Core Insights - Twin Disc, Incorporated (TWIN) shares have increased by 6.2% since the fiscal third quarter results, outperforming the S&P 500 index which rose by 0.6% during the same period [1] - The company reported a net loss of 11 cents per share in the fiscal third quarter, compared to a net income of 27 cents per share in the previous year [2] - Net sales increased by 9.5% year-over-year to $81.2 million, driven by the Marine and Propulsion Systems and Industrial segments, along with contributions from recent acquisitions [2] - Despite revenue growth, profitability declined sharply with a net loss of $1.5 million compared to a net income of $3.8 million a year ago [3] - EBITDA fell by 42.7% to $4 million from $7 million, attributed to lower operating income, foreign currency losses, and higher pension-related amortization [3] Financial Performance - Gross profit rose to $21.7 million from $20.9 million, but gross margin decreased by approximately 150 basis points to 26.7% due to an unfavorable product mix [4] - Operating income dropped to $2 million from $3.6 million, impacted by a 13.2% increase in marketing, engineering, and administrative expenses [4] - The six-month order backlog increased to $133.7 million from $124 million, indicating stable demand across product categories [6] Regional and Segment Performance - Europe captured a larger share of revenue aided by the Katsa acquisition, while North America saw strong demand in the Marine and Propulsion segment [5] - Industrial sales surged by 56.2% to $9.7 million, while Land-Based Transmissions declined by 6.9% to $17.8 million [5] Management Insights - The CEO emphasized sequential margin improvement and strength in core marine markets, particularly in North America and Europe [7] - The CFO highlighted positive operating cash flow of $7.5 million and disciplined cost control efforts, despite foreign exchange volatility impacting earnings [8] Strategic Developments - Twin Disc completed the acquisition of Kobelt, aligning with its strategic goals to strengthen its industrial and marine technology portfolio [11] - The company's capital allocation strategy focuses on bolt-on acquisitions, debt reduction, and dividends, returning $1.7 million to shareholders during the quarter [11]

Company Overview - Twin Disc, Inc. designs, manufactures, and sells marine and heavy-duty off-highway power transmission equipment [2] - The product range includes marine transmissions, azimuth drives, surface drives, propellers, boat management systems, power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, and control systems [2] - The company serves customers in pleasure craft, commercial and military marine markets, as well as energy and natural resources, government, and industrial markets [2] - Sales are conducted through a direct sales force and a distributor network, targeting both domestic and foreign customers [2] Recent Developments - Twin Disc's CEO John Batten and CFO Jeff Knutson will attend the D. Boral Inaugural Global Conference on May 14 in New York City [1] - Executives from Twin Disc will be available for one-on-one meetings with registered investors during the conference [1]

Twin Disc (TWIN) Q3 2025 Earnings Call May 07, 2025 09:00 AM ET Company Participants Jeffrey Knutson - VP of Finance, CFO, Treasurer & SecretaryJohn Batten - CEO & PresidentDavid Macgregor - President Operator Thank you for standing by. My name is Alex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Twin Disc, Inc. Fiscal Third Quarter twenty twenty five Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker ...

