凯登 (KAI) 2026年第三季度业绩电话会议：营收、每股收益及现金流创历史新高

核心要点

• Kadant公布2026财年第三季度营收达到创纪录的3.132亿美元，同比增长15%，其中售后零部件营收达到创纪录的2.184亿美元。内生营收增长4%。
• 调整后每股收益（EPS）增长21%至创纪录的3.64美元，而通用会计准则（GAAP）每股收益增长26%至2.96美元。调整后每股收益比公司季度指引区间的上限高出0.64美元。
• 在并购、成本控制和运营效率提升的推动下，调整后EBITDA增长24%至创纪录的7170万美元，利润率从21.4%扩大至22.9%。
• 经营活动现金流和自由现金流分别达到6290万美元和5810万美元的季度历史新高。Kadant在本季度偿还了5100万美元的债务。
• 第三季度所有三个运营板块的新增订单同比增长23%。期末在手订单达到3.16亿美元，其中包括1.67亿美元的资本设备和1.49亿美元的零部件与耗材。
• 管理层将全年调整后每股收益指引上调至12.58美元至12.73美元，并将营收指引收窄至11.95亿美元至12.10亿美元。

关键财务数据

毛利率下降是由于资本项目的产品组合变化所致。关税退税带来正面影响，但被与并购相关的存货摊销以及Kadant Profil内部销售相关的递延利润所抵消。

业务与运营业绩

流体控制：在创纪录的售后零部件销售和稳健的资本设备出货推动下，营收同比增长8%。流体处理受益于能源、国防和包装领域的需求。订单增长超过7%，调整后EBITDA增长22%至创纪录的3100万美元，利润率达到创纪录的30.7%。管理层预计需求保持稳定，工厂自动化、国防和能源领域的强劲表现部分抵消了欧洲市场的疲软。

工业加工：在12%的内生新增订单增长、收购以及售后需求的支撑下，新订单达到1.23亿美元。营收为1.43亿美元，调整后EBITDA总计为3700万美元，利润率为26.1%。管理层预计售后需求将保持稳定，且随着经济信心的改善，资本订单可能有所增加。

物料搬运：在散装物料搬运设备售后需求的带动下，新增订单增长13%至6700万美元。由于上年同期基数创纪录且资本出货量有所下滑，营收下降了4%。调整后EBITDA利润率降至22.1%。管理层提到与基础设施支出和数据中心建设相关的项目活动表现健朗。

包括国防、航空航天和工厂自动化在内的较新终端市场的增长速度快于Kadant的传统市场。公司在本年度斩获了一笔约800万美元的航空航天订单以及数百万美元的新工厂自动化业务。

Kadant还宣布，Michael Colwell将于2027年初出任首席执行官。Jeffrey Powell将转任执行董事长，并将继续积极参与支持管理团队和增长举措。

管理层业绩指引

Kadant上调了2026财年全年营收预期指引的下限，并提高了调整后每股收益指引：

全年调整后每股收益指引扣除了每股2.19美元的无形资产摊销和每股0.51美元的收购相关费用。第四季度调整后每股收益指引扣除了每股0.55美元的无形资产摊销和每股0.11美元的收购相关费用。

全年预期基于以下假设：毛利率为44.0%-44.3%，销售及管理费用占营收的27.0%-27.5%，净利息支出为1900万美元至1950万美元，税率为27.0%-27.5%，折旧费用为2750万美元至2800万美元。

风险与关注领域

• 政治不确定性和经济逆风继续延长大型资本项目的“报价到订单”周期。
• 尽管管理层指出北美和亚洲的投资情绪正在改善，但欧洲和亚洲的工业活动仍受到经济压力的影响。
• 资本项目依然活跃，但下订单的时间点存在不确定性，部分项目可能会推迟至2027年。
• 第三季度毛利率受到资本设备项目组合及与收购相关会计调整项目的影响。
• 管理层表示，目前客户对提价的接受度有限，使得内部成本控制和运营效率成为支撑利润率的主要杠杆。
• 尽管管理层认为私募股权基金投资组合中积压了大量最终可能会投放市场的企业，但随着2026年的推进，并购交易活跃度有所放缓。

