On Wednesday, Kadant (NYSE:KAI) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Kadant reported strong financial performance in Q1 2026, with revenue increasing by 18% to $281.5 million and adjusted EBITDA rising 19% to $57 million.

The company highlighted robust demand in its aftermarket business, contributing to record bookings and aftermarket parts revenue, which accounted for 74% of total revenue.

Strategic initiatives include the acquisition of Vostalpena Bohler Profil, expected to be accretive to earnings in the future despite a short-term dilutive effect on EPS.

Management expressed cautious optimism about future capital project activities, noting geopolitical uncertainties and energy price fluctuations as potential challenges.

The company raised its revenue guidance for 2026 to $1.178 billion to $1.203 billion, with adjusted EPS expected to be between $12.33 and $12.68.

Full Transcript

OPERATOR

Thank you for standing by. Welcome to the Q1 2026 Kton 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'll need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 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 Chief Financial Officer. Please go ahead.

Michael McKenney (Executive Vice President and Chief Financial Officer)

Thank you, Therese Good morning everyone and welcome to Kadant first 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 future plans and expectations, financial and operating results and prospects are for 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 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 10K 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 most directly comparable GAAP measures is contained in in our first 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@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, thank you who will give you an update on Kadant business and future prospects. Following Jeff's remarks, I'll give an overview of our financial results for the quarter. We will then have our Q and A session.

Jeff Powell (President and Chief Executive Officer)

Jeff thanks Mike hello everyone. Thank you for joining us this morning to review our first quarter results and discuss our business outlook for 2026. The first quarter was a strong start to the year, highlighted by robust demand and solid earnings growth. We delivered strong profitability while continuing to see healthy demand in our aftermarket business and improving capital business. Despite the high level of uncertainty fueled by global trade challenges and the ongoing conflict in the Middle east, our first quarter exceeded expectations across most financial metrics. Record bookings and record aftermarket parts revenue, along with solid execution in our operations, drove healthy gross margin performance across our businesses. This, combined with lower than expected operating cost, led to exceeding our earnings expectations in the first quarter. We continue to refine our 8020 performance system which also contributed to our results despite economic headwinds and tough competition in our core markets. Turning now to our first quarter financial performance in Slide 6, I'd like to highlight a few metrics that I believe are central to our growth story. Double digit organic growth combined with our recent acquisitions delivered exceptional bookings growth of 25% in the first quarter compared to the same period last year. New order activity was strongest in North America and Asia, with all regions seeing healthy demand growth compared to last year. Revenue was up 18% with aftermarket parts revenue a record 209 million, representing 74% of our total revenue. The first quarter of the year is often a strong quarter in terms of parts bookings and revenue as our customers prepare for annual maintenance shutdowns. This strong demand is supported by our large installed base. Adjusted EBITDA increased 19% to $57 million, representing 20.2% of revenue. Finally, our adjusted EPS at $2.84 benefited from better than expected gross margin performance, lower than expected operating expenses, and excellent execution discipline. Overall, the quarter reflected a balanced picture of increasing commercial momentum and bookings, solid profitability and cash flow, and a revenue mix that strongly favored aftermarket parts. Next, I'd like to discuss the performance of each of our three operating segments, beginning with our flow control segment. Flow control segment created strong demand in the first quarter, led by our North American businesses. Bookings increased 12% to a record 112 million, led by robust capital order activity and record aftermarket parts demand. Q1 revenue increased 7% to $99 million, with aftermarket parts revenue making up 77% of total Q1 revenue. This revenue performance is expected to remain stable as the year progresses and benefit from increased capital shipments in the second half of the year. Adjusted EBITDA increased 5% compared to the same period last year and our adjusted EBITDA margin was 27.8%. While EBITDA margin was down modestly compared to last year, we expect to gain some operating leverage as the year progresses. Next, I'll discuss our industrial processing segment on Slide 8. Strong demand for aftermarket parts and improved capital project order activity combined with contributions from recent acquisitions led to record bookings of 145 million in the first quarter. Importantly, organic bookings were up 23% reflecting improving underlying demand for our products and technologies. As we started the year, revenue increased 37% to a record 123 million due to contributions from our recent acquisitions which included Clyde Industries and Mabini. Integration of these companies into our industrial processing segment is progressing well and we are pleased with the results delivered by both of these companies during the short time they have been part of Kadant. Adjusted EBITDA margin remained healthy at 24% of revenue. Overall, our first quarter performance in the segment was solid, with second half of the year looking to be stronger than the first. In our material handling segment, we achieved steady year over year growth in both revenue and bookings. Consistent with our expectations, revenue increased 5% to $60 million while new order activity was up modestly to $65 million. While business activity remains stable, we are seeing an environment defined by capital equipment timing. Volatility. An unfavorable product mix led to downward pressure on gross margin, which contributed in part to a lower EBITDA margin. As we move into the second quarter, our backlog is strong and we're encouraged by the fundamentals of our end markets which include aggregate mining, waste management and recycling. We've entered 2026 with good start to the year in terms of record bookings and solid revenue performance, further supporting our confidence in the periods ahead. We are seeing an improving capital equipment market. Although the timing of these projects is more uncertain than normal due to the ongoing geopolitical conflicts, we will continue to focus on strengthening our operations using our eXh20 business performance system and other internal initiatives including increasing investments in automation to provide increased value for our customers. Finally, last week we closed on the previously announced acquisition of Vostalpena Bohler Profil, now called Cadent Profil, a manufacturer of customized rolled products, rolled profiles and industrial knives. In the short term, due to a portion of the cells of Knet Profil being intercompany, this acquisition will have a dilutive effect on our adjusted EPS until the products currently held in inventory by other cadent businesses are sold to a third party customer Mike will discuss this in more details in his remarks. Looking forward, we expect the newest addition to Cadent to be accretive to our earnings growth and we are looking forward to integrating this business into the Cadent family. With that, I'd like to turn the call over to Michael. Thank you, Jeff.

