Kewaunee Scientific Reports Results for First Quarter of Fiscal Year 2025

Rhea-AI Summary

Kewaunee Scientific (NASDAQ: KEQU) reported its Q1 FY2025 results. Key highlights include:

- Sales decreased 2.9% to $48,393,000
- Pre-tax earnings fell 28.8% to $2,430,000
- Net earnings decreased to $2,193,000
- Diluted EPS dropped to $0.74 from $0.86
- Order backlog increased to $159.4 million
- Domestic sales rose 0.3% to $35,523,000
- International sales declined 10.7% to $12,870,000

The company maintained a strong financial position with $25,186,000 in cash and a debt-to-equity ratio of 0.68-to-1. Despite challenges in the international segment due to project delays in India, the domestic segment showed improved performance. The company's CEO expressed confidence in another strong year based on the robust backlog and high quoting activity.

Positive

• Order backlog increased to $159.4 million from $140.8 million year-over-year
• Domestic segment net earnings improved to $2,871,000 from $2,711,000
• Domestic segment EBITDA increased to $4,738,000 from $4,578,000
• Strong cash position of $25,186,000
• Improved debt-to-equity ratio of 0.68-to-1 compared to 0.70-to-1 in April 2024

Negative

• Overall sales decreased 2.9% to $48,393,000
• Pre-tax earnings fell 28.8% to $2,430,000
• Net earnings decreased to $2,193,000 from $2,474,000
• Diluted EPS dropped to $0.74 from $0.86
• International sales declined 10.7% to $12,870,000 due to project delays in India
• Corporate segment pre-tax net loss increased to $1,992,000 from $1,004,000

Insights

Financial Analyst

Kewaunee Scientific's Q1 FY2025 results show a mixed performance. While sales decreased by 2.9% to $48.39 million, the company's order backlog grew to $159.4 million, up from $140.8 million year-over-year. This suggests potential future revenue growth.

The decline in pre-tax earnings (28.8% decrease) and net earnings (11.4% decrease) is concerning. However, the domestic segment showed slight improvement, with a 0.3% increase in sales and higher net earnings. The international segment's 10.7% sales decrease due to construction delays in India appears to be a temporary setback.

The company's financial position remains stable with a healthy cash balance of $25.19 million and improved working capital. The debt-to-equity ratio of 0.68-to-1 is manageable, especially considering the sale-leaseback transaction's impact.

Market Research Analyst

Kewaunee's Q1 results reflect broader industry trends in the laboratory furniture and equipment sector. The stable domestic demand across all end-markets indicates a resilient scientific research and healthcare infrastructure in the U.S. However, the international segment's challenges, particularly in India, highlight the volatility in emerging markets and the impact of local economic conditions on global companies.

The strong order backlog ($159.4 million) and high quoting activity for new projects suggest continued demand for laboratory and technical furniture. This aligns with global trends of increased investment in scientific research and healthcare facilities. The company's focus on both domestic and international markets positions it well to capitalize on these opportunities, despite short-term challenges.

Corporate Finance Expert

Kewaunee's financial strategy shows a balanced approach to growth and stability. The company maintains a strong cash position ($25.19 million) while managing its debt effectively. The sale-leaseback transaction has significantly reduced the company's net debt exposure, with the debt-to-equity ratio (excluding the transaction) at a low 0.19-to-1.

The increase in professional service fees, while impacting short-term profitability, may indicate investments in future growth or operational improvements. The company's use of adjusted EBITDA and other non-GAAP measures provides a clearer picture of its core operational performance, which appears stable despite headwinds.

Investors should monitor the company's ability to convert its growing backlog into revenue and manage international market challenges to drive long-term value creation.

STATESVILLE, N.C., Sept. 11, 2024 /PRNewswire/ -- Kewaunee Scientific Corporation (NASDAQ: KEQU) today announced results for its first quarter ended July 31, 2024.

Fiscal Year 2025 First Quarter Results:

Sales during the first quarter of fiscal year 2025 were $48,393,000, a decrease of 2.9% compared to sales of $49,839,000 from the prior year's first quarter. Pre-tax earnings for the quarter were $2,430,000 compared to $3,412,000 for the prior year quarter, a decrease of 28.8%. Net earnings were $2,193,000 compared to net earnings of $2,474,000 for the prior year quarter. EBITDA¹ for the quarter was $3,325,000 compared to $4,305,000 for the prior year quarter. Diluted earnings per share was $0.74 compared to diluted earnings per share of $0.86 in the prior year quarter.