分析师问答环节亮点

管理层表示，资本设备意向项目管线正在扩大，但规模在500万美元至2500万美元之间的传统工业加工项目需要更长时间才能转化为订单。相比之下，航空航天、国防和自动化领域的投资活动似乎正在加速。

Kadant Profil的整合进展顺利。管理层预计，标准零部件剩余的收购相关存货影响将在2027年第一季度基本消除。2026年预期约每股0.20美元的负面拖累也应在2027年开始逆转，从而改善木材领域的工业加工利润率状况。

管理层表示，部分客户在整合设施后正准备重新投资，特别是在纤维加工领域。设备老旧化和多年的投资不足支撑了创纪录的售后零部件需求，即使客户的开工率仍低于历史最高水平。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Operator

Good day, and thank you for standing by. Welcome to the Q3 2026 Kadant Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Michael McKenney, Executive Vice President and Chief Financial Officer. Please go ahead.

Michael McKenney

Thank you, Stephen. Good morning, everyone, and welcome to Kadant's Third Quarter 2026 Earnings Call. With me on the call today is Jeff Powell, our Chief Executive Officer.

Before we begin, let me read our safe harbor statement. Various remarks that we may make today about Kadant's 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 January 3, 2026, 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 will 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 third quarter earnings press release and the slides presented on the webcast and discussed in the conference call, which are available in the Investors section of our website at kadant.com. Finally, I wanted to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call, we are 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 Kadant'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?

Jeffrey Powell

Thanks, Mike. Hello, everyone. Thank you for joining us this morning to review our third quarter results and discuss our outlook for the remainder of the year. We had an excellent financial performance in the third quarter across a broad range of key metrics. We achieved record revenue, and we're particularly pleased with aftermarket parts revenue in Q3, continuing the record-setting pace from both Q1 and Q2 of this year. As you know, our aftermarket business is a core strategic growth area, and it's encouraging to see this continue to thrive.

Market demand for capital equipment strengthened so political uncertainty and economic headwinds continue to impact the timing of large projects. We are winning new capital projects, but the quote-to-order cycle continues to be extended.

As has been the case throughout 2026, our operation teams around the world delivered exceptional value for our customers and shareholders. I want to thank them for their outstanding efforts and the results they produced in the third quarter as well as our commitment to our operational excellence demonstrated throughout the year.

Turning next to Slide 6. I would like to review our Q3 financial performance. Our Q3 revenue and earnings performance continue to improve sequentially, and I am pleased to report record adjusted EPS performance. Bookings in the third quarter increased 23% and the same period last year with growth across all 3 of our operating segments. Revenue was up 15% to a record $313 million and benefited from outstanding aftermarket parts business and record first half bookings.

Our focus on internal cost control and solid execution contributed to increased operating leverage with record adjusted EBITDA of $72 million and an adjusted EBITDA margin of nearly 23%. We are thrilled to achieve these results in less than ideal market conditions. Adjusted EPS was also a record at $3.64 in the third quarter. And finally, cash flow from operations and free cash flow in the third quarter were records at $63 million and $58 million, respectively, demonstrating the continued strength of our business model.

Next, I'd like to review the performance of our operating segments, beginning with our Flow Control segment. Record aftermarket parts revenue and solid capital equipment shipments drove an 8% year-over-year increase in Q3 revenue. Growth was led by our Fluid Handling product line supported by healthy demand from the energy, defense and packaging markets. Encouragingly, our new order activity was up more than 7%, largely due to the growth in our aftermarket business. Adjusted EBITDA of $31 million was a record and up 22% compared to same period last year, leading to a record EBITDA margin of 30.7%.

Factory automation, defense and energy markets -- end markets continue to show strength, particularly in the Americas, while industrial activity in Europe and Asia reflects the persistent economic headwinds in those regions. As we look ahead to the remainder of 2026, we expect stable demand in our Flow Control segment. The segment continues to benefit from diversified market exposure with improving investment sentiment in North America and Asia, helping to offset some of the softness in Europe.