Michael McKenney (Executive Vice President and Chief Financial Officer)

I'll start with some key financial metrics from our first quarter. Revenue increased 18% to 281.5 million in the first quarter 26 driven by record parts and consumables revenue representing 74% of total revenue. Gross margin was 45% in the first quarter 26, down 110 basis points compared to 46.1% compared to in the first quarter 25. About half of this decrease relates to the negative effect of acquired profit and inventory amortization which lowered gross margin in Q1 2026 by 50 basis points. The remaining decrease was due to the lower gross margin profile associated with the product mix in the quarter. SGA expenses as a percentage of Revenue decreased to 29.3% in Q1 2026 compared to 29.8% in the prior year period. SG&A expenses increased 11.3 million or 16% to 82.5 million in the first quarter 26 compared to 71.2 million in the first quarter 25. This included an increase of 7.9 million from our acquisitions and a 2.8 million unfavorable foreign currency translation effect. Our effective tax rate in the first quarter was 28.2% compared to 24.3% in the prior year period. The comparatively higher tax rate was due to discrete tax benefits related to the release of tax reserves and and vesting of equity awards in Q1 2025 which lowered the effective tax rate by 320 basis points. Our GAAP EPS increased 6% to $2.16 in the first quarter and our adjusted EPS increased 14% to $2.84, which exceeded the high end of our guidance range by 43 cents. As a reminder, we announced on our last earnings call that our adjusted EPS now excludes noncash intangible amortization expense. The 43 cent guidance beat was due to higher gross margins and lower operating expenses than anticipated. Adjusted EBITDA increased 19% to 56.8 million compared to 47.9 million in Q1 2025, principally due to strong contributions from our 2025 acquisitions. As a percentage of revenue, adjusted EBITDA was 20.2% compared to 20% in Q1 2025 operating cash flow was 21.9 million and free cash flow was 18.7 million in Q1 2026. Both were down slightly compared to the Q1 2025. Our Q1 2026 tends to be the weakest cash flow quarter, as was the case in 25. Other non operating uses of cash in the first quarter of 2016 included $9.8 million of repayments on our debt, $3.3 million for capital expenditures, $4 million for dividends on our common stock, and $4.9 million for tax withholding payments related to the vesting of stock awards. Let me turn next to our EPS results for the quarter. Our adjusted EPS increased $0.34 from $2.50 in the first quarter 25 to $2.84 in Q1 2026. This included increases of $0.58 from our acquisitions and $0.25 due to higher revenue. These increases were offset by decreases of $0.24 due to higher operating expenses, $0.12 due to a higher tax rate, $0.07 due to a lower gross margin percentage, $0.05 due to higher interest expense and $0.01 due to higher non controlling interest expense. Let me provide some further details on these fluctuations. The 58 cent increase from our acquisitions represents the operating results of our 2025 acquisitions excluding associated borrowing costs and acquisition related costs as well as recurring intangible amortization expense of $0.13. The majority of the 24 cent impact from higher operating expenses is due to an unfavorable foreign currency translation effect. Collectively included in all the categories I just mentioned was a favorable foreign currency translation effect of $0.08 in the first quarter 26 compared to the first quarter of last year. Looking at our liquidity Metrics On Slide 15, our cash conversion days increased to 147 at the end of Q1 2026 compared to 130 at the end of 2025, principally due to a higher number of days in inventory as our operations work to fulfill orders and backlog. Working capital as a percentage of revenue increased to 20% in the first quarter 26 compared to 16.8% in the first quarter 25 due to the lack of a full year of revenue from our 2025 acquisitions. If you exclude the impact of our 2025 acquisitions from this calculation, it would be 17.4% which is slightly above Q1 2025. Our net debt, that is debtless cash, decreased 8 million sequentially to 244 million at the end of Q1 2026. Our