Kadant inc (KAI) Q3 2021 Earnings Call Transcript

Image source: The Motley Fool.

Kadant inc (KAI -0.42%)
Q3 2021 Earnings Call
Nov 3, 2021, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Q3 2021 Kadant Inc. Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Michael McKenney, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Thank you, Grace. Good morning, everyone, and welcome to Kadant's Third Quarter 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 the 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 2, 2021, 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 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 www.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?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

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 another quarter of record revenue and bookings, along with strong EBITDA margin performance and free cash flow, positioning us well for a strong finish to the year. I'd like to begin by reviewing our operational highlights for the third quarter. The robust demand for aftermarket parts and a high level of capital project activity in the third quarter led to an all-time high for revenue and bookings. Our aftermarket parts and consumable business was exceptionally strong in most regions of the world, and new order activity was driven by solid demand across all of our operating segments. In the third quarter, we announced the closing of two acquisitions, one in our Flow Control segment and another in our Material Handling segment. The integration of these businesses is going well and their financial results contributed to our third quarter performance.

Just after the third quarter closed, we completed an acquisition of a small manufacturing business in India. It is a well-established manufacturer of engineered stock preparation and equipment used to process recycle and virgin fiber for paper packaging and tissue production. Our acquisition of this business will create a new manufacturing base for us in India, where we have leading market position and have been active for more than 20 years. It also provides a strategic platform to accelerate new business opportunities in the fast-growing and in packaging petition markets. Before moving on to our Q3 financial performance, I want to comment on the global supply chain and how we are managing in this complex environment. The headwinds found within the global supply chain continued to be a challenge, pushing out expected deliveries and materials and creating a significant amount of work, to keep our delivery promises to our customers. I'm pleased to say it is a challenge that our operations teams around the globe are managing successfully. Our employees are doing a great job in navigating through a highly dynamic and uncertain environment that looks to be with us for some time.

While there is little expectation for a sudden return to normalcy, I am confident we will work through these immediate supply chain challenges and continue to meet our customers' needs. Turning now to slide six and our Q3 financial performance. You can see we had significant increases across all of these financial metrics compared to Q3 of last year. Q3 revenue was up 29% compared to the third quarter of 2020 to a record $200 million. Excluding acquisitions and the favorable impact of FX, revenue was up 18% compared to the same period last year. Our aftermarket parts consumables revenue was up 28% to a record $131 million in Q3. The consistently high operating rates of our customers and strong end-market demand contributed to our record aftermarket performance. Solid execution contributed to boosting our adjusted EBITDA margin to 20.5%, which led to our excellent operating cash flow of $38 million in Q3. All of our operating segments delivered excellent adjusted EBITDA margin performance despite the continuing inflationary pressures for materials and the ongoing supply chain constraints. Bookings were exceptional in the quarter, up 71% to a record $245 million.

Excluding acquisitions and FX, bookings were up 57%, with contributions from all three of our operating segments. I'll review the performance of these segments next, beginning with our Flow Control Group. Flow Control segment achieved its fifth consecutive increase in quarterly revenue, reaching a record $76 million in the third quarter, up 34% compared to Q3 of last year. Aftermarket parts revenue was exceptionally strong and made up 72% of total Q3 revenue. Bookings were also a record at $77 million, up 55% compared to last year. Organic bookings, which excludes acquisitions and FX, were up 32% compared to the same period. Strong performance in Europe and North America led our bookings growth in Q3. Improved operating leverage led to record adjusted our adjusted EBITDA margin of 29.1%. While our recent acquisition at Clouth contributed to our overall performance, organic growth within our Flow Control Group continued to demonstrate the strength of this segment. Our Industrial Processing segment continued to experience strong demand with bookings nearly doubling from the same period last year to a record $119 million. New orders for our fiber processing systems in the U.S. and Europe led this increase in the third quarter.