Our Industrial Processing segment again delivered excellent quarterly results despite challenges in the global capital equipment market. Strong competitive positioning, recent acquisitions and 12% organic bookings growth drove new orders to $123 million. Revenue increased to $143 million, with strong contribution from both aftermarket parts and capital equipment shipments. Operational leverage in our recent acquisitions contributed to our improved margin performance in this segment. Adjusted EBITDA was $37 million and represented 26.1% of revenue in the third quarter. Looking ahead, we believe our aftermarket demand will remain stable and that our capital business will see an uptick in order activity. Our capital project pipeline remains healthy, and we expect orders will move forward as economic confidence strengthens.

In our Material Handling segment, we benefited from strong commercial execution in the third quarter. Our bookings were up 13% to $67 million, led by exceptional aftermarket demand for our bulk Material Handling equipment. Revenue was down 4% compared to the record third quarter performance of last year. This decline was due entirely to lower capital shipments compared to the same period last year. While the lower revenue volume -- with the lower revenue volume, adjusted EBITDA margin decreased to 22.1% compared to the record performance of Q3 and last year. We expect demand to be stable in the near term and project activity to remain healthy, particularly in infrastructure spending and the build-out and data centers.

For the remainder of 2026, we expect demand to remain stable with potential upside from capital projects. There remains a lot of activity around new capital projects, and this could become a meaningful contributor though the timing of these projects can be uncertain and could shift to 2027.

Before I turn the call over to Mike for a closer look at our third quarter performance, I'd like to briefly address my upcoming transition to Executive Chairman and Michael Colwell's appointment as CEO. I've had the privilege of leading what I believe is an exceptional company, not just one with great products and innovative technologies by a company whose people come to work every day determined to make a real difference for our customers, communities and all Kadant stakeholders. Over the past 48 years, I've been a part of some great businesses, None, however, compared to Kadant. It comes down to the special qualities that make Kadant unique. I believe our culture of integrity, commitment, accountability and entrepreneurism allows us to serve our customers better, creating lasting value for the shareholders.

Michael takes over at the beginning of the year. I will remain actively engaged in supporting the leadership team and its growth initiatives. I want to thank the employees and shareholders for the opportunity to be part of Kadant legacy, and I'm confident that [indiscernible].

I'll now pass the call over to Mike for his review of our Q3 financial performance. Mike?

Michael McKenney

Thank you, Jeff. I'll start with our third quarter performance. Our third quarter record revenue of $313.2 million [indiscernible] included record aftermarket parts revenue of $218.4 million. Organic revenue increased 4% compared to the third quarter of '25 including a 5% increase in organic capital revenue. Gross margin was 44.7% in the third quarter of 26%, down 50 basis points compared to 45.2% in the third quarter of '25, largely due to a lower gross margin profile associated with the mix of capital projects in the period. We had a benefit in the third quarter from tariff refunds but this was offset by the negative impact from the amortization of acquired profit and inventory and deferred profit associated with intercompany sales at our Kadant Profil acquisition.

SG&A expenses as a percentage of revenue decreased to 26.4% in the third quarter of 2016 compared to 27.9% in the prior year period. SG&A expenses were $82.7 million in the third quarter, 26, increasing $6.9 million compared to $75.8 million in the third quarter '25. This increase includes $6.1 million of operating expenses and $2.3 million in noncash intangible amortization expense from our recent acquisitions. These increases in SG&A expense were partially offset by a $2 million decrease in acquisition-related costs.

Our GAAP EPS increased 26% to $2.96 in the third quarter and our adjusted EPS increased 21% to a record $3.64 in the third quarter of '26. The third quarter '26 adjusted EPS exceeded the high end of our guidance range by $0.64 in part due to higher-than-expected revenue. This included higher-than-expected aftermarket parts revenue at our Industrial Processing segment as well as higher capital revenue at our Flow Control segment.

In addition, our acquisitions performed better than anticipated, and our operating expenses were lower than forecast. This strong performance contributed to a record adjusted EBITDA and record cash flow performance in the quarter, which I'll discuss further in further detail on the next slide. Adjusted EBITDA increased 24% to a record $71.7 million compared to $58 million in the third quarter '25 due to strong performance at our Industrial Processing segment driven by our recent acquisitions and record performance at our Flow Control segment. Adjusted EBITDA margin exceeded the last 4 quarters and rose to 22.9% compared to 21.4% in the third quarter '25. I should note that our businesses have done an excellent job in controlling expenses while optimizing business processes to help drive our record results.

