenney
Senior Vice President & Chief Financial Officer
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Quarterly Gross Margins
45.6%
43.7% 43.4% 43.0%
47.3%
48.6%
43.9% 43.9%
45.2%
43.0%
44.7% 44.7%
48.1%
46.5%
47.5%
43.1%
45.6%
44.9%
45.6%
30%
35%
40%
45%
50%
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Quarterly SG&A
US$ (millions)
25%
30%
35%
40%
45%
$0
$10
$20
$30
$40
SG&A SG&A as a % of Revenues
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
3Q15 to 3Q16 Adjusted Diluted EPS
$0.78
$0.11 $0.03 ($0.06)
($0.05) $0.81
$0.00
$0.25
$0.50
$0.75
$1.00
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Cash Flow
($ Millions) 3Q16 3Q15
Income from Continuing Operations $9.2 $8.7
Depreciation and Amortization 3.4 2.6
Stock-Based Compensation 1.3 1.3
Other Items (0.2) (0.1)
Change in Current Assets & Liabilities (excl. acquisition) 1.8 3.4
Cash Provided by Operating Activities $15.5 $15.9
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Key Working Capital Metrics
3Q16 2Q16 3Q15
Days in Receivables 60 58 63
Days in Inventory 95 89 123
Days in Payables 39 45 51
63 58 60
123
89 95
51 45
39
20
40
60
80
100
120
140
Days in Receivables Days in Inventory Days in Payables
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Working Capital and Cash Conversion Days
3Q16 2Q16 3Q15
Working Capital % LTM Revenues* 11.6% 12.7% 14.7%
Cash Conversion Days** 116 days 102 days 135 days
*Working Capital is defined as current assets less current liabilities, excluding cash, debt, and the discontinued operation.
** Based on days in receivables plus days in inventory less days in accounts payable.
0
50
100
150
200
0%
5%
10%
15%
20%
D
A
YS
%
O
F
R
EV
ENU
E
Cash Conversion Days Working Capital % LTM Revenues *
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Cash and Debt
($ Millions) 3Q16 2Q16 3Q15
Cash, cash equivalents, and restricted cash $65.5 $54.9 $56.9
Debt (63.5) (64.3) (29.4)
Net Cash (Debt) $2.0 $(9.4) $27.5
$30.9 $30.1
$41.5
$47.7
$51.8
$48.5
$58.7
$11.6
$14.3
$9.5
$18.7 $19.9
$12.5
$20.1
$27.5
$35.7 $33.9
$(9.4)
$2.0
($20)
$0
$20
$40
$60
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Questions & Answers
To ask a question, please call 888-326-8410 within the U.S. or
+1-704-385-4884 outside the U.S. and reference 782 961 28.
Please mute the audio on your computer.
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KAI 3Q16 Business Review–November 1, 2016
© 2016 Kadant Inc. All rights reserved.
Q3 2016 Key Take-Aways
• Solid quarter in revenue, EPS, and cash flow
• Bookings tempered by weak industrial markets
• 2016 EPS performance on track
• Investor Day in NYC on December 1
Third Quarter 2016 Business Review
Jonathan W. Painter, President & CEO
Michael J. McKenney, Senior Vice President & CFO