TWIN - Earnings call transcript Q4 2024

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Operator

Welcome to the Twin Disc Inc. Fiscal Fourth Quarter and Full Year 2024 Conference Call.

We will begin with introductory remarks from Jeff Knutson, Twin Disc CFO. Please go ahead.

Jeffrey Knutson

Good morning, and thank you for joining us today to discuss our fiscal 2024 4th quarter and full year results.

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

expectations the would in that is differ results forward-looking especially the materially Form differ of that conference beliefs, everyone the to important results statements materially predictions the statements hopes, could I such cause statements the remind on factors are could annual this company statements. forward-looking to certain company's concerning remember like company's statements. contained are those future forward-looking made report XX-K, that during expressing from or It projected for from actual which call, to obtained Information in may or the in by actual copies SEC. be those contacting

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

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

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

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

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

call Now I'll turn over the John. to

John Batten

increased for fourth of X.X% to capture healthy fiscal everyone, products capping consistent increased markets, fourth across our To several quarter's morning, highlights. the again year-over-year strategic of continue Xth X.X% begin the XXXX. supported welcome We walk in XXXX we demand performance, and key some year call. Good quarter, year-over-year which and for the of our to solid with, conference sales to quarter priorities fiscal our through quarter execution for I'd as like a delivered results end

capital other in manufacturer year. fourth for components Katsa years, quarter, in of high-quality management the strong We we seeing enhancements transmission completed working and drive implemented a across of from full businesses the gearboxes. Critically, helping power quarter generation leading both the ongoing operational the recent our we've acquisition and are historically and disciplined also benefit cash fourth Oy,

are We our both the accelerate global our of will Oy Katsa cross-selling confident broaden opportunities business. reach that across and addition

strong focus we expanding and financial our profile, by portfolio on product flexible our forward. opportunities our to drive that Twin continue through will sheet balance strategic segment Backed Shifting to results. Disc will

sustained saw Propulsion -- Marine Our and year-over-year continued global through X% through a comparison challenging quarter. market fishing both our Systems sales pleasure Canadian demand with we fourth softer the showing graft and in delivered business, the the activity. the demand commercial and end fourth a year Despite markets in in increase

boating ELITE new performing ] tap decrease As slight see resulting demand. part to segment. noted That turmoil continues market rise a strength integral Mass product importance we spending boat in in of driven in to into our during project. partnerships Rolla as collaboration our our the been [indiscernible] Marine have offering. our in Propulsion to recent be luxury consistently also quarter, we work patrol We to of quarter, propulsion development us allowed due the of Systems backlog the well and a [ to and through and inventory saw by highlighting the that a further the continue has geopolitical enhance strategic with an of defense surge meet government last solid

for transmissions have sub by ] [ in marine the seen workload to for strength need of boats market, Pacific we quarter [ continued demand partially ] in Indonesia cold with the Asia from transport raw The the driven materials this China.

ours. year-over-year driven X.X% increased by business our of side land-based the On largely

in record levels gas and markets oil demand robust, the RF remains quarter. were flat. to reaching transmission of Our backlog Exports

Asia and continue meaningful we see both in to America. activity However, North

In the year-over-year. Industrial declined segment, sales X.X%

saw we a year, demand the quarter. through sluggish market construction commoditized weak largely resulting can recovery for and see with a been during agriculture demand the We products. in lower fourth slight has after just demand While

While remains resilient. commoditized continued more products have products more higher sophisticated been for weakness, experiencing demand content,

into manufacturers we on strategy. what partnerships new with move focused with control. fiscal our in to we can XXXX, efforts the original and we advancing line markets remain As penetrate long-term equipment

represented In with year-over-year, terms continue uptick backlog, growth. to simultaneously of the of our proud to while $XX.X of addition This sequentially X-month both I say increase backlog Oy, comes inventory. our am Katsa that we backlog, reducing which million and

trend percentage backlog business macroeconomic and highlights demand resilience continued our management inventory our lingering and both inventory of capturing impact of sustained Our of a the disciplined despite declining the as of uncertainty.