Financial Data and Key Metrics Changes - The company reported sales of $81.2 million, an increase of approximately 10% compared to the prior period, with strong gross margins reaching 26.7% [5][16] - On an organic basis, revenue increased by 1.7%, driven by continued strength in the Veth product line, despite softened oil and gas shipments to China [5][6] - The net loss attributable to the company for the quarter was $1.5 million, or a loss of $0.11 per diluted share, compared to net income of $3.8 million, or $0.27 per diluted share in the prior year [16][17] - Gross profit margin improved sequentially from 24.1% to 26.7%, reflecting enhanced operational efficiencies and an improved product mix [17] Business Line Data and Key Metrics Changes - The Marine and Propulsion segment saw sales increase by 10.7%, largely due to acquisitions and robust demand in commercial marine and luxury yacht markets [8][10] - The Industrial segment showed stable performance, supported by positive contributions from recent acquisitions, with a backlog strengthening to approximately $134 million [11][12] - The land-based transmission business remained strong, driven by demand in the airport and firefighting markets [10] Market Data and Key Metrics Changes - Geographic sales growth was notable in European markets, benefiting from recent acquisitions and continued strength in marine-related projects [17] - The company noted stable volumes in China, although tariff uncertainties have led to a more measured pace in new build activity [11] Company Strategy and Development Direction - The company continues to execute its long-term strategy of global footprint optimization, operational excellence, and strategic acquisitions [13] - Recent acquisitions of Katsa and Cobalt are aimed at expanding engineering capabilities and enhancing market reach [13] - The company is strategically positioned to capitalize on growing customer interest in electrification and hybrid propulsion systems [10][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth trajectory, supported by a robust backlog and disciplined capital allocation [20] - The company remains vigilant in managing potential tariff impacts and global market uncertainties, leveraging operational flexibility [20] - Management anticipates continued positive margin trends driven by product mix and ongoing operational improvements [18] Other Important Information - The company estimates approximately $500,000 of tariff-related impact for the upcoming fourth quarter, representing roughly 1% of the cost of goods sold [7] - The company is actively evaluating alternative sourcing options to limit potential exposure to tariffs [7] Q&A Session Summary Question: Order patterns and backlog stability - Management noted that there have been no significant cancellations in marine orders, with order rates showing a strengthening trend [26][27] - The backlog was reported to be stable, with expectations of increasing orders in North America and Europe, particularly for patrol boats and military applications [27][28] Question: Mitigating circumstances around pricing and tariffs - Management indicated proactive measures regarding pricing and sourcing strategies to mitigate tariff impacts, with expectations of minimal impact on Q4 margins [30][31] Question: Insights on CoBelt acquisition - Management expressed optimism about replicating the success of previous acquisitions, with significant growth potential identified in CoBelt's product offerings [33][34] Question: Enhanced operational efficiencies - Management highlighted efforts in improving assembly processes and sourcing strategies to drive profitability, particularly for high-demand products [39][40]

