- Earnings call transcript Q1 2023

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Operator

Greetings. Welcome to the Twin Disc, Inc. Fiscal First Quarter 2023 Earnings Conference. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. reminder, is a recorded. As Instructions] this being conference [Operator your pleasure Berger It my introduce host, is now to Andrew Relations. of Investor Thank you.

begin. may You

Unidentified Company Representative

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

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

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

John Batten

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

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

the XXXX year. fiscal hoped as carry into more over momentum quarter, the we'd much went right quarter that first of of in that fourth would As this

increases cost of own revenue the a have out a as much chain, it chips, we constraints castings, operations We did. with was to much delays struggles with faced North general. living to was did faced our wiring, high the they quarter capacity order and in and The gears, as on elevated ability utility and several not we're the capacity. a America pricing and whether seeing and to getting much going as cost disappointing its to gears, causing real-time to that treat could as continued quarter in there is based falling team to continuing real delays have we're line shortages continued and short forgings In we higher address our harnesses, continues global European heat Our and supply labor the be and on costs, considerable the because for the structure due shortage six capture operations, to even with salaries, significant with new very of rise, pricing. chain scrap in supply wages months. It's demand there. delayed inflation European in to Reshoring very challenge

honor the European salaries raise quote. at have time While manufacturers governments can to immediately, effective of price

whether of the XXXX-XXXX. fourth the to in gross able Additionally, margins first the rapid erosion this are lower better could we're while very have on we're China the we and hulls higher shipyards second throughout The hulls in components inflation be those projects issued due and confident At least of some chain and to improvement and summer the saw electric inflation, of XXX ago making and continue forward. and will of facing much increases that challenge shipments supply and fiscal expected we the forward would into diesel points shipped larger higher since better third can reality and revenue quarter we the this products to see in cost just to months and see these are than revenue to focus in that expected That also projects by continues been not late basis to progresses. get XX anyone as will the to vet we margin will are fiscal higher backlog they Europe. Part margins year of the that on a Those we had Europe explained quoted living year. level the fall. over recapture with acquisition quarter issue the other improvement propulsion quarter, margin XXXX and has that quarter of on and -- were engines, with we it. in we're all prefab expectation going Margins motors, at that shipped to in XX facing that's with never the general, and XXX built in going we propulsion be mitigate the before

a demand at demand improving in in pressure our we In see North global to oil domestic Europe continue received demand high the fleet and more new both continues domestic orders markets. parts pumping level. for unit Asia in We and for marine very and strong we America, quarter, gas growing the and and markets, our see in steady oil demand gas, industrial demand

job the issues and both doing deal suppliers, into production and efficiently managing quarter application other and delays technologies should front we internal quarter to hybrid That the the Hinckley very We and PTOs next at be for in India, Lufkin, in And meet markets. our operating is quarter team will of hydraulic have backlog be the to well-received demand. moved into types chain with the quarters that XXXX, foul can are shows boat a exciting our remaining and a the working and being has have Yachts. year. everything capacity, shipping XXXX as several In vessel of and them fiscal the huge we this mentioned and with speak projects fruition. Last transmissions this on with and more built very few from orders did many the to hybrid here in team other they are space very supply we of is marine in Racine, coming great and projects customers electric

Just hybrid unit and hybrid XXXX of partner Texas. It been in possibility at also the the straightforward positive. that reception it growth that continues And to to now an past bullishly grow by as And few Jeff, has our are projects distributor be transmission. the weeks, of I'll and our but we we the down other the released over older financial. Supply to e-frac uses see The the constrained just talk our very construction inverters, on future. and number new opportunity and about chain in The applications. Grizzly was motors, the show refits and and here challenges. X optimistic of Sewart in lots moment, their is at well electrification all turn electric Nothing will solution Tier frac supply hybrid

Jeff Knutson

the of the compared demand North improving propulsion and prior sales results. pressure American $X.X from reflects remained sales to Europe up By the the of challenging while up increase products John US somewhat in the industrial to just sales run $XX chain morning, X%. XX%, limited Sales previous product to gas, up most million through million were year quarter XX%; transmission when components fiscal sales product our constraints XXXX the market. European predictable equipment selling first has XX%. global from or the impact into market. us by by America Thanks oil XX%. for our in up and briefly under dollar help were of the for just Sales XX% The while prior quarter. sales quarter grew were find in North by improved good mentioned demand pumping first by goods quarter increased I'll The were and marine ongoing produced competitiveness Electronic first quarters. the Shipments reliable quarter, supply. With industrial the year region begun supply and Asia-Pacific marine area improved X%; strengthening company's in into everyone.