highway and land-based scale, a on global applications, continues Gogo by off deep the collaboration That close major creation to also Jeff become financial successful our solutions strategy hybrid OEMs. to marine of driven [ with overview. like a relationships provider expand leading We to us In ]. closing, with reach our aim electrification by long-term takes before I'd and address through for supported

We modernize improving are to continuing business results costs, all and better by stakeholders. inventory shipments also lowering and delivering for our improved creating rationalize times

systems expand which to focus will growth. to the hybrid M&A, regard profitable into looking for shifting controls marine the With industrial are offerings into we and business sectors, both space. our have us electrification remains integration, our bring us in Our on ample technology actively of and that new opportunities avenues

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

Jeffrey Knutson

morning, for 'XX. for John. our solid business from demand markets. of remain or the $XXX.X . I'd noncash system inventory million Thanks, full increased note the over the like a $XX overall to of the year. quarter income everyone. operating year to prior or $X.X for for divestiture XXXX, Good sales XXXX the in the of and that revenue was Sales of X.X% up delivered fiscal by in in were DCS year loss the line up quarter, Adjusting prior this sale X.X% impacted boat the the across product X.X% continued full year management as related on third fiscal year. million We million XXXX $X.X million, $XX.X million

$X.XX diluted $X.X operating fourth $X.X $XX actually of a $X.XX $X.XX or XXXX. income million on income $XX.X $X.X Disc full million up share for in prior per the share 'XX. to or the sale higher quarter facility $X.X in the than million recorded Adjusting of Net was million we year share million the diluted in of diluted was those per or is million year share the of income per income year. attributable Belgian or gain prior compared fiscal diluted Twin quarter from net for items, to Full net year. X the Additionally, fourth $X.XX per 'XX

mix and during a to X.X% year increase a benefits XX.X% dollars period, to compared million. increased efficiency positive the and the prior of gross XX.X% and cost profit reduction Gross profit margin favorable to initiatives. increased $XX.X This active volume, operational due to incremental product is

and we consistent While Propulsion growth. saw demand Marine saw Systems groups, growth we both sequential at of transmissions the our in overall year, and each supporting throughout land-based product

that pressured market sales another As the John a and mentioned, we quarters. over last also in our softer Industrial Across geographies, few saw has Asia Pacific an of quarter the our been saw improvement increase by strengthening segment in ] course balance a was Strength manufacturer supported markets pullback markets to fiscal our the Eastern in 'XX. a shipments sheet remain Eastern Middle committed and [ to in by America. over the Dubai. of We North in Middle we

ended of total X.Xx. debt Katsa flow year. positive near-term $XX.X higher generating increase by a cash of cash year We $XX.X $X.X free prior of debt due million, XX.X% X.X% the a a million $XX ratio maintained net Twin around than improved million, a the EBITDA net to acquisition. Disc in and with maintained the balance as [indiscernible] leverage to million despite

fiscal M&A enter 'XX healthy opportunities suitable enhancing balance sheet, of debt, that innovative objectives to are uncertainty navigate well of continue to we and we with macroeconomic align with a bolt-on our offerings. excellence we a As product positioned strong with monitor prudently, our level

period XXX impact activity, Gross the mix. points of and margin operational approximately quarter increased due cost primarily from reduction product basis the favorable to efficiencies prior

'XX, into enhance Moving focused fiscal [indiscernible] momentum profitability. on remain we as we further

and upon capital that positioned our M&A balance cash debt unchanged strong framework. into leverage opportunities remain a we fit action with allocation healthy supporting well priorities act to Our are sheet strategic low

for sectors product hybrid driving priority The and technology, our electric industrial enhance portfolio. our business is innovation our in to

drive R&D, diversification expansion internal growth, geographic and and making also to in organic are We including investments marketing. investments

framework balance while towards flexibility important long-term and financial an us, driving strikes prudence maintaining For growth. this

As medium-term targets $XXX our we to enter establish believe the and gross the XXXX our fiscal with XX%. million position year, of we for growth approximately update are a Twin consistent of in deliver margins long-term goals XXXX, revenues new great we strategy will of execution By Disc.