Overall demand for housing and wood products remained high, and our wood processing product line capitalized on strong end market demand. Revenue in this segment increased 31% to $82 million with strong performance in aftermarket parts and capital business. Adjusted EBITDA was up 24%, while adjusted EBITDA margin declined compared to Q3 of last year when we received employee retention benefits related to the pandemic. As you may have read in the press, China is experiencing power supply issues. This has created a challenge for us with production schedules, and it is uncertain how long this will impact our operations. We are also seeing an increasing number of requests from our customers to delay shipments as they manage supply chain constraints. In spite of these headwinds, we entered the quarter with another record backlog that positions us well for the remainder of the year. Moving to our material handling segment, we experienced healthy demand for our capital equipment and aftermarket parts.

Revenue was up 17% to $42 million with parts revenue, making up 59% of total revenue in the quarter. Bookings in this segment were up compared to same period last year to a record $49 million in Q3. We saw increased order activity and strong demand for high-performance pillars, which contributed to our record bookings in the third quarter. Our recent acquisition, Balemaster, is also experiencing record demand and the integration of that business and the cadence is proceeding well. Solid execution of our buying businesses, including our recent acquisition, helped boost adjusted EBITDA by 26% and adjusted EBITDA margin by 120 basis points compared to the same period last year. Despite the supply chain issues I mentioned earlier, we remain optimistic for improved capital investment environment as infrastructure spending and industrial demand for raw bulk materials grow. As we look ahead to the remainder of 2021, we continue to see signs of healthy project activity. Our decentralized structure continues to serve us well during these rapidly evolving times, allowing us to respond quickly to local and regional developments. Our record backlog has us well positioned for the remainder of the year. However, delays in shipments and the timing of orders have shifted some expected revenue bookings from Q4 into 2022, which Mike will comment on in his remarks. With that, I'd like to pass the call over to Mike to review our Q4 -- Q3 performance.

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Thank you, Jeff. I'll start with some key financial metrics from our third quarter. Consolidated gross margins were 44.9% in the third quarter of 2021 compared to 44.2% in the third quarter 2020. Our consolidated gross margins in the third quarter of 2021 were negatively affected by the amortization of acquired profit and inventory related to the Clouth and Balemaster acquisitions, which lowered consolidated gross margins by 110 basis points. In the third quarter of 2020, government assistance benefits increased consolidated gross margins by 110 basis points. Excluding the impact from both of these consolidated gross margins were approximately 43% in both periods. Our parts and consumables revenue represented 66% of revenue in both periods. SG&A expenses were $52.3 million in the third quarter of 2021, an increase of $8.5 million compared to $43.9 million in the third quarter 2020. Third quarter of 2021 SG&A includes $3.4 million in SG&A from our acquisitions.

There was an unfavorable foreign currency translation effect of $0.9 million in the quarter and a reduction in government assistance benefits of $0.7 million. We also incurred acquisition-related costs of $1.3 million in the third quarter of 2021 compared to $0.4 million in the third quarter 2020. The remaining increase in SG&A expenses is primarily associated with increased incentive compensation and travel-related costs due to improved business conditions. As a percentage of revenue, SG&A expenses decreased to 26.2% in the third quarter of 2021 compared to 28.4% in the prior year period. Our effective tax rate was 24.6% in the third quarter of 2021, lower than we anticipated, primarily due to tax benefits from acquisition-related expenses, employee equity awards and the reversal of tax reserves associated with uncertain tax positions. Our GAAP diluted EPS was $1.75 in the third quarter, up 37% compared to $1.28 in the third quarter 2020, and our adjusted diluted EPS increased 50% to $1.97. Adjusted EBITDA increased 36% to $40.9 million or 20.5% of revenue compared to $30 million or 19.4% of revenue in the third quarter of 2020 due to strong performance in our Flow Control segment, which was up 42% with a large portion attributable to organic growth.