leverage ratio calculated in accordance with our credit agreement decreased to 1.27 at the end of the first quarter 26 compared to 1.33 at the end of 25. At the end of April we borrowed 155 million euros to fund our acquisition and as a result we anticipate that our leverage ratio will increase to just below 2 next quarter. After deducting our acquisition borrowing, we have approximately $210 million of borrowing capacity available under our revolving credit facility, an additional $200 million of uncommitted borrowing capacity. As we anticipated, we had an increase in capital bookings in the first quarter. Our book to bill ratio increased to 1.14, a three year high due to record aftermarket parts and a strong uptick in capital bookings. Our ending backlog was up 13% sequentially to 326 million. That being said, we remain cautious with our outlook for capital project activity in 2016. While some pending capital projects have moved forward given some easing of earlier tariff related uncertainty, the timing for other capital projects may be impacted by the current macroeconomic and geopolitical tensions. This environment has made it extremely difficult for our operations to forecast the timing of capital orders requiring significant judgment and on order timing and future material costs. As Jeff mentioned in his remarks, we completed our acquisition of WIL subpoena Bowler Profile, which we now call cadent profile on April 30. We have now incorporated the operating results for this business into our updated 2026 guidance. I want to outline how the financial results of this acquisition will be reflected in Cayden's financial statements. This company has been a longtime supplier to several Cadent businesses and as a result, a significant portion of its revenue which was 45% for the last fiscal year will be intercompany revenue and therefore not included in cadence reported revenue. The associated profit generated on this intercompany activity will be reflected in Kadant results, but the timing will depend on when the underlying product is sold to a third party customer. In addition, our Cadent businesses currently have on hand inventory that will need to be consumed. For now, we have taken a conservative approach and have not included any profit for the intercompany sales as we estimate it may take the remainder of the year to work through the current on hand inventory. Therefore, the only change to our guidance is the inclusion of Cadent Profile's external revenue and its operating results as well as the associated borrowing costs. We estimate Cadent Profile, including the associated borrowing costs will be dilutive to our adjusted EPS results by $0.20 in 2026. Of course, if current on hand inventory turns faster than expected, there could be some upside potential. For 2026. We are raising our revenue guidance for 26 to 1,178,000,000 to 1,203,000,000. Revised from our previous guidance of 1,160,000,000 to 1,185,000,000. We now expect adjusted EPS of $12.33 to $12.68 in 26, which excludes $2.20 of intangible amortization expense and 33 cents of acquisition related costs. This is revised from our previous guidance of $12.53 to $12.88, which excluded $2.13 of intangible amortization expense and $0.13 of acquisition related costs. Looking at our quarterly revenue and eps performance in 26, we expect that the first quarter will be the weakest quarter of the year. Again, I want to stress the only guidance change is related to adding the forecasted results for Cadent Profile and the associated borrowing costs. Our revenue guidance for 2Q26 is 296 to 306 million and our adjusted EPS guidance for the second quarter is $2.88 to $2.98, which excludes $0.55 of intangible amortization expense and $0.07 of acquisition related costs. 26 guidance includes the following assumptions. Gross margins of 44.5 to 45% SGA as a percent of revenue of 27.6 to 28.1%, net interest expense of 20 to 21 million, a tax rate of 27.5 to 28%, depreciation expense of 27 to 27.5 million and intangible amortization expense, which we now add back to our adjusted eps calculation of 34.5 million. That concludes my review of the financials and I will now turn the call back over to the operator for our Q and A session. Therese, thank you.