some conversion to to also John like closing consistent updated call We targets free at turn and review our to XX%. of deliver cash share back the now expect flow to remarks. I'd least

John Batten

the through quarter fourth team's margin generation that deliver of ability and very the year. of am cash trend carried continued our proud to expansion. the I we robust performance solid Overall,

As momentum encouragement the we experienced fourth evidenced giving healthy demand in backlog year quarter provides us enter our as XXXX, a solid we ahead. by foundation for sales and the strength the

market saw the capital largely future. handle profitable market capitalize growth a robust steady well and what strategic XXXX opportunities with we We strengthened any on throughout expect the working sheet to to conditions by uncertainties into effective with remain are balance equipped consistent management, well growth and we

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

Operator

[ Belly first Wong we And of go Instructions] [Operator will to Simon Funds ].

Simon T. Wong

traction EFAC your there you -- terms get of of to new the mean, an want offering. your in Just offering I any on -- Can there? update

John Batten

for year. still testing has So just an that engine waiting now. order a I calendar the diesel building and right remain They're mode But the to traditional we'll say, lot rigs well, traditional. with in it's, frac would spread of back first this hopeful it we're Again, gone -- I have X,XXX.

diesel X,XXX again seen are conventionally. that in we've parts for So used uptick There are spare an and X,XXX rigs.

line . question to hopeful. a I just it's says of probably remain the when. happen. it's Everyone Finally, down It's that going

Simon T. Wong

gas On provide that and much be -- quarter can that between great, the revenue sector? of equipment that mean note, revenue can to was and too. how then this break down -- you oil consumer, if would I And you

Jeffrey Knutson

Yes. question, That's a good Simon.

[indiscernible] that's can of America at really in with between been quarters. I units, shipments and consistent with market, a I think And it's China bit North consistent it's pretty you detail . units a more into consistent would aftermarket something off-line. transmission level. new primarily give terms with say forward But been for little mix previous in I maybe the

Simon T. Wong

Okay.

Okay. And in the talk pipeline is -- there the the that overall you R&D about? can for anything company,

John Batten

testing. out say Manitowoc there's I came the other soon in prototype for say past elite show their as through I would mega go the was projects that crane, far most [ hybrid worked they're -- to year -- -- Rolla this what have more this But hybrid they gaining -- because internally, not. thing that it's Italy, success notable showed just the a on working that we it's ] market, German we together primarily say that on would like debuted Dutch at would it's as I that the OEMs that -- announce now we're but and a that electric in the to we're and the yard. earlier system past the for other No, year with have fiscal with thrusters too

that fit and working and I focused some they Simon, really what now, Katsa were and expanding of on on had would see products how under the our things right we're that doing, that they our line. we're engineers then into development range

of elite to say the components boxes the coming of transmission the the expansion next I It in drop us XX global be you'd would some what see an line, vet XX front. would from out be to Katsa industrial and thrusters. months would So

we're right So that's now. focused what on

to electric. the or that transmissions them then the develop gearboxes And marine PTI, hybrid-ready go make on continue to we our

models So you'll years, really in you'll more broad I working our areas. that's lot see we're coming in expanding next what in -- a year, those range specific sense. out, think But the a on see X

Simon T. Wong

Okay.

speaking While did revenue how to Katsa, quarter's they this of much results? contribute

Jeffrey Knutson

close Simon. none, It Yes, essentially really, the end quarter. at was of the

no but the the some their to costs the related costs impact and the operation. balance sheet quarter was opening and related impact closing only into Katsa P&L to So for . brought acquisition, obviously

Simon T. Wong

'XX Okay. revenue to that be line in EBITDA and you're Is I guiding both on line? 'XX. that see the with

Jeffrey Knutson

and revenue Sorry, didn't similar [indiscernible] -- so that . I yes, yes, point traditional EBITDA

Simon T. Wong

does But from it include contribution Okay. Katsa?

