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Twin Disc Q2 Earnings Flat Y/Y, Sales Up on Katsa Acquisition
TWINTwin Disc(TWIN) ZACKS·2025-02-07 16:46

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 89.9million,a23.289.9 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 19million,attributedtostrongdemandfortransmissionsusedinairportrescueandfirefightingvehicles[5]−TheIndustrialsegmentsawthestrongestgrowth,withsalessurging44.819 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 4.8million[7]ManagementCommentary−CEOJohnBattenemphasizedthefocusonintegratingKatsaOyandcapitalizingoncross−sellingopportunities,particularlyinEuropeandNorthAmerica,withstrongdemandforhybridandelectricpropulsionsystems[8]−CFOJeffKnutsonacknowledgednear−termmarginpressuresduetoinventoryrationalizationbutexpressedconfidenceinimprovingoperationalefficienciesandreducingcosts[9]FinancialPosition−TwinDiscreportedasix−monthbacklogof4.8 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 144.3millioninthepriorquarter,attributedtostrongshipmentsratherthanweakeningdemand[10]−Cashlevelsdecreasedby24.3144.3 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 24.9million,primarilyduetotheKatsaacquisition[10]CapitalAllocationandGuidance−Managementplanstospendapproximately24.9 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]