• Revenue: $89.3 million, a 23.2% year-over-year increase.
• Net Income: $900,000 or $0.07 per diluted share, compared to a net loss of $900,000 or $0.07 per diluted share in the prior year.
• Gross Profit Margin: Decreased to 24.1% from 28.3% in the prior year period.
• Gross Profit: Increased 5% to $21.7 million.
• EBITDA: Increased to $6.3 million, up 13.5% compared to the prior year.
• Operating Cash Flow: $4.3 million generated in the quarter.
• Net Debt: Increased $12.3 million to $9 million in the quarter.
• Cash Balance: $15.9 million, 24.3% lower than the prior year.
• Marine Propulsion Sales Growth: 23.9% year-over-year increase.
• Land-Based Transmission Sales Growth: 19.8% year-over-year increase.
• Industrial Segment Growth: 44.8% year-over-year increase.

• Warning! GuruFocus has detected 6 Warning Sign with VSH.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Twin Disc Inc (NASDAQ:TWIN) reported a strong double-digit sales growth of 23.2% year over year, reaching $89.3 million for the second quarter.
• The integration of Katsa Oy has expanded Twin Disc Inc (NASDAQ:TWIN)'s global footprint and engineering capabilities, particularly in Europe and North America.
• The marine propulsion segment saw a 23.9% year-over-year sales increase, driven by strong demand for Veth products in both commercial applications and the luxury yacht market.
• The industrial segment grew 44.8% year over year, supported by the addition of Katsa and a rebound in Lufkin orders.
• Twin Disc Inc (NASDAQ:TWIN) maintained a healthy backlog across all end markets, indicating sustained demand and order momentum.

Negative Points

• Gross profit margin decreased to 24.1% from 28.3% in the prior year period, impacted by inventory write-downs and unfavorable product mix.
• Net income was only $900,000 or $0.07 per diluted share, compared to a net loss in the previous year, but still reflects challenges in profitability.
• Oil and gas exports were down, contributing to a 24% decline in the oil and gas business compared to the prior year.
• Net debt increased by $12.3 million to $9 million, primarily due to the cost of acquisition.
• Cash balance decreased by 24.3% compared to the prior year, reflecting financial pressures despite strong operating cash generation.

Q & A Highlights

Q: Can you quantify how much your oil and gas business was this quarter and how much it was down year-over-year? A: The oil and gas business was about a little under 8% of revenue for the quarter and down about 24% compared to the prior year Q2. - Jeff Newton, CFO

Q: Is the quoting activity in the oil and gas sector primarily from North America or Asia? A: It's both North America and Asia, with some activity also from South America. - Jeff Newton, CFO

Q: Are you seeing oil and gas customers getting back to work in light of the change in administration? A: It's a bit early to say definitively, but we have seen an increased level of activity and some new potential projects, indicating a renewed level of activity in that market. - Jeff Newton, CFO

Q: Can you refresh your CapEx outlook for the year and your free cash flow conversion target? A: We are targeting to convert 60% of EBITDA to free cash flow, though it might be a stretch this year due to a difficult Q1. CapEx is expected to be in the range of $12 to $14 million, with some larger projects in the second half of the year. - Jeff Newton, CFO

Q: Are there any R&D projects being commercialized this year that will contribute to growth? A: We are not ready to discuss specific new products, but we continue to focus on the hybrid electric market, which is a significant growth area for us. - Jeff Newton, CFO

Q: Any updates on the electric frac fleet pilot project? A: The project is stable and ongoing, but there is nothing newsworthy to report this quarter. - Jeff Newton, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.