Twin Disc(TWIN) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported sales of $81.2 million, an increase of approximately 10$1.5 million, or a loss of $0.11 per diluted share, compared to net income of$3.8 million, or $0.27 per diluted share in the prior year [16][17] - Gross profit margin improved sequentially from 24.1$134 million [11][12] - The land-based transmission business remained strong, driven by demand in the airport and firefighting markets [10] Market Data and Key Metrics Changes - Geographic sales growth was notable in European markets, benefiting from recent acquisitions and continued strength in marine-related projects [17] - The company noted stable volumes in China, although tariff uncertainties have led to a more measured pace in new build activity [11] Company Strategy and Development Direction - The company continues to execute its long-term strategy of global footprint optimization, operational excellence, and strategic acquisitions [13] - Recent acquisitions of Katsa and Cobalt are aimed at expanding engineering capabilities and enhancing market reach [13] - The company is strategically positioned to capitalize on growing customer interest in electrification and hybrid propulsion systems [10][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth trajectory, supported by a robust backlog and disciplined capital allocation [20] - The company remains vigilant in managing potential tariff impacts and global market uncertainties, leveraging operational flexibility [20] - Management anticipates continued positive margin trends driven by product mix and ongoing operational improvements [18] Other Important Information - The company estimates approximately $500,000 of tariff-related impact for the upcoming fourth quarter, representing roughly 1% of the cost of goods sold [7] - The company is actively evaluating alternative sourcing options to limit potential exposure to tariffs [7] Q&A Session Summary Question: Order patterns and backlog stability - Management noted that there have been no significant cancellations in marine orders, with order rates showing a strengthening trend [26][27] - The backlog was reported to be stable, with expectations of increasing orders in North America and Europe, particularly for patrol boats and military applications [27][28] Question: Mitigating circumstances around pricing and tariffs - Management indicated proactive measures regarding pricing and sourcing strategies to mitigate tariff impacts, with expectations of minimal impact on Q4 margins [30][31] Question: Insights on CoBelt acquisition - Management expressed optimism about replicating the success of previous acquisitions, with significant growth potential identified in CoBelt's product offerings [33][34] Question: Enhanced operational efficiencies - Management highlighted efforts in improving assembly processes and sourcing strategies to drive profitability, particularly for high-demand products [39][40]