TWIN - Earnings call transcript Q3 2022

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Operator

Greetings. Welcome to the Twin Disc, Inc. Fiscal Third Quarter 2022 Earnings Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. this being note, Please Instructions] conference recorded. is [Operator over host, Stan now turn your conference the I'll Berger. to

may You begin.

Stanley Berger

Thank you, you results nine-month Disc, and the we time Shamali company's of participate and thank are management [ph]. to third us extremely business On you behalf fiscal for outlook. pleased to our XXXX financial that in have joining the of taken call the discuss Twin and quarter

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

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

John Batten

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

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

over the highlights Before some the the touch on quarter. I'll quarter from of go results, we operational

hampered to Racine, a orders backlog we last the and third transmission mentioned our with into continue our call, Wisconsin a improve for quarter. product few transmission facilities. issues shipments, Supply marine Nivelles, the Belgium and headed chain in vendors quarter especially nice from As our really in at and lines the our we key

and all deliveries have year, shot and electronic particular wiring components, problems past large have we over material some out the components with While supply. and an short also harnesses lead-times raw casting connectors, incredible were

to Our reschedule that meet hard incoming cadence to team the been has of in inventory working short supply. are components

is chain coming be as improve improving While that $XXX $XXX,XXX shipment. lead-times issues gives waiting supply we'll for several to and us $XX,XXX predictability some quarters. able Obviously, inventory caused are transmissions in and harnesses shipments before our not confidence had issues, improving, that on we

for to headed millions the water did We in our pumping shipped time of transmissions pressure also continued Australia Oil dollars quarter. had of be to leave inventory several customers in strong transmission, spreads. past quotes in the orders fleet for parts almost and also transmissions for activity XXXX rebuild for we requests for our receiving Besides six new aftermarket China. XXXX fleet. North we the China both for China and that XXXX doubled for the not pace gas our American for to for months on have and and on are the and orders for to demand North American has

American where clutches. production produce we of Lufkin, industrial One our in and spots of the in PTOs bright facility North all was our

year production over resilient base, reliance very a rate of least and amount on XX% since their they components went increased over electrical Indian into the run ago. a has With supply

marine there This and comments margins. were by but in numbers quarter's gross mix handles, in my his be strong aftermarket Australia handle modest the were this and North improved summer. strong Pack marine Australian industrial have We past but America also hydraulic particularly the a Seakeeper results the outlier, general, moving driven entire really demand sales other the and -- this and in will line, significantly years. quarters in shipments Australian The both PTO product market into parts Jeff of also has has our the the gyro shipments market improved for they strong the right drove than line market. but into Twin and past gas. and product our sales, shipments, there the spring in grown sales and comments, for our transmission those for growth specific in oil

hybrid and Disc I'll have same the area with hard and this for January our were Many internally on we or are several of not the of cost and will our will day-out. this the into Staffing we Jeff back working goods summer. a December last can the continue we global prototype back improve and a is and prove and the specifically, far, of is turn financial. extensively have spring day-in and shortages days problem. be our now, and results for quarter, due share shortages quarantine, During some traced it call can And phase. to months chain. electronics that work equipment, to COVID to connector to designing of pleased so their China very be out and our we're we we lost lockdown details, will moved will, who this their few suppliers. the electric area we goods sold are and supply said team customers but bottlenecks discussed hopeful but Twin for either our cost Internally, be with Hopefully, can Once -- late good ports

Jeff Knutson

quarter XX prior Sales from up of quarter good everyone. fiscal million were $XX.X for run million through I'll briefly and the Thanks by locations. been prior or the third chain or $XXX,XXX continuing reflects performance from year-to-date year John limited but supply growth the X.X% X% across previous $X.X demand markets, to severely quarter, increase sales our morning The numbers. third our and compared shipment the across down although in challenges quarter. year has the

This electronic difficulty in specifically noted quarters the in as mentioned, from increase we've and performance unpredictable experienced has John shipments receiving significant inventory just to a -- to components resulted previous in as are components and await complete able delivery in levels in of and pass before challenging. we primarily being lead-times units. increase delayed final ship and increase an suppliers' As delivery in backlog

America year As by the XX%, weakness the Asia-Pacific products and while XX%, the With that the industrial XX%. to the By quarter. off-highway into and compared up exposure of Europe to sales in third to product nearly were X.X%. by sales declined were propulsion actually supply least exposure grew region, sales sales component X.X% by industrial line down has chain electrical and prior just improved sales marine greater in transmission shortage, just North sales down were XX%

or exchange we net first a X.X% are the currency now of through year. nine million million Foreign the $X impact negative to was and prior months, quarter ahead in sales third $XX.X the