The Company's order backlog was $159.4 million on July 31, 2024, as compared to $140.8 million on July 31, 2023, and $155.6 million on April 30, 2024.

Domestic Segment - Domestic sales for the quarter were $35,523,000, an increase of 0.3% from sales of $35,420,000 in the prior year quarter. Domestic segment net earnings was $2,871,000 compared to $2,711,000 in the prior year quarter. Domestic segment EBITDA was $4,738,000 compared to $4,578,000 for the prior year quarter. Domestic segment volumes were similar to the prior year quarter with demand remaining stable across all end-markets.

International Segment - International sales for the quarter were $12,870,000, a decrease of 10.7% from sales of $14,419,000 in the prior year quarter. International segment net earnings was $463,000 compared to $469,000 in the prior year quarter. International segment EBITDA was $696,000 compared to $670,000 for the prior year quarter. The decline in sales is attributable to customer construction site delays in India which pushed out the timing of deliveries.

Corporate Segment – Corporate segment pre-tax net loss was $1,992,000 for the quarter, as compared to a pre-tax net loss of $1,004,000 in the prior year quarter. Corporate segment EBITDA for the quarter was ($2,109,000) compared to corporate segment EBITDA of ($943,000) for the prior year quarter. The change in EBITDA was driven by an increase in professional service fees during the quarter that are unrelated to the core business and the net change in Corporate cost allocation methodology across our business segments.

Total cash on hand on July 31, 2024 was $25,186,000, as compared to $25,938,000 on April 30, 2024. Working capital was $56,012,000, as compared to $49,291,000 at the end of the first quarter last year and $56,037,000 on April 30, 2024.

The Company had short-term debt of $3,627,000 as of July 31, 2024, as compared to $3,099,000 on April 30, 2024. Long-term debt was $28,293,000 on July 31, 2024, as compared to $28,479,000 on April 30, 2024. The building lease from the Company's December 2021 sale-leaseback transaction accounts for $27,958,000 of the long-term debt on July 31, 2024 and $28,133,000 of the long-term debt on April 30, 2024. Long-term debt, net of the sale-leaseback transaction, was $335,000 on July 31, 2024 as compared to $346,000 on April 30, 2024. The Company's debt-to-equity ratio on July 31, 2024 was 0.68-to-1, as compared to 0.70-to-1 on April 30, 2024. The Company's debt-to-equity ratio, net of the sale-leaseback transaction, on July 31, 2024 was 0.19-to-1, as compared to 0.20-to-1 on April 30, 2024.

"Our financial performance for the first quarter of fiscal year 2025 was solid," said Thomas D. Hull III, Kewaunee's President and Chief Executive Officer. "Domestic segment operating performance was improved when compared to last year's first quarter as our manufacturing loadings remain at a consistent level. Site delays in India on multiple projects impacted our ability to ship products and deliver services leading to a slightly down quarter when compared to the prior year first quarter."

"Looking ahead, our backlog remains strong and quoting for new projects remains high, providing a line of sight to another strong year for the Company."

______________________________

1 EBITDA is a non-GAAP financial measure. See the table below for a reconciliation of EBITDA and segment EBITDA to net earnings (loss), the most directly comparable GAAP measure.

EBITDA, Segment EBITDA, Adjusted EBITDA, and Adjusted Segment EBITDA Reconciliation

Quarter Ended July 31, 2023		Domestic		International		Corporate		Consolidated
Net Earnings (Loss)		$                 2,711		$                    469		$                  (706)		$                 2,474
Add/(Less):
Interest Expense		380		36		14		430
Interest Income		—		(213)		(1)		(214)
Income Taxes		913		282		(298)		897
Depreciation and Amortization		574		96		48		718
EBITDA		$                 4,578		$                    670		$                  (943)		$                 4,305
Quarter Ended July 31, 2024		Domestic		International		Corporate		Consolidated
Net Earnings (Loss)		$                 2,871		$                    463		$               (1,141)		$                 2,193
Add/(Less):
Interest Expense		441		21		10		472
Interest Income		—		(174)		(173)		(347)
Income Taxes		764		279		(851)		192
Depreciation and Amortization		662		107		46		815
EBITDA		$                 4,738		$                    696		$               (2,109)		$                 3,325
Professional Fees		—		—		7302		730
Adjusted EBITDA		$                 4,738		$                    696		$               (1,379)		$                 4,055

