TWIN - Earnings call transcript Q3 2021

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Operator

Good day, and welcome to the Twin Disc Inc. Fiscal Third Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Stan Berger. Please go ahead.

Stan Berger

Christina. you, Thank the pleased of participate Twin we Disc, our On you management have extremely that to taken are call. behalf of the in time third discuss Thank business and Company's us for nine to you fiscal financial joining outlook. XXXX quarter results and months the

Form actual I to are to the now, which of beliefs, hopes, which important introducing Information may XX-K, It the that during predictions to that results either the from for materially be made forward-looking are obtained cause actual differ by release, this remind contained expectations those certain forward-looking Company By market Company's results morning statements is the a SEC. intentions, management, factors concerning contacting projected materially Before or conference the states call, in received management's everyone copy the opened. Company's news from on statements future before that statements. issued the statements. copies could this in in the remember especially you would like those of differ that could Report forward-looking have such or those should was Annual

copy, Secretary. she Treasurer to If are to Company's Officer, turn the President received Annette time, not and Knutson, a over XXX-XXX-XXXX Officer; Twin Financial Jeff Disc's and call Batten, this of John Batten. Chief and call the John Vice you Hosting I at the will have Mianecki John? copy the today Finance, send please you. At call will Chief Executive

John Batten

third good Welcome quarter call. fiscal and our everyone. XXXX morning, Stan, you, Thank conference to

Jeff be to a with take we'll your then usual, begin summary will short happy statement questions. I As and and

over touch in of quarterly the operational on Before highlights some I'll goes Jeff the quarter. the results,

our their cases as in significant so in business. employees road America, global office continued safe, work keeping and in continuing to restrictive. great Europe the became COVID than Asia saw challenges to do families both More operate while more and team North job Our a we and

keeping those moving customer. the in teams job, product employees a running, fantastic the facilities Our safe, two and regions did to

you ships ships As COVID-related faced container India into expect and Twin in supply with inbound and to along things else everyone continue with to until the can that from back several quarter, China. respect swing get Unfortunately, to container chain through imagine, will are ships outbound especially this linger freely. full moving we mid-summer issues more Disc

February last we of continue now in and fourth and to speak. quarter staff in As the our our future, our all conference production remote online location we'll added we November came being be by the and engineering sourcing rest in I continuing and strong our take sales are employees 'XX. quarter, report quarter moving PTOs in Lufkin we and to the third that the then hydraulically last with actuated a quarter-over-quarter summer. seeing started off back line our and the April in break vacation are followed I'm happy with fiscal in what spring clutches in late full as for and since to late the mechanical actuated the Orders March. is It country of PTOs improvements December. the planning, were seen that we've and In January mentioned in orders at PTO seem facility call, early

hybrid our products website and in plan out our of in calls, goal electric we increase in for mentioning previous the been our layout and our and and to electrification I've highway rolled markets. global continues off future R&D product As project activity that development portion

starting this to on improvement saw but North We We we're continue it before America as saw improve. North report U.S. in the American that Europe to factories activities the our frac and that rigs for in through and starting both our rebuild to trend Canada in in we're at partners new Happy also distribution distribution to see orders work first our we see well. North America, and the continues to inventory, unit

start to in fiscal remained 'XX. and unit remained this Asia should steady and Our for projects the marine increase into strong improving later we to back I'll see continued year comments outlook. new should oil fiscal And global gas and remainder of the some and and come and improving shipments to markets over With orders, our shipments on year. I turn orders that, throughout the it before Jeff

Jeff Knutson

ongoing million, the quarter the year declined good $XX propulsion I'll down and again XX.X%. third third to briefly result the prior from John, was quarter were XX% million through morning numbers. 'XX the quarter to marine or quarter, Compared prior everyone. from COVID-XX the priority transmission weak fiscal were industrial the $XX.X XX.X%, down effects run for due global pandemic. Thanks, or generally sales XX.X%, and down economy of the sales year of down of third The Sales the quarter.

