Twin Disc(US:TWIN)2022-09-01 16:47Financial Data and Key Metrics Changes - Sales for Q4 2022 were $76 million, an increase of nearly $10 million or 15% year-over-year, and up $16.7 million or 28.1% from the previous quarter [12] - The fourth quarter margin percentage improved to 31.8% from 27.7% in the prior year, driven by increased revenue and a more profitable product mix [13] - Net profit for fiscal 2022 was $8.1 million or $0.60 per diluted share, compared to a net loss of $29.7 million or $2.24 per diluted share for fiscal 2021 [16] Business Line Data and Key Metrics Changes - Industrial products sales improved by nearly 42% compared to the prior year, while off-highway transmission sales grew by 21.4% and marine propulsion sales were up by 6.7% [12] - The oil and gas business accounted for approximately 20% to 25% of total sales in the quarter, translating to about $15 million to $18 million [36][37] Market Data and Key Metrics Changes - Sales in North America increased by 28%, while Asia Pacific saw a 40% rise; however, Europe experienced a decline of 15% [13] - Foreign currency exchange had a negative impact of $5.1 million on sales for Q4 and $8.5 million for the full year [13] Company Strategy and Development Direction - The company is focusing on improving its global footprint and has plans for facility relocations in Europe to enhance operational efficiency [10] - There is a strong emphasis on developing hybrid and electric propulsion systems, as evidenced by the collaboration with Hinckley on the SilentJet project [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the backlog, which is up 40% year-over-year, and noted strong demand in oil and gas, marine, and industrial markets [20] - Concerns remain regarding global supply chain issues and the impact of rising energy prices in Europe [20] Other Important Information - The company recorded a restructuring benefit of $600,000 during the quarter, contributing to an operating profit of $7.8 million compared to an operating loss of $5 million in the prior year [15] - Capital spending for the year was $4.7 million, significantly less than intended due to lead times on machine tools [18] Q&A Session Summary Question: Can you help us unpack how much of the gross margin improvement was price versus mix? - Management indicated that about $3 million of the increased gross profit was volume-related, with $2 million from a combination of mix and price, where approximately $1.5 million was mix-driven [24] Question: Can you discuss the impact of elevated fuel prices on your marine customers? - Management noted that higher fuel prices could dampen demand in the pleasure craft market, but there is a growing trend towards hybrid and electric options [26] Question: Are you still comfortable with the timeline for deliveries in oil and gas? - Management confirmed that they were able to take orders and ship in the fourth quarter, with more orders expected to ship in the first and second quarters of 2023 [29] Question: What are your expectations for free cash flow in 2023? - Management anticipates free cash flow in the range of $3 million to $5 million, depending on capital expenditure programs and inventory management [33] Question: How much of the oil and gas business was related to new equipment versus consumables? - Management estimated that about 20% to 25% of the quarter's sales were oil and gas related, with approximately half of that being new units [36][39]