Good day. Thank you for standing by. Welcome to the Q2 2026 Kadant Earnings 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. 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 CFO. Please go ahead. Thank you, Lauren. Good morning, everyone. Welcome to Kadant's second quarter 2026 earnings call. 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, 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 3rd, 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 second quarter earnings press release and the slides presented on the webcast and discussed in the conference call, which are available in the investor section of our website at kadant.com. Finally, I want 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? Thanks, Mike. Hello, everyone. Thank you for joining us this morning to review our second quarter results and discuss our business outlook for the second half of 2026. I'll begin by reviewing our second quarter highlights. We delivered excellent results in the second quarter despite continued softness in global capital equipment markets. Across all operating segments, commercial activity was strong, particularly in our aftermarket business, even as our customers remain cautious about the evolving geopolitical environment. Despite the uncertainties, our business model continues to perform. Our large installed base provides reoccurring profitable revenue through maintenance upgrades, aftermarket parts, and growing service demand as our customers seek to maximize productivity while reducing input cost. This dynamic was evident across all operating segments in the second quarter and remains a key source of earnings stability. We are seeing healthy quote activity and commercial engagement while the primary headwinds remain customer approval cycles, delayed project releases, and geopolitical uncertainty. Overall demand remained healthy in the second quarter. Our operational execution and cost discipline led to meeting or exceeding profitability expectations. Against a backdrop of continued trade policy uncertainty and geopolitical tension, our second quarter performance was particularly noteworthy. I want to congratulate our sales and operations teams around the world for their outstanding execution and strong results. Turning next to slide six, I'd like to review our Q2 financial performance. Bookings in the second quarter increased 16% to $312 million, led by contributions from our recent acquisitions and strong demand for aftermarket parts. Even as new orders for large capital projects were delayed, we're encouraged by the fact that multiple large projects, while not yet formally released, are in advanced stages. Revenue increased 23% to a record $313 million. While our revenue benefited from our recent acquisitions, I am pleased to report that organic revenue increased 8%, with all operating segments achieving solid growth. Adjusted EBITDA was a record at $68 million, up 30% from the prior year period. Our adjusted EPS was a record at $3.42, up 26% compared to our performance in the second quarter of 2025. Strong cash flow remains an important feature of our business model. During the second quarter, operating cash flow increased 32% compared to the same period last year to $54 million. Free cash flow was also healthy at $43 million, up 17%. Capital project activity has remained soft for an extended period, as I noted earlier. We expect improving capital spending trends in the second half of 2026 and entering 2027. Industrial automation, modernization investments, energy, and defense, among others, remain important growth drivers for our businesses. I'll provide more details on that when I review our operating segments. I'll begin with our Flow Control. As you can see on slide seven, our Flow Control segment delivered a solid quarter despite an extremely challenging European economic environment. We had solid bookings in the second quarter of 2026, up 11% compared to the same period last year, and benefited from strong aftermarket demand, while capital project bookings, particularly in North America, were stronger than expected. Revenue in the second quarter increased 5% to $100 million, even as weaker manufacturing activity in Europe dampened our results. Our aftermarket revenue was a record $76 million and made up 76% of total revenue. Our adjusted EBITDA margin was relatively stable at 27.7% despite mixed market conditions. As we look ahead to the second half of 2026, we expect demand to remain consistent as the year progresses. Although Europe faces stiff economic headwinds, this segment continues to benefit from its diversified market exposure, while the investment environment in North America and Asia continues to show signs of optimism. Our Industrial Processing segment delivered excellent quarterly results despite ongoing uncertainty in global capital markets. Our competitive positioning is strong, and our recent acquisitions boosted new orders to $136 million, up 29% compared to the same period last year. Revenue increased to a record $144 million, with strong contributions