Twin Disc, Incorporated

Thank you for standing by. My name is Andrea and I will be your conference operator today. At this time, I would like to welcome everyone to the TwinDisk Incorporated Fiscal First Quarter 2025 conference call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to redraw your question, I would now like to turn the call over to Jeffrey Knudson, TwinDisk CFO. Thank you. Please go ahead.

Good morning and thank you for joining us today to discuss our fiscal 2025 first quarter results. On the call with me today is John Batt, TwinDisk CEO. I would like to remind everyone that certain statements made during this conference call, especially statements expressing hope, belief, 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. Any 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 and 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 a release to you. Now, I'll turn the call over to John.

Good morning, everyone, and welcome to our fiscal 2025 first quarter conference call. To begin, I'd like to walk through some of the quarter's highlights. We are pleased to report a strong start to the year with double-digit revenue growth in the first quarter. We are making progress in advancing our long-term strategy of becoming a leading provider of hybrid electrification solutions as we deepen our relationships with major OEMs and have continued to expand VET's reach on a global scale. Our performance in the quarter was primarily driven by the impact of the acquisition of Casa Oil, along with growth in our marine and propulsion business, where demand for VET remains exceptionally strong. As many of you recall, we took proactive steps in fiscal 2024 to build up inventory within VET in anticipation of increased demand, which has since materialized. End market demand in our industrial business is stabilizing. However, the business grew this quarter largely due to the addition of CASA. The integration of CASA, our second largest acquisition to date, is progressing ahead of schedule. The addition of CASA has broadened our global reach and opened up new cross-selling opportunities with leading European OEMs, which we expect to continue supporting our long-term performance. Shifting to our product segment results, sales in our marine and propulsion segment grew 22.9% year-over-year, driven by sustained activity in commercial markets and the impact of the cost of acquisition. Within the luxury yacht market, that continues to expand on a global scale, and its backlog grew sequentially by 19% in the quarter. Incoming orders for VET products reached an all-time high in October, driven in part by the demand for elite thrusters, which customers seek out for their increased fuel efficiency, added maneuverability, and low noise and vibration levels. We are gaining traction with elite thrusters in new geographic markets beyond Europe, and our largest North American distributor is already positioned to be one of Beth's largest customers due in part to strong demand for this product. We are also capturing demand for customers that are converting to hybrid and electric marine systems. We recently won a hybrid system order for a site-seating vessel in the Northeast that enables us to supply 10 times the content that would have been needed on a ship powered by internal combustion engines. by adding content like batteries, motors, controls, converters, and inverters. We also delivered multiple units to marine control drives, which drive large thrusters and hybrid systems for use in the Panama Canal. We will continue pursuing these types of growth opportunities as part of our strategic focus on expanding our offerings in the hybrid and electrification space. As mentioned in the past few quarters, a long-term trend of heightened government defense spending has supported increased inquiries for patrol boat projects, which should drive additional growth in the near term. Turning to our land-based transmission business, we saw a 7% decline in sales, primarily due to the softness in the Asian Pacific region as oil and gas exports remain flat, reflecting the broader demand challenges in the region. Despite this, we're encouraged by record levels of backlog in our airport rescue, and firefighting, or ARF, transmission business, which represented roughly half of our revenue within land-based transmissions in the quarter. ARF vehicles are essential for fire safety and prevention at any airport around the globe. Our ability to offer advanced configurations, unique torque capability, and innovative power-dividing systems makes us the supplier of choice for ARF applications. Our ARF business has remained particularly robust. We are capturing increased demand for these vehicles as new airports are built internationally, Aging vehicle fleets need to be replaced, and tightening global emission standards require fleet transmission to be updated. We are also meeting demands for replacement parts for military vehicles, including transmissions and steering units, which we expect to continue supporting growth in the segment due to the impact of ongoing geopolitical turmoil. Sales in our industrial segment increased 61.3% year-over-year, primarily driven by the addition of CASA along with the general stabilization of end market demand. While demand remains softer for some commoditized products, demand for higher content products has been resilient. We received a notable order for hydraulic power takeoffs, which efficiently allow the conversion into hydraulic power with minimum vibration from an OEM in the agricultural space. Looking ahead to Q2, orders to our Lufthansa facility, which manufactures power takeoffs and such as for heavy duty industrial equipment, also started to rise. We expect construction and agricultural markets to remain soft through fiscal 2025, but we will continue gaining share by leveraging our extensive engineering and applications experience to meet unique customer needs. Our backlog has reached historical levels. Six-month backlog grew both sequentially and year-over-year, supported by demand for vet products, as I mentioned earlier. Foreign exchange accounted for 3.4 million of sequential backlog growth. and inventory as a percentage of backlogs increased to 99.7%. As we move through the year, we remain committed to disciplined inventory management to lower inventories compared to backlogs. To conclude my comments, I'd like to address our long-term strategy before Jeff takes us through our financial review. At the center of our strategy is a continued emphasis on controls and systems integration, which unlocks sales and margin potential to drive sustainable growth. This strategic shift is creating opportunities for us to explore and to capitalize on higher-margin solutions in both our core and emerging markets. With active projects focusing on fully electric and hybrid applications, we are well-positioned to capture growth as the industry moves towards innovative, sustainable technologies. Simultaneously, we are streamlining and modernizing operations to enhance shipments by reducing inventory costs, shortening lead times, and delivering improved outcomes for all stakeholders. Globally, we are already recognized as a leader in marine transmission and propulsion technology, underscored by that continued growth. Now our mission has become the leading supplier of hybrid and electrical solutions across each of our end markets. With that, I'll now turn it over to Jeff to discuss the financials. Jeff?