TWIN - Earnings call 2 2024 | Twin Disc, Incorporated

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Operator

Ladies and gentlemen, thank you for standing by. I would like to welcome everyone to the Twin Disc, Inc. Fiscal Second Quarter 2024 Conference Call. [Operator Instructions]. Thank you. the to hand now will call Mr. over I Officer. Jeff Knutson, Financial Chief

conference. You may begin your

Jeffrey Knutson

Good you and fiscal morning, thank XXXX discuss today second our to quarter results. for joining us

Batten, with today call CEO. the On is John Twin me Disc's

those the certain differ statements. I this in made to It projected hopes, expectations is conference everyone the materially for that expressing during or statements important statements predictions statements. would company's especially future forward-looking remind could like beliefs, to from actual that results call, are such remember forward-looking

the Information concerning XX-K, differ the the are factors may the that actual SEC. Form results or by in of copies could forward-looking materially to cause obtained company's contained on either be in from report which annual those contacting statements company

made reflect call assumptions this new statements events Any to are the undertakes are to forward-looking of information. as update no that statements subsequent on publicly these company obligation and today, or revise based or during

also certain financial During today's discuss non-GAAP call, measures. will management

For financial results, financial a non-GAAP earlier the release earnings GAAP see today. measures reconciliation issued of definition and please to a of non-GAAP

By the now, opened. received you which news market morning this should was issued release, have before the

our you send a If received please at copy, will not and XXX-XXX-XXXX we the call have release. office

over Now I'll turn call to the John.

John Batten

everyone, welcome second Good XXXX morning, call. and to conference quarter fiscal our

call some today's highlights. with begin Let's

by cash We continued improvement. execution continued operational our high results working growth operations. capital from our coupled large strong historically solid teams, momentum generating These part in driven the on profitable second quarter, by by delivering focus with were our in

top year-over-year our XX.X% Marine ongoing fiscal and seeing Transmission Propulsion trend line sales supporting XXXX. in to are both growth in continue expansion and We strength of double-digit Land-Based

which solid XX.X%. gross basis margin We XXX to improved also delivered expansion, points

Pacific. has Asian the after backlog in We're Asia significant market. to our marine been return One softness growth increase highlight particular capture in to offshore stable cyclical also transmissions a work orders at in market end A workboat activity market demand. for seeing teams continued as

Moving Propulsion global group. driven Sales in on and activity product in markets. to commercial Marine XX%, increased growing Systems results by by

the We which supported continue increases at current backlog defense rising are and sequentially term driving of in year. spending, we meet inventory increased to prepare Vet and Veth fiscal geopolitical heading expect remains has second the success boat turmoil. increased Rolla the the projects, half seeing X% partnership. given by as in Veth demand record further into the near of petrol levels, to we

Sales and unit gas see the oil for gas and a grew expect On activity further to orders part trajectory has driven new of in strength transmissions performed with and X% also supporting demand the of by the quarters. ARFF in these continued business. North our oil first well for America in backlog the to encouraged growth. We're this business coming strong Land-Based rising within Transmission year-over-year, markets.

the Looking end to quarter. in segment, after and signs continuing orders to early uncertainty first broadly orders due are previously of improvement trend spare a pullback at upwards, reporting the seen we in market have parts

prior year. Our amongst by XX% with the customers declining softness segment OEM industrial sales pressured versus remained industrial has

demand steady to for demand remained higher-content have where for continued We commoditized see product sluggish lower-content products. sophisticated has

Despite with partner on products. to OEMs on a remain this we domestic range capturing near-term softness, major focused of opportunities

Next, inventory speak to backlog. I'll and

faster over impact to increase, end to the continued has chain enable with backlog supply along year solid shipment of the Our driven past deliveries. our across made by markets, demand improvements

mentioned a earlier. as increase increase in of We in the inventories are a mainly temporary seeing percentage to due also backlog, near-term inventory

percentage driving and quarters. lower as remain to focused inventory see in we coming the current a said, of fiscal the of second expect work inventories through our fall half year in we on backlog That as the backlog

business, as Disc provider modernizing results detail. In financial briefly and for land-based before improved have and us electrification takes in all helping stakeholders. strides lowering position and better quarters, Jeff recent long-term We great our to the rationalizing like Twin and made we applications. shipments through deliver of marine times solutions for create cost leading off-highway while strategy lead a aim hybrid our address I'd to inventory to