from both aftermarket parts and capital equipment shipments. While acquisitions led this growth, our organic growth of 13% was excellent. Operational leverage in our recent acquisitions contributed to our improved margin performance in this segment. Adjusted EBITDA was 26.1% of revenue and a record $38 million in the second quarter. Looking ahead to the second half of 2026, we believe our aftermarket parts demand will remain stable, and that the current market softness in capital business is largely timing driven. We are encouraged that our capital project pipeline continues to grow, and we believe these projects will accelerate once economic confidence improves. Turning now to our Material Handling segment, we had good performance across our business, even as customers remain cautious regarding large capital expenditures. Similar to our other segments, aftermarket parts and service performed well in the quarter and contributed to our bookings of $73 million. This growth was largely due to robust demand for our high-performance BELA product line. Strong revenue volume and solid execution led to adjusted EBITDA increasing 7% to $15 million. The business activity remains strong with several larger capital projects under discussion. Based on our market analysis, we believe our material handling markets are stable, and recovery in capital equipment demand is expected in 2027. The segment remains well-positioned for growth as project conversions improve, while continued aftermarket and service activity supports earnings. Growing opportunities remain tied to demand in infrastructure, mining, food processing, and recycling. As I conclude my prepared remarks, I want to emphasize how pleased I am with our operations teams as they execute their strategic initiatives to create and capture more value. Our business has continued to win new orders and deliver exceptional results despite the prolonged geopolitical uncertainties. Although customer caution and extended approval cycles are affecting capital project timing, we believe demand is being deferred rather than lost. Looking ahead to the second half of 2026, we believe demand will strengthen relative to the first half of the year and that the softness in global capital spending will begin to strengthen. Commercial activity remains healthy. Our backlog is growing, and our ability to execute with our strong cost discipline is shown across the operating segments. With that, I'll turn the call over to Mike for a review of our financial performance for Q2 and our guidance outlook for the remainder of the year. Mike? Thank you, Jeff. I'll start with some key financial metrics from our second quarter. Second quarter record revenue of $312.9 million included record aftermarket parts revenue of $214.2 million. Organic revenue increased 8% compared to the second quarter of 2025, including a 23% increase in organic capital revenue. Record revenue drove an increase in gross profit in the second quarter, but at a comparatively lower gross margin. Gross margin was 43.8% in the second quarter of 2026, down 210 basis points compared to 45.9% in the second quarter of 2025. Our mix of higher margin aftermarket parts revenue decreased to 68% compared to 71% in the second quarter of 2025. Our gross margin was lower as a result of the higher capital mix and as a result of the product mix within both aftermarket and the capital categories. We had a benefit in the second quarter from tariff refunds, but this was largely offset by the negative impact from the amortization of acquired profit and inventory and deferred profit associated with our Kadant Profil acquisition, which I outlined on our last earnings call. As a refresher, Kadant Profil has been a longtime supplier to several Kadant businesses, and a significant portion of its revenue, approximately 50%, is now intercompany revenue under Kadant. The associated profit generated on this intercompany activity is recognized in Kadant's results, but the timing depends on when the underlying product is sold to the third-party customer. Our Kadant businesses had on-hand inventory at the acquisition date that needs to be consumed before profit related to post-acquisition activity can be recognized. We estimate it will take the remainder of the year to work through the remaining acquisition date inventory. SG&A expenses were well managed, and as a percentage of revenue decreased to 26.1% in the second quarter of 2026, compared to 29% in the prior year period. SG&A expenses increased $7.7 million, or 10%, to $81.6 million in the second quarter of 2026, compared to $73.9 million in the second quarter of 2025. This increase includes incremental SG&A expense of $7.9 million related to our acquisitions. Our GAAP EPS increased 24% to $2.75 in the second quarter, and our adjusted EPS increased 26% to a record $3.42. This growth was attributed to higher organic revenue and stronger performance from our acquisitions. Second quarter of 2026 adjusted EPS exceeded the high end of our guidance range by $0.44, largely due to lower operating