John Batten

obviously us in, revenue if take . add line. you we're year will the growth when I a Katsa Katsa up. you -- on expecting mean,

Simon T. Wong

Okay. clarifying that. more me, for then one. the one And All That's right. last Yes. for

'XX? for outlook CapEx Our

Jeffrey Knutson

tools. similar, able be we than bit lead to going this were machine higher It's a little a in again, little probably, we year, struggle we invest bit significant hopefully, just times what more with as

around targeting. what something million $XX we're So is

Operator

at Haimes Asset Barry Management. Sage next move We'll to

Barry Haimes

I the had was had a couple recurring, could so, kind of on which couple great if just number, nonrecurring? That's just that but nonrecurring? you identify $XX question, the any is first cash One is of And questions. a what's more. free million what's of a I flow,

Jeffrey Knutson

I of level over from higher really. think a what liked bit inventory would bit a we not little little I at quickly Yes, mean, we a than benefited is have levels historically.

low-hanging fruit recurring. really we no adjustments point down. But terms one-off . were bringing to some that inventory not So would in of that true

Barry Haimes

So was the to $X rightsizing just million ballpark? million, that just it, was size inventory $XX

Jeffrey Knutson

the think I the Yes, level in improve think started we we year and more we around something I on that do some still and range. room good like accelerating actually close to have out through traction to as inventory year. that And the get

some low as was, opportunity there. maybe have while hopeful as still we're it So the we hanging isn't good fruit that

Barry Haimes

Great. Okay.

question probably the think to And with going year be correct Industrial new see you I'm business. I'm that. you point would Second assuming . as better down, out, is do maybe where is, that or if wrong the if fiscal on so, the you get flat you positive to offsets me Katsa for

John Batten

worst-case getting this -- could have that be traction. markets down would I been would we the I flat But overall again. say say is would Certainly, Barry, Yes. be the of John. scenario.

equipment, So would with good the industrial. and hybrid we've are we in systems say, in I my smaller lot more that in pretty our some are some PTOs getting of mechanical that been mentioned used it's more and expenses a I of us HPTOs for traction basic ag irrigation construction as have comments, but

may we X/X probably what So But of 'XX. Katsa, and which of just is our broadening when opportunity business did chance number to to their have again, we think growth their line this round industrial think industrial. in industrial. to speed our comparing for our an sales that in a we say but we add about million, in curve have up register Katsa a of grow business, just certainly, and let's we with adding Obviously, apples-to-apples traditional you $X their X/X we're core not year, in, is

almost and in So European XXX% Northern -- the market.

product line accelerate to So world the us certainly, is their taking around industrial our going growth. help

Barry Haimes

the then Got question. just a little it. And you segment last customers Within could Marine, bit. just

if high-end and what's segment, buckets, the if that mentioned pie would there look any we chart are big the did you like? commercial, that what on if So yacht other just rough

John Batten

can yacht government. crafts I And that expansion that quarters next military it's the of is and is So it's again, X pleasure year XXX% X us now based and take Asia I the flip would flop to to then and be biggest going going -- with so is, bucket grown quarter, Europe. if or bucket smaller you the and are America be would going to for biggest say, with be best on And mega the then a and upon into the pie chart, percentage depending the Commercial Marine the market. North and

our transmissions but revenue-generating X far marine, for and #X those by market, commercial we the disk build are whether in -- that traditional vessels it's are #X market Revenue-generating best biggest our thrusters. the vessels . away market. marine twin So

Barry Haimes

Right. that And size? . and craft pleasure at is in go down very the high end the is terms of just or

John Batten

business. as -- stronger it IPS like XX below our up in pretty XX-foot be that's our feet, bottom spot. now to get boats up stronger is XXX XX and twin built things And craft Volvo the to Grand and to we Banks, is you pleasure go gave range probably we Australia, and fish in our it XX-foot folks that's outer yacht, everything market going start It up from core sport be much and outboard to and diesel, a down, that goes just are probably you end for engine above, feet, as of the out in get could you banks, our XX that XX feet to Riviera that Maratimo sweet

Operator

and the for Thank concludes section today's this conference And you question-and-answer participation. call. your

You now disconnect. may

Twin Disc (TWIN) 15 Aug 242024 Q4 Earnings call transcript