NASDAQ:TWIN Twin Disc Q3 2024 Earnings Report $7.00 +0.17 (+2.49%) Closing price 05/2/2025 04:00 PM EasternExtended Trading$7.54 +0.55 (+7.79%) As of 05/2/2025 07:12 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Twin Disc EPS ResultsActual EPS$0.27Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ATwin Disc Revenue ResultsActual Revenue$74.16 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ATwin Disc Announcement DetailsQuarterQ3 2024Date4/30/2024TimeN/AConference Call DateTuesday, April 30, 2024Conference Call Time11:00AM ETUpcoming EarningsTwin Disc's Q3 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Twin Disc Q3 2024 Earnings Call TranscriptProvided by QuartrApril 30, 2024 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Thank you for standing by. My name is Alex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fiscal 2024 Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:31I would now like to turn the call over to Jeff Knutson, Chief Financial Officer. Please go ahead. Speaker 100:00:41Good morning, and thank you for joining us today to discuss our fiscal 2024 Q3 results. On the call with me today is John Batten, Twin Disc's CEO. I would like to remind everyone that certain statements made during this conference call, especially statements expressing hopes, beliefs, expectations or predictions for the future are forward looking statements. It is important to remember that the company's actual results could differ materially from those projected in such forward looking statements. Information concerning factors that could cause actual results to differ materially from those in forward looking statements are contained in the company's annual report on Form 10 ks, copies of which may be obtained by contacting either the company or the SEC. Speaker 100:01:23Any forward looking statements that are made during this call are based on assumptions as of today, and the company undertakes no obligation to publicly update or revise these statements to reflect subsequent events or new information. During today's call, management will also discuss certain non GAAP financial measures. For a definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results, please see the earnings release issued earlier today. By now, you should have received the news release, which was issued this morning before the market opened. If you have not received a copy, please call our office at 262 638-4000 and we will send the release to you. Speaker 100:02:02Now I'll turn the call over to John. Speaker 200:02:04Good morning, everyone, welcome to our fiscal 2024 Q3 conference call. Let's begin today's call with some highlights. We delivered solid results in the Q3, continuing the trends seen throughout the year. As we continue to capture healthy end market demand, we achieved another quarter of margin expansion as well as robust fleet cash flow generation. These consistent results underscore the long term impact of operational improvements we've made throughout our business in recent years, as well as ongoing tailwinds provided by disciplined working capital management to support overall performance. Speaker 200:02:41In line with our strategic focus on expanding our presence in the industrial and marine technology markets, we are pleased to have announced our recent agreement to acquire Casa Oi, a leading manufacturer of high quality power transmission components and gearboxes based in Finland. This acquisition will broaden Casa's global reach as we've leveraged Twin Disc global sales, distribution and service network, while also generating cross selling opportunities through Casa's existing customer base as we tap into its long standing relationships with leading European OEMs, similar to the dynamic we've achieved with Veth. With our strong balance sheet and flexible financial profile, we will continue to explore similar strategic opportunities to drive sustained growth for Twin Disc. Moving on to results by product group. Sales in Marine and Propulsion Systems increased 3% year over year. Speaker 200:03:33The global commercial markets have remained active, providing a strong foundation for sustained demand. We continue to see an uptick in government defense spending tied to recent geopolitical turmoil, leading to an increase in patrol boat projects and other activities linked to fleet readiness. Veth continues to perform well, supporting overall growth in marine propulsion as the mega yacht market remains strong. We saw a solid 16% sequential increase in 6 month backlog, driving the recent inventory build to support riding demand. This uptick underscores the enduring strength of the vet and roll partnership, which has created an additional competitive edge for TWIN DISC by unlocking additional growth opportunities within both new and established markets. Speaker 200:04:19We also continue to capture increased demand for work boat marine transmissions, particularly in the Asia Pacific region due to the resurgence of projects for inland tugs in the region. A portion of this business is being driven by solid demand for coal tugboats utilized for transporting raw materials and coal from Indonesia to China. We will continue to focus on tapping into these regional opportunities to position the business for further growth. Onto the land based transmission business. Sales decreased 3% year over year, driven in part by sustained exports to the Asian oil and gas markets. Speaker 200:04:53That said, even as sustainable energy is still a focus globally, oil and gas exploration activity remains strong, and