expenses and better acquisition performance than forecasted. This strong performance contributed to record adjusted EBITDA and strong cash flow performance in the quarter, which I'll discuss in further detail on the next slide. Adjusted EBITDA increased 30% to a record $68.1 million, compared to $52.4 million in the second quarter of 2025, due to strong performance at our Industrial Processing segment. As a percentage of revenue, adjusted EBITDA was 21.8%, compared to 20.5% in the second quarter of 2025. As outlined in the chart, our cash flow of $53.5 million increased significantly compared to the first quarter of 2026 and was up 32% compared to the second quarter of 2025. Our capital expenditures increased to $10.9 million in the second quarter of 2026 compared to $4 million in the prior period, due in part to the purchase of a previously leased manufacturing facility. After excluding capital expenditures, free cash flow increased 17% to $42.6 million compared to the second quarter of 2025. Let me turn next to our EPS results for the quarter. Our adjusted EPS increased $0.71 from $2.71 in the second quarter of 2025 to $3.42 in the second quarter of 2026. This included increases of $0.67 due to higher revenue, $0.52 from our acquisitions, excluding the associated borrowing costs, and $0.01 from lower non-controlling interest expense. These increases were partially offset by $0.23 due to a lower gross margin percentage, $0.12 due to higher interest expense, $0.08 from a higher effective tax rate, and $0.06 from a higher operating expenses. Collectively, including all the categories I just mentioned, was a favorable foreign currency translation effect of $0.05 in the second quarter of 2026 compared to the second quarter of last year. Looking at our liquidity metrics on slide 15, our cash conversion days decreased to 133 at the end of the second quarter of 2026, compared to 147 at the end of the first quarter of 2026. Working capital as a percentage of revenue was 19.3% in the second quarter of 2026, compared to 17.7% in the second quarter of 2025, due to the lack of a full year of revenue for our most recent acquisitions. If you exclude the acquisition impact from this calculation, it would be 17.4%, which is slightly below the second quarter of 2025. Our net debt, that is, debt less cash, was $373 million in the second quarter, increasing $129 million sequentially. We borrowed $181.8 million to fund our recent acquisition and repaid $29.8 million in the second quarter. Our leverage ratio, calculated in accordance with our credit agreement, increased to 1.72 at the end of the second quarter of 2026, compared to 1.27 last quarter. At the end of the second quarter of 2026, we had $249 million of borrowing capacity available under our revolving credit facility, an additional $200 million of uncommitted borrowing capacity. I'll review our guidance for 2026. Our record second quarter revenue and strong organic capital revenue have improved our outlook, and as a result, we are modifying our guidance for the year. We are raising our full year 2026 revenue guidance to $1.19 billion-$1.21 billion, revised from our previous guidance of $1.178 billion-$1.203 billion. We expect adjusted EPS of $12.43 to $12.68 in 2026, revised from our previous guidance of $12.33 to $12.68. Our adjusted EPS guidance excludes $2.17 of intangible amortization expense and $0.48 of acquisition-related costs. We remain cautious with our outlook for the remainder of 2026. While aftermarket parts demand remains healthy, we are continuing to see uncertainty related to the timing of capital projects. The geopolitical conflicts and the resulting impact on input costs are resulting in our customers taking a more cautious approach. Customer demand for quotes remains healthy. With many active projects, the quote to order time is longer. Our revenue guidance for the third quarter of 2026 is $297 million-$307 million, and our adjusted EPS guidance for the third quarter is $2.90-$3.00, which excludes $0.55 of intangible amortization expense and $0.07 of acquisition-related costs. Our 2026 guidance includes the following assumptions: gross margins of 44%-44.5%, SG&A as a percentage of revenue of 27.2%-27.7%, net interest expense of $19.5 million-$20 million, a tax rate of 27.8%-28.3%, depreciation expense of $28 million-$28.5 million, and intangible amortization expense, which we now add back to our adjusted EPS calculation of approximately $34 million. That concludes my review of the financials. I'll now turn the call back over to the operator for our Q&A session. Lauren? Thank you. At this time, we will conduct the question- and- answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and 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 now open. Hey, good morning, gentlemen. Morning, Ross. Hey, just to kick it off on a high level here with the project pipeline comments, several large projects getting close to the finish line. Can you maybe just provide more color on just pockets of strength that you're seeing? It feels like