This is the second quarter in a row that our consolidated adjusted EBITDA, as a percentage of revenue, has exceeded 20% and we expect to also achieve this for full year 2021. Operating cash flow increased 56% to $37.9 million in the third quarter of 2021 compared to $24.4 million in the third quarter 2020. Free cash flow increased 53% to $34.6 million in the third quarter of 2021 compared to $22.6 million in the third quarter of 2020. We had several notable nonoperating sources and uses of cash in the third quarter of 2021. We paid $141.4 million for the acquisitions of Clouth and Balemaster and we borrowed $63.1 million related to these acquisitions. Despite the significant acquisition activity in the quarter, we were able to utilize our strong cash flows to pay down our debt by $26 million. We also paid $3.4 million for capital expenditures and paid a $2.9 million dividend on our common stock. Let me turn next to our EPS results for the quarter. In the third quarter of 2021, our GAAP diluted EPS was $1.75. And after adding back acquisition-related costs of $0.22, our adjusted diluted EPS was $1.97. In the third quarter of 2020, our GAAP diluted EPS was $1.28, and our adjusted diluted EPS was $1.31.

As shown in the chart, the increase of $0.66 in adjusted diluted EPS in the third quarter of 2021 compared to the third quarter 2020 consists of the following: $0.90 due to higher revenue; $0.09 from acquisitions, net of interest expense and acquisition borrowings; and $0.05 due to lower interest expense. These increases were partially offset by $0.21 due to higher operating expenses, $0.15 due to a decrease in the amounts received from government assistance programs. $0.01 from higher noncontrolling interest expense and $0.01 due to higher weighted average shares outstanding. Collectively, included in all the categories I just mentioned, was a favorable foreign currency translation effect of $0.07 in the third quarter of 2021 compared to the third quarter of last year due to the weakening of the U.S. dollar. Looking at our liquidity metrics on slide 15. Our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable, decreased to 113 at the end of the third quarter of 2021 compared to 140 at the end of the third quarter of 2020. This decrease was primarily driven by a lower number of days in inventory.

Working capital, as a percentage of revenue, was 13.5% in the third quarter of 2021 compared to 15.6% in the third quarter 2020. Our net debt, that is debt less cash, increased $115 million sequentially to $231 million at the end of the third quarter of 2021. We borrowed $63 million in the quarter to fund our acquisitions, and we were able to pay down $26 million of debt in the quarter. Our leverage ratio, calculated in accordance with our credit agreement, was 1.69 at the end of the third quarter 2021 compared to 1.71 at the end of the second quarter of 2021. Our net interest expense decreased $0.3 million to $1.3 million in the third quarter of 2021 compared to $1.6 million in the third quarter of 2020. At the end of the third quarter of 2021, we had $105 million of borrowing capacity available under our revolving credit facility, which matures in December of 2023. I would like to update our revenue range for the fourth quarter and full year 2021. Although we had record bookings of $245 million in the third quarter, which is the fourth record quarter in a row. We ended the third quarter with a record backlog of $299 million, the current headwinds from supply chain and logistical constraints have caused us to reduce our revenue expectations for the fourth quarter.

We now anticipate revenue of $210 million to $215 million, down from $220 million to $225 million that we noted in the July call. For the full year 2021, we now anticipate revenue of $778 million to $783 million revised from $783 million to $793 million. This change in the revenue range includes $13 million of revenue that has been moved into 2022 and as a result of supply chain issues or customer requested changes to the shipping dates. In addition, the timing of capital orders also had an impact. As Jeff mentioned, the China power supply issue, which came to light during September, has also had an impact on our production schedule. The Chinese government has imposed varying power restrictions from time to time, which are outside of our control. Our current revenue expectation is based on the current power use guidelines we have been given holding throughout the quarter. Our guideline and gross margins essentially remains the same.

We anticipate fourth quarter gross margins will be 42%, which includes the impact of amortizing the acquired profit and inventory. Our current estimate for the amortization of acquired profit and inventory in the fourth quarter is $2.1 million or $0.13. We anticipate SG&A expenses will be approximately $55 million to $56 million, and R&D will be a little over $3 million in the fourth quarter. The SG&A expense includes backlog amortization of approximately $600,000 or $0.04. We anticipate our net interest expense will be approximately $1.4 million in the fourth quarter of 2021, and we anticipate the tax rate for the quarter will be 27% to 28%. We hope these directional comments are helpful. That concludes my review of the financials, and I will now turn the call back over to the operator for our Q&A session. Operator?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Kurt Yinger from D.A. Davidson.