we are encouraged by demand in the North American oil and gas market. Additionally, the increasing ARP demand remains quite strong, which we will be even better positioned to capture with the addition of Casa. Similar to last quarter, sales in our Industrial segment remained off, declining 15% year over year. This dip can largely be attributed to reduced demand from our lower horsepower range of our off route. Additionally, while commoditized products have experienced continued weakness, demand for more sophisticated higher content products has been relatively more resilient. Speaker 200:05:34We remain focused on advancing our OEM partnerships, which are crucial for our long term growth strategy and allow us to leverage synergies and reach new markets effectively. Next, I'll speak to inventory and backlog. One of the key indicators for our company's strength and resilience is our backlog, which has been steadily increasing over the past 6 months. We are pleased to report that our backlog continues to grow both sequentially and on a year over year basis. Critically, inventory as a percentage of backlog has continued to trend downwards as well, reflecting our commitment to ongoing operational efficiency. Speaker 200:06:08Looking ahead, we anticipate further progress in inventory reduction during the Q4 of 2024 as we continue to work through our backlog supporting continued cash generation. I'd like to briefly address our long term strategy before Jeff takes us through the financial details. Our commitment to innovation and adaptation is at the forefront of our long term strategy. We are steadfast in our mission to expand our presence into hybrid and electrification solutions for marine and land based applications. As demonstrated by agreements to acquire Casa, we are committed to our efforts not only to develop, but also acquire cutting edge technologies that meet the demands of customers in our global markets. Speaker 200:06:48Our recent success in expanding the Veth product line into untapped markets and regions also underscore our dedication to broadening our reach and solidifying our position as an industry leader. Moreover, our operational initiatives are geared towards enhancing efficiency and responsiveness, exemplified by the ongoing rationalization of our global footprint. By streamlining operations, we not only boost our competitive edge, but also strengthen our ability to cater to our customers' needs. With a keen focus on industrial and marine technology sectors and protecting those with a hybrid centric focus, we are poised to capitalize on emerging opportunities and further augment our portfolio. In closing, our unwavering dedication to innovation, operational excellence and strategic partnerships will continue to drive our success and deliver value to all our stakeholders. Speaker 200:07:38With that, I will now turn it over to Jeff to discuss the financials. Jeff? Speaker 100:07:43Thanks, John. Good morning, everyone. We delivered sales of $74,200,000 for the quarter, up $389,000 50 basis points from the prior year period as overall demand remained solid. Net income attributable to Twin Disc for the Q3 was $3,800,000 or $0.27 per diluted share compared to $3,300,000 or $0.24 per diluted share in the Q3 of fiscal 2023. Gross profit margin increased to 28.2% compared to 26.1% during the prior year period and gross profit increased 8.7% to $20,900,000 This improvement reflects the realization of previous price increases, continued easing of supply chain headwinds and successfully executing our operational playbook. Speaker 100:08:31Marine and Propulsion Systems reported 3% growth, while Land Based Transmission and Industrial sales reported year over declines of 3% 15%, respectively. Looking at top line distribution across geographies, sales continue to increase across the Asia Pacific and European region compared to the prior year supported by robust demand, while the proportion of sales in North American markets declined. We also saw a notable increase in sales within the Middle East, in particular Turkey, which drove sales up $2,200,000 year over year with increased best sales for offshore wind projects. We continue to strengthen our balance sheet with the solid cash generation delivered in the Q3. We reduced debt by 24,100,000 dollars to negative $6,800,000 compared to the prior year period and ended the quarter with a cash balance of $23,800,000 approximately $9,800,000 higher versus the prior year period. Speaker 100:09:24EBITDA remained strong at $7,000,000 compared to the same amount during the prior year period. We continue to decrease our leverage ratio this quarter to negative 0.3x, putting us in an excellent position to invest in our business while executing inorganic growth opportunities. As noted earlier, gross profit margin for the 3rd quarter increased to 28.2%, expanding approximately 2 10 basis points from the prior year period, again due to cost reduction initiatives and the impacts of operational efficiencies. Looking towards the Q4, we expect challenging year over year comparisons to the historically strong results delivered in the prior year period. That said, we do anticipate continued strength in margins and cash generation. Speaker 100:10:08Now on to capital allocation. With our solid balance sheet strengthened by ample cash generation, we continue to explore strategic opportunities for M and A, particularly in military that align with our vision for the future. Our focus on marine technology, industrial and the hybrid electric sector underscores their dedication