Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales increased 0.6% year-over-year for the fourth quarter and 6.6% for fiscal 2024.
- Completed the acquisition of Katsa Oy, expected to broaden global reach and accelerate cross-selling opportunities.
- Strong cash generation for both the fourth quarter and full year, supported by disciplined working capital management.
- Gross profit margin increased to 29.7% from 29.5% in the prior year period.
- Net income for the full year increased to $11 million from $10.4 million in the prior year.
Negative Points
- Sales in the industrial segment declined 8.9% year-over-year.
- Softer demand in the Canadian fishing market and pleasure craft business.
- Operating income impacted by a $3.1 million noncash loss on the sale of the boat management system product line.
- Exports to oil and gas markets were flat.
- Inventory levels were higher than desired, indicating potential inefficiencies.
Q & A Highlights
Q: Can you provide an update on your EFAC offering and any traction there?
A: We are still in the testing and waiting phase with the 7,600. We remain hopeful for an order this calendar year, but the market has shifted back to traditional diesel engine frac rigs. We have seen an uptick in spare parts for diesel rigs, and we remain optimistic about future orders.
Q: How much of this quarter's revenue was from the oil and gas sector, and can you break it down between equipment and consumables?
A: The mix between forward market, aftermarket, and transmission units has been consistent with previous quarters. Primarily, shipments have been to China for new units and North America for aftermarket.
Q: Is there anything in the R&D pipeline that you can talk about?
A: We are focused on expanding our elite thruster range and integrating Katsa's products into our line. We are also developing PTI gearboxes for marine transmissions to make them hybrid-ready or electric. Specific models will be released in the next 18 to 24 months.
Q: How much revenue did Katsa contribute to this quarter's results?
A: Katsa did not contribute to this quarter's results as the acquisition closed right at the end of the quarter. The only impact was their opening balance sheet and related acquisition costs.
Q: Are you guiding fiscal 2025 to be in line with fiscal 2024 for both revenue and EBITDA?
A: Yes, we expect similar revenue and EBITDA levels for fiscal 2025, excluding the contribution from Katsa, which will drive revenue growth.
Q: What is your CapEx outlook for fiscal 2025?
A: We are targeting around $10 million, similar to this year, although we faced some lead time challenges with significant machine tools.
Q: Was any of the $25 million free cash flow nonrecurring?
A: No, there were no true one-off adjustments. We benefited from reducing inventory levels, which contributed around $5 million to $10 million.
Q: Do you expect the industrial segment to be down in the new fiscal year, and what are the positive offsets?
A: Flat would be the worst-case scenario. We are gaining traction with more sophisticated products and hybrid systems. The addition of Katsa will help accelerate our industrial growth.
Q: Can you segment the Marine customers and provide a rough pie chart?
A: Commercial Marine is the largest segment, followed by pleasure crafts and military/government. Commercial revenue-generating vessels are our primary market, with North America and Asia being the top regions.
Q: Is the pleasure craft market only at the high end?
A: Our pleasure craft market starts at 50-foot yachts with twin engine diesel. We get stronger as the size increases, with our core business in the 50 to 100-foot range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