OPERATOR

At this time, we will conduct the question and answer session as a reminder to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from Gary Prestipino with Barrington. Your line is open.

Gary Prestipino (Equity Analyst)

Good morning, Jeff and Mike. Hey, Looking back on what you said at the end of Q4, you said there were, you know, several capital projects that you thought would come to the market, but you weren't really including them in any guidance or anything like that just because of the uncertainty. I mean, I know it's still an uncertain environment. But has anything happened there in terms of the amount of projects that you still think will be coming to the market? Great question, Gary. Yeah, so you know, we had several handful, I'd say seven to eight projects that we were monitoring of varying size that did not come in, that we thought may come in in 25, that didn't come in, but they're still alive and well here in 26. And in the first quarter one of those projects came in and I'm happy to tell you here that in the second quarter an additional two of those projects have come in. So as Jeff and I have said in our little notes here, we see the capital activity warming up a little bit here now, which is nice to see. Okay, that's very good news. And then just for purposes with the acquisition, I'm going to call it Vostalpena Bohler Profil because I can't pronounce this name here. It looks like as of the last numbers you gave as 51.5 million euros, 15.6 million euros of adjusted EBITDA works out to about 60 million of annualized revenues, 18 million of EBITDA. Is that holding in terms of the profitability of the business? We see any growth from the time that you gave us that trailing 12 month September number for 25.

Michael McKenney (Executive Vice President and Chief Financial Officer)

So the profitability is holding. But when we did the forecast, we really looked at where they were so far in 26 and what they thought would happen for the remainder of 26. And so it has, it has stepped down a little bit. So that 60 million run rate that you quoted, I now have is 55 million. And I would say of that incremental decrease, we're a component of that. We are a component of it because what we're trying to do is quite frankly get through our on hand inventory so that we can get to current inventory being purchased that is now intercompany. And you know, we can recognize the profit on it. So we were a component of the reduction. Some is also external sales, but we stepped down our purchases because of our current inventory levels.

Gary Prestipino (Equity Analyst)

Okay, that's fine. And then this thing has 100% of aftermarket parts revenue. So it's basically recurring. Right? Okay, thank you.

Michael McKenney (Executive Vice President and Chief Financial Officer)

You're welcome.

OPERATOR

Thank you very much. Our next question is from Ross Sperenblack. From William Blair. Your line is open.

Ross Sperenblack (Equity Analyst)

Hey. Good afternoon, gentlemen.

Jeff Powell (President and Chief Executive Officer)

Morning, Ross.

Ross Sperenblack (Equity Analyst)

Somewhat of a cautious tone this quarter from your European peers. It would be great to just kind of get a sense of what you're seeing by geography and also anything around Just factory utilization rates globally as well.