resi's still choppy, but June had a pretty strong little period for cardboard in the U.S. Just any way we should think about that going forward. Yeah, Ross, I think we have some large projects in the packaging side of the business. We're moving more in on some of the adjacent markets. We booked a very large order this quarter, in the second quarter, on the aerospace side of the business. We're continuing to book orders on the OSB side of the business. That business continues to, I would say, outperform the rest of the wood sector. We have some large baler projects, so it's actually spread across most of our businesses. As we've talked now for frankly two and a half years, there's been this capital equipment investment recession that we've been in. That just can't last forever. We're starting to see projects start to move forward in the planning stage really in almost all of our major sectors. Okay. Can you maybe just remind us how that would have compared to last year? I just get the sense that there's definitely a more diversified recovery coming across your end markets, which obviously provides confidence to go forward. Yeah. The biggest projects for our business tend to be on these large packaging conversions. Those projects can be anywhere from $10 million-$25 million. As you would imagine, they get the most scrutiny, and I think the customers want to have good visibility on what's going on. That's really what's kind of delayed them, all the uncertainties we've seen. Some of those, I think, are moving forward. Some of them we thought actually might have happened last year, and they did not. They got pushed off a year because of just the different uncertainties of tariffs and everything else, the wars. They aren't going to delay them forever. As I've mentioned many times, we seldom see projects canceled. It's always just a matter of timing on these things. It's clear that some of these things are starting to move forward, where I think the customer can no longer put off making the investments in them. The environment's stronger, the pipeline's stronger. I think the timing of some of these larger projects is more near-term now than it certainly was this time last year. Okay. Just on the M&A side, thinking about the 2025 acquisitions, even the more recent ones here, can you maybe just give us a sense of how those are performing versus internal expectations and the thoughts on kind of looking out to 2027 on integrating and kind of driving more accretive margins from the three that you did in the last, call it 12 months here? Yeah. I would say, Ross, the larger transaction we did with Clyde Industries, they are really performing well. They are really doing well. Very happy with the results to date. Going to the one that we just completed, Profil. Of course, I mentioned in the call we have the profit deferral issue, but they're off to a very good start. They're off to a good start. They had some nice bookings. We're pretty happy with how they've started out here. The smaller one we did on the fiber processing side, a component of what they're doing is supplying a product into our fiber processing systems. Right now, orders are soft in that area, though I would say we're looking at the back half of 2026 and into the very front part of 2027 as some I think we see some good opportunities on the board. I'd say two of the three doing very well, the one that we called out more as a technology buy for us to fit into our upcycling system. That one's a little bit more challenged in the short run here because of the lower demand. Awesome. That's great to hear. I'll hop back in a few. Thank you. Our next question comes from the line of Gary Prestopino with Barrington. Your line is now open. Hi, Jeff and Mike. Couple of questions. First of all, Mike, I didn't write down the organic revenue growth and the organic capital revenue growth. Could you just give me that again, please? The organic revenue growth was 8%, and the organic capital revenue growth was 23%. Okay. Thank you. In this quarter, you're once again saying you still expect things to get better on the capital side in the back half of the year, your clients still seem to be reticent to commit. Is that how we should read this? What the outlook would be maybe for capital for the next six months? I know, Gary, we kind of sound like a broken record. We've been talking about this feels like forever now. We are seeing some increase. As I mentioned, we booked a nice $8 million project this quarter, in the second quarter on the aerospace side. We booked another OSB order. Then, as I said, we're getting further along on some of these larger projects that we've been in discussions on. We think things are going to, from a booking standpoint, are going to continue to improve. The second quarter, actually, capital equipment revenue, I think, Mike, was the second best ever- Yeah in the second quarter. We definitely are starting to see some pickup in the capital equipment activity, and we expect that'll continue. It's been a long slog, I'll tell you that. It's