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]

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% [6][17] - On an organic basis, revenue increased by 1.7%, reflecting continued strength in the Veth product line, despite softened oil and gas shipments to China [6][17] - 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 [17][18] - Gross profit margin improved sequentially from 24.1% last quarter to 26.7% this quarter, driven by operational efficiencies and an improved product mix [18] Business Line Data and Key Metrics Changes - Marine and Propulsion segment sales increased by 10.7%, largely due to acquisitions and robust demand in commercial marine and luxury yacht markets [10] - The industrial segment showed stable performance, supported by contributions from CASA and initial contributions from COBELT, with a strong backlog of approximately $134 million [12][13] - The oil and gas sector experienced muted newbuild activity, but the aftermarket business remained resilient due to fleet aging and ongoing maintenance needs [11][12] 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 [18] - The company anticipates approximately $500,000 of tariff-related impact for the upcoming fourth quarter, representing roughly 1% of the cost of goods sold [8][9] Company Strategy and Development Direction - The company continues to execute its long-term strategy of global footprint optimization, operational excellence, and strategic acquisitions [14] - Recent acquisitions of Katsa and Cobalt are aimed at expanding engineering capabilities and enhancing market reach [14][20] - The company is strategically positioned to capitalize on growing customer interest in electrification and hybrid propulsion systems [11][14] 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 [21] - The company remains vigilant in managing potential tariff impacts and global market uncertainties, leveraging operational flexibility [21] - Management highlighted ongoing investments in technology and innovation to drive sustainable growth [21] Other Important Information - The company ended the quarter with a cash balance of $16.2 million, maintaining adequate liquidity [19] - Operating cash flow generation was positive, totaling approximately $3.4 million, positioning the company for a strong fourth quarter [19] Q&A Session Summary Question: Order patterns and backlog stability - Management noted that there have been no significant cancellations in marine orders, with a strengthening trend in order rates [27][28] Question: Mitigating circumstances around tariffs and pricing initiatives - Management indicated proactive measures regarding pricing and sourcing strategies to mitigate tariff impacts, expecting minimal impact on Q4 margins [31][32] Question: Growth potential of COBELT and replication of Veth's success - Management expressed optimism about replicating the success of previous acquisitions, with significant growth potential in various markets [34][36] Question: Enhanced operational efficiencies and margin improvements - Management highlighted efforts in improving assembly processes and sourcing strategies to drive profitability in high-demand products [40][41]

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].

Financial Performance - Q3 sales increased by 9.5% year-over-year to $81.2 million[7] - Organic sales increased by 1.7% year-over-year[7] - Gross margin decreased approximately 150 basis points year-over-year to 26.7%[7] - Q3 EBITDA was $4.0 million, compared to $7.0 million in the previous year; net loss was $1.5 million, compared to a net income of $3.8 million in the previous year[7] - The company's six-month backlog is $133.7 million[7] Sales by Product Group - Marine & Propulsion Systems sales increased by 10.7% year-over-year[11] - Land-Based Transmissions sales decreased by 6.9% year-over-year[15] - Industrial sales increased by 56.2% year-over-year[18] Balance Sheet - Total debt was $40.8 million, and cash was $16.2 million, resulting in net debt of $24.5 million[39] - The leverage ratio is 1.0x, compared to -0.3x in the previous year[42] Geographic Sales Mix - North America accounted for 27% of sales[36] - Europe accounted for 43% of sales[36] - Asia Pacific accounted for 22% of sales[36]

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. is set to release its fiscal 2025 third-quarter results on May 7, 2025, followed by a conference call to discuss the results with the investment community [1]. Company Overview - Twin Disc, Inc. designs, manufactures, and sells marine and heavy-duty off-highway power transmission equipment, including marine transmissions, azimuth drives, surface drives, propellers, and boat management systems [3]. - The company also offers power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, and control systems [3]. - Twin Disc's products are sold primarily to customers in the pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government, and industrial markets [3]. - Sales are conducted through a direct sales force and a distributor network, targeting both domestic and foreign customers [3].

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].