Foreign increased first and currency the currency exchange prior year. net in a constant quarter sales sales the a basis, $X.X has from million to impact XX.X% quarter negative on

quarter in XXXX $X Spending compared fiscal the compared on US The prior result due by first domestic reserve. increase quarter profit the European the product spending year XX.X%. items prior in prior favorable a partially and ERC the million currency global a credit, such The or $XXX,XXX. in costs as impact These fees, -- marketing, the COVID the The items, have volume to operations. foreign year offset administrative impact Adjusting more of increased in to normal salaries, year and a for first engineering, a then in several offset impact warranty with adjustment fiscal a at favorable XX.X% percent of margin prior small translation increase improved Netherlands activities inflation, impacts Along the is of those year function quarter negative current the the travel, XX.X% primarily by were mix, is quarter. the to gross year primarily partially inflationary $XXX,XXX. professional a Dutch including and and non-recurring subsidies increase program, and and areas COVID to marketing, for a our was would been subsidy, million. The first benefits, increases XX.X% included the return totaling totaling bonus of $X.X these to one-off XXXX.

prior of revenue XX.X% compared the in quarter, percent year a to were expenses XX.X% first quarter. first As ME&A for the

by compares quarter. $X the the EBITDA the was a prior compared year million million effective quarter share by sale the foreign or year quarter, the to of the and for profit this in of in quarter we quarter recorded the tax fiscal or to our increase first loss breakeven COVID quarter, jurisdiction first a on rate for facility prior XX.X% share a diluted down gain leaseback XXXX of for non-operating the XXXX prior and of year, $X.X million tax $X per prior driving subsidies per $X.X the was earnings And million year. compared driven to facility. in the for rate. prior of net mix The the diluted Swiss first During to gain net fiscal year related the the $X.XX effective with XX.X% the sale of the first $X.XX

to for $X.X decline balance Turning translation the chain million. up increase a customer significant was the significant is the excluding sheet, supply the impacted The delayed million our by quarter shipments, sourcing of that strategies autonomy $X operations. will impacted currency-driven result of on imbalances, and anticipate fiscal of improvement in and to shipments quarter planning, progress. continue our drive as We the and second focus distribution we through inventory, timing significant inventory refine

was cash the the operating the and in results, With quarter negative focused quarter. was increase inventory for machine at $X.X tools. the our spending of for slightly million operating lower Capital on modernization

expect million some turn rate John year spending the And of a between final remainder $XX now, back million for run for for We and capital similar in totaling I'll the the $XX year. to comments. quarterly it

John Batten

a results, outlook. moment I'll good quick about XXXX. through on feel still think Thanks, spend quarters and last the our very we first we our year, build Jeff, year. Like quarter Despite the will fiscal

waves, We our than we some are will more ago, too. in year with manufacturers to markets cetera. we cost local optimistic we inflation general, deal in local a conditions, to The facing on, are, whether them. due challenges are supply structures continue were pass much coming that and challenges, will can't address to et that's are and they have But

take the American a right our helps North it been challenge markets, the the now concludes which now forward please into and US primarily Latania, of will months open line few selling past And is marine Europe. on and has concern dollar. remarks, your additional US-based in I our Jeff into European happy for the products, be to going questions. Jeff our the As That operations prepared it while transmissions, mentioned, questions. are sold strengthening

Operator

Thank you.