to staying at the forefront of innovation and these areas present significant upside potential and complement our existing capabilities and expertise. Simultaneously, we are allocating capital towards internal investments aimed at driving organic growth and operational excellence. This includes substantial investments in R and D to foster innovation expansion into new geographic markets to capitalize on emerging opportunities and the continued strengthening of our marketing efforts to drive market penetration. Speaker 100:10:54Furthermore, we remain committed to consistently returning capital to shareholders through share repurchases and dividend payments. Overall, our capital allocation strategy reflects balanced approach aimed at driving sustainable growth and fostering innovation while maintaining financial prudence and flexibility. I'd like to now turn the call back over to John to share some closing remarks. Speaker 200:11:15Thanks, Jeff. Before we open the line for questions, I'd like to highlight a few key takeaways from our quarterly results. Our Q3 performance highlights our continued operational excellence marked by a notable margin expansion and robust cash generation. Our strong balance sheet bolstered by consistent profitable growth and solid working capital management positions us favorably to navigate market uncertainties and take advantage of strategic growth opportunities. Looking ahead, we maintain our cautiously optimistic outlook driven by sustained demand dynamics. Speaker 200:11:47Our resilience amid external challenges reaffirms our agility and adaptability in capturing market opportunities and our performance not only reflects our operational prowess, but also underscores our commitment to delivering long term value to shareholders. I'd like to thank all of our teams for their continued hard work and dedication to supporting our business this quarter. As we approach the end of the fiscal year, we look forward to continuing our growth journey as we drive Twin Disc forward and generate long term value for our shareholders. That concludes our prepared remarks. Jeff and I will be happy to answer your questions. Operator00:12:25Thank you. We will now begin the question and answer session. And we have one question that comes from the line of Simon Wong with Gabelli Funds. Please go ahead. Speaker 300:13:00Hey, this is Rueda filling in for Simon today. Maybe just my first question here, I guess how much of this quarter's revenue is derived from oil and gas customers? And I guess what is the breakdown between new equipment and consumables? Speaker 100:13:17Yes, it's a good question. I would say it's been a pretty normal quarter for oil and gas. In terms of percentage of revenue for the quarter, I'm doing some quick math, probably around 10% to 15%, kind of evenly split between consumable and unit. Speaker 300:13:40Okay. Thanks. And then maybe my second question, I guess, what are you seeing well, I guess, what is the company seeing in terms of North American frac customers? Speaker 200:13:52I would say this is John. I'd say we've seen an uptick in the calendar year in new spare parts orders and we have some limited units going out. But I would say that, I mean, our outlook is that will probably pick up through the rest of the calendar year, just given what's happening in the Mideast is I think we're going to see some more activity here at home, as well as in Asia. Speaker 300:14:22Okay, thanks. And then I guess you're working down your inventory for 4Q fiscal year 4Q 2024. How should we think about inventory as a percentage of backlog for next quarter? Speaker 100:14:36I think it's going to continue to ratchet down. We're not going to have an incredible shift. I think we'll see a trajectory kind of like what we've seen in the last few quarters. Speaker 300:14:48Okay. And then just my last question here, I guess, any update on the timing of closing of the Katz acquisition? And does the acquisition need approval from Finland's Economic Minister to close? Speaker 200:15:03Yes. So we did get that approval this week and we should be closing, I would say, around the end of the month within 30 to 40 days, we'll be closed. Speaker 300:15:16Okay. Thank you. That's all my questions. Speaker 200:15:19Thank you. Operator00:15:22Your next question comes from the line of Will Naskowitz with Heartland. Please go ahead. Speaker 400:15:30Hey, good morning. Thanks for taking my questions and congratulations on a strong quarter, particularly on the free cash flow generation. It's great to see. I'm just curious on the industrial side you're welcome. Just on industrial, I know you commented in your opening remarks. Speaker 400:15:44Are you seeing signs of stabilization there? You had Speaker 200:15:55this past quarter has been the this past quarter has been the best order quarter in a few quarters. And it's been broad based as far as the lower horsepower range both in Europe and in the U. S. And in Australia. I would kind of be the big markets for us. Speaker 200:16:17But we've seen it pick up a little bit. Again, this past quarter was a much better order quarter. And we have some of the higher some of the gearboxes with electronic controls that have been on order. So again, it's looking up, but it's still we got a ways to go to get back to where we were. Speaker 400:16:40Okay. And then the acquisition, as I recall, maybe it was $30,000,000 in revenue or somewhere around that level. Can you just provide any additional perspective on just like the margin profile of the company? And is it new end