Kurt Yinger -- D.A. Davidson -- Analyst

Great. Thanks and good morning Jeff and Mike. Just wanted to start off on the supply chain. With orders being pushed out, do you expect that's really a Q4 type phenomenon as you get into next year can kind of get back on track and continue to grow sequentially? Or do you expect that's going to remain a challenge in terms of delivering the plan and the backlog?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

So as Mike mentioned, we had quite a bit of revenue that shifted from Q4 into next year. Right now, our thinking is that the first couple of quarters of next year, we're still going to see some shipping challenges. And a lot of it has to do with logistics and shipping is probably one of the biggest challenges we have. But kind of what we're hearing and what you read is that they think by summertime, they should have this kind of sorted out. And so we think it's -- right now, our expectation is it's going to be a first half of the year type phenomenon. And we're hoping that the back half of the year, things will be back to something a little more normal. We've never dealt with this before. So nobody knows for sure, but that's our sense is that things will start to sort themselves out the first quarter or two of next year.

Kurt Yinger -- D.A. Davidson -- Analyst

Got it. Got it. And I mean when you think about just the capacity of your system and the flexibility that you might have. I mean, is the supply chain a limiting factor to kind of revenue growth from here? Or is it more just based on more of a headwind in terms of delivering to kind of scheduled out time lines?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Yes. I think it's more of a delivery problem. It's not -- I don't think it's going to be a revenue issue. It's not going to curtail revenue or I don't expect us to lose much in the way of revenue because of it. It's just -- it's taking a little longer to deliver than we might otherwise.

Kurt Yinger -- D.A. Davidson -- Analyst

Okay. Okay. That's helpful. All right. And then just on the margin front, can you just talk directionally about how you're thinking about the potential kind of impact as capital presumably increases as a proportion of revenue in 2022. Is that something with overall volume levels being higher, do you think you can kind of hold in that 42% to 43% gross margin range you've kind of achieved here in the second half? Or could that drag be a real needle mover?

Jeff Powell -- Kadant Inc. -- Analyst

I don't know if it will be a real needle mover, Kurt, but there's no question that, that mix of capital and parts and consumables plays a part in the gross margin performance. So I always say when we're heavier capital, that will create some pressure on gross margins. But the good news side of that is we get operating leverage on it. So our operating margins will be better.

Kurt Yinger -- D.A. Davidson -- Analyst

Got it. Okay. All right. That's helpful. And then just last one for me. As you look across your segments in your different customer sets and geographies. I mean it seems like over the last quarter or two here, things have been universally strong. But I guess as you look ahead to Q4, any notable pockets of acceleration or deceleration or any trends you're kind of thinking about heading into 2022 that are different from what you've seen over the last couple of months?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

No, I would say no, not right now. I mean I think our customers continue to operate at a fairly high operating rate, as you know. 2/3 of our business recently has been parts and consumables, and they tend to go as the operating rates go. And so most of our customers around the globe are operating at very high rates. Demand is pretty high still. And so right now, we've had kind of broad growth across all three of our segments, and we don't see any significant variation from one segment to the other. I think everybody seems to be operating at a pretty high rate right now, demand is pretty high.

Operator

Thanks. Next, we have Walt Liptak from Seaport Research.

