Hello, and thank you for standing by. Welcome Kadant Acquisition of Clyde Industries 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 one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I will now like to hand the conference over to Michael McKenney. You may begin. Thank you, Tawanda. Good morning, everyone, and welcome to Kadant's conference call to discuss its acquisition of Clyde Industries. 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 Kadant's future plans and expectations, including the expected benefits of the acquisition of Clyde Industries, 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. With that, I'll turn the call over to Jeff Powell, who will discuss the acquisition. Following Jeff's remarks, we will then have a Q&A session. Jeff? Thanks, Mike. Hello, everyone. Thank you for joining us this morning to discuss the acquisition of Clyde Industries. Clyde is a leading manufacturer of boiler efficiency and cleaning system technologies. They are based out of Atlanta. Like many of Kadant companies, they are over 100 years old. They have major operations in addition to the U.S. and Brazil, Southeast Asia, and Europe. They're a market leader in recovery boilers and the pulp and paper industry, but they also provide the technology to the general industry anywhere that you have a boiler operating where the residue and ash builds up and requires cleaning. The revenue for their last fiscal year, which ended February 28, was approximately $92 million, and we paid approximately $175 million for the company. Clyde's core product is a boiler cleaning technology. As I mentioned, boilers that are fired with fuel over time have residue that builds up ash, soot, hydrocarbon materials, and it needs to be cleaned to maintain the efficiency, the heat transfer efficiency of a boiler, but also the safe operations of a boiler. If you allow this to build up, not only do you reduce the energy efficiency, so you consume more fuel, but you also have the potential for fires and even explosions. It is a very core technology that is required when you're operating boilers. Clyde specifically has a leading technology called SMART Clean, which instead of just periodically on a timed schedule cleaning, actually has sensors that measure the buildup in a boiler and therefore only go and clean the system when required. They also have a technology that uses low-pressure steam, which is a much lower cost. The combination of the two technologies can generate energy savings in a given year for a large operating boiler, $2 million- $3 million in energy savings, and equally importantly, can reduce CO2 emissions by up to a couple hundred thousand tons. This technology is, like I said, it's state of the art and really plays well into Kadant's overall sustainability and energy-saving initiatives. In addition to the soot blowers, we also manufacture electrostatic precipitators and other energy recovery technology that goes into general industrial applications. As you can see on this slide here, these soot blowers actually can be quite large. A large boiler nowadays might have up to 200 of these in a particular installation. These are kind of hot, corrosive environments, a lot of moving parts, and therefore they generate a lot of aftermarket opportunities. The industries they serve really anywhere where there's boilers operating, but they really are particularly strong in the pulp and paper area where you use recovery boilers for the production of pulp, power generation, as well as general industry. This picture here on general industry is actually, I think, a sugar cane operation in probably in South America where they provide this technology. We specifically like Clyde because it's an industry leader. It has an industry-leading technology. It has very strong financials. Approximately 75% of their revenue is aftermarket. They have a first-class management team, a very experienced management team with very strong technical know-how. They had all the attributes that we like, all the attributes that we think fit very well within Kadant organization. We are very, very pleased that they have joined our company. We think it's a great opportunity for Kadant as well as for Clyde. As many of you know, we operate a decentralized operating structure, and they will continue to operate as a standalone business. They will have access to Kadant's global manufacturing footprint. They'll have access to Kadant's global sales, of course, and service network, and also all of the best practices that we employ within Kadant, things like 80/20, lean, and other initiatives that we have found to be very, very valuable within the Kadant operating structure. I think that, you know, they'll find as they get to know the organization that there are many opportunities for them to collaborate with our other divisions around the world. With that, I will turn it over to Mike, who will discuss specific details of the transaction. Mike? Thanks, Jeff. I'd like to provide some additional color on the financial metrics associated with this transaction. The purchase price was approximately $175 million, subject to customary adjustments. For the fiscal year ended February 28, 2025, Clyde had approximately $92 million in revenue and $21.4 million of adjusted EBITDA, which translates to an EBITDA multiple of 8.2 x. Factoring in some modest favorable tax attributes, the multiple is just below 8 x. I would note that Clyde's revenue is 75% from parts and consumables, so a strong recurring revenue stream, and they're an asset-light business with low CapEx requirements. We funded the acquisition primarily through borrowing under our revolving credit facility. We estimate that our leverage ratio, as defined in our credit agreement, will still be relatively low at approximately 1.5. Absent any changes from the Fed, we expect our borrowing rate to be approximately 5.4%. While we're still working on the valuation of intangibles that will be amortized for book purposes, our current estimates are that we will have a high level of non-cash intangible amortization expense. We estimate this in combination with the interest expense will make this transaction slightly dilutive in the fourth quarter of 2025 on a GAAP EPS basis. However, on an adjusted basis, we estimate it will be slightly accretive, and free cash generation should be quite good. As always, we'll work hard to de-lever and drive down the interest cost. I'm going to now turn the call over for questions, but before we start, I should mention that the Q&A session is specific to the Clyde transaction. As we are currently in the third quarter of 2025 closing process and cannot comment on the third quarter of 2025 results or our guidance for 2025 until our upcoming earnings call near the end of October. With that, we'd be happy to take your questions. Tawanda, operator? Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ross Sparenblek with William Blair. Your line is open. Hey, good morning, gentlemen. Morning, morning, Ross. It'd be great to get a sense of just how you guys sourced this deal and the impetus for the family making the decision to pass this along. Yeah. They spun off from a European operation a few years ago. We actually looked at the opportunity back then, and for various reasons, made the decision not to pursue it at that time. They were purchased by private equity and came to market again. We'd known the business. We liked the business a lot even back then. When the opportunity came to look at it again, we made the decision to pursue it and are very pleased that we were ultimately successful in being able to acquire the company. Okay, can you just give us a sense of maybe what the growth profile has been for this company, as well as maybe the margin profile over the last five years? Yeah. I'd say, Ross, over the last three to four years, the CAGR has been about 7%- 8%. Oh, wow. Anything to call on, like, the specific drivers there? Just broader adoption, maybe some R&D on the new tech? Yeah. I mean, what's happening around the world is you're seeing new, very large recovery boilers going in for pulp production, Southeast Asia, South America. They're particularly strong in that market. They've secured most of those orders. The world is driving towards larger, more efficient operations with bigger and bigger systems. They've been very successful in capturing the majority of that market share. Perfect. All right, I'll hop back in line. Thank you. Please stand by for our next question. Our next question comes from the line of Gary Prestopino with Barrington. Your line is open. Good morning, Jeff and Mike. A series of questions here. First of all, as I look on slide nine, the main products here are these soot blowers, correct? Is that, and then are port cleaners, those would be the main products that you guys or this Clyde Industries company produces? Yes. Okay. The question I would have is, what is the aftermarket part component of these things? If you put a soot blower, they have 200 on a machine. Is the useful life of these things three months and you have to replace the whole soot blower, or is there something internally in the soot blower that needs to be replaced? Yeah. There are, as I mentioned, these things move in and out and rotate around as they're conveying the steam. There are a lot of moving parts, so things do wear out. There are many, many parts. There's the drive mechanisms, there's the actual lance that moves in and out of the boiler, and there are several parts that have to be replaced over time. There will be x where they'll replace the entire structure, the canopy, and everything, but more often, they're replacing particular parts as they wear out during the operations. Okay, that's what I'm getting at. Yeah. Okay. This is the great razor blade business in a sense. Once you're on the system, you're going to get the aftermarket sales, right? Yes, for the most part, that's accurate. Yes. Okay. I noticed it looks like it's margin accretive on an adjusted EBITDA basis. You cited a CAGR of 70% revenue over a three to four-year basis. 7%- 8%. 7%- 8% growth over the. 7%-8%. Okay. I didn't know. I must have cut out there. 7%- 8%. I was wondering, that's huge growth. Are most of the products that are manufactured, are they manufactured in the U.S. and then shipped across the world, or what's their manufacturing footprint look like? They have a big footprint in Atlanta, and they have a big footprint in Brazil. They have smaller kind of weld shops in other parts around the world, but the primary manufacturing footprint for a majority of the products is the United States and Brazil. Okay. Lastly, who is the main competitor in this business for you? There's a company called Diamond. That's their main competitor. There's maybe, you know, some smaller regional, very small players, but the other big player is Diamond. Okay, thank you very much. Thank you. Please stand by for our next question. Our next question comes from the line of [Kirk Binger] with D.A. Davidson. Your line is open. Great. Thanks. Just two quick ones. I guess, Jeff, would you mind providing just kind of end market split and maybe geographic split of sales? I mean, it sounds like it's very concentrated in pulp and paper, but any color there would be great. Sure. On the geo revenue, 55% North America. Rest of the world, because of their footprint in Brazil, is 20%. Asia, 18%, and Europe, 7%. On the end markets, approximately 60% pulp and paper. On Power-Gen, their revenue, it's in the low 20s. The remainder, industrial, is in the high teens. Got it. Okay. Perfect. Not to get too far ahead of ourselves, but you kind of mentioned some of these large recovery boiler installations of late. I guess, how do you think about the cyclicality of that, how it might impact the next couple of years relative to at least the growth you cited in the 7%- 8% range? As we mentioned, 75% of their business is aftermarket. That obviously doesn't have near the cyclicality that the capital would. There have been a lot of large new systems brought online, and they'll start to generate parts going forward here for the next few years. That's where the bulk of the growth, we think, is going to come from, all of the aftermarket associated with a lot of these large installations that have come online in the last few years and are still in the process of coming online. Okay. Perfect. Appreciate the color. Thank you. Yeah. Thank you. Please stand by for our next question. Our next question comes from a line of Walter Liptak with Seaport Research. Your line is open. Hi. Good morning, guys. Congratulations. Hi. I wanted to ask just to follow on to that last one. This is a similar business to what you guys already do with capital projects versus aftermarket, which is great. With that 7%- 8% CAGR that you've seen in the last three or four years, are we coming out of a stronger capital period going into a weaker capital period, or how do you see the capital projects doing? What's the funnel looking like? What's their orders and backlog looking like for capital projects? We certainly