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].

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]

Financial Data and Key Metrics Changes - The company reported sales of $89.9 million for Q2 2025, reflecting a 23.2% year-over-year increase, driven by a $10 million incremental benefit from the Casa acquisition [4][17] - Net income attributable to Twin Disc was $900,000 or $0.07 per diluted share, compared to a net loss of $900,000 or $0.07 per diluted share in Q2 2024 [18] - Gross profit margin decreased to 24.1% from 28.3% in the prior year, with gross profit increasing 5% to $21.7 million [19][21] - EBITDA increased to $6.3 million in Q2, up 13.5% compared to Q2 2024 [21] Business Line Data and Key Metrics Changes - Marine propulsion segment sales grew 23.9% year-over-year, driven by strong demand for VET products [6][19] - Land-based transmission sales increased 19.8% year-over-year, supported by strong demand in airport rescue and firefighting transmission [8][19] - The industrial segment grew 44.8% year-over-year, driven by the addition of Casa and a rebound in Lufkin orders [11][19] Market Data and Key Metrics Changes - The company experienced a decline in oil and gas exports, which accounted for a little under 8% of revenue for the quarter, down about 24% year-over-year [34] - Increased sales were noted in Europe due to the Casa acquisition and a larger proportion of sales from North America, particularly in VET projects [20] Company Strategy and Development Direction - The company is focused on integrating Casa to enhance engineering capabilities and market reach, particularly in Europe and North America [5][14] - There is a commitment to capitalizing on cross-selling opportunities, optimizing shared cost efficiencies, and maintaining strong execution [5][15] - The company aims to balance disciplined external investments with internal initiatives to ensure sustained growth and shareholder value creation [24][27] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing strength in shipments of VET products and a healthy backlog across all end markets [6][10] - The company is optimistic about the stabilization of its industrial business and anticipates momentum in oil and gas as quoting activity increases [10][12] - Management emphasized a focus on higher-margin products and services while maintaining pricing discipline [22][27] Other Important Information - The company is committed to generating consistent cash flow and maintaining leverage within a comfortable range [23] - There is a focus on research and development to drive innovation and expand market presence [24] Q&A Session Summary Question: Can you quantify how much your oil and gas business is this quarter and how much was it down year over year? - The oil and gas business accounted for a little under 8% of revenue for the quarter, down about 24% compared to the prior year Q2 [34] Question: Is the quoting activity primarily from North America or Asia? - The quoting activity is from both North America and Asia, as well as some South American activity [36] Question: Can you refresh your CapEx outlook for the year and your free cash flow target? - The company targets to convert 60% of EBITDA to free cash flow, with Q2 free cash flow at about $6.4 million. CapEx is projected to be in the range of $12 to $14 million for the second half of the year [41][43] Question: Any new products or technologies being commercialized this year? - There are no specific new products or technologies ready to be discussed, but the company continues to focus on the hybrid electric market [45] Question: Any updates on the electric track fleet product? - The electric track fleet product remains stable, with no significant news to report for the quarter [49]