Turning to our cash flows. We had both record operating and free cash flow in the third quarter of '26 at $62.9 million and $58.1 million, respectively. On a year-to-date basis, both metrics are ahead of last year, with free cash flow up 20% over last year. Nonoperating uses of cash in the third quarter of '26 included $51 million of repayments on our debt, $4.8 million for capital expenditures and $4.3 million for a dividend on our common stock.

Let me turn next to our EPS results for the quarter. Our adjusted EPS increased $0.63 from $3.01 in the third quarter of '25 to $3.64 in the third quarter '26. This included increases of $0.50 from the operating results of our recent acquisitions excluding associating borrowing costs, $0.29 due to higher revenue and $0.04 due to lower tax rates. These increases were partially offset by $0.15 in higher interest expense, $0.02 due to lower gross margin percentage, $0.02 due to higher non controlling interest and $0.01 due to higher weighted shares outstanding. Our effective tax rate of 26.4% in the third quarter was lower than anticipated, primarily due to discrete tax benefits. Collectively, included in all the categories I just mentioned, was a favorable foreign currency translation effect of $0.02 in the third quarter of '26 compared to the third quarter of last year.

Looking at our liquidity metrics on Slide 15. Our cash conversion days were 133 at both the end of the third and second quarters of 26 compared to 131 at the end of the third quarter '25. Working capital as a percentage of revenue decreased to 17.8% in the third quarter '26 compared to 19.3% in the second quarter of '26. Our net debt, that is debt less cash, decreased $56.4 million or 15% sequentially to $316.6 million. As noted earlier, we paid down $51 million of our debt this quarter, demonstrating our ability to generate strong cash flow globally and efficiently pay down our acquisition borrowings.

Our leverage ratio, calculated in accordance with our credit agreement decreased to 1.49% compared to 1.72% at the end of the second quarter '26. At the end of the third quarter '26, we had $300 million of borrowing capacity available under our revolving credit facility.

Now I'll review our guidance for '26. Despite many challenging market conditions, we delivered strong financial performance in the third quarter and expect to end the year with records in a number of financial metrics, including revenue, adjusted EBITDA and adjusted EPS. We also had record operating and free cash flow in the third quarter as well as the first 9 months of '26. We are raising the lower end of our full year '26 revenue guidance to $1.195 billion to $1.210 billion, revised from our previous guidance of $1.19 billion to $1.21 billion. We are raising our adjusted EPS guidance and now expect $12.58 to $12.73 in '26, revised from our previous guidance of $12.43 to $12.68. Our adjusted EPS guidance excludes $2.19 of intangible amortization expense and $0.51 of acquisition-related costs. Our revenue guidance for the fourth quarter of '26 is $287 million to $302 million and our adjusted EPS guidance for the fourth quarter is $2.67 to $2.82, which excludes $0.55 of intangible amortization expense and $0.11 of acquisition-related costs.

Our full year '26 guidance includes the following assumptions: gross margins of 44% to 44.3%, SG&A as a percentage of revenue of 27% to 27.5%, net interest expense of $19 million to $19.5 million, a tax rate of 27% to 27.5% and depreciation expense of $27.5 million to $28 million.

That concludes my review of the financials, and I'll now turn the call back over to the operator, Stephen, for our Q&A session. Stephen?

Operator

[Operator Instructions] Our first question comes from Ross Sparenblek of William Blair.

分析师问答

Unknown Analyst

This is Sam Karlov on for Ross. So organic orders are relatively strong across the board. I'm curious how your capital equipment project funnel has evolved in the past few months in each segment? And then are there any major macro or customer trends that have gotten better or worse for your business over the past few months?

Jeffrey Powell

I think the activity level, the discussion level has improved. And I would say the pipeline is growing, although I can't say there's any particular area where things have really changed. What we're finding is more activity in some of the newer markets that we've gotten into the defense side, aerospace, automation, those areas are growing faster, and they seem to be right now willing to make more investments in those areas. So that's the area that we've seen some nice bookings and a nice growth area. The larger capital projects tend to be associated with our Industrial Processing segment. I'm talking about projects that can be anywhere from $5 million to $25 million. Those, I would say, are still in discussions, but they are taking longer to turn into orders than they have traditionally. So there's still some caution in some of those larger capital projects in some of our older core markets. But the newer markets we've entered into, the investment cycle seems to be accelerating.