market, new customers, just some additional color would be useful. Speaker 200:17:01Sure. So, I would say the margin profile is really it kind of falls right in line with where we are. Depending upon the product line, it's going to bounce around high 20s to low 30s. But if there's so much there, Will, they're going to be a great supplier for us on gears for our product that we build in the U. S, in the Netherlands, in Italy. Speaker 200:17:32And their product they started off as a component supplier. So they're heavily invested in very complex machining centers to do gears. They were I would say the last third of their life, they've been getting into the gearbox business, whether it's in the industrial space, in specialty marine gears, they do transfer cases for all wheel drive military vehicles. Until recently, it was just Finland. But then again, as Finland has joined NATO, they've gotten orders from Germany and Sweden. Speaker 200:18:08So we see some good market expansion. And again, if you look at the horsepower range where they have product, it's pretty much right on top of Twin Disc. These are all customers and markets that we understand, but they've just been so heavily focused on the European market and the Scandinavian market that we feel that there's a real potential to bring them out into the global market. So all of our guys, whether they're in the marine business, the industrial business or the transmission business, they're chomping at the bit to get a hold of the Casa products and introduce them to the global customers. Speaker 400:18:51Thanks for that elaboration. I guess my final one here is just back to your opening comments. John, at the end, you handed off to Jeff just talking about innovation, electrification, hybrid, etcetera. I'm just wondering if you could just frame for us the opportunity. You're obviously steeped in know how in traditional transmission. Speaker 400:19:11Can you just frame for us any perspective on the opportunity as you continue to take this technology as know how to apply to the hybrid and electrification markets? Thank you. Speaker 200:19:20Yes. So, Will, there's a huge opportunity, and it really is in our space off highway, whether it's marine or construction or ARF, it's putting the package together for the OEM to help them. So we have if you think about our mechanical product, whether it's a pump drive or transmission, it's kind of the heart of hybrid. So it allows for an ICE engine propulsion system, but then also has input for electric motor coming from a battery. And our control system is the brain. Speaker 200:19:59And there are a lot of other parts that we put in put together in the system, the inverter, all sorts of other things, the wiring. But it's the content. One crane application, we would sell a gearbox, let's just say the $20,000 The hybrid system can be $160,000 to 200,000 dollars That's a big multiplier. But again, we're relying on that OEM to be able to sell that hybrid crane for a considerable premium over a traditional crane. We look at some of the marine applications that we're doing. Speaker 200:20:37We're quoting systems that are $500,000 to $1,000,000 depending upon if it's single or twins group. And just a few years ago, that would have been almost the cost of the entire vessel. So we're proving to ourselves and our customers that we have the technological solution. Now we're just waiting for these things to get through testing and seeing how they play out in If the market is willing to spend extra for this type of performance and this type of, I would say, just profile as far as emissions. Now in some cases, in California, they're mandating that some of these government funded vessels go completely electric or hybrid. Speaker 200:21:22So we see some wins coming up very quickly. In some of the other markets, whether it's construction or other things, it's a wait and see. They're building the equipment and then seeing how well they are accepted in the market. But just to answer your question, it's a big our content can easily can go up from 4 to 8 times pretty quickly. Speaker 400:21:47Well, thanks for that elaboration and again congrats on Speaker 100:21:50a great quarter and best of luck here in your 4th quarter. Speaker 200:21:52Thanks so much for the time. Thanks. Thanks, Phil. Operator00:21:57That concludes our Q and A session. I will now turn the conference back over to John Batten for closing remarks. Speaker 200:22:05Thanks, Alex. Again, we'd like to thank you for participating in our Q3 call and look forward to speaking you in August for our Q4 fiscal year end 2024 conference call. Thank you, everyone. Operator00:22:19Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTwin Disc Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Twin Disc Earnings HeadlinesComparing INLIF (NASDAQ:INLF) & Twin Disc (NASDAQ:TWIN)May 4 at 1:41 AM | americanbankingnews.comTwin Disc Announces Details of Fiscal 2025 Third Quarter Earnings Release, Webcast, and Conference CallApril 22, 2025 | markets.businessinsider.comWhat if America bought gold like it used to?History Says Gold Wins When This Signal Flashes — and It’s Flashing Now Every time the Buffett Indicator has hit extreme levels, stocks have crashed — and gold has dominated the decade that followed. Today, the Buffett Indicator is at its highest reading in history… and Buffett himself is sitting on an unprecedented $325 billion cash pile. Sources say he’s preparing to deploy it — not into stocks, but into gold. Garrett Goggin has uncovered which gold company could be his next big move.May 4, 2025 | Golden Portfolio (Ad)Longbow Research Initiates Coverage of Twin Disc (TWIN) with Buy RecommendationApril 17, 2025 | msn.comThis Twin Disc Analyst Begins Coverage On A Bullish Note; Here Are Top 5 Initiations For ThursdayApril 17, 2025 | benzinga.comTwin Disc Shares Hammered By Trade Uncertainties And Nervous InvestorsApril 16, 2025 | seekingalpha.comSee More Twin Disc Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Twin Disc? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Twin Disc and other key companies, straight to your email. Email Address About Twin DiscTwin Disc (NASDAQ:TWIN) engages in the design, manufacture, and sale of marine and heavy duty off-highway power transmission equipment in the United States, the Netherlands, China, Australia, Italy, and internationally. The company operates in two segments, Manufacturing and Distribution. Its principal products include marine transmissions, azimuth drives, surface drives, propellers, and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, and controls systems. The company also provides third-party manufactured products. It sells its products through a direct sales force and distributor network to customers primarily in the pleasure craft, commercial marine, patrol, and military marine markets, as well as in the energy and natural resources, government, agriculture, recycling, construction, oil and gas, and industrial markets. The company was incorporated in 1918 and is headquartered in Milwaukee, Wisconsin.View Twin Disc ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 5 speakers on the call. Operator00:00:00Thank you for standing by. My name is Alex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fiscal 2024 Third Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:31I would now like to turn the call over to Jeff Knutson, Chief Financial Officer. Please go ahead. Speaker 100:00:41Good morning, and thank you for joining us today to discuss our fiscal 2024 Q3 results. On the call with me today is John Batten, Twin Disc's CEO. I would like to remind everyone that certain statements made during this conference call, especially statements expressing hopes, beliefs, expectations or predictions for the future are forward looking statements. It is important to remember that the company's actual results could differ materially from those projected in such forward looking statements. Information concerning factors that could cause actual results to differ materially from those in forward looking statements are contained in the company's annual report on Form 10 ks, copies of which may be obtained by contacting either the company or the SEC. Speaker 100:01:23Any forward looking statements that are made during this call are based on assumptions as of today, and the company undertakes no obligation to publicly update or revise these statements to reflect subsequent events or new information. During today's call, management will also discuss certain non GAAP financial measures. For a definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results, please see the earnings release issued earlier today. By now, you should have received the news release, which was issued this morning before the market opened. If you have not received a copy, please call our office at 262 638-4000 and we will send the release to you. Speaker 100:02:02Now I'll turn the call over to John. Speaker 200:02:04Good morning, everyone, welcome to our fiscal 2024 Q3 conference call. Let's begin today's call with some highlights. We delivered solid results in the Q3, continuing the trends seen throughout the year. As we continue to capture healthy end market demand, we achieved another quarter of margin expansion as well as robust fleet cash flow generation. These consistent results underscore the long term impact of operational improvements we've made throughout our business in recent years, as well as ongoing tailwinds provided by disciplined working capital management to support overall performance. Speaker 200:02:41In line with our strategic focus on expanding our presence in the industrial and marine technology markets, we are pleased to have announced our recent agreement to acquire Casa Oi, a leading manufacturer of high quality power transmission components and gearboxes based in Finland. This acquisition will broaden Casa's global reach as we've leveraged Twin Disc global sales, distribution and service network, while also generating cross selling opportunities through Casa's existing customer base as we tap into its long standing relationships with leading European OEMs, similar to the dynamic we've achieved with Veth. With our strong balance sheet and flexible financial profile, we will continue to explore similar strategic opportunities to drive sustained growth for Twin Disc. Moving on to results by product group. Sales in Marine and Propulsion Systems increased 3% year over year. Speaker 200:03:33The global commercial markets have remained active, providing a strong foundation for sustained demand. We continue to see an uptick in government defense spending tied to recent geopolitical turmoil, leading to an increase in patrol boat projects and other activities linked to fleet readiness. Veth continues to perform well, supporting overall growth in marine propulsion as the mega yacht market remains strong. We saw a solid 16% sequential increase in 6 month backlog, driving the recent inventory build to support riding demand. This uptick underscores the enduring strength of the vet and roll partnership, which has created an additional