The our to impact third of impact margin third the impact the in positive result The prior offset across -- is in current supply base. compared product, early improved in year of actions more the quarter margin percent to was and of costs quarter year the quarter. XX.X% increases mix profitable the taken of inflationary the pricing to revenue, XX.X% increased

Relief increases, and increased and or return Spending the is administrative on fiscal the primarily compared inflationary to that million quarter in costs The continue react subsidy of return marketing inflationary XXXX. actions. to program and of to are any for environment bonus travel, in pricing the COVID professional the quarter due marketing global recorded prepared engineering on third XX the $X.X to spending impact fiscal increase monitor by the of partially spending required a favorable and a We in Dutch was fees, a X% quarter. with offset additional

months, As of percent revenue were expenses ME&A in fiscal XXXX And to the the XXXX. ME&A for held of asset We prior quarter. the for compared restructuring the of and carrying recorded revenue a expenses for $XXX,XXX the XX.X% were charges sale. quarter, value to adjustment an million of during third for related fiscal $XX.X $XX.X to an primarily both quarter million third nine

tax $X.X improved the the loss of of compared restructuring income nine million facility third with a EBITDA the for was rate positive profit year price operating is EBITDA the benefits prior the an profit prior $XX XXXX year slightly three The by nine full year the operating $X. to to to for current in from in million first XXXX to comparable the building the the was [ph] million of what the $X.X or $X.X of share nine on for the prior allowance, year $X.X per was tax recognized $X.XX the being quarter. from the accounted third million an quarter current first million was from year XX.X% prior which months for year quarters. quarters is through we includes first net XXXX $X.X or million compared the of and gain and -- by was had valuation fiscal million EBITDA diluted in domestic an resulting a first effective our -- profit $X.XX significantly quarter share months charge, of quarter of $X.X million, improved EBITDA months. the was fiscal The losses. three period. fiscal in loss XX.X% $XXX,XXX a $XX.X Swiss period. impacted sale $X.X Specifically, lower than compared improved the million operating million from of $XX.X for the domestic Including rate on And diluted quarter no per in headquarters The prior corporate of million. agreed price earlier. net third the

the balance first Turning driven three $XX.X the was sheet, supply quarters, noted. through inventory chain the briefly primarily imbalances, million up by to John

and units. machine cash incoming a quarters, in lead-times first planning increase schedule, entirely that the by currently preventing the million $X.X $X.X of well negative focused impacted Capital in are just will at behind quarter. significant balance and on shortage final million was three remains inventory, with operating inventory shipment components the strategies on for spending assembly sourcing items tools. We With

spending, that start million we for anticipate now that, to XXXX. with $X it the back slower the final we'll And range in million I'll comments. Given some $X invest fiscal in to in capital John turn

John Batten

Thanks Jeff.

us outlook. continue European our raw a in the is on our concern Russian improving and particularly supply heavily more quick chain -- continue Supply our their trend. rely issues area, to and material. Clearly, spend backlog orders on moment Just who Ukrainian improving

delayed the have questions. North tempered seen rules and impacts by shutdown. day and to So any shortages. feel we labor production. All-in-all, other respect we for that Shamali be lot happy a temporary and and of not please balance remarks. elevated through than natural going demand see American This huge now far, and gas prepared is to to quarter-over-quarter prices U.S. take supply Canadian deliveries due improvements year Ukraine with drive our the out to the more will we sanity term, however, concludes your And line the be some for headed That open question. provided will the Russia. Jeff [ph], I solid Longer

Operator

will question session. conducting time, of be Josh with a the from your this we At Please question-and-answer line with Our comes Instructions] proceed Sure. Baird. first [Operator question. Chan

Josh Chan

morning, Good John and Jeff.

John Batten

Hi Josh.

Jeff Knutson

Hi Josh.

Josh Chan

my question kind I some your is of guess for calendar I kind behind guess to is next it talk there comments forward a gas -- the requests, spend good first that those quotes Or Hi and even? or timing or on the pull oil getting could urgency the John ability you willingness of spreads. year? on about new morning.

