Kadant NYSE: KAI reported a stronger-than-expected start to fiscal 2026, with management pointing to record bookings, record aftermarket parts revenue and improving capital equipment demand, while also cautioning that geopolitical uncertainty continues to affect the timing of customer projects.
On the company’s first-quarter earnings call, President and Chief Executive Officer Jeff Powell said the quarter “exceeded expectations across most financial metrics,” despite uncertainty tied to global trade challenges and the conflict in the Middle East. Powell said demand remained healthy in the company’s aftermarket business and improved in its capital business.
Revenue rose 18% year over year to $281.5 million. Aftermarket parts and consumables revenue reached a record $209 million and represented 74% of total revenue. Adjusted EBITDA increased 19% to $56.8 million, or 20.2% of revenue. GAAP diluted earnings per share rose 6% to $2.16, while adjusted EPS increased 14% to $2.84, exceeding the high end of the company’s guidance range by $0.43.
Chief Financial Officer Michael McKenney said the earnings beat was driven by higher-than-expected gross margins and lower operating expenses. He noted that Kadant’s adjusted EPS now excludes non-cash intangible amortization expense.
Bookings Reach Record Level as Capital Activity Improves
Kadant reported a 25% increase in bookings from the prior-year period, supported by double-digit organic growth and contributions from recent acquisitions. Powell said new order activity was strongest in North America and Asia, with all regions seeing demand growth compared with last year.
McKenney said Kadant’s book-to-bill ratio rose to 1.14x, a three-year high, due to record aftermarket parts activity and a strong uptick in capital bookings. Ending backlog increased 13% sequentially to $326 million. During the question-and-answer portion of the call, McKenney said one of several capital projects the company had been tracking came in during the first quarter, and two more had come in during the second quarter.
Still, management maintained a cautious tone on capital spending. McKenney said the timing of some capital projects could be affected by macroeconomic and geopolitical tensions. Powell said customers can delay investments only for so long before it affects competitiveness, but added that uncertainty from issues such as tariffs and the Middle East conflict has slowed decision-making.
Segment Results Led by Flow Control and Industrial Processing
In the Flow Control segment, bookings rose 12% to a record $112 million, led by capital order activity and record aftermarket parts demand. Revenue increased 7% to $99 million, with aftermarket parts accounting for 77% of segment revenue. Adjusted EBITDA rose 5%, and adjusted EBITDA margin was 27.8%.
Powell said Flow Control revenue is expected to remain stable as the year progresses and benefit from higher capital shipments in the second half.
The Industrial Processing segment posted record bookings of $145 million, supported by strong aftermarket parts demand, better capital project order activity and contributions from recent acquisitions. Organic bookings rose 23%. Revenue increased 37% to a record $123 million, reflecting contributions from Clyde Industries and Babbini. Powell said the integration of those companies is progressing well.
In Material Handling, revenue increased 5% to $60 million, and new order activity rose modestly to $65 million. Powell said the segment continues to see stable business activity but faces volatility in capital equipment timing. An unfavorable product mix pressured gross margin and contributed to a lower EBITDA margin.
Margins, Cash Flow and Balance Sheet
Kadant’s gross margin was 45% in the first quarter, down from 46.1% a year earlier. McKenney said about half of the decline was due to acquired profit in inventory amortization, which reduced gross margin by 50 basis points. The rest reflected product mix.
SG&A expenses were 29.3% of revenue, down from 29.8% in the prior-year quarter. Total SG&A increased to $82.5 million from $71.2 million, including $7.9 million from acquisitions and a $2.8 million unfavorable foreign currency translation effect.
Operating cash flow was $21.9 million, and free cash flow was $18.7 million, both down slightly from the first quarter of 2025. McKenney said the first quarter tends to be Kadant’s weakest cash flow quarter. Net debt declined sequentially by $8 million to $244 million, and the company’s leverage ratio fell to 1.27x from 1.33x at the end of 2025.
Kadant Profil Acquisition Affects Guidance
Kadant closed its previously announced acquisition of voestalpine BÖHLER Profil, now called Kadant Profil, on April 30. Powell said the business manufactures customized rolled products, rolled profiles and industrial knives.
McKenney said Kadant Profil has long supplied several Kadant businesses, meaning a significant portion of its sales will be treated as intercompany revenue and excluded from Kadant’s reported revenue. He said the company has taken a conservative approach by not including profit from intercompany sales in 2026 guidance while Kadant works through existing inventory held by its businesses.
As a result, McKenney said Kadant Profil, including associated borrowing costs, is expected to be dilutive to adjusted EPS by $0.20 in 2026. He added that there could be upside if current inventory turns faster than expected.
Kadant raised its 2026 revenue guidance to a range of $1.178 billion to $1.203 billion, up from $1.160 billion to $1.185 billion. However, adjusted EPS guidance was revised to $12.33 to $12.68 from the prior range of $12.53 to $12.88, reflecting the addition of Kadant Profil and related borrowing costs.
For the second quarter, Kadant expects revenue of $296 million to $306 million and adjusted EPS of $2.88 to $2.98. McKenney said the company expects the first quarter to be the weakest quarter of the year.
Management Highlights Regional Differences
Asked about geographic trends, Powell said North America remains Kadant’s strongest market and has been for several years. He said Asia was strong in the first quarter, while Europe remains most sensitive to the Middle East conflict and energy prices.
Powell said some European customers are again discussing delays as they wait for more clarity on energy prices. He added that while higher energy costs can improve the payback calculation for some Kadant products, significant spikes that hurt overall demand also affect the company.
In closing remarks, Powell said record order activity and strong aftermarket parts demand provided a solid start to 2026, but reiterated that the timing of capital projects remains more uncertain than normal.
About Kadant NYSE: KAI
Kadant Inc, headquartered in Westford, Massachusetts, is a global supplier of high‐value, critical components and engineered systems for the pulp and paper industry and other process industries. The company's product portfolio spans stock preparation technologies, refiners and pulpers, fluid handling systems, and web‐handling equipment designed to optimize the efficiency and quality of paper production. In addition to capital equipment, Kadant offers aftermarket services, including spare parts, maintenance programs and process optimization consulting, which together support long‐term customer productivity and reliability.
Originally part of a larger industrial conglomerate, Kadant was established as an independent public company in 1991.
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