____________________

2 Professional fees not related to our core business

Adjusted Consolidated Statement of Operations Reconciliation

	Three Months Ended July 31,
	As Reported 2024	Professional Fees	Adjusted 2024	2023
Net sales	$      48,393	$              —	$       48,393	$      49,839
Cost of products sold	35,905	—	35,905	37,925
Gross profit	12,488	—	12,488	11,914
Operating expenses	9,913	7303	9,183	8,106
Operating profit	2,575	730	3,305	3,808
Pension expense	—	—	—	(41)
Other income, net	327	—	327	75
Interest expense	(472)	—	(472)	(430)
Profit before income taxes	2,430	730	3,160	3,412
Income tax expense	192	1534	345	897
Net earnings	2,238	577	2,815	2,515
Less: Net earnings attributable to the non-controlling interest	45	—	45	41
Net earnings attributable to Kewaunee Scientific Corporation	$         2,193	$            577	$         2,770	$         2,474
Net earnings per share attributable to Kewaunee Scientific Corporation stockholders
Basic	$           0.77	$            0.20	$            0.97	$           0.87
Diluted	$           0.74	$            0.19	$            0.93	$           0.86

___________________

3 Professional fees not related to our core business

4 Estimated tax impact of professional fees not related to our core business

About Non-GAAP Measures

The Company includes non-GAAP financial measures such as adjusted net earnings and adjusted net earnings per share, in the information provided with this press release as supplemental information relating to its operating results. Adjusted net earnings represents GAAP net earnings adjusted for professional fees not related to its core business and the corresponding tax impact. This financial information is not in accordance with, or an alternative for, GAAP-compliant financial information and may be different from the operating or non-GAAP financial information used by other companies. The Company believes that this presentation of adjusted net earnings and adjusted net earnings per share provides useful information to investors regarding certain additional financial and business trends relating to its financial condition and results of operations.

EBITDA and Segment EBITDA are calculated as net earnings (loss), less interest expense and interest income, income taxes, depreciation, and amortization. Adjusted EBITDA and Adjusted Segment EBITDA are calculated as EBITDA or Segment EBITDA less the impact of the professional fees not related to the Company's core business that were incurred during FY25, as discussed in more detail above. We believe EBITDA, Segment EBITDA, Adjusted EBITDA, and Adjusted Segment EBITDA allow management and investors to compare our performance to other companies on a consistent basis without regard to depreciation and amortization or the costs incurred related to our one-time pension termination transaction executed during fiscal year 2024, which can vary significantly between companies depending upon many factors. EBITDA, Segment EBITDA, Adjusted EBITDA, and Adjusted Segment EBITDA are not calculations based upon generally accepted accounting principles, and the method for calculating EBITDA, Segment EBITDA, Adjusted EBITDA, and Adjusted Segment EBITDA can vary among companies. The amounts included in the EBITDA, Segment EBITDA, Adjusted EBITDA, and Adjusted Segment EBITDA calculations, however, are derived from amounts included in the historical consolidated statements of operations. EBITDA, Segment EBITDA, Adjusted EBITDA, and Adjusted Segment EBITDA should not be considered as alternatives to net earnings (loss) or operating earnings (loss) as an indicator of the Company's operating performance, or as an alternative to operating cash flows as a measure of liquidity.

About Kewaunee Scientific

Founded in 1906, Kewaunee Scientific Corporation is a recognized global leader in the design, manufacture, and installation of laboratory, healthcare, and technical furniture products. The Company's products include steel and wood casework, fume hoods, adaptable modular systems, moveable workstations, stand-alone benches, biological safety cabinets, and epoxy resin work surfaces and sinks.

The Company's corporate headquarters are located in Statesville, North Carolina. Sales offices are located in the United States, India, Saudi Arabia, and Singapore. Three manufacturing facilities are located in Statesville serving the domestic and international markets, and one manufacturing facility is located in Bangalore, India serving the local, Asian, and African markets. Kewaunee Scientific's website is located at http://www.kewaunee.com.