[Part I. FINANCIAL INFORMATION](index=2&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for Q3 and nine months ended March 28, 2025, with notes on acquisitions, segments, and debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 28, 2025 | June 30, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$332,882** | **$312,058** | | Total Current Assets | $231,968 | $219,631 | | **Total Liabilities** | **$182,693** | **$157,004** | | Total Current Liabilities | $109,857 | $99,516 | | Long-term Debt | $37,774 | $23,811 | | **Total Equity** | **$150,189** | **$155,054** | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $81,242 | $74,161 | $244,060 | $210,709 | | Gross Profit | $21,706 | $20,940 | $62,708 | $58,233 | | Income from Operations | $1,947 | $3,602 | $4,542 | $6,758 | | Net (Loss) Income Attributable to Twin Disc | $(1,472) | $3,822 | $(3,317) | $3,579 | | Diluted (Loss) Income Per Share | $(0.11) | $0.27 | $(0.24) | $0.26 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended March 28, 2025 | Nine Months Ended March 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,531 | $22,273 | | Net cash used by investing activities | $(23,970) | $(7,765) | | Net cash provided (used) by financing activities | $10,189 | $(5,083) | | **Net change in cash** | **$(3,825)** | **$10,580** | - The company completed the acquisition of **100%** of the outstanding common stock of Kobelt Manufacturing Co. Ltd. on February 14, 2025, a Canadian manufacturer of controls, propulsion, steering, and braking systems[14](index=14&type=chunk)[22](index=22&type=chunk) [Note B: Acquisition of Kobelt Manufacturing Co. Ltd.](index=7&type=section&id=B.%20Acquisition%20of%20Kobelt%20Manufacturing%20Co.%20Ltd.) Details the February 14, 2025 acquisition of Kobelt Manufacturing for **$16.6 million**, including financing and provisional purchase price allocation - The acquisition of Kobelt was completed on February 14, 2025, for an aggregate cash payment of approximately **$16,586 thousand**[22](index=22&type=chunk)[23](index=23&type=chunk) - The acquisition was partially financed through a new **$6,500 thousand** credit agreement with BMO Harris Bank N.A[24](index=24&type=chunk) Preliminary Purchase Price Allocation (in thousands) | Account | Amount | | :--- | :--- | | Total consideration | $16,960 | | Total identified net assets acquired | $14,829 | | **Goodwill** | **$2,131** | [Note F: Business Segments](index=11&type=section&id=F.%20Business%20Segments) Analyzes Manufacturing and Distribution segments, noting Q3 FY2025 sales and net income changes Net Sales by Segment (in thousands) | Segment | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Manufacturing | $72,484 | $62,640 | $212,265 | $175,545 | | Distribution | $30,138 | $37,022 | $95,448 | $107,117 | Net Income (Loss) by Segment (in thousands) | Segment | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Manufacturing | $1,574 | $5,662 | $6,574 | $9,298 | | Distribution | $1,738 | $3,248 | $3,918 | $7,427 | Total Net Sales by Product Group - Q3 2025 (in thousands) | Product Group | Total Net Sales | | :--- | :--- | | Industrial | $9,734 | | Land-based transmissions | $17,776 | | Marine and propulsion systems | $49,298 | | Other | $4,434 | | **Total** | **$81,242** | [Note K: Long-term Debt](index=18&type=section&id=K.%20Long-term%20Debt) Details the increase in long-term debt to **$40.8 million** for acquisitions and the terms of the new **$50 million** credit agreement Long-term Debt Composition (in thousands) | Debt Component | March 28, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Revolving loans | $25,751 | $16,288 | | Term loan | $15,000 | $9,500 | | **Subtotal** | **$40,774** | **$25,811** | - On February 14, 2025, the company entered into a new credit agreement that refinanced and replaced the prior agreement, increasing the term loan to **$15 million** and the revolving credit commitment to **$50 million**[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - The credit agreement requires the company to maintain a Total Funded Debt to EBITDA ratio not exceeding **3.50 to 1.00** and a Fixed Charge Coverage Ratio of at least **1.10 to 1.00**[72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial performance, highlighting **9.5%** Q3 net sales growth from acquisitions, gross margin decline, and liquidity changes [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Examines Q3 FY2025 net sales growth of **9.5%** to **$81.2 million** from acquisitions and a gross margin decline to **26.7%** Q3 Fiscal 2025 vs Q3 Fiscal 2024 (in thousands) | Metric | Q3 2025 | Q3 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $81,242 | $74,161 | +9.5% | | Gross Profit | $21,706 | $20,940 | +3.7% | | Gross Margin | 26.7% | 28.2% | -1.5 p.p. | | Income from Operations | $1,947 | $3,602 | -46.0% | - The acquisitions of Katsa Oy and Kobelt contributed **$7.1 million** and **$1.2 million** of additional revenue in the quarter, respectively[121](index=121&type=chunk) - The decline in gross profit percentage is primarily attributed to a less favorable product mix and purchase accounting amortization related to the recent acquisitions[124](index=124&type=chunk) - For the first nine months of FY2025, net sales increased **15.8%** to **$244.1 million**, with acquisitions contributing **$27.5 million** in revenue[128](index=128&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=32&type=section&id=Financial%20Condition%2C%20Liquidity%20and%20Capital%20Resources) Assesses financial position, noting cash decrease, debt increase for acquisitions, and stable order backlog - Total borrowings and long-term debt increased by **$15.0 million** to **$40.8 million**, mainly to finance the Kobelt acquisition[141](index=141&type=chunk) - Inventories increased by **$7.5 million (5.7%)** to **$138.0 million**, with the Kobelt acquisition accounting for a **$6.0 million** increase[138](index=138&type=chunk) - The company's order backlog to be shipped over the next six months is approximately **$133.7 million**, consistent with the level at June 30, 2024[138](index=138&type=chunk) - Management believes existing liquidity sources are adequate to fund the company's cash and capital requirements for the foreseeable future[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 28, 2025, with no material changes to internal control - The CEO and CFO concluded that the company's disclosure controls and procedures are effective in ensuring timely and accurate reporting[167](index=167&type=chunk) - No material changes were made to the company's internal control over financial reporting during the most recent fiscal quarter[168](index=168&type=chunk) [Part II. OTHER INFORMATION](index=38&type=section&id=Part%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Discusses ongoing product liability claims, which management deems not material to the company's financial condition - Ongoing product liability claims are not expected to have a material impact on the company's business or financial condition[170](index=170&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Identifies new risk factor concerning tariffs and trade policies, potentially impacting operations, costs, and margins - The company has identified a new risk related to tariffs and trade policies, which could materially and adversely impact business operations, costs, and margins[172](index=172&type=chunk)[173](index=173&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered equity sales or share repurchases, with **315,000** shares remaining authorized for buyback - No shares were purchased under the company's stock repurchase program during the quarter[176](index=176&type=chunk) - As of March 28, 2025, **315,000** shares remain authorized for purchase under the company's stock buyback plans, which have no expiration date[176](index=176&type=chunk)