Jeff Powell (President and Chief Executive Officer)

Yeah, I would say, of course, North America, as it has been really for the last few years, is continuing to be the strongest market. Asia was strong, I would say, in the first quarter. And as you pointed out, Europe is the most sensitive to what's going on in the Middle east and energy prices, in addition to all the other challenges they frankly have right now. So I think that we expect that I'll probably be the case probably for most of the year that North America will be the strongest. And last year, I would say Europe, Asia was quite weak to begin with and Europe was in the middle. But I think Asia and Europe have flipped a little bit now and it really will depend on how quickly this conflict is resolved and what the ultimate terms are when it is resolved. If energy prices return back to normal, then I think Asia or Europe was position to try to start to make some investments. But of course, this has really impacted them because they're so dependent on external supply chains for their energy production.

Ross Sperenblack (Equity Analyst)

Okay, so have you seen factory utilizations start to tail off in Europe to start the year?

Jeff Powell (President and Chief Executive Officer)

I don't know that we've seen data. This conflict's been going on now for several weeks. I'm not sure that we've seen hard data yet as to what that's doing. But there's. It's definitely slower. You know, our European partners, you know, you know, some of our European divisions are talking about customers, talking about, you know, delaying things again until they get a better picture on where energy prices are going to go. You know, a lot of our products, of course, the, you know, the payback calculation is very much driven by energy cost. So some spikes in energy sometimes can help our products. But of course, when you have significant spikes, it really crushes overall demand. Then we get impacted by that like everybody else. So I think we're going to keep a close eye on what happens to energy prices in this conflict in the Middle east. But Europe is definitely the most sensitive to it.

Ross Sperenblack (Equity Analyst)

Okay, well, if we take out the large project in the first quarter, it looks like capital bookings were still up 20% year over year, and they've been accelerating here. And your parts have been outperforming utilization rates for the last couple of years now. Just trying to get a sense of where you think kind of the run rate demand is. And if we're starting to see the deferred maintenance start to flow, at least in the States.

Jeff Powell (President and Chief Executive Officer)

Yeah, I mean, we've been saying for some time that our history would tell us that it's hard for our. Our customers to go more than two or three years under investing before it really starts to impact their operations. And so I think we're, you know, we've been tracking the, you know, the age of our installed base, and some of it's quite old. And as you pointed out, the parts are really outperforming because of that. So, you know, we have expected that there will start to be an investment cycle. You know, a little bit of the issue we have. It seems like beginning of every year, there's some black swan event that just creates uncertainty in the market. You know, it's a. Last year it was the big tariff war. This year, now it's a Middle east conflict, and it just creates uncertainty and it slows things down. But they can only delay investing for so long before it starts to really impact their competitiveness. So we're encouraged by the orders we've gotten. I would say when Mike mentioned a lot of those large capital projects, most of them were outside of Europe. They weren't in Europe. I mean, there are a few that are in Europe, and we've gotten some actually in Europe, you know, even this quarter. But a lot of the big ones are, you know, North America or, you know, I would say, you know, North Africa, places like that. Really outside of. Outside of. Certainly outside of Western Europe, because they've been, you know, they've been quite cautious for some time.

Ross Sperenblack (Equity Analyst)

Yeah. Well, I mean, just also, given all the M and A you guys have done in the last two years, can you help us maybe frame what this deferred maintenance spend should look like in the bookings? I mean, is it like, is it kind of a 100 million quarterly run rate?

Jeff Powell (President and Chief Executive Officer)

Yeah. Well, you know, Ross, if we, if you look at the midpoint of our guidance on revenue, and if we had the. Essentially the same split on parts capital, so 7129, we'd need about $340 million of capital revenue. So if you did that right out of the gate, you'd say $85 million a quarter. Capital revenue in the first quarter, of course, was softer, but we had good capital bookings. So the first quarter capital revenue was just $72 million. So that would say, okay, now that $85 million of revenue needs to be about $90 million. And when we're looking forward, you know, the divisions are saying that they foresee capital bookings that will be, you know, above the 90 million mark. So. And I would add. I would kind of stitch in here, you know, the reason for our continued Caution. And hopefully the geopolitical stuff will be settled here shortly and that won't create any further disruptions. But. Okay, we did have some of these capital projects that we were tracking, we thought would come in at 25. Now some have come in projects that we had slated for 26. A couple projects already have been moved to 27. And specifically those movements were related to the, the war. So that's why we're, we're being a little cautious here on the guidance front. So I'm hopeful that we'll continue on the track we're on and we'll get to the end of the second quarter and we'll have confidence to. Enough confidence to raise guidance.