Walt Liptak -- Seaport Research -- Analyst

Hi, good morning guys. I wanted to ask just to go back to that last question about the shipping. And if you could just go into a little bit more detail. We've all heard about what's going on, on the West Coast ports. Is that you're having trouble getting component parts in through the ports? Or is there something else going on with shipping about getting products out from your factory some place else?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Yes. I mean it's a little bit of everything, but I would tell you that the bigger issue for us is getting containers and ship out of China, frankly, that's a big part of it. As you know, a large percentage of our business in China is sold and stays in China, but they still do manufacture components for some of their sister divisions around the globe. And right now, it's -- shipping is just very tough. The costs have gone up substantially. We've been able to manage that side of it, but the timing, the schedules are something that are somewhat out of our control. So that's what we're dealing with or struggling with. As I said on the -- Kurt asked the question, I think most of the experts think that it'll start to resolve itself here over the next several months in the spring time in early summer. That certainly is our hope and expectation. But that's really what it is. It's getting our equipment done kind of shifted out to its customers.

Walt Liptak -- Seaport Research -- Analyst

Okay. I wonder if you can give us some more detail about the types of products, which segment some of the delayed shipments are in?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Yes. I would say, Walt, it's heavily -- probably, frankly, to no surprise. It's heavily weighted in industrial processing. So of that $13 million revenue shift number that I gave, 80% of that is in industrial processing. And again, sticking with the $13 million and when you kind of split that among the product offerings in industrial processing, Half of that is in the stock product line and then 30% is in the wood product line. So it's very heavily weighted in industrial processing.

Walt Liptak -- Seaport Research -- Analyst

Okay. Got it. Okay. Great. Yes. And maybe to say we into another question is in industrial process, great orders there. It's been really strong tied to the residential builds. How is the funnel looking for projects? Do you get visibility on some of those projects, do you think the order activity will continue into 2022?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

I think demand continues to be fairly strong. After the quarter closed, we booked an order on the wood processing side for, I think, what was it, Mike?

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

$8 million.

Jeffrey L. Powell -- President, Chief Executive Officer & Director

$8 million order we booked in the last week for some new stranders in the OSB market, so which is a very -- one of the biggest orders. Actually, I think it is actually the biggest order in the company's history. So right now, demand continues to be very strong. Lumber prices are off of they're high. They're down in the $575 range, still well above the historical average of about $375. So they've dropped quite that, but they're still companies that are still very profitable. Demand is very high, and they're reinvesting back in their businesses to meet that demand.

Walt Liptak -- Seaport Research -- Analyst

Okay. All right. Great. And maybe just the last one for me is -- I wonder if you could just help us go through the M&A that you completed and just talk about which segments those are in and a little bit about the fit with Kadant.

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Sure. So Clouth, which was picked out of Germany is in the Flow Control group, and they were -- as you know, Walt, one of our oldest businesses, one of the original business with Kadant was the doctor & blades business, and Clouth was a major competitor. So we were kind of number one and number two in the world in that particular market. And so they joined the Kadant family. And so we combined two of the -- two strongest blade suppliers in the world together. So there's tremendous, as you might imagine, tremendous opportunities there for product development, for market penetration, for sharing best practices for you -- they have very, very sophisticated manufacturing operations in Europe that we can leverage. So it's just -- it was -- I think I mentioned when we made the acquisition, it was our number one acquisition target for 30 years. So it was -- and so you couldn't ask for anything much better than that.

Balemaster, which was in our Material Handling segment, again, I think I mentioned we've been talking to them for about five years. They're a premier baler supplier in the U.S. Record demand, as I mentioned, a very strong business serving the -- principally, the containerboard markets, what they're prime going after is OCC and pre-consumer cardboard for box plants and board mills and things. So again, a great fit for us. As you know, we have the largest supplier balers in the world. through our European operation combined with this. And they're seeing for several quarters now, they've seen near record demand. So just a great fit for us in a market that's doing very well. As the global economy shifts more and more to these renewable materials and provincially fiber cellulose fiber, demand for recycling that continues to go up. So it's no surprise that those businesses are seeing very strong demand. E-commerce is up. I think I saw it was up 14% over the third quarter of last year. Containerboard is forecasted to grow about 4.7% a year for the next five years, well above kind of GDP as people migrate to more sales based packaging.