Unknown Analyst

Got it. No, that's super helpful. I guess switching gears for a second. Can you give us an update on the integration of fill and kind of update us on where you are working through that inventory on hand from that business?

Jeffrey Powell

Yes, I'll let Mike discuss where we are. But I would say from an operational standpoint, the integration has gone quite well. As you're aware, we've worked with them for 30 years. Half their business was to us already. So it's been a very smooth, I would say, integration, and we're very pleased with the way things are going there. They're out chasing some new markets and having some success. We announced, I think, last quarter, they've gotten a very large order in the aerospace area. So we're so far quite pleased with the operational integration.

Michael McKenney

Yes. And Sam, on the inventory front, I think as we had forecast, we're going to start to turn the corner here in the fourth quarter. So by the first quarter of '27, that should be relatively behind us for the standard components.

Unknown Analyst

Got it. That's super helpful. And then just before I forget, can you give the split on the backlog for capital equipment versus parts and consumables?

Michael McKenney

Yes. It's -- so the -- we ended with the backlog of $316 million, and the split is $167 million capital, parts and consumables, $149 million.

Operator

Our next question comes from the line of Gary Prestopino of Barrington.

Gary Prestopino

Mike, just going through some of my notes on -- when you made this acquisition of was it Profile KAI, you said it was going to be dilutive this year because of the intercompany transfers, right, about $0.20 per share. Yes. Okay. So as we get into '27, how does that start factoring out? I mean that whole $0.20 drag is going to go away and it should start maybe kind of mimicking the margins that your overall company has or generates or within the segment division that it's in?

Michael McKenney

Yes. That's a good way to think of it, Gary. We're tracking to that $0.20 drag. And right now, as we get right off the bat when we get into '27, we'll, I believe, turn the corner on that, and you'll start to see improvement in the margin profile for the Industrial Processing for specific to the wood sector.

Gary Prestopino

Okay. That's good. And then the previous question asked about the backlog for capital and aftermarket parts. What was the corresponding backlog last year at this time for capital and aftermarket parts?

Michael McKenney

Last year, it was $273 million. And I don't have in with me. I will guess that, that was probably about 60-40, 60% capital, 40% parts. That would be my estimate on that.

Gary Prestopino

Okay. And just any thoughts on that now that this election is over and the uncertainties are gone, at least domestically, what do you think -- what kind of impact do you think that could possibly have on your capital project activity?

Jeffrey Powell

Well, I got to be honest with you. Gary, I have no clue. I mean it's Things have been -- I would say, generally speaking, things have been -- and we said this now for -- actually for quite some time, things have been much softer than we would have expected when you look at the overall state of the economy. And so short of us going into a macro recession, it's kind of -- it would be surprising if things get substantially worse. Could they get better? Absolutely. We think that many of our customers have underinvested now for the last several years. And that's why our parts continue to set new record levels, even though operating rates are actually quite soft. They're nowhere near record operating rates, and yet we just continue to have quarter after quarter of record parts because they're running such old equipment. So they're going to have to start to make some investments. And we're talking to some customers that are now saying, okay, we're starting to put our plans together to start to reinvest in the business. So -- but I wouldn't venture a guess on these election results and how they might impact things. I don't see -- I mean, there's nothing quite obvious that would be highly negative that I can see, but I'm not smart enough to figure out what these guys are going to do.

Gary Prestopino

Okay. That's helpful. You just add a thought there. And then just a comment on the M&A pipeline.

Jeffrey Powell

Yes. It's -- I would say that it's softened a little bit as the year has progressed here. At the beginning of the year, there was some decent deal flow. But recently, the bankers are telling us that we've experienced ourselves a little bit of a slowdown in new deals coming to market. And there's a huge pent-up book of businesses that need to be moved, certainly on the sponsor side. On the private equity side, they've got big portfolios of businesses that they've not brought to market, and they're going to have to do that. But things have -- I would say, have softened a little bit here as the year has progressed.

Gary Prestopino

And best of luck to you in your retirement.