Financial Data and Key Metrics Changes - The company reported second quarter sales of $89.3 million, reflecting a 23.2% year-over-year increase [4] - Net income attributable to the company was $900,000 or $0.07 per diluted share, compared to a net loss of $900,000 or $0.07 per diluted share in the same quarter of the previous year [13] - Gross profit margin decreased to 24.1% from 28.3% in the prior year, with gross profit increasing by 5% to $21.7 million [14][16] Business Line Data and Key Metrics Changes - Marine and Propulsion segment sales grew 23.9% year-over-year, driven by strong demand for Veth products [5][6] - Land Based Transmission sales increased by 19.8% year-over-year, supported by strong demand in the airport rescue and firefighting transmission business [8] - The Industrial segment saw a significant growth of 44.8% year-over-year, aided by the addition of Casa and a rebound in Lufkin orders [9][10] Market Data and Key Metrics Changes - The company experienced a decline in Oil and Gas exports, down about 24% year-over-year, accounting for a little under 8% of revenue for the quarter [24] - Sales in Europe increased due to the acquisition of Casa, while North American markets benefited from strength in Veth projects [15] Company Strategy and Development Direction - The company is focused on capitalizing on cross-selling opportunities, optimizing shared cost efficiencies, and maintaining strong execution [5] - The integration of Casa is expected to enhance engineering capabilities and market reach, particularly in Europe and North America [11] - The company aims to balance disciplined external investments with internal initiatives to ensure sustained growth and shareholder value creation [18] Management's Comments on Operating Environment and Future Outlook - Management noted a healthy backlog across all end markets and expressed optimism about the continued stabilization of the industrial business [5][10] - The company is committed to disciplined inventory management and optimizing costs to enhance profitability [17] - Management highlighted a renewed level of activity in the Oil and Gas market, although it is still early to draw definitive conclusions [27] Other Important Information - The company reported a cash balance of $15.9 million, which is 20.4% lower than the prior year [16] - Operating cash generation was strong at $4.3 million for the quarter, with EBITDA increasing to $6.3 million, up 13.5% year-over-year [16] Q&A Session Summary Question: Can you quantify how much your Oil and Gas business is this quarter? - The Oil and Gas business accounted for a little under 8% of revenue for the quarter and was down about 24% year-over-year [24] Question: Is the quoting activity primarily from North America or Asia? - Quoting activity is from both North America and Asia, as well as some South American activity [25] Question: Are you seeing a renewed level of activity in the Oil and Gas market? - There has been an increased level of activity and some new potential projects, indicating a renewed level of activity in that market [27] Question: What is your CapEx outlook for the year? - The company is targeting a CapEx range of $12 million to $14 million for the second half of the year [29] Question: Are you still targeting to convert 60% of your EBITDA to free cash flow? - The company aims to convert 60% of EBITDA to free cash flow, with Q2 showing a bounce back in free cash flow above $6.4 million [28] Question: Is there anything new being commercialized this year that will contribute to growth? - The focus remains on the hybrid electric market, with ongoing development and increasing traction, but no specific new products were ready to be discussed [31] Question: Any updates on the electric frac fleet pilot? - The electric frac fleet pilot is stable and ongoing, with no significant news to report for the quarter [34]

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 ...

Financial Performance - Net sales for the second quarter increased 23.2%, or $16.9 million, to $89.9 million compared to $73.0 million in the same quarter last year[89] - For the first half of fiscal 2025, net sales increased 19.2%, or $26.3 million, to $162.8 million from $136.5 million in the same period a year ago[96] - The European region saw a significant revenue increase of $19.5 million or 41.6% due to the acquisition of Katsa[96] Expenses and Profitability - Gross profit as a percentage of sales for the second quarter declined to 24.1%, down from 28.3% in the same period last year, primarily due to a non-cash inventory write-down of $1.6 million[92] - Marketing, engineering, and administrative expenses increased by $1.7 million (9.9%) over the same period last fiscal year, with ME&A expenses as a percentage of sales at 21.0% compared to 23.6% last year[93] - Interest expense increased by $0.1 million to $0.5 million in the second quarter due to a higher average outstanding revolver balance following the Katsa acquisition[94] - The effective tax rate for the fiscal 2025 second quarter was 58.5%, down from 64.0% in the prior fiscal year[95] Cash Flow and Liquidity - Cash decreased by $4.2 million to $15.9 million as of December 27, 2024, compared to $20.1 million as of June 30, 2024[105] - The Company remains in compliance with its liquidity and other covenants, with available cash and credit expected to meet future capital requirements[118] Assets and Liabilities - Trade receivables decreased by $1.5 million, or 2.8%, compared to last fiscal year-end, with trade receivables as a percentage of sales at 59.7% in the second quarter[106] - Inventories decreased by $2.2 million, or 1.7%, to $128.3 million, with a backlog of orders approximating $124.0 million, down from $133.7 million at June 30, 2024[107] - Accounts payable decreased by $4.0 million, or 12.3%, to $28.6 million, primarily due to inventory reduction during the second quarter[109] - Total borrowings and long-term debt decreased by $0.9 million to $24.9 million, with a net debt of $9.0 million, compared to $5.7 million at June 30, 2024[110] - Total equity decreased by $7.4 million, or 4.8%, to $147.6 million, impacted by a net loss of $1.7 million and dividends paid of $1.1 million[111] Capital Expenditures and Investments - Net property, plant and equipment increased by $0.4 million (0.7%) to $58.5 million, with capital spending of $5.1 million in the first half and an expected total investment of $12 to $15 million in fiscal 2025[108] - The Company is focused on modernizing manufacturing processes and improving efficiencies globally as part of its capital program[108] Debt and Financial Stability - The Credit Agreement allows for a Term Loan of up to $20.0 million and Revolving Loans of up to $45.0 million, with a maturity date extended to April 1, 2027[112] - The Company’s Total Funded Debt to EBITDA ratio may not exceed 3.50 to 1.00, ensuring financial stability[114] - The Company expects to contribute $0.5 million to postretirement benefits and defined benefit pension plans in fiscal 2025[119]