competitive edge for TWIN DISC by unlocking additional growth opportunities within both new and established markets. Speaker 200:04:19We also continue to capture increased demand for work boat marine transmissions, particularly in the Asia Pacific region due to the resurgence of projects for inland tugs in the region. A portion of this business is being driven by solid demand for coal tugboats utilized for transporting raw materials and coal from Indonesia to China. We will continue to focus on tapping into these regional opportunities to position the business for further growth. Onto the land based transmission business. Sales decreased 3% year over year, driven in part by sustained exports to the Asian oil and gas markets. Speaker 200:04:53That said, even as sustainable energy is still a focus globally, oil and gas exploration activity remains strong, and we are encouraged by demand in the North American oil and gas market. Additionally, the increasing ARP demand remains quite strong, which we will be even better positioned to capture with the addition of Casa. Similar to last quarter, sales in our Industrial segment remained off, declining 15% year over year. This dip can largely be attributed to reduced demand from our lower horsepower range of our off route. Additionally, while commoditized products have experienced continued weakness, demand for more sophisticated higher content products has been relatively more resilient. Speaker 200:05:34We remain focused on advancing our OEM partnerships, which are crucial for our long term growth strategy and allow us to leverage synergies and reach new markets effectively. Next, I'll speak to inventory and backlog. One of the key indicators for our company's strength and resilience is our backlog, which has been steadily increasing over the past 6 months. We are pleased to report that our backlog continues to grow both sequentially and on a year over year basis. Critically, inventory as a percentage of backlog has continued to trend downwards as well, reflecting our commitment to ongoing operational efficiency. Speaker 200:06:08Looking ahead, we anticipate further progress in inventory reduction during the Q4 of 2024 as we continue to work through our backlog supporting continued cash generation. I'd like to briefly address our long term strategy before Jeff takes us through the financial details. Our commitment to innovation and adaptation is at the forefront of our long term strategy. We are steadfast in our mission to expand our presence into hybrid and electrification solutions for marine and land based applications. As demonstrated by agreements to acquire Casa, we are committed to our efforts not only to develop, but also acquire cutting edge technologies that meet the demands of customers in our global markets. Speaker 200:06:48Our recent success in expanding the Veth product line into untapped markets and regions also underscore our dedication to broadening our reach and solidifying our position as an industry leader. Moreover, our operational initiatives are geared towards enhancing efficiency and responsiveness, exemplified by the ongoing rationalization of our global footprint. By streamlining operations, we not only boost our competitive edge, but also strengthen our ability to cater to our customers' needs. With a keen focus on industrial and marine technology sectors and protecting those with a hybrid centric focus, we are poised to capitalize on emerging opportunities and further augment our portfolio. In closing, our unwavering dedication to innovation, operational excellence and strategic partnerships will continue to drive our success and deliver value to all our stakeholders. Speaker 200:07:38With that, I will now turn it over to Jeff to discuss the financials. Jeff? Speaker 100:07:43Thanks, John. Good morning, everyone. We delivered sales of $74,200,000 for the quarter, up $389,000 50 basis points from the prior year period as overall demand remained solid. Net income attributable to Twin Disc for the Q3 was $3,800,000 or $0.27 per diluted share compared to $3,300,000 or $0.24 per diluted share in the Q3 of fiscal 2023. Gross profit margin increased to 28.2% compared to 26.1% during the prior year period and gross profit increased 8.7% to $20,900,000 This improvement reflects the realization of previous price increases, continued easing of supply chain headwinds and successfully executing our operational playbook. Speaker 100:08:31Marine and Propulsion Systems reported 3% growth, while Land Based Transmission and Industrial sales reported year over declines of 3% 15%, respectively. Looking at top line distribution across geographies, sales continue to increase across the Asia Pacific and European region compared to the prior year supported by robust demand, while the proportion of sales in North American markets declined. We also saw a notable increase in sales within the Middle East, in particular Turkey, which drove sales up $2,200,000 year over year with increased best sales for offshore wind projects. We continue to strengthen our balance sheet with the solid cash generation delivered in the Q3. We reduced debt by 24,100,000 dollars to negative $6,800,000 compared to the prior year period and ended the quarter with a cash balance of $23,800,000 approximately $9,800,000 higher versus the prior year period. Speaker 100:09:24EBITDA remained strong at $7,000,000 compared to the same amount during the prior year period. We continue to decrease our leverage ratio this quarter to negative 0.3x, putting us in an excellent position to invest