Twin Disc(US:TWIN)2022-02-02 21:14Financial Data and Key Metrics Changes - Sales for the quarter were just under $60 million, an increase of $11.3 million or 23.3% from the prior year and up $12.1 million or 25.4% from the previous quarter [15][16] - The second quarter margin percentage improved to 22.5% compared to 18.3% in the prior year, driven by increased revenue and a more profitable product mix [16] - The net loss for the second quarter was $3.8 million or $0.29 per diluted share, compared to a net loss of $4.3 million or $0.33 per diluted share in the prior year [20] Business Line Data and Key Metrics Changes - Industrial product shipments increased by 46%, marine and propulsion shipments rose by 14.5%, and off-highway transmission sales grew by 13.4% for the second quarter [15] - Marketing, engineering, and administrative costs increased by $1.9 million or 14% compared to the prior year, primarily due to increased salaries and benefits [17] Market Data and Key Metrics Changes - Sales into North America were up 30%, Asia Pacific sales increased by 17%, and European sales rose by 5% [16] - The Australian marine market, particularly for pleasure craft, continued to show elevated demand, with significant unit orders for marine transmissions [8] Company Strategy and Development Direction - The company anticipates improving conditions in North American oil and gas and aims to match internal and supply chain capacity to meet increasing demand [23] - There is a focus on hybrid and electrification applications, with ongoing R&D and engineering activity [24] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain challenges remain, but there is optimism about demand recovery in various markets, including oil and gas and marine [11][23] - The company is hopeful that inflationary pressures may stabilize, allowing for better pricing strategies moving forward [42] Other Important Information - The company recorded restructuring charges of $1.2 million related to a Belgian restructuring program, expected to drive annualized savings of approximately $1.6 million once complete [19] - Inventory increased by $9 million in the first half, primarily due to supply chain imbalances [21] Q&A Session Summary Question: Oil and gas market outlook and order trajectory - Management indicated that conversations with OEMs are ongoing, and they expect new unit orders to improve within the next three to six months based on historical cycles [29] Question: Price increase and surcharge impact - Management explained that the recent price increases and surcharges are aimed at maintaining gross margins amid rising costs, with expectations to return to gross margins above 25% in the second half [35][36] Question: Backlog pricing and margin impact - The backlog will be shipped at higher prices due to recent price increases, which should positively impact current margins [40] Question: Labor constraints and growth - Management acknowledged challenges in growing the workforce, particularly in North America, but noted improvements in the situation [63] Question: Cash flow expectations - The company expects to be free cash flow positive in the second half of the fiscal year, despite some challenges in the first half [56]