Sales Performance - Sales for the fiscal 2025 second quarter increased 23.2% year-over-year to $89.9 million, driven by a $10.0 million incremental benefit from Katsa Oy[5] - Organic sales increased 10.1%, attributed to strength in the Marine and Propulsion Systems and Industrial product segments[5] - Organic net sales for the quarter were $79,579,000, up from $72,243,000 in the same quarter of 2023, indicating a growth of approximately 10.5%[26] Profitability - Gross profit increased 5.0% to $21.7 million, while gross margin decreased approximately 420 basis points to 24.1% due to inventory write-downs and unfavorable product mix[7] - EBITDA increased 13.5% year-over-year to $6.3 million, reflecting solid operational performance[10] - EBITDA for the quarter was $6,262,000, compared to $5,519,000 in the prior year, representing an increase of about 13.5%[22] - The company reported a net loss of $1,673,000 for the quarter, compared to a net loss of $148,000 in the same quarter of 2023[30] Expenses and Liabilities - Marketing, engineering and administrative expenses increased by 9.9% to $18.9 million, primarily due to the addition of Katsa[8] - Depreciation and amortization expenses increased to $6,534,000 from $5,023,000, reflecting a rise of about 30%[30] - Current liabilities increased to $102,658,000 from $99,516,000, showing a growth of approximately 2.2%[28] Cash Flow and Debt - Cash decreased 24.3% to $15.9 million, while total debt increased 40.5% to $24.9 million, primarily due to the Katsa acquisition[11] - Total debt increased to $24,873,000 as of December 27, 2024, from $17,698,000 in the prior year, while net debt rose to $8,967,000 from a net cash position of $(3,323,000)[24] - Cash and cash equivalents decreased to $15,906,000 from $21,021,000 year-over-year, indicating a decline of approximately 24.5%[28] Order Backlog and Market Outlook - The backlog of orders to be shipped over the next six months is approximately $124.0 million, supported by strong ongoing order activity[11] - The industrial segment has started to recover, with improving order rates through the quarter[3] - The company aims to enhance its business and explore additional growth opportunities while focusing on hybrid and electric solutions[4] Dividends and Assets - The company paid dividends of $1,136,000 during the quarter, compared to $560,000 in the same quarter of the previous year, marking an increase of 102.9%[30] - Total assets decreased to $307,360,000 from $312,058,000, reflecting a decline of about 1.5%[28] Net Income - Net income attributable to Twin Disc was $0.9 million, or $0.07 per diluted share, consistent with the prior year[10] - Net income attributable to Twin Disc for the quarter ended December 27, 2024, was $919,000, compared to $930,000 for the same period in 2023, reflecting a slight decrease[22]