Jeffrey Powell

I'm not going away completely. I'm not going away completely. It's a little less work.

Gary Prestopino

A part-time gig as an adviser, right?

Jeffrey Powell

Well, I'm actually still to be an employee through all '27. So I don't come off the payroll to '28.

Operator

Our next question comes from the line of Walter Liptak of Seaport Research.

Walter Liptak

Congratulations, Jeff, on a really good run. I wanted to ask a question about the comment that you made on the first question about some of the pivot into defense, aerospace, automation growing faster. I wonder if you could give us a little bit more color about sort of what that funnel looks like and maybe the magnitude, like if you are seeing more capital orders there, like what percentage of revenue do those sectors make up?

Jeffrey Powell

Yes, I don't have that exact number. Of course, it's a new market for us. So it's a smaller percentage. It's just that a lot of it is new business that we didn't have before. So it is impactful from that standpoint. It is growing. Probably I think this year, I think our biggest order in a new market was on the aerospace side. I think it was about an $8 million order.

Mike, is that right?

Michael McKenney

Correct. Yes, about $8 million order. We mentioned that on the factory automation side that we picked up several million dollars worth of business this year that was new business to us, and that continues even recently, I think we've continued to book some nice factory automation projects with some big well-known names. So it's all kind of incrementally new business for us, and it's markets that we're putting a lot of focus. strategically, we're focusing on those because we do know they're new business for us and also growing faster than some of the older markets. So it's encouraging to see that we're having some good success there.

Walter Liptak

Okay. And the $25 million order that you referenced, is that in the papermaking sector?

Michael McKenney

Well, I just talked about project sizes in the industrial processing side range anywhere from $5 million to as much as $25 million. We have booked $25 million order in the fiber processing side in the past. That tends to be -- our single largest projects tend to be on the fiber processing side.

Walter Liptak

Okay. Okay. And then, yes, I guess as we're thinking about 2027, it seems like some of the sectors have been consolidating here for a little while. Based on your experience, is there like a point at which the recapitalization starts as they invest in the remaining facilities, updating them and things even before sort of the sectors start changing? Or is there something that we're -- we should be thinking about for when some of the more traditional capital orders start picking up?

Michael McKenney

Yes. I think that some of our customers have started to talk and announce that they're going to start to reinvest in the assets that they kept online. As you know, there was a fair amount of consolidation, particularly in the fiber processing side. And when that happens, of course, they spend their time focused on which assets are going to shutter and which ones they're going to invest in because overall demand for the product globally, at least has not gone down. It continues to go up. So you've got to replace that -- if they shut down a plant somewhere, somewhere else, it's got to be picked up. And so some of our customers have announced and are talking about an investment cycle starting up as they now have rationalized their combined operation and are ready to start trying to improve efficiencies and get ready for, I think, the economies as they start to reaccelerate. So we do expect to see some of that and have had some discussions along those lines.

Walter Liptak

Okay. Great. And then just last one for me. The margins look pretty good kind of across the board with the exception of some of the noise from acquisitions. But the -- how are you feeling about price cost and just selling price increases and being able to deal with the inflationary pressures?

Yes. I mean what we primarily focused on is internal cost control and internal initiatives. I mean the market isn't very excited about price increases right now with the economies in some areas still being somewhat soft. But where we can make an impact and where we have focused and got benefit from is really operational efficiencies and cost controls internally within our organization. So we have some some fairly global, I would say, global-wide initiatives we're working on right now to bring our -- to continue to bring our costs down and become more efficient. And so that's really where we're seeing the benefits from less so on pricing and more on our internal efficiencies and cost control.

Operator

Okay. I am showing no further questions at this time. I would now like to turn it back to Jeff Powell, CEO, for closing remarks.

Jeffrey Powell

Thanks, Stephen. So before wrapping up the call today, I just want to leave you with a few takeaways. 2026 is expected to be a record-setting year for Kadant despite the economic pressures and geopitical challenges around the world. Strong performance in the first 3 quarters of 2026 along with the numerous operational improvements we've achieved through our 80/20 performance system and other initiatives that position us well for the remainder of the year. We look forward to sharing our successes with you on future calls, and we want to thank you for joining us today.

Operator

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.