were North sales sales Europe were Asia Looking sales XX% X%. down by America XX% in down region, down were while in and into Pacific

$X.X first are a note $XX.X million down million third quarters, sales quarter. or XX.X% three Foreign in prior impact And to sales net positive to exchange year. compared currency was the through the

compared prior quarters. Foreign three to translation contributing positive of currency year a the impact million $X.X first

prior XX.X% percent third to third The was margin XX.X% year compared the in quarter. quarter

the gross retention noted. payroll just Gross decrease I favorable this The well administrative million a XX.X% months. for XX.X%, nine a from for credit marketing with impact primarily third Spending quarter overall continuation marketing, at expense million sequential shipments employee oil profit retention improvement and nine revenues, compared mix volume for 'XX. a aftermarket which of amortization as profit result profitable is fiscal and decreased profit and into reflecting XX.X% have an $X.X engineering costs for as reduced gas adjusting Gross 'XX on American of benefited in benefit. the fiscal fiscal the the to activities North third first declines to or and of costs, finished credit less to 'XX compared $XXX,XXX the the from months and the XX% markets. been the quarter contributed employee the would The for quarter $X.X

cost reduction continue opportunities decline to aggressively revenues. We compensate for in the to pursue

a MD&A compared first of percent year. to XX.X% finishing quarter same party XX.X% is third for to the the period spending months XX%, or of or MD&A nine third XX.X% in XX.X% the for expenses down revenue And revenue As nearly compared for the quarter. at million last were $X.X

$XX.X related was $XXX,XXX our actions income operation to was European fiscal essentially year the excluding charges and with at quarter, this cost to ongoing and operating quarter million reduced operations. income The the restructuring Our and operating charge charge third actions nearly impacted our productivity prior primarily structure in impairment the year adjust of and cost level reduction recorded million. prior third $XX was by volume domestic

prior For months 'XX nine months months, same fiscal the 'XX of nine year. that was X.X% XX.X% resulted in exclusive the of rate last loss effective impairment prior year the just 'XX for in over charge. reported the the compared loss XX.X%. fiscal from tax period of operating X.X The first a improvement rate to fiscal nine fiscal reflects The million million $X.X impairment that decrease to

or in the EBITDA XX.X the nine share, diluted fiscal share million prior 'XX in loss $X.XX million fiscal current quarter million or first net quarter. quarter. $X.XX for share diluted compared share Company the rate. improved of diluted take net the to million negative third for net X.X newly XXX,XXX, year to year, the of per loss reported the a an The periods. Through the profit of in resulting $X.XX was prior in During diluted $X.XX was from comparable was per or prior increase exemption we've of quarter months, regulations of million compared year, enacted year advantage to the to the high per XX.X a third tax X.X XX.X the per able third or

improved X.X of year. EBITDA the is prior far million over million so year the over $XX For

Turning the Capital very challenging back quarter cash to a increased. $X million hasn't to the at on final bringing defer million tools flow million in capital the million currency John despite free driven Lufkin inventory we roughly all machine were modern for And in we was of flow focused and months. has it some non-essential spending environment that, million the down to to generate cash and and and million year. to and for and facility X.X remained focus million date cash with able to of on to and for nine the year-to-date X.X spending quarter expect testing market the turn new I'll been X.X fiscal continue comments. deposit million year equipment. during invest the first million continued flow, $X translation to X.X a operating the With X.X $X.X in X.X sheet, quarter liquidity balance It

John Batten

Thanks, Jeff.

a the Now outlook. on just spend couple moments

parts in improve spare last to some seen late American markets from order upticks our new rebounded in shares the As a our in calendar that gas of March and from little lows which be units. optimistic orders rebuilds, mentioned bit we've continues to our a so seen oil year. are activity thought the going And and improving throughout North calendar continue earlier we've that We've market April their call, low, year.