Kaye Instructions] now will Our Noah question proceed. conduct [Operator first with comes Please from session. Oppenheimer. a We question-and-answer

Noah Kaye

bps, XXX the Thanks on mentioned questions. expectations price the actual lag of you for than I think bps reflecting kind results higher XXX really was taking John, margin cost.

XQ, us XQ? So we today, look in drag backlog help just XXX as as is for look next of you the how couple does think that about look bps, look quarters? subsequent XXX understand, like the What at that quarters, bps

John Batten

better our with look say help in back, America. there, challenging we I'm Europe, in if Noah, I shutdowns can backlog, quarter in just you inflation. going Jeff operations. our projects it at me was going out cost quarter I'm were talking longer today knew fourth at just to looks I the incredibly let But lower we tell What's it three first the Europe, too. it was Well, you our But Europe, just North Veth one looks on end in than go than forward. most of But next Europe, incredibly the did trend, margin a have going general, and in quarters, shutdowns would just of better quarter. not the at that We I if mean, is but increases. general, in inefficient. just inefficient, living always general, Europe, about shutdowns in had we first the the our

one on the The and our is need expected. quarter. in of to given maybe effect didn't to general, is to when be staffed X% and did we're The that inflation X.X% thought in I to the the chain? European was all part, lower the meaning lower it is XX% certain Belgium -- look that of the gets now. optimistic. X% there's operations. to through a They XX% operations is also always times working the We immediately. delayed right increase We're there. taking For Europe that X%. we we on usually instance, living and in be X%, all is and long So, be have -- an mean, that's to be going demand extraordinary higher That to are was would quarter. frustrating going based We you whole the effective than caught they cost supply on XX% continue. revenue parts. is we revenue levels anticipate can over significantly We Dutch because that continue have a than But what demand this again, don't that by to XX%, serious how

lots We of have projects.

around orders. outside never a is Our sales into highest job the converting of projects I And doing great the backlog Europe. percentage Northern with our Veth particularly would it's is world projects has been, team say, of

So, the home one grow the outside their market. strategic was objectives of to of business

all be Now we're the parts get able doing that. We to them. just have to ship and

-- of where looking better is are now a we're at forget the ago. Where were mean, details So significantly we we right the than quarter. year I

challenges the is through and again the Just kind everything again, we quarters, year. a pricing we're with backlog, looking in the the year, of with thing beyond what many our year to backlog some and inflation we of ago, rapid just the the is we we frustrating our lot and But of ways, those again, very improved same six had months. And and deal did. not through that this have at six reported months, just a faced

improve year. that optimistic the the we're throughout things quarter So will during

XX much was So, happier than and months I'm ago. it this year

Noah Kaye

the we've change companies bear. That's inflation are helpful. because looking been that listening challenging wrangling to I right, times And some there that to with guess of industries answer, lot had at a in really to just respect they various extraordinarily price, how

price So may that talk change. to how us and about how you

you better going how projects are you What now? that what the you of mentioned forward? -- allows inflation index. You that, price do manage And do you living And changing? kind to think of cost

John Batten

It does.

do very So of difficult that we priced -- what which seen from time anything price quarter. increases we frequency at shipment, meaning North to it, the Historically, was is I've it. been America, able of price our besides -- sheer the increases, were like had every never to

$XXX if meaning of we're a model months, We but today also price to we'll order saying did surcharge but price. at the it in time month, go might last more. year. not price are never the now But change you next more you XYZ, giving is two a much it, be order order, you we I'm may pricing the the back surcharge,

back do pricing we now are in to we're What's it to the going of we the So every at time at is, go because look time price primarily impossible priced increases. we price two them can't, shipment. do of you almost changed Europe, And at frequently more years, the and time It's annual of do costs a shipment, much of but order. of going did inflation not even prices at is not six price with -- they're from mentioned, scrap don't and -- falling, order. And of think necessarily seeing not We lot hopeful We're a coming higher they're I up, see the as a has stabilized. we're lot level. much months material at I down, suppliers. the we're our decreases

not stability the it's feel down. but it, we coming -- some of better So they're about of

So answer a time? your it when someone -- we margin changes, may we are that the buy we wants And have a When it's price confident almost from everything to case-by-case we're question, it at different. when be quote, -- the that looking in basis. month now, to if we as