We are our into that maintaining systems business growth. bring new on our focus and avenues integration, controls will profitable us shifting

to With both evaluating the offerings within technology expand the to of space. the hybrid also and in for sheet, support electrification continuously marine which we our opportunities of ample our are sectors, and business strong balance industrial M&A opportunities grow us our

now With I'll over the it turn Jeff to financials. Jeff? that, to discuss

Jeffrey Knutson

for period the $XX for as attributable Disc second million to share the up of or share everyone. the $XXX,XXX was morning, demand overall XX.X% quarter $X.XX million quarter per 'XX. Good diluted We sales John. $X.X remained from delivered to Twin diluted or per compared in second quarter, Thanks, or strong. income million $X.XX $X.X the year of prior fiscal Net

period, year product XX.X% margin profit actions, headwinds, successfully executing improvement the to profit increased of and compared chain Gross This XX.X% operational mix million. $XX.X easing and during benefit prior to pricing our increased favorable to a continued the reflects supply gross prior of XX.X% playbook.

reported Systems while growth X% and double-digit Transmissions Land-Based Industrial reported sales year the declined to growth, Propulsion and period. prior compared Marine

the increase declined. to Asia American regions demand, robust Looking European across year, top line across compared sales by sales at Pacific distribution the geographies, prior supported North to while continued and

versus cash We million delivered prior $X.X through the the continued and year negative million a compared the to quarter net ended $XX.X the generation balance by We our million solid year period $XX prior approximately with to of sheet to second cash reduced balance strengthen the period. $X.X debt higher in quarter. million,

to million $X the $X.X year in facility gain the a million to prior of year quarter on recorded due decreased sale XXXX. of the during a period from million second prior EBITDA $X.X

putting business ratio to inorganic continued excellent our us this to We X.Xx, to opportunities. in executing quarter decrease an in below position our negative while invest growth leverage

pricing basis continued points expanding of easing our the from year the due headwinds, chain successful product XXX supply gross As and mix period. noted approximately a benefit quarter for to second margin execution of increased Again, profit operational earlier, the prior favorable actions, of playbook. XX.X%, to

enable shipments. to supply stronger improved chain has Our continued

and faced higher have being a we our labor ME&A increased we &A grow sales headwinds while spend some within ME&A. continue percentage has as to decreased said, of business. However, has That as nominally, it costs currency

continued Simultaneously, within industrial we efforts. including as development, Now exploring research on with In making line a emphasis technology, hybrid strategic allocation. to into low capital allocation and marine investments specified the opportunities John on priorities level, capital our of are additional our electric expansion the specific with given framework, our we and mentioned. marketing the in areas are new strengthening geographic company, debt M&A and sector,

As return repurchases to we consistently are to shareholders pleased always, through payments. capital and dividend

economic to landscape their will strategy evolve. allocation continue our operating in changes We evaluate to as adjusting they priorities, and capital and environment the

now I'd the back to like over call to turn remarks. to closing John some share

John Batten

Jeff. Thanks,

takeaways for I'd results. few the highlight our key from we Before to line like questions, a open quarterly

stable In summary, margin market robust we're generation. expansion revenue cash advancing demand, our seeing end momentum and double-digit of growth,

maintaining We improvements management. including operational these are on that results, supported have disciplined the focused working capital

macroeconomic fiscal given lingering end optimistic levels we year, outlook in our the remainder of towards Despite cautiously demand our strengthening markets. uncertainty, a hold

work to growth strengthen consistent will profile, opportunities. the Our potential giving our to financial while through challenges ability continue us performance pursuing

Twin to to sustaining for hard we for our Disc of look business all progress teams value commitment thank to this our as generate like and work forward drive forward long-term their our supporting this I'd and shareholders. We quarter.

our concludes questions. happy remarks. will prepared I That Jeff your be to now and answer

Operator

the [Operator first from Simon Funds. Instructions] from Our Gabelli comes Wong question line of

Simon T. Wong

the business. from much oil patch? First Land-Based question, of that your you was Transmission saw some How nice growth in

Jeffrey Knutson

I would say relatively the oil consistent. was patch

patch the I probably split think ARFF transmission on and side. oil it was between our our

Simon T. Wong

about So million, so XX-XX, million? $X $X

Jeffrey Knutson

I right, yes. think that's about

Simon T. Wong

Okay.

you North first America. new equipment you activity or E-frac? Is higher from was for the diesel-based mentioned Now a say saw transmission? that that for -- received order Or that you your the new you the

John Batten

Yes, diesel were Simon, unit traditional orders for the new frac.

hoping awaiting this the first happens yet E-frac. for the still We PO I'm quarter. are that

But all Asia a And rate orders our very America in year and the orders unit for this North along at ago. and quarter remain spare business chugging so good all keeps to Asia. compared obviously, parts far, the new a

Simon T. Wong

Okay.

Now more patch, that to Or mostly new and equipment? you consumable I from -- mean, down some break does going how new mean the because units is oil due that did mention between consumables? to that Is $X million that I Asia.