and facilities been we respect to that During initiatives. sourcing new the the cost open been last for travel implement everyone months, reduction do of continues as and some business we've analyzing how begin activities up, XX has the with we'll as to to changes planning

you has difficult can or been of this conference. As do to e-mail imagine, much video via

in things first the of Racine footage with as our the headquarters see in here about square that original mentioned the represents calls, XX% is, plants feet you'll I've in our corporate Racine about area. XXX,XXX of One our square in

XXst need calendar facilities and facility. facility facility from some space, larger machine we winding fit in office our to old town see have everyone plant this lease out, other in home, almost throughout and of modernizing across from changes our to we'll the room aftermarket us coming the to to work this the future. taking Given We expect out in may plants see tools into but some Street year

highway as you, calls, nothing into in that conference we electrification can that products, at in solutions hopefully share this to we with to bring we information but security, our we both efforts competitive heavily and ability invest can very in sys some our come further optimistic Finally, systems data have global into And detail the markets. continue we'll share point. in off and are we customer

that, happy Christina, So prepared remarks, time. this our to that with at be take we'll questions completes

Operator

from our [Operator Josh Instructions] Baird. Chan We'll with take first question

Josh Chan

uptake or activity. a quarters mentioned little do you'd kind kind are you rebuild bit several Oil of of and Is When a of of some think that pronounced type gas of still more including becoming do this point? away there clear that you more improved kind kind equipment? you see new see at

John Batten

I quarter. guess next we'll I late point. anticipate the would would can probably see continue the be think activity at fall my early units rebuild this maybe for summer,

John Batten

same And desire? they then that for end or on desire equipment. is type or electric oil of you to that particular able have if the have gas, of tracking will kind you Do a customers, products and hybrid serve sort eventually

John Batten

And or call after talking would that the about next actually I I'll the be maybe one one. Yes. hope that,

Josh Chan

have I market or recovers? improve? in year question can just improving what incremental expected market kind so these margins assuming offer I point Last next that margin is levels? end the the you see wondering, be the guess How two, do gross I'm of more gross over that

Jeff Knutson

Jeff. is this Josh,

heavily upon, happening in and we're based aftermarket. So, gas North and impacted American what's oil mixed company

as of some can XXs, than towards lower, into cost if products. heavily if driving little would it's, mid successful we oil lower We're It a for been higher at weighted over very in seeing we've of a to recover. bit North markets margin our now. think last margin the improvement, months be our look start I the gas, products. and that, P&L key the reductions the XX be But it's some American incremental little bit in that

So, on incremental as mid through think fiscal I we into XXs, the 'XX. work

Operator

question go Instructions] to [Operator next We'll Noah Kaye from our with Oppenheimer.

Noah Kaye

the bit issues industrial that some and this going the supply I about think chain of any prepared companies remarks a talked quarter. you in through

What issues? surprise huge the materials the quarter? dimension of us, sort actually you and Do future headwinds you I more of they inflation? will first said continue those of don't as quarters. impact some like Can So cost manifest in freight premium you can it in a there's chain margin drag think in supply things was imagine if for

John Batten

that I'm trying quickly my No, quantify head. it to question. a good is in

good be the very on quarter. great a know, I think I parts coming team had our wasn't India. we did airfreight job from honest, the would I in impact say, mitigating. Noah, probably some that to

and month are be paying that that things it's the think we'll month. next this I bills

So, I but will try you'd say the hasn't don't is be wouldn't I P&L X wrong, we've -- and it yet. X% increased surcharges, been in July what see seen in to and want it going out an It's answer. to I get that to to mitigating range something steel pricing effective throw something in that based price announced we're we've freight. on increases, X% there steel

we've it's range to forward and So, to the going of kind that anticipated going X is X% in X. that be that that's so impact

on the plus percent depending hope we're that that products, so in helps. that X pricing And range,

Noah Kaye

Yes.