John Batten

I spend deliveries you'd half QX affect I XXXX. sometime obviously. see this Probably think -- -- fall don't don't fiscal -- would wouldn't of think our the It think would late end can't sales year, QX, first but the I of -- area. be fiscal the be -- in say that know or I I

Josh Chan

encouraging. do service trajectory And prior that's to so, in that rush guess you expect a cycles? of kind recovery, some of I that kind in Okay, are of potentially? of, the if And -- this like terms prepared of you

John Batten

I -- going I different time and constricted. just whether this to to availability the think build of -- this new think be different it's wave is think just going it's what's rigs it's people I because Josh, to just be material,

recovery. So, just longer -- a I -- I which means see, hopefully it'll be

Josh Chan

right. Right,

John Batten

Yes.

but engine, activity I rebuild you that's everything, the -- think you just people of to hard lot the why rebuild got transmission. get rebuild a build it's to because you've hard pump, the now -- So, find to the find think rebuild rig, right so I see you rigs, you

do So, going But equipment. a of there's operators lot need certain that on. think I new that

six to everything for that are the at -- lead-times So, out. months -- but nine see I we for think -- least that

So, November that's timeframe, going why I'm to be thinking quarter. October-ish it's second

Josh Chan

the think the with quarter, compared progression at comments into sense. possible might next on end, but see I usually the is like third, made makes your but revenue that some fourth it constraints now? you you John, have an quarter in That the you're Understood. supply then uptick And seeing to

John Batten

critical the up that that yet us -- that far strongest quarter of on but for us a orders, is lining sure. execution we're quarter most hasn't as hit as crunch, fourth have of the be It's Everything if components. even on supply the have will the the here. topline hits -- unless something we not It's some last year the inventory we just

Josh Chan

do is through, this Or this quarter? level guess, any unusual of, margins I for -- -- And quarter, your anything there I going great. That's Okay. sustainable that, question kind actions gross strong forward? you Very helped coming margin guess pricing was last this are the me.

John Batten

Well, the -- absolutely I mean product. it's the mix saw the think margin of you was I

heavier -- China. and transmissions So, heavy on much oil on gas -- to

and kind and North -- lot of American You for of because parts of oil for the North gas activity bigger a had go mix industrial. that spare chain, was supply American didn't we backwards

part as pricing a it, was was mix big it of So, but of certainly part well.

Josh Chan

that’s Thanks-- Okay, good color.

Jeff Knutson

terms In a QX similar in I question that's is mix what guess, is sustainability, Yes. was mix? the the of

John Batten

shaping the is And up what's that's similar for mix. quarter,

Josh Chan

for on of good year. the rest Thanks the great. and Okay, color luck the

John Batten

Thanks Josh.

Operator

proceed comes question with the Please next question. line Kaye your Our of from Noah Oppenheimer. with

Noah Kaye

to the a into quarter actually taking for here. more morning. dig love Thanks little bit questions. Would the Good

you've know price -- First, it, I it, how growth? got total if don't if you've much but got did benefit price

John Batten

inflationary I couple that around a of we I to basis significant Mix XXX sort that somewhere we you different the way XXX maybe The improvement something kind net a point a another interesting in the margin so I impact, quarter-to-quarter. had is the and at would Noah. just rest over a Yes, I points. XXX-ish mix. -- and basis that of of because probably price look was more If say QX, is can give a is of QX things, half thing of so XXX is sort guess, look increase. about to

a So, lines and reductions. product mix customer cost within

get So I we last at and into of did -- gas talked should margin what in would think us think be we -- it, non-heavy yes, we what the XX, XX% to did range look what we that's I what XX about actually the the really when that end back a price year to at by consider call mid quarter upper was -- that we given of think in us, And QX, I normal the get won't oil for was next range. kind XX to had the pricing, see. with the we

Noah Kaye

is alone first that positive I this environment accomplishment. Well, comment would just in a to price/cost get significant

repeat the can think sales year-over-year. it? catch you well was and Can think slightly you happened transmissions land-based I that? just off-highway being So, in with around was down. uplift, quarter? because you mix industrial marine point said I just XX% What you But done. were your up the an to said down repeat But quite I didn't

John Batten

Sure.

than X.X% up So, oil yes, the was was offset number, and up the I gas there land-based X.X%, but have other of story land-based don't part that areas. I but more the -- is bigger by think

offsetting the of the land-based was up that the gas and aftermarket get and -- to land-based net of X.X%. we're a So, and component oil military But up. was to component

the when -- are the aspect. margin, talk higher driving are mix about those we key So, those

Noah Kaye

just some I'm what break in [indiscernible], seems into than quarter, quarter, inventory others. know the had think? this better let start but margins if bit trying that if freight, into figure little to Yes. corporate What able to XX% If the that, of bit, that some issues actually come is it to up comes a me chain ease out various supply here a kind contribution if of actually might and like average the is bottlenecks tied of margin you little be

John Batten

out I I we of Yes, think for quarter. that the finished XX.X question. mean [ph] I not the that's mean,

similar So, everything of with volume a yes, more us -- just there. mix, things alone get volume would

the of is pretty healthy mix. as it's a think we things question yes, we QX, of we're work of So, kind with which did I into with way, some what QX. guess. continuation in seeing our what That's not out Yes, I going the

