Twin Disc(US:TWIN)2021-05-01 17:00Financial Data and Key Metrics Changes - Sales for Q3 2021 were $57.6 million, down $11 million or 16% from the prior year [15] - Gross profit margin for Q3 was 24.2%, slightly up from 24.1% in the prior year [17] - Net profit for Q3 was $100,000 or $0.01 per diluted share, compared to a net loss of $25.2 million or $1.92 per diluted share in the prior year [22] - EBITDA for Q3 was $3.8 million, improved from negative $24.9 million in the prior year [23] Business Line Data and Key Metrics Changes - Transmission sales were down 13.4%, industrial sales down 14.8%, and marine and propulsion sales down 23.2% compared to the prior year [15] - The decline in aftermarket volume and shipments into the North American oil and gas markets contributed to the less profitable mix of revenues [17] Market Data and Key Metrics Changes - Sales in North America were down 29%, Europe down 10%, and Asia Pacific down 6% [16] - Foreign currency exchange had a net positive impact of $3.9 million on sales in Q3 [16] Company Strategy and Development Direction - The company is focusing on cost reduction opportunities to compensate for revenue declines [19] - There is a strong emphasis on R&D and project activity in hybrid and electrification, with plans to roll out new products in global and off-highway markets [12][30] - The company plans to modernize its facilities and implement cost reduction activities as travel restrictions ease [28] Management's Comments on Operating Environment and Future Outlook - Management noted that April orders rebounded, indicating an improvement in market share throughout the calendar year [27] - The company is optimistic about the recovery of North American oil and gas rebuild activities and expects to see new unit orders by late summer or early fall [34][27] - Management acknowledged ongoing supply chain issues but indicated that the impact on margins was being mitigated [39][40] Other Important Information - The company recorded restructuring charges of $251,000 in Q3, primarily related to cost structure adjustments [20] - Inventory was down $5.5 million in the quarter, reflecting a focus on liquidity and cash flow [24] Q&A Session Summary Question: When will there be a more pronounced uptake in new equipment for oil and gas? - Management anticipates rebuild activity to continue for the next quarter, with new units expected by late summer or early fall [34] Question: Will the company have products to serve the demand for hybrid or electric tracking equipment? - Management confirmed that they are working on products to meet this demand and hope to provide updates in future calls [35] Question: What incremental gross margins can be expected as the market recovers? - Management expects incremental gross margins to be in the mid-30s as markets recover, with potential for higher margins if weighted towards North American oil and gas [36] Question: Can you quantify the impact of supply chain issues on margins? - Management indicated that the impact was not significant in the current quarter but acknowledged that costs would be felt in the coming months [39] Question: Will the company be able to produce to end market demand this quarter? - Management stated that they are currently able to meet demand and have scheduled container ships arriving in late May [46] Question: How does the proposed California fracking ban affect the company? - Management expressed that the company’s exposure to California is minimal and does not concern them significantly [50]