wouldn't model 7%- 8% going forward. As you know, we're pretty conservative when it comes to our planning and our modeling. I would say we tend to kind of model around GDP plus or minus a little bit. Obviously, it'll be fantastic if they continue to grow in the high single digits, but certainly, our planning has them growing more in the lower single digits. Oh, okay. Great. That's because of the mix of maybe more aftermarket, less capital than what you've seen? Yeah. There are a lot of big, large projects that have come online that they've won. As you know, those things tend to have a cyclicality to them. We wouldn't expect that kind of growth over the next five years. Although it could happen, it's certainly nothing that we're budgeting for or planning for at this time. Okay. Great. It sounds like you've got a great team with this acquisition. I wondered, as you think about this as more of a standalone business with access to the Kadant global networks, are there any cost synergies or sales synergies that you're thinking about for the future growth or profits? That is something that we'll look at. As you know, one of the things we never do is to model synergies into our acquisition models. Our returns and our expectations are always unsynergized. We do know we have some synergies, and they tend to vary quite a bit from acquisition to acquisition. I think that's something to still be explored. I will say that, as you know, we do have a manufacturing footprint all around the world. They will have available to them the ability to manufacture some or some parts of their systems if they choose to in other places around the world. As far as sales synergies, probably less so there because, as you Kadant is more on the recycle side and not on the virgin pulp side of the business. I will say that we just bought, as you know, Babbini a couple of months ago, and they're very strong in the sugar beet market. There might be some opportunities there. These guys are starting to penetrate the sugarcane market with their technology. It is still yet to be seen whether there might be some opportunities on the sugar beet side where Babbini pretty much is involved in the majority of the sugar beet operations around the world. There might be some synergies there for new market opportunities, but I would say it's a little early for us to fully understand what they may be. Okay. Great. Okay. Maybe the last one for me is, you know, 80/20 is clearly a core value and strength for Kadant How do you approach acquisitions now with 80/20? Do you introduce them to it early, or do you wait until they're part of the family for a while, the group for a while, and then introduce them to 80/20? Traditionally, we have a fairly light touch starting out. We like them to get settled in. There are some integration steps, even though we run a decentralized model. Certainly, on the financial side, as you know, there's a lot of integration because they have to report quarterly. We typically like to let the dust settle and for them to get used to the new procedures and comfortable with that before we start to look at it. We will introduce it to them, and they can guide us on their interest in it and what they think the timing might be for that. Some of our businesses want to get involved in that sooner, and some want to start it after they've had a period of time to fully integrate in. That's a discussion we'll have with them, and together with them, we'll make a decision on when the timing might be appropriate. We do believe, as there has been with every other company within Kadant, there's good opportunities there. Okay. Great. Thank you. Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star one one on your telephone. Please stand by for our next question. We have a follow-up question from the line of Ross Sparenblek with William Blair. Your line is open. Thank you for taking the call, guys. Can you hear me? Yeah, we can hear you. Yeah, we can hear you, Ross. Okay. Perfect. Yeah. On the parts removals and just thinking about, like, you know, the order cadence, is that primarily book and ship, or is there a lag in the backlog there, similar to, like, flow control? Some of the parts are a little more standardized. One thing they specialize in, I think, is quick turnarounds. That's one of the ways they maintain market share and go after market share, on delivery and quick turnaround. They maintain a decent inventory of a lot of their standard products and really try to service the customer and get them out to them pretty quickly. Okay. Is there a backlog associated with this we should be aware of? Yeah. They currently have a fairly decent backlog, Ross, in terms of on the revenue recognition front. We think this will recognize this upon shipment. It's not going to be over time. When they do these projects where they're maybe supplying 100 units or 200 units, they'll be shipping those as they manufacture them. Okay. This, you know, conceptualizes a project of that size. Is that like a three-year project? No, I don't think so. I think they ship them out. They can assemble them, build them, and get them out much sooner than that. Okay. On the footprint, this is somewhat larger than what you guys have historically acquired. As G&A, is that accretive or dilutive to the overall company? On an overall basis, I think it's going to be accretive, but it's quite modest. Okay, very helpful. Ross, I'd say one thing that we're still working on is the intangibles. A component here is contingent on where the valuations land. Okay. Congratulations, guys. Thank you. Thank you. Please stand by for our next question. Our next question is a follow-up from the line of Gary Prestopino with Barrington. Your line is open. Yeah. Mike, just a quick question. You know, I kind of calculate the adjusted EBITDA margin from the numbers you gave us at about 23%. Is there any reason why that would not hold going into 2026 just for modeling purposes? Yeah, nothing comes to mind, Gary, that should change that particular metric in the short run. Okay, thank you. Thank you. Ladies and gentlemen, I'm showing no further questions from the queue. I would now like to turn the call back over to Jeff Powell for closing remarks. Again, I want to thank everybody for joining us today. As you can see, we're very excited. We think this is a great addition to the Kadant family. We're very excited that they're joining us, and we look forward to reporting on their progress going forward. Thank you. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.