This press release contains statements that the Company believes to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this press release, including statements regarding the Company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements. Words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to known and unknown risks, uncertainties, assumptions, and other important factors that could significantly impact results or achievements expressed or implied by such forward-looking statements. Such factors, risks, uncertainties and assumptions include, but are not limited to: competitive and general economic conditions, including disruptions from government mandates, both domestically and internationally, as well as supplier constraints and other supply disruptions; changes in customer demands; technological changes in our operations or in our industry; dependence on customers' required delivery schedules; risks related to fluctuations in the Company's operating results from quarter to quarter; risks related to international operations, including foreign currency fluctuations; changes in the legal and regulatory environment; changes in raw materials and commodity costs; acts of terrorism, war, governmental action, and natural disasters and other Force Majeure events. The cautionary statements made pursuant to the Reform Act herein and elsewhere by us should not be construed as exhaustive. We cannot always predict what factors would cause actual results to differ materially from those indicated by the forward-looking statements. Over time, our actual results, performance, or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and harmful to our stockholders' interest. Many important factors that could cause such a difference are described under the caption "Risk Factors," in Item 1A of our Annual Report on Form 10-K for the fiscal year ended April 30, 2024, which you should review carefully, and in our subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. These reports are available on our investor relations website at www.kewaunee.com and on the SEC website at www.sec.gov. These forward-looking statements speak only as of the date of this document. The Company assumes no obligation, and expressly disclaims any obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Kewaunee Scientific Corporation Condensed Consolidated Statements of Operations (Unaudited) ($ and shares in thousands, except per share amounts)
	Three Months Ended July 31,
	2024		2023
Net sales	$       48,393		$       49,839
Cost of products sold	35,905		37,925
Gross profit	12,488		11,914
Operating expenses	9,913		8,106
Operating profit	2,575		3,808
Pension expense	—		(41)
Other income, net	327		75
Interest expense	(472)		(430)
Profit before income taxes	2,430		3,412
Income tax expense	192		897
Net earnings	2,238		2,515
Less: Net earnings attributable to the non-controlling interest	45		41
Net earnings attributable to Kewaunee Scientific Corporation	$          2,193		$          2,474
Net earnings per share attributable to Kewaunee Scientific Corporation stockholders
Basic	$            0.77		$            0.87
Diluted	$            0.74		$            0.86
Weighted average number of common shares outstanding
Basic	2,849		2,860
Diluted	2,967		2,885

 

Kewaunee Scientific Corporation Condensed Consolidated Balance Sheets ($ in thousands)
	July 31, 2024		April 30, 2024
	(Unaudited)
Assets
Cash and cash equivalents	$           24,211		$           23,267
Restricted cash	975		2,671
Receivables, less allowances	43,545		45,064
Inventories	19,285		20,679
Prepaid expenses and other current assets	4,683		5,136
Total Current Assets	92,699		96,817
Net Property, Plant and Equipment	17,112		17,649
Right of use assets	6,944		7,454
Deferred income taxes	8,091		7,401
Other assets	7,172		5,445
Total Assets	$         132,018		$         134,766
Liabilities and Stockholders' Equity
Short-term borrowings	$             3,627		$             3,099
Current portion of lease obligations	2,144		2,234
Current portion of financing liability	731		713
Accounts payable	20,619		23,262
Other Current Liabilities	9,566		11,472
Total Current Liabilities	36,687		40,780
Long-term portion of lease obligations	5,333		5,669
Long-term portion of financing liability	27,227		27,420
Other non-current liabilities	5,258		4,688
Total Liabilities	74,505		78,557
Kewaunee Scientific Corporation Equity	56,023		54,760
Non-controlling interest	1,490		1,449
Total Stockholders' Equity	57,513		56,209
Total Liabilities and Stockholders' Equity	$         132,018		$         134,766

 

Contact:	Donald T. Gardner III
	704/871-3274

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SOURCE Kewaunee Scientific Corporation

FAQ

What were Kewaunee Scientific's (KEQU) Q1 FY2025 sales?

Kewaunee Scientific's sales for Q1 FY2025 were $48,393,000, a decrease of 2.9% compared to $49,839,000 in the same quarter of the previous year.

How did Kewaunee Scientific's (KEQU) earnings per share change in Q1 FY2025?

Kewaunee Scientific's diluted earnings per share decreased to $0.74 in Q1 FY2025, compared to $0.86 in the same quarter of the previous year.

What was Kewaunee Scientific's (KEQU) order backlog as of July 31, 2024?

Kewaunee Scientific's order backlog was $159.4 million as of July 31, 2024, compared to $140.8 million on July 31, 2023, and $155.6 million on April 30, 2024.

How did Kewaunee Scientific's (KEQU) international segment perform in Q1 FY2025?

Kewaunee Scientific's international sales for Q1 FY2025 were $12,870,000, a decrease of 10.7% from $14,419,000 in the prior year quarter, due to customer construction site delays in India.