Twin Disc, Incorporated

Greetings and welcome to TwinDisk Inc. Fiscal Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Berger. Thank you. You may begin.

Thank you, Doug. On behalf of the management of TwinDisk, we are extremely pleased that you have taken the time to participate in our call, and thank you for joining us to discuss the company's fiscal 2023 second quarter and first half financial results and business outlook. Before introducing management, I would like to remind everyone that certain statements made during this conference call, especially those statements, introductions, 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 the forward-looking statements are contained in the company's annual report on Form 10-K, copies of which may be obtained by contacting either the company or the SEC. 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 a release to you. Hosting the call today are John Batten, Chief Executive Officer, and Jeff Knudson, the company's Vice President of Finance, Chief Financial Officer, Treasurer, and Secretary. At this time, I will turn the call over to John Batten.

Thank you, Stan, and good morning, everyone. Welcome to our fiscal 2023 second quarter conference call. As usual, we will begin with a short summary statement, and then we'll be happy to take your questions. Given the inflationary pressures and supply constraints that we saw in the first quarter, we think our teams around the world did a very good job making improvement in almost every area to deliver a better year-over-year and sequential quarter. On the top line, in holding a constant currency, sales improved almost 15%. Jeff will cover the details, but most of that growth came in North America with a very healthy improvement in oil and gas rebuild activity. Global marine and industrial shipments also improved more than what's stated in some percentages once you take the currency into account. Half of each business is produced in euros. The late summer and fall months of 2022 delivered another round of cost increases that we had to pass on with new pricing in January. That should further improve gross margins as we finish fiscal 23. Activity in all of our markets was robust. Vest backlog increased nicely, and they had very strong shipments in the quarter. Additionally, many of their lower margin projects have now shipped. There was a noticeable improvement quarter over quarter in their results. Shipments in Asia declined slightly as demand slowed during some COVID lockdowns, and we also had units waiting for control harnesses and displays. This should improve in the second half of the year. Much of our inventory increase in the quarter can be attributed to this pause in shipments, but we expect this to improve in the second half. Again, other causes in increased inventory remain late deliveries on key components like gears from heat treat that keep us from shipping completed transmissions. North America oil and gas had a very good quarter for aftermarket rebuilds, which will continue into the second half. New unit shipments should start later this quarter and into the fourth quarter. As I mentioned last quarter, Grizzly has released a 3,000-horsepower EnviroFrac electric frack rig with our 7600 transmission on it, and I suspect that you will see this deployed in the field later this calendar year. Other new hybrid and electric applications that have come to the market include the research vessel Resilience to be built by Snow & Company in Seattle for the Pacific Northwest National Laboratories. The RV Resilience is a 50-foot catamaran that is both diesel and electric motor driven through our master clutches and marine transmissions. This should be in the water by the end of the fiscal year. I encourage everyone to visit our website for the latest updates on all of our hybrid and electric applications. In the quarter, you noticed that we recorded the gain on the sale of our Belgian facility. Through years of supply chain consolidation and our decision to focus mainly on gear production and assembly and test, we're looking for a new, smaller, and more efficient building for this facility. This process is well underway. Similarly, we are looking to do this with our Italian operations. We look to be more efficient both with our organizational and footprint structures. And now I'll turn it over to Jeff to talk about the financials.