So, it there to then this and expect increases you'll price do that be we like or quarter have sounds think able about you compare that do in that this you quarter [indiscernible] [indiscernible]. to beyond we and

John Batten

going quarter, in but bit, quarters we're today was digital think I in just this [indiscernible] impacted going Sorry, hearing, forward. mitigating you it's be to but little

Noah Kaye

Right.

positive September next that in may Is a but be fair? price the quarter, have to for quarter. drag you you'll So, cost this

John Batten

exactly. Yes, Yes.

Noah Kaye

All right.

the any you of in make that or [indiscernible]? you to to chains entertainment. any then were on of issues digital end anticipate that quarter? sure of for produce with kind this able terms Sorry to feel we just And And SKUs market do any supply demand we're

John Batten

they very stuffs ship, the some caught that the we their that in companies the industrial in [indiscernible] scrambled affected hard the of worked and in. from that and parts products of to or the So, evergreen because lot produce they've Texas products a with got team behind come we The we India. most were -- in, seen were here but parts that get shipping Lufkin airfreight

quarter, but May. up in of So, most won't missed we are fourth anything, we may that quarter, so late the look we dollars If are container ships in, made that a right now we to scheduled big, through certainly good due the the the quarter. bit we revenue have lose of in due be be fourth little industrial, whatever in first

have Jeff to initiatives. we reduction that parts in our coming some as from India, other cost The of was alluding

have, So, they parts those parts America. we already were in actually of just we trials lot bringing a have in North and here

So, I think be I this fourth at significant think may there an in be it impact may point, the it'll quarter, the don't impact results. --

Noah Kaye

that's Yes, helpful.

be free pretty So well you the done positive cash be the comfortable that working any on positive quarter flow for headwinds for capital generating of the year to feel fourth do aware here or you'll additionally?

John Batten

headwinds. of hope had free the through continue of sort we've then the fourth Hope quarter aware out. year. discipline I'm continue any and we'll not again yes that And Noah, I marginally that the think, that that the be to trend in positive cash operationally. come flow

comes continue focus that capital discipline that the as grow. in area we working volumes to to back maintain on and As

Noah Kaye

with something being but industry point if California XXXX, Great. of and you, last one And in gas down your if your concerns whether about better regional ban, that and exposure that some I I in, we announcement that have just helpful investors an taking why? could talk kind American that when North business noticed. for it's just and make the to to something that's investors start was fracking guess not maybe proposed understand oil

John Batten

john. wasn't Not a whole of it's on there lot activity Noah, going there. really,

our exposure and Texas, So, Marcellus, Dakotas. and the all we're exposure, the as really, in we're and industry the Canada is, and in southern the around

units of play New number at really the of into and dollars don't So, York the California all.

us. So, short answer no, really it I is doesn't guess the concern

Noah Kaye

you having essential. you're been sorry I'm to you off, cut

John Batten

a No, believer I we that, in the amazed, natural I gas for future. say just as are strong

of percentage, that as country electrification natural As that wind needs great need And generate the we a upgrade and definitely we grid, to we sources more and see it's hybridization need. energy electricity, electricity. feel and but solar gas our replacement markets and coal. to is continue, generate This compared to the to

future. plays our X,XXX that foreseeable X,XXX right again, into and So, the for

Operator

[Operator Instructions] remarks. questions at any back the this time, to Berger, turn As it Mr. are closing appears for I'll call or additional no

Stan Berger

at our look forward If the you hope you back Disc close August. turn to conference And with contact interest questions. all of you. thank your and quarter Jeff feel today. Christina. not, in answered Christina, appreciate please again call joining we speaking of to fiscal our that we've I'll XXXX Twin And myself. or We in free Thank the to you, for continuing call your

Operator

concludes your you This today's for Thank participation. call.

may You now disconnect.

Twin Disc (TWIN) 1 May 212021 Q3 Earnings call transcript