in our business while executing inorganic growth opportunities. As noted earlier, gross profit margin for the 3rd quarter increased to 28.2%, expanding approximately 2 10 basis points from the prior year period, again due to cost reduction initiatives and the impacts of operational efficiencies. Looking towards the Q4, we expect challenging year over year comparisons to the historically strong results delivered in the prior year period. That said, we do anticipate continued strength in margins and cash generation. Speaker 100:10:08Now on to capital allocation. With our solid balance sheet strengthened by ample cash generation, we continue to explore strategic opportunities for M and A, particularly in military that align with our vision for the future. Our focus on marine technology, industrial and the hybrid electric sector underscores their dedication to staying at the forefront of innovation and these areas present significant upside potential and complement our existing capabilities and expertise. Simultaneously, we are allocating capital towards internal investments aimed at driving organic growth and operational excellence. This includes substantial investments in R and D to foster innovation expansion into new geographic markets to capitalize on emerging opportunities and the continued strengthening of our marketing efforts to drive market penetration. Speaker 100:10:54Furthermore, we remain committed to consistently returning capital to shareholders through share repurchases and dividend payments. Overall, our capital allocation strategy reflects balanced approach aimed at driving sustainable growth and fostering innovation while maintaining financial prudence and flexibility. I'd like to now turn the call back over to John to share some closing remarks. Speaker 200:11:15Thanks, Jeff. Before we open the line for questions, I'd like to highlight a few key takeaways from our quarterly results. Our Q3 performance highlights our continued operational excellence marked by a notable margin expansion and robust cash generation. Our strong balance sheet bolstered by consistent profitable growth and solid working capital management positions us favorably to navigate market uncertainties and take advantage of strategic growth opportunities. Looking ahead, we maintain our cautiously optimistic outlook driven by sustained demand dynamics. Speaker 200:11:47Our resilience amid external challenges reaffirms our agility and adaptability in capturing market opportunities and our performance not only reflects our operational prowess, but also underscores our commitment to delivering long term value to shareholders. I'd like to thank all of our teams for their continued hard work and dedication to supporting our business this quarter. As we approach the end of the fiscal year, we look forward to continuing our growth journey as we drive Twin Disc forward and generate long term value for our shareholders. That concludes our prepared remarks. Jeff and I will be happy to answer your questions. Operator00:12:25Thank you. We will now begin the question and answer session. And we have one question that comes from the line of Simon Wong with Gabelli Funds. Please go ahead. Speaker 300:13:00Hey, this is Rueda filling in for Simon today. Maybe just my first question here, I guess how much of this quarter's revenue is derived from oil and gas customers? And I guess what is the breakdown between new equipment and consumables? Speaker 100:13:17Yes, it's a good question. I would say it's been a pretty normal quarter for oil and gas. In terms of percentage of revenue for the quarter, I'm doing some quick math, probably around 10% to 15%, kind of evenly split between consumable and unit. Speaker 300:13:40Okay. Thanks. And then maybe my second question, I guess, what are you seeing well, I guess, what is the company seeing in terms of North American frac customers? Speaker 200:13:52I would say this is John. I'd say we've seen an uptick in the calendar year in new spare parts orders and we have some limited units going out. But I would say that, I mean, our outlook is that will probably pick up through the rest of the calendar year, just given what's happening in the Mideast is I think we're going to see some more activity here at home, as well as in Asia. Speaker 300:14:22Okay, thanks. And then I guess you're working down your inventory for 4Q fiscal year 4Q 2024. How should we think about inventory as a percentage of backlog for next quarter? Speaker 100:14:36I think it's going to continue to ratchet down. We're not going to have an incredible shift. I think we'll see a trajectory kind of like what we've seen in the last few quarters. Speaker 300:14:48Okay. And then just my last question here, I guess, any update on the timing of closing of the Katz acquisition? And does the acquisition need approval from Finland's Economic Minister to close? Speaker 200:15:03Yes. So we did get that approval this week and we should be closing, I would say, around the end of the month within 30 to 40 days, we'll be closed. Speaker 300:15:16Okay. Thank you. That's all my questions. Speaker 200:15:19Thank you. Operator00:15:22Your next question comes from the line of Will Naskowitz with Heartland. Please go ahead. Speaker 400:15:30Hey, good morning. Thanks for taking my questions and congratulations on a strong quarter, particularly on the free cash flow generation. It's great to see. I'm just curious on the industrial side you're welcome. Just on industrial, I know you commented in your opening remarks. Speaker 400:15:44Are you seeing