Twin Disc Inc (TWIN, Financial) released its 8-K filing on November 6, 2024, reporting its financial results for the first quarter ended September 27, 2024. The company, a leader in the manufacture and sale of marine and heavy-duty off-highway power transmission equipment, operates through two main segments: Manufacturing and Distribution.
Revenue Growth Driven by Strategic Acquisition
In the first quarter of fiscal 2025, Twin Disc Inc (TWIN, Financial) achieved a 14.7% increase in sales, reaching $72.9 million. This growth was primarily fueled by the acquisition of Katsa Oy and robust performance in the Marine and Propulsion Systems and Industrial product segments. The acquisition has been a strategic move, enhancing the company's capabilities and market reach.
Geographical Sales Distribution and Gross Profit
The company experienced double-digit growth in European and Latin American markets, with a notable shift in sales distribution towards Europe and other regions, including the Middle East and South America. Gross profit rose by 16.1% to $19.3 million, with a slight increase in gross margin to 26.5%, reflecting higher volumes despite an unfavorable product mix.
Challenges in Land-Based Transmissions and Increased Expenses
Despite the positive revenue growth, Twin Disc Inc (TWIN, Financial) faced challenges in its Land-Based Transmissions segment, which saw a 7.0% decline in sales due to a slowdown in Asian Oil and Gas markets. Additionally, marketing, engineering, and administrative expenses increased by 15.1% to $19.5 million, driven by the Katsa acquisition, stock compensation adjustments, and inflationary pressures on wages and benefits.
Financial Metrics and Net Loss
The company reported a net loss of $2.8 million, or $0.20 per diluted share, compared to a net loss of $1.2 million, or $0.09 per diluted share, in the same quarter of the previous year. This was attributed to a $1.5 million increase in other expenses, including a $1.1 million currency loss and higher amortization of actuarial losses from the company's pension plan. EBITDA decreased by 23.0% to $1.7 million.
Balance Sheet and Cash Flow Analysis
As of the end of the first quarter, Twin Disc Inc (TWIN, Financial) reported a backlog of orders worth $144.3 million, up from $133.7 million at the end of the previous quarter. Inventory levels increased to 99.7% of the six-month backlog. Cash reserves decreased by 18.2% to $16.7 million, while total debt rose by 37.6% to $29.8 million, primarily due to the Katsa acquisition.
Our team has maintained its focus on capturing demand to deliver sales growth in the quarter. We saw a near-term impact to operating cash generation, largely due to a combination of increased inventories and a shift in order timing by certain customers," stated Jeffrey S. Knutson, Vice President of Finance, Chief Financial Officer, Treasurer and Secretary.
Conclusion and Outlook
Twin Disc Inc (TWIN, Financial) has demonstrated resilience through strategic acquisitions and strong performance in key segments, despite facing challenges in specific markets. The company's focus on capturing demand and improving cash flow positions it well for future growth. Investors and stakeholders will be keen to see how Twin Disc Inc (TWIN) navigates these dynamics in the coming quarters.
Explore the complete 8-K earnings release (here) from Twin Disc Inc for further details.