Noah Kaye

one you And thunder you've I if from us and projects got sneak want to more sort electric did you in. an what in of project I that Can Hinckley. future just from idea give Okay. steal applications space apart hybrid don't but or…? the could announcements, maybe some exciting of mention

John Batten

Yes, two, longer-term would going say, five, off. lot things taxi the there's craft a It be one could with market. bit projects It work was not like smaller, But a builders a be mean, commercial boat splash things in more, like ferry. to vessels could be further there's more there, system. whether XX up that. related that. in be little premier but a are I'd could the coming one, definitely there -- I I pleasure -- a of huge more more Hinckley it

generating they're that is space is So and a efficient fuel the revenue find very with positioning more commercial using solution to as Everyone vessel active. business. very, a a green

-- components getting it's Again, going is everything all very to there. based So we're on -- it's though, optimistic. the

been lead pushed way motor electric times have out. So,

dealing trying things we're of one that's more announcements. some that right now the with to So get and

they and that will type And be more do want and be equipment vessel, then to they to what application. coming so whether the a we there six months can for and it's an want land it about. or year, on test lot of it, will construction the XX released, get on, industrial but a talk then work we do sure, we to of through it They for

Noah Kaye

Well, appreciate Thanks. color. the all Great.

John Batten

Noah. Thanks, right. All

Operator

Funds. [Operator Simon Wong with Gabelli Instructions] Our next comes proceed. question from Please

Simon Wong

Hey, Jeff. John and

John Batten

Simon. Hey,

Jeff Knutson

Hey, Simon.

Simon Wong

of much was Just side. some quarter oil sales oil quick the on questions and How this gas and your gas? in

Jeff Knutson

It's question, good Simon. a

and next question, do you real I'll why then me and your quick jump Let a you back on quick. don't calculation, come to

Simon Wong

question related Okay. much My and How you North the pumping quarter, due also of coming had next pumpers just oil was the came in pressure to related and order really gas? of oil gas. much orders American Because how wondering back? nice -- to that to

John Batten

I a parts big part. as far as tell guess, room equal don't the have not it's I'm you it's same combination Jeff, in a but orders I units, level. continue I high unit a new about part at with but of can the numbers. also

it pretty and quarter oil North good for a gas America. was So

Simon Wong

they the... seeing we the are order Or for No, traditional are diesel fleet? to related

John Batten

are the units obviously, that XX%. we higher. far That's point but XX%, potentially much ask the right you forward, say fleet the for that I have that now, parts, can question, for quarters traditional away. percentage where we in a the go not and very get at next see XX%, So we're few e-frac will -- each a I diesel quarter small it's fleet, but do would

Simon Wong

right. All Okay.

time transmission the a pressure order you for the place for for pumper an order time actually if what's or new -- placing equipment lead So pressure today, What's guys? today. not lead

John Batten

with early fleet months, the three reason We and them in, and with dealing them we're December are holidays. to an months. we But in because for three first quarter would today, three I X,XXX months the sorry, is the could yes, three Jan calendar ordered -- year. short to if months you next November I of to have go say, get traditional would And probably

Simon Wong

then Okay. -- question last All And right.

John Batten

just me reasons let just -- going -- was Simon, I And back. so come of one go to the

could potentially be of engine. lead we what's availability -- the So seen fleet that seen reasons to the we refit the of more one continues times have of I is think haven't controlling and

is of engines that enough and the So what's they customers number transmissions happening securing satisfy we're we see engines to orders then just getting have.

as more think I engine orders more becomes see supply up. and available, will So then it our reliable -- go we'll

Simon Wong

Okay.

John Batten

have get rebuild, rebuilding. The they is spare orders because engines, more we flip side don't when they they're parts

Simon Wong

right. Right,

in doing then Okay. mentioned something Great. And more Can -- hydrogen there? the press release. about in talk you you're you your what about

John Batten

Which I -- part, Simon?