Financial Performance - Sales for the fiscal 2025 third quarter increased 9.5% year-over-year to $81.2 million, driven by the addition of Katsa Oy and Kobelt, along with strength in the Marine and Propulsion Systems and Industrial product segments [5]. - Gross profit increased 3.8% to $21.7 million, while gross margin decreased approximately 150 basis points to 26.7% due to an unfavorable product mix [7]. - Net loss attributable to Twin Disc was ($1.5) million, or ($0.11) per diluted share, compared to net income of $3.8 million, or $0.27 per diluted share, for the same quarter last year [10]. - EBITDA for the third quarter was $4.0 million, down 42.7% compared to the third quarter of fiscal 2024 [10]. - Organic net sales for the quarter ended March 28, 2025, were $75,430 thousand, a slight increase from $74,161 thousand in the same quarter of 2024 [26]. Order Backlog and Market Activity - The six-month backlog of orders increased to approximately $133.7 million, compared to $124.0 million at the end of the second quarter [11]. - The company reported a healthy six-month backlog supported by strong ongoing order activity across key markets [9]. - Strong order activity for Veth continues to be driven by demand in the luxury yacht and riverboat vessels [3]. Expenses and Cash Flow - Marketing, engineering, and administrative expenses increased by $2.3 million, or 13.2%, to $19.4 million, primarily due to the addition of Katsa and Kobelt [8]. - Cash provided by operating activities for the three quarters ended March 28, 2025, was $7,531 thousand, down from $22,273 thousand for the same period in 2024 [30]. - The company incurred depreciation and amortization expenses of $10,194 thousand for the three quarters ended March 28, 2025, compared to $7,497 thousand for the same period in 2024 [30]. - Cash at the end of the period was $16,245 thousand, down from $20,070 thousand at the beginning of the period [30]. Debt and Liabilities - Cash decreased 19.1% to $16.2 million, while total debt increased 139.3% to $40.8 million, primarily due to higher long-term debt related to acquisitions [11]. - Total debt increased to $40,774 thousand as of March 28, 2025, from $17,042 thousand as of March 29, 2024 [24]. - Total liabilities increased to $182,693 thousand as of March 28, 2025, from $157,004 thousand as of June 30, 2024 [28]. Acquisitions and Strategic Focus - The company remains focused on integrating recent acquisitions and advancing its strategic priorities in hybrid and electric marine solutions [4]. - The company acquired Kobelt, resulting in an investment of $16,346 thousand during the three quarters ended March 28, 2025 [30]. Inventory and Write-downs - The company reported a loss on the write-down of industrial product inventory amounting to $1,579 thousand for the three quarters ended March 28, 2025 [30].

TWIN DISC, INC Investor Presentation DISCLOSURES Safe Harbor Statement This presentation contains statements that are forward-looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management's current expectations that are based on assumptions that are subject to risks and uncertainties. Actual results may vary because of variations between these assumptions and actual performance. Investors are referred to Twin Disc's fiscal year 2024 An ...