signs of stabilization there? You had Speaker 200:15:55this past quarter has been the this past quarter has been the best order quarter in a few quarters. And it's been broad based as far as the lower horsepower range both in Europe and in the U. S. And in Australia. I would kind of be the big markets for us. Speaker 200:16:17But we've seen it pick up a little bit. Again, this past quarter was a much better order quarter. And we have some of the higher some of the gearboxes with electronic controls that have been on order. So again, it's looking up, but it's still we got a ways to go to get back to where we were. Speaker 400:16:40Okay. And then the acquisition, as I recall, maybe it was $30,000,000 in revenue or somewhere around that level. Can you just provide any additional perspective on just like the margin profile of the company? And is it new end market, new customers, just some additional color would be useful. Speaker 200:17:01Sure. So, I would say the margin profile is really it kind of falls right in line with where we are. Depending upon the product line, it's going to bounce around high 20s to low 30s. But if there's so much there, Will, they're going to be a great supplier for us on gears for our product that we build in the U. S, in the Netherlands, in Italy. Speaker 200:17:32And their product they started off as a component supplier. So they're heavily invested in very complex machining centers to do gears. They were I would say the last third of their life, they've been getting into the gearbox business, whether it's in the industrial space, in specialty marine gears, they do transfer cases for all wheel drive military vehicles. Until recently, it was just Finland. But then again, as Finland has joined NATO, they've gotten orders from Germany and Sweden. Speaker 200:18:08So we see some good market expansion. And again, if you look at the horsepower range where they have product, it's pretty much right on top of Twin Disc. These are all customers and markets that we understand, but they've just been so heavily focused on the European market and the Scandinavian market that we feel that there's a real potential to bring them out into the global market. So all of our guys, whether they're in the marine business, the industrial business or the transmission business, they're chomping at the bit to get a hold of the Casa products and introduce them to the global customers. Speaker 400:18:51Thanks for that elaboration. I guess my final one here is just back to your opening comments. John, at the end, you handed off to Jeff just talking about innovation, electrification, hybrid, etcetera. I'm just wondering if you could just frame for us the opportunity. You're obviously steeped in know how in traditional transmission. Speaker 400:19:11Can you just frame for us any perspective on the opportunity as you continue to take this technology as know how to apply to the hybrid and electrification markets? Thank you. Speaker 200:19:20Yes. So, Will, there's a huge opportunity, and it really is in our space off highway, whether it's marine or construction or ARF, it's putting the package together for the OEM to help them. So we have if you think about our mechanical product, whether it's a pump drive or transmission, it's kind of the heart of hybrid. So it allows for an ICE engine propulsion system, but then also has input for electric motor coming from a battery. And our control system is the brain. Speaker 200:19:59And there are a lot of other parts that we put in put together in the system, the inverter, all sorts of other things, the wiring. But it's the content. One crane application, we would sell a gearbox, let's just say the $20,000 The hybrid system can be $160,000 to 200,000 dollars That's a big multiplier. But again, we're relying on that OEM to be able to sell that hybrid crane for a considerable premium over a traditional crane. We look at some of the marine applications that we're doing. Speaker 200:20:37We're quoting systems that are $500,000 to $1,000,000 depending upon if it's single or twins group. And just a few years ago, that would have been almost the cost of the entire vessel. So we're proving to ourselves and our customers that we have the technological solution. Now we're just waiting for these things to get through testing and seeing how they play out in If the market is willing to spend extra for this type of performance and this type of, I would say, just profile as far as emissions. Now in some cases, in California, they're mandating that some of these government funded vessels go completely electric or hybrid. Speaker 200:21:22So we see some wins coming up very quickly. In some of the other markets, whether it's construction or other things, it's a wait and see. They're building the equipment and then seeing how well they are accepted in the market. But just to answer your question, it's a big our content can easily can go up from 4 to 8 times pretty quickly. Speaker 400:21:47Well, thanks for that elaboration and again congrats on Speaker 100:21:50a great quarter and best of luck here in your 4th quarter. Speaker 200:21:52Thanks so much for the time. Thanks. Thanks, Phil. Operator00:21:57That concludes our Q and A session. I will now turn the conference back over to John Batten for closing remarks. Speaker 200:22:05Thanks, Alex. Again, we'd like to thank you for participating in our Q3 call and look forward to speaking you in August for our Q4 fiscal year end 2024 conference call. Thank you, everyone. Operator00:22:19Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by