Simon Wong

It's -- vehicle -- global release control you market -- looking new hydrogen some see Yes, markets applications. some had press you across leading a hydrogen you're that demand system in among electric applications your for for hybrid, and trend.

John Batten

thought Oh, you was -- hydrogen. said no. okay, I like I okay.

with on engineering, with continue yes, they So the Hinckley hybrid our controller. refine that and to controls working everything base and we're our group

controls logic able multiple multiple using our to control and inputs So, outputs. being

better the on that it's our transmission, which or products, project to that's think whether RF and better every getting heart. that's PTOs, mechanical transmission application. and hydraulic technology we're we of So the and our of transmission product, In frac the a do, better so controls, brains our one of our marine I an the controls,

very system in moving that all incredible of controls So that's our control technology, cost-effective group will markets. doing creating an a is stuff, our work and our job with things adaptable what's work, but controls off-highway making

these -- to giving So -- them of sources. them time also we delays, can't multiple time it, mean, some develop production it's and then giving it's I sources, develop

last very done markets. they strength at company. XX of They So an real months in getting our ready in the incredible transition job have this a for us all our are

Simon Wong

Okay. Great.

Jeff Knutson

your just about back question. going of to related was to It quarter XX% market. the first and Simon, was oil gas Hey,

Simon Wong

consumables? equipment new between have and Yes. Do you a split

Jeff Knutson

pretty pretty balanced It's balanced. actually,

John Batten

-- but to Simon, available, more were to there available. it aren't units, goes It's more just it's back said. right And engines I what now. tilt would balanced engines yes, the that If Yes.

seeing we're So lot a rebuild more activity.

Simon Wong

real Yes, I'm hearing is here. engine constraint a

guys. you, Thank Great. Okay.

John Batten

Simon. Thanks,

Operator

next Jefferies. proceed. Jim comes Please question from with Our Dowling

Jim Dowling

how inventory breakdown the market, between finished on you might and Could versus the hand on skew Yes. that end and and us one progress in North some energy color by work Good fellows. and marine? product America Europe morning, give

Jeff Knutson

Yes.

industrial, biggest say, remainder, material. I but component. to would half in what's little component and over That's America. it's into assembled a finished new little a XX% so a guess, as could component marine. that that. be got, it a assembled fully I call and be weeks. a biggest or inventory about be or I we've in is what part to units. of is unit able In So, sold eight complex very just said, we of either primarily XX% allowing is Say, marine, gas salable, Pacific. potentially our deliver is work John's of within from Asia inventory. parts A North in maybe WIP raw the here us -- piece the say, That finished Europe, oil it's And oil would big that gas be is Europe total I process. the and in transmission XX%-ish, inventory, probably be point, and would our of in in and the would it's earlier XX% XX% the the in large is would market in the In over US, US say like would remainder a Asia, the terms

Jim Dowling

And inventory-related of delivered priced much still but already a how inventory because will open bear? be charge much the of market delays? has other you can into last And are final where your question, one product been how whatever can't

Jeff Knutson

I've and a to that, but inventory would that I'll you admit our of to I I of range have percentage huge a say it's think that's fixed maybe don't XX% better feel. something -- would it's maybe that's isn't I of price say, in. inventory more thought question. locked John, completely. XX% committed good sort a orders, -- through price That's

John Batten

not a be may it That's it's for Jim. the higher, majority, sure. but Yes, bit little

Jim Dowling

you. Thank

Operator

At the this turn over Batten call back closing I will Mr. comments. time, John to for

John Batten

of today. Jeff and Latonya, either questions. your XXXX continuing answer our answered an to to all out And you reach we've the to everyone, you forward as not, interest get you, call possible. back Twin Disc, we'll second of to quickly to your and as And the I'll conference Latonya, question fiscal quarter. again your you, call close for speaking look If myself. joining in feel that now hope turn free or please We at We appreciate thank Thank you. with our

Operator

conclude Thank you. does today's This teleconference.

at disconnect and this And You participation, lines may day. your have a time. you your thank great for

Twin Disc (TWIN) 4 Nov 222023 Q1 Earnings call transcript