Noah Kaye

Yes.

it levels down capital around that working sort feasible capital? your is bring in just to inventories And the last inventory XQ, year Okay. a bring levels how question to be thinking inventory on we management, is basis of a sequentially plan? in the working then And down a XQ, in full sequentially should goal and about

Jeff Knutson

yes, I want it, ourselves smart XXXX. foot those inventory about should think inventory I what focused Yes, we is want smarter shoot we I things to But to that inventory. as see coming We year. driving fiscal in mean, the together, we're we and think, some don't the being bringing obviously, reduction about be really out on into close in drive of going that us some

negative planning So, of positive QX, of drive extent where that in get but to sort in. we're bringing we're what reverse them about QX getting flow cash getting be in, QX, bring our we we reverse That's trend smart out, the think in and and done components where in the should get focused QX. I to a that -- in reversal a and free not bit product

Noah Kaye

of activity how here. programs some do couple a changing, in of look a into revenue. electric dimension, just quarters, Okay. material the ton last nothing little point, bit we as hugely you XXXX? And just At terms the in that think this maybe maybe of I of question term going? are longer been But there's

John Batten

far do -- them project want of still -- the so to release I I can't I'm We at people for in-person. So, I the and one have revenue think -- customers. have shows are it. -- prototypes the of first as tons for our -- do I we release think land-based shows side, where -- trade no, -- in really the the for system what so side, as for early far it's to work these on just customers. our waiting they It's order on unfortunately,

over So, you'll I see that summer. -- think the that

share the dollar again, can see call, XXX,XXX. next amount start one, system, the the -- it's -- that's I we'll quarter, component we the hopefully, to a So, $XXX,XXX fourth think and but versus hybrid

for So huge the -- it's of same potential. so it's piece equipment,

construction we're of excited half I the news about or on either projects So, see starting market customers how to the But some this we'll the vessel this start -- think embraces growth we're piece working calendar year, and their of all is there released equipment. as have second to that the their their more opportunity. --

Noah Kaye

color. Okay, much perfect. Thanks so for the

John Batten

Thanks Noah.

Operator

Instructions] [Operator Gesing line question. question Please Our of with proceed next the from Rand your comes Neuberger. with

Rand Gesing

guys. Hey

John Batten

Hey Rand.

Jeff Knutson

Rand. Hey

Rand Gesing

Talking future, extraction. equipment we're technologies about the for but repurposing the like oil energy in people in services hearing heck non-carbon sort of business there the where out

runs I guys this in the of and technology? name heard deep the I've this of any it, earth and -- into things technology. been company type of reading next-gen into of you have back -- trials? I sort is of participating one begun water to can't of comparing up you So, have is there, a any these pressurized frac this about type Or there's being but it been a of Have -- way is turbine. inject remember comes there, heard out you the but And that know used just a rig the

John Batten

no. that I specifically we've or think I been-- know I can say don't don’t no, and one yes

Rand Gesing

[indiscernible].

John Batten

do getting of on it to working involved solution Yes, transmissions. go one were a soon customers project with we been electric with if differently. an into to can in and and prototype pumping, to do think of you say, way some And of form too our we've ready to a pressure

ready solutions and So, lot lots of it's there delivery and to power of designed, being different in getting discussed, generation, Yes, pump. lots be of prototyped. the a to the of different different projects, -- energy

Rand Gesing

with about--. Yes. company share All you right. we'll more talk this I'll and

John Batten

Thanks be Rand, that will interesting. very

Rand Gesing

Okay, signal. that bit a hear a great. of to Glad -- little demand we're we're getting

the I helpful demand point would to to sustainability couple had that a think of that years the -- that's sustainable really of would you. be of company. be we Thank

John Batten

Rand. Thanks Absolutely.

Operator

turn the now the have remarks. we And I'll call John over for back end Batten of closing session. question-and-answer to reached the

John Batten

conference appreciate Thank to conference you, myself free you, call have Twin thank your Shamali look truly please we of and either back with [ph] we turn get Shamali and speaking call that quickly call If [ph] you we hope your close as answered or you. to everyone for in interest of fourth not, And answered will following the your joining call. forward Jeff fiscal to all as the and questions. and quarter feel question XX again I'll Disc, our year today. now possible. continuing our We end

Operator

And time. John. lines for concludes conference and this this disconnect you at participation. your Thanks Thank your may today's you

Twin Disc (TWIN) 29 Apr 222022 Q3 Earnings call transcript