unusual. I've said this before, we normally don't see this kind of softness unless we're in a recession, a macro recession. The economies haven't been in that, of course. It's just that we've got this bifurcated capital investment cycle now where it seems like all the oxygen's been sucked out of the room between AI and all the geopolitical uncertainties that have occurred around the world. We definitely are starting to book some capital, and we think some of these projects are getting closer to being released. Okay. It's really the mindset is just, Okay, we've got a lot of things swirling around here, but eventually we're going to need this equipment. Does the growth in your aftermarket part sales indicate that these machines are being run extremely hard and eventually something's got to give? We always say that our aftermarket business is somewhat driven by operating rates. We've been experiencing record or near record aftermarket business, even though none of our customers are operating anywhere near record operating rates. What that tells us is the average age of the equipment is long. It's aged. It's old, and it's taking a lot more to keep it up and running. That's a pretty strong indicator as to the status of the installed base out there and the average age of the installed base. Okay. I would just assume that with the change in guidance ranges and all that, the guidance doesn't reflect the beat in this quarter, and that's just more or less conservatism and dealing with the uncertainty going forward? Was Q2 just a total positive surprise as far as the outperformance? Well, we're very happy with the outperformance, I think you're viewing it correctly, Gary. We want to be cautious here going into the back half of the year. Okay. One last quick one. Do you have the current assets, current liabilities for the quarter, Mike? Yeah. One second there. Current assets, $581 million. Okay. Current liabilities, $224 million. Thank you so much. You're welcome. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. Our next question comes from the line of Ross Sparenblek with William Blair. Your line is now open. Thanks for the follow-up here, guys. Can you help us with the equipment backlog? I'm getting something close to $182. There's obviously currency at a minimum that can change that number. As I recall, Ross, you asked that on the last call, and you were spot on. Sometimes you're- Your streak continues, Ross. It is 182. Yep, it's 182. All right. Well, thanks for that. Just based on what you're kind of seeing, and it feels like there's a lot more confidence here based off customer conversations as well, and equipment orders are hanging around that $90 million level. Is $300 million quarterly orders kind of the new base that you're thinking for the back half of the year? Yeah. I'd say yes, more or less. Yep. Okay. With the third quarter guide, the implication is just more timing related and you're building the backlog looking into 2027? Yes, that's right, Ross. Some of these larger capital orders come in, those are really going to end up being revenue for 2027. Okay. We haven't talked about 80/20 for a while. Maybe update us on where you are on that program. Last I recall, you were around 50% done because of the M&A, although I'm not exactly certain which divisions are the focus this year. Yeah. It hasn't changed much. We seem to be kind of stuck on that 50% because we'll start three companies or four companies, then we buy three or four companies, and so the percentage doesn't change. We're continuing to aggressively pursue that implementation. We have several businesses that are in the process right now. We continue to refine the initiative, refine the process specifically for the Kadant businesses. It's still a primary driver of our increased profitability, our increased EBITDA margins, that are part of our five-year plans. Okay. Yeah, I'll pass along. Thanks, guys. Thank you. As a final reminder, if you would like to ask a question, please press star one one on your telephone and wait for your name to be announced. I am showing no further questions at this time. I would now like to turn it back to Jeff Powell for closing remarks. Thank you, Lauren. Before wrapping up the call today, I just want to leave you with a few takeaways. Despite the weaker economies in certain areas of the world and increasing geopolitical uncertainties, our second quarter results demonstrated the resilience of Kadant's business model. We have strong market positions and expect strengthening demand in the second half of the year as project activities gain momentum despite ongoing trade issues and follow geopolitical tensions influencing market confidence. Our large installed base, strong aftermarket business, and disciplined operational execution enables us to deliver solid results while positioning the company for meaningful upside as capital spending recovers. With that, I want to thank you for joining us at the call today, and we look forward to updating you next quarter. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.