John Batten

quarter, less on So bit revenue a growth say spare more the I was in the in little parts. Asia and would to new units

So had it the was of new mix been in higher than parts quarters. spare second units, in quarter previous the the

new little slowdown we rebuild unit activity. bit an So saw and uptick a activity and in of

Simon T. Wong

you're feedback your from Okay. still been What's your first offering, the E-frac And order. waiting purchase the then customers? for

John Batten

working out geared where had for gone we're but has up But the testing very details feedback extremely It's some been we yet, and the -- been stand. production. remain order And we I'm we're that's well. could -- it's the think quickly. and just I ready surprised we customer. for The haven't has react I'll We be honest, financing some great.

Simon T. Wong

Okay. it. And nice year. to room expansion more looks It like some quarter. growth you growth How expansion geographic continued in is saw it last then Got expand much really Veth, in geographic -- there geographically? this

John Batten

Australia trying have to Quite Asia. North shipments first a or America might bit. had year in actually to We There's -- and think, scratched last the just I mean, the we've quarter. fiscal been surface -- that

build thruster the of the just mega market, the surface, propeller, scratching the don't combination just build in yacht ELITE world. in the Europe, they around particularly But the they again, product design line, Rolla and

So we're to looking expand that.

in So some -- solve we're I here the have production would Netherlands trying the like we say, we just -- actually, U.S. that have in some do to constraints

think so once capacity-wise. the more It's geographic get line. some we things I top expansion grow can got us, some well. that we've out work So to we'll as we see production-wise, behind that But

Simon T. Wong

Jeff. for the did step Okay. take of How We of a for it progressing A gross from quarter. margin margin gross couple first but year? nicely the do you saw see year-over-year, back the questions rest expand

Jeffrey Knutson

Yes.

a gas lower mix. quarters, around We it's orders an bit going uptick to QX think mix, depending the did QX a that in in was QX, right we've be on in seen than and between Like and see previous on especially the little range margin. in mentioned, we John a quarter. and as closed oil little our bit aftermarket aftermarket has of out drag I

was sign. a that positive So

get to to it's in kind think this XXs, range, XX% what we is trying would high of going to I said in we've what before, So expect. the and be

Simon T. Wong

One in. CapEx year question, sneak outlook full Okay. the for more the if year? What's for one CapEx your more I full -- could

Jeffrey Knutson

Yes.

targeting $XX think consistently pretty million. We've million. I been $XX

I a think so it's guess, close. pretty run rate we've got I far,

it got less. So years $XX orders back-end really in maybe I million, around previous to little right where get place loaded, bit was that some us think a unlike we've maybe

John Batten

for but grinders, on more order, There's gear lead still months. Simon. out the Yes, XX they're times machine over tools,

but they're next fiscal coming order, on have tools we not in So big machine year. until

Operator

[Operator the Instructions] Our Green from of question Neuberger. line Mike comes from next

Rand Gesing

You This hear me guys? is Rand. Great. actually

would to So the the additional EBITDA, of sort we expect half top look, so we we QX use $X.X get behave like of to see you if guys -- line. second how quarters million

Jeffrey Knutson

Yes.

I think up. we'll be

million been we've in think EBITDA. hovering I month around $XX

the half. I think through second grow we'll

the up through second to $X.X million. $X getting back So half like to million

Rand Gesing

what line half, Okay. I'm given top the Great. of on revenues year any hearing -- backlog, continued assuming that you're guys Is the second markets, And visibility pretty next you you case? was year-on-year. end sort wondering year-over-year. you having And feel I about growth the about about growth if have good

John Batten

Yes. Rand, John. it's

and us in saw -- question -- in obviously the of very Middle surprises well. backlog half is for optimistic. getting just things taking some the because the taking longer. quarter chain, what supply think It's first the we're The to a what of we to do unforeseen the longer our very backlog we've second think given backlog quarter. East second we're feedback there in is concerns quarter, shipping and have there I second the and we're pretty the to orders in nice get in a But I

recession fiscal beginning that everything next year. reading soft you're half of of the about reading year, our market second landing, in We're our the in the

particularly seeing of we're mentioned that, well. customers, it's our So bit quiet tugs, we're long Rand, a mining, also whether in our orders market, And had some for and that but been optimism be from for there's very in doing the Asian markets seem what time. my far, hearing comments, to a little marine I

it's more to most it's bit little -- fiscal for tell, we're too So us, probably going but soon our a optimistic into 'XX. than I think

Rand Gesing

Great. Okay.

get repositioning to gets you out it leave still a weather trying Let's there. better. with I'm guys the visit the great little But work and company. when on

Operator

Thank you, ladies gentlemen. and

you call. time, further now we may you for As today's We have thank will participating, conference conclude no and at disconnect. questions this we

Twin Disc (TWIN) 7 Feb 242024 Q2 Earnings call transcript