Core Insights - Twin Disc, Inc. reported a solid performance in the third quarter of fiscal 2025, with a 9.5% year-over-year increase in sales to $81.2 million, driven by acquisitions and strong demand in marine propulsion markets [4][8] - The company experienced a net loss of $1.5 million for the quarter, a significant decline from a net income of $3.8 million in the same period last year, primarily due to reduced operating income and increased expenses [9][10] - The six-month backlog of orders increased to $133.7 million, reflecting sustained order activity across key markets [10][11] Financial Performance - Sales increased by 9.5% year-over-year to $81.2 million, with organic revenue growth of 1.7% when excluding acquisitions and foreign currency impacts [4][27] - Gross profit rose 3.8% to $21.7 million, but gross margin decreased by approximately 150 basis points to 26.7% due to an unfavorable product mix [6][8] - Marketing, engineering, and administrative expenses increased by 13.2% to $19.4 million, driven by the addition of Katsa and Kobelt, as well as inflationary impacts [7][8] Product Group Performance - Marine and Propulsion Systems sales increased by 10.7% year-over-year to $49.3 million, while Land-Based Transmissions saw a decline of 6.9% [5] - The Industrial product segment experienced significant growth, with sales up 56.2% to $9.7 million [5] Strategic Focus - The company is focused on integrating recent acquisitions, driving operational efficiencies, and positioning itself as a leader in hybrid and electric marine solutions [3][11] - Twin Disc's diversified geographic footprint and mission-critical portfolio are expected to provide resiliency amid global macroeconomic uncertainties [2][3] Cash Flow and Debt - Operating cash flow for the quarter was $3.4 million, with a healthy backlog supporting future cash generation [8][10] - Total debt increased by 139.3% to $40.8 million, primarily due to higher long-term debt related to acquisitions [10][29]

Core Viewpoint - Twin Disc, Inc. has successfully completed the acquisition of Kobelt Manufacturing Co. Ltd. for $16.5 million, enhancing its product offerings and global reach in the marine and industrial sectors [1][2][4]. Company Overview - Twin Disc, Inc. specializes in power transmission technology for marine and land-based applications, offering products such as marine transmissions, azimuth drives, and hydraulic torque converters [5]. - Kobelt Manufacturing Co. Ltd. is a Canadian company with over 60 years of experience in designing and producing high-quality products for marine and industrial sectors, focusing on propulsion, steering, and braking control systems [6]. Acquisition Details - The acquisition of Kobelt, which generated approximately $14 million in revenue for the year ending December 31, 2024, is expected to be immediately accretive to Twin Disc's U.S. GAAP earnings [3]. - Kobelt's extensive after-sales services and manufacturing capabilities, including an in-house foundry and precision machining, will enhance Twin Disc's quality control and product diversification [2][4]. Strategic Implications - The acquisition is anticipated to expand Twin Disc's international reach and create growth opportunities through enhanced partnerships and a broader product offering [2][4]. - Both companies share a strong reputation and extensive history, which is expected to add value to their combined customer base [4].

Core Insights - Twin Disc reported a net income per share of 7 cents for the second quarter of fiscal 2025, unchanged from the prior year, with sales reaching $89.9 million, a 23.2% year-over-year increase [2][3] - The company experienced a decline in gross profit margins by 420 basis points to 24.1% due to inventory write-downs related to the Katsa Oy acquisition and an unfavorable product mix [3] Segment Performance - Marine and Propulsion Systems segment sales increased by 23.9% year over year to $56.7 million, driven by strong demand in North America, particularly in commercial and luxury yacht applications [4] - Land-Based Transmissions revenues rose 19.8% year over year to $19 million, attributed to strong demand for transmissions used in airport rescue and firefighting vehicles [5] - The Industrial segment saw the strongest growth, with sales surging 44.8% year over year to $9.5 million, partly due to contributions from Katsa Oy and increased orders from the Lufkin facility [6] - Revenues from Other Products decreased by 1.8% year over year to $4.8 million [7] Management Commentary - CEO John Batten emphasized the focus on integrating Katsa Oy and capitalizing on cross-selling opportunities, particularly in Europe and North America, with strong demand for hybrid and electric propulsion systems [8] - CFO Jeff Knutson acknowledged near-term margin pressures due to inventory rationalization but expressed confidence in improving operational efficiencies and reducing costs [9] Financial Position - Twin Disc reported a six-month backlog of $124 million, down from $144.3 million in the prior quarter, attributed to strong shipments rather than weakening demand [10] - Cash levels decreased by 24.3% year over year to $15.9 million, while total debt increased by 40.5% to $24.9 million, primarily due to the Katsa acquisition [10] Capital Allocation and Guidance - Management plans to spend approximately $12 million to $14 million on capital expenditures for fiscal 2025, with increased investment expected in the second half of the year [11] - The company aims to convert 60% of EBITDA into free cash flow, although management acknowledged challenges in achieving this target due to weaker first-quarter performance [11] Other Developments - Twin Disc is exploring strategic acquisitions aligned with its core expertise in industrial and marine technology, with a focus on integrating Katsa Oy and enhancing operational synergies [12]