Ross Sperenblack (Equity Analyst)

Yeah, I mean, it looks like we're treading the right direction after. Yeah. Some headaches. And just on the capital backlog on the equipment side, I have like 193. Is that ballpark? I know that, you know, subject to change with fx.

Jeff Powell (President and Chief Executive Officer)

Yeah, actually, sorry, Ross, one second. Do you have that right here? Yeah. So backlog was 321 and you're spot on. It's 193 capital. So nice work there.

Ross Sperenblack (Equity Analyst)

Good quarter, guys. I'll pass along. Thank you.

OPERATOR

Thank you. As a reminder to ask a question, you need to press Star 11 on your telephone and wait for your name to be announced. Our next question is from Addie Maiden from DA Davidson. Your line is open.

Addie Maiden (Equity Analyst)

Hey, thanks for taking my questions, guys. And just a couple of quick ones for me. So coming. Looking at your FY26 sales outlook, does it still contemplate roughly like 1 to 3% organic sales growth? And can you remind us how that splits up between capital equipment and pnc?

Michael McKenney (Executive Vice President and Chief Financial Officer)

Yep. Hang in there, Eddie. I'll flip to that. So on the sales side. Yeah, you're right in the ballpark there. At our midpoint, I have us at 2%. So, you know, right in the middle of the 1 to 3. And then what was the second part of the question, Eddie? On the split, I have that as being. Yeah, I have it being, you know, 71 parts and consumables, 29 capital.

Addie Maiden (Equity Analyst)

Awesome. Okay. And so looking at like PNC, obviously, like slightly lower year over year, was there any like one or two big factors that were like contributed to this? And would there, is there anything that would let you to be concerned around this? Maybe the lower contribution?

Michael McKenney (Executive Vice President and Chief Financial Officer)

Well, Eddie, I'm not sure. I tried to read through your. The pre call report this morning, which I thought was relatively on track except for one item. But I can tell you on the parts and consumables front either. Now, are you looking revenue or bookings there? Mainly revenue, but yeah, you can talk about bookings too, because they're up. It's up all in. And it's up organically for both revenue and bookings. So I'm not sure. There might have been just a little misstep. I think the only place you might get to organic being negative or, excuse me, either being negative, is on organic. You wouldn't of course, come anywhere near that. On the all in. There are huge upticks. But when I go to the organic, we're in good shape on that also, so.

Addie Maiden (Equity Analyst)

Got it. I think our report mainly talks about like the 74% versus 75% last year.

Michael McKenney (Executive Vice President and Chief Financial Officer)

Yeah, yeah, I have. You know, I would grant you organic on the parts and consumables front for revenue is, you know, is only up modestly, you know, on that revenue front and on the bookings front, it's up 4%.

Addie Maiden (Equity Analyst)

So. Okay, got it.

Michael McKenney (Executive Vice President and Chief Financial Officer)

Yeah. Thank you for the color. Appreciate it.

Addie Maiden (Equity Analyst)

You're welcome.

OPERATOR

Thank you. If you have any questions, please press STAR11 on your telephone and wait for your name to be announced. One moment. And I'm showing no further questions at this time. So I would now like to turn it back to Jeff Powell for closing remarks.

Jeff Powell (President and Chief Executive Officer)

Thank you, Therese. So before wrapping up the call today, I just wanted to leave you with a couple takeaways. Our record setting, newer activity and strong demand for aftermarket parts provides a solid start to 2026. While there are a lot of discussions around new capital projects, the timing of these projects is more uncertain than normal due to the issues that we've noted today. Our employees around the globe continue to focus on meeting our customers needs and finding new ways to deliver long term value to our stockholders. I want to thank you for joining the call today and we look forward to updating you at the end of next quarter. Thank you.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.