So it's -- all those things all those trends, if you will, drive demand for our businesses. And then the last one was the acquisition of India, which we just completed recently after the quarter closed. Again, that's a company that we've been talking about buying for many years. And we really want to get a manufacturing front print in India. We do -- it's not a large market for us, but it is one of the faster-growing markets, and we've been there for quite a while. And we really wanted to get a manufacturing footprint there so we could expand our market penetration and the market position there as well as understanding the cost structure and the technical skills and competencies that exist in India for manufacturing. So it was one that serves two purposes. It allows us to continue to deepen and broaden our market presence there, but also gives us another manufacturing base in a country where we can evaluate the opportunities that come along with that. And that one is in our industrial processing groups. So we really made an acquisition in each of the three sectors. With Clouth being the largest and then Balemaster and then the small India operation.

Operator

[Operator Instructions] Your next question comes from the line of Bobby Eubank from Chevy Chase Trust.

Bobby Eubank -- Chevy Chase Trust -- Analyst

Hi, guyst. Congrats on those acquisitions and the strong bookings. I wish you the best with dealing with these logistical issues that you and many other companies are dealing with. On inflation and some of the challenges of managing cost I know it's a little bit early, but any kind of early reads on 2022 kind of Opex increases from an organic basis?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Thanks for the question, Bobby. Well, of course, in our next call, when we wrap up the year, we'll give a lot of color on 2022. So I don't want to front-run that. But I would say it's -- we won't be surprised if the inflationary pressures continue into 2022. But I think our folks are very in tune with their input costs, and they're making adjustments accordingly.

Bobby Eubank -- Chevy Chase Trust -- Analyst

Great. That's the kind of color I was looking for. And I appreciate that, glad that you're aware of and watching and monitoring it and just kind of what are you seeing in the day-to-day challenges right now in terms of operating costs?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Well, certainly, prices have -- there's two things that are happening. Of course, costs are going up and delivery times are lengthening. One of the -- we've talked about this before, one of the many pluses of our highly decentralized structure, is that our local operations teams on the ground can make decisions pretty quickly based on what they're seeing. So for instance, we might see delivery issues in Europe, but we might see cost issues in North America, here we might see something in China. But our local teams there obviously work it every day. And so they're able to respond pretty quickly to try to manage those cost increases and those logistic challenges. And when necessary, they also can respond quickly to raise prices to pass along those increased costs.

We always work hard not to do that because we pride ourselves in being able to continually improve the value that we deliver to our customers. But there are times when your input costs go up, to an extent that you can't offset those through productivity or other issues, in which case then you have to pass them on. And so we -- when required to do that, we do that. And like I said, it's done at the local level based on the conditions that our operating teams are seeing there. So we feel good that we're able to stay in front of these issues. You'll see our margin -- Mike mentioned our gross margins were the same this quarter as they were a year ago. And even though we've seen these inflationary challenges. And that's because our guys manage it locally in real time. So that's always served us well.

Operator

[Operator Instructions] Presenters, I'm showing no further question at this time. I would now like to turn the conference back to Mr. Jeff Powell, President and Chief Executive Officer, for any closing remarks. Sir?

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Thanks, Grace. Before wrapping up the call today, I just want to leave you with a few takeaways. 2021 is shaping up to be the best year in our history across a wide range of metrics. We made solid progress this year on our efforts to accelerate revenue growth and the acquisitions we completed in the second half of the year, will further contribute to this growth and our long-term sustainability. Our year-to-date free cash flow is at a record level and our ability to generate free cash flow remains a cornerstone of our business model. We look forward to a strong finish in 2021. With that, we want to thank you for joining us today, and please stay safe.

Operator

[Operator Closing Remarks]

Duration: 37 minutes

Call participants:

Michael J. McKenney -- Executive Vice President and Chief Financial Officer

Jeffrey L. Powell -- President, Chief Executive Officer & Director

Kurt Yinger -- D.A. Davidson -- Analyst

Jeff Powell -- Kadant Inc. -- Analyst

Walt Liptak -- Seaport Research -- Analyst

Bobby Eubank -- Chevy Chase Trust -- Analyst

More KAI analysis

All earnings call transcripts