Twin Disc, Incorporated · NASDAQ:TWIN
Twin Disc — Q1 2019 Earnings Presentation
34 slides from Twin Disc's earnings presentation, Nov 5, 2018
Slide 1: Investor Presentation: First Quarter Fiscal 2019
Confidential ale lem “SSE INVESTOR PRESENTATION First Quarter Fiscal 2019
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT This presentation contains statements that are forward-looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management's current expectations that are based on assumptions that are subject to risks and uncer
Slide 3: Twin Disc Overview
Confidential ale lem YEARS TWIN DISC OVERVIEW
Slide 4: Twin Disc at a Glance
TWIN DISC AT A GLANCE Founded in 1918 Headquartered in Racine, WI = ~900 employees (incl. Veth) Designer and manufacturer of heavy duty power transmission equipment A global company — Manufacturing operations in the U.S., Belgium, Netherlands, Italy, Switzerland and Japan (JV) = World-wide distribut
Slide 5: Geographic Diversity
GEOGRAPHIC DIVERSITY + Manufacturing location @ Company owned distribution / service location _@ Purchasing / sourcing offices ox kad * ee e e e = North American oil and gas markets driving increase in FY18 ™ European segment has been beaded relatively stable in recent years $s bed " us bad testof (
Slide 6: Twin Disc Strategic Priorities
TWIN DISC STRATEGIC PRIORITIES ®™ Continued growth in land-based transmission business ™ Increased focus on controls and system integration rather than individual components @ Integration of Veth Propulsion acquisition ™ Development of hybrid technologies for diesel applications m North American foo
Slide 7: Marine & Propulsion — Work Boat / Commercial Marine
MARINE & PROPULSION — work BOAT / COMMERCIAL MARINE ie aiEWcica™ Diesel powered planning & displacement vessels 30’- 250’. Products Ye - transmissions t= Transmissions - propellers -MCD's goonies D cos Propellers — European market remains stable Oo, of ¢€ — Recent softness in China economy tempered
Slide 8: Marine & Propulsion — Pleasure Craft
MARINE & PROPULSION — PLEASURE CRAFT get Markets Market Dynamics High speed diesel powered planing & displacement yachts 50’- 150’. Transmissions Propellers steering _- é S| oe <> “ aS cr Tim x Drives ‘Systems: Caner — Market remains stable but off historic highs, some market share gains recently —
Slide 9: Marine & Propulsion — Patrol Craft
MARINE & PROPULSION — PATROL CRAFT Iealicincicg™ High speed diesel powered planing & displacement yachts 50’ 150’. Transmissions caring Propellers * é S| oe <> « » < cr Tim a Drives ‘Systems Caner — Experienced recent growth as demand for coastal security applications has increased globally Market D
Slide 10: Recent Acquisition: Veth Propulsion Overview
RECENT ACQUISITION: VETH PROPULSION OVERVIEW TRANSACTION OVERVIEW & BUSINESS DESCRIPTION Acquired Veth Propulsion for €49.7 mill earn-out provisions are met = Financed with existing cash / new debt facility ™ Veth Propulsion’s expected calendar 2018 net sales are approximately €51 million = Global m
Slide 11: Veth Propulsion Product Overview
VETH PROPULSION PRODUCT OVERVIEW Azimuth Thrusters Tunnel Thrusters Diesel Engines / Generator Sets Electronics / Other 1" Rudder propeller with 360° maneuverability Allows for greater flexibility in design of marine engine room Mountable without dry-docking zorive Lorive Diesel /Hybrid Electric /Di
Slide 12: Strategic Rationale for Veth Propulsion Acquisition
STRATEGIC RATIONALE FOR VETH PROPULSION ACQUISITION 2 HAAA Complementary product offering with exposure to new technologies Additive engineering talent and product development capabilities Acceleration of hybrid technology strategy End market diversification away from land-based energy markets and a
Slide 13: Land Based Transmission Products
LAND BASED TRANSMISSION PRODUCTS Eleaicucicms Diesel powered off-highway and all- terrain specialty vehicles 400hp— 3000hp. Products ‘TA90-8501 Fracking _TASO-7500 Fracking TD64-1180 ARFF Transmission Transmission Transmission = Pressure Pumping: = Decline in global oll prices in 2015 caused drop in
Slide 14: Industrial Products
INDUSTRIAL PRODUCTS Belarus Heavy duty industrial disconnect anic: Power Take-Off hydraulicclutches Paid ea lutch x be A Reduction gearboxes Pump Drive i Pump mount drives North American Energy Related: = Impacted by fall of oil prices beginningin FY15 — Demand recovered in FY17 through FY18 as Nort
Slide 15: Growth Overview
Confidential ale lem YEARS GROWTH OVERVIEW
Slide 16: FY19 Growth Outlook
FY19 GROWTH OUTLOOK 6 = Marine markets are beginning to accelerate Asian commercial marine markets experienced softening from FY15 through FY17, but experienced significant recovery in FY18 Longer term, this remains a potential high growth market for the Company’s products North American commercial
Slide 17: Backlog Summary
BACKLOG SUMMARY SIX MONTH BACKLOG () (Sinmilions) $150 $125 $100 $75 $50 Dobe $0 ga @ stat eat at FYi6 FYI, rvs Fra g am OT FISREEa Te Propuen of 5000 |) Beccogorfree an eres sobesva fos hamect dung the nest se worthy pote 7 Confidential =
Slide 18: Financial Overview
Confidential ale lem YEARS FINANCIAL OVERVIEW
Slide 19: Q1 Performance
Q1 PERFORMANCE NET SALES (Sinmilions) 19 BSSsssesse EARNINGS PER SHARE 04 03 02 On FYI6 0.39 FYIT FYI8 FYI9 mBase mVeth 0.29 Fay FY FYI9 0.26 mFY6 mFYI7 mFY18 mFY19 Continued strength in O&G demand, with start of Asian activity. Global marine improving, up 13% from Fv18. Industrial demand stable, wi
Slide 20: Net Sales Diversity
NET SALES DIVERSITY NET SALES BY CATEGORY (Sinmiions) Marine = Land-Based Transmission ‘Industrial mother Marine segment includes marine transmissions, controls, surface drives, propellers and boat management systems Land-Based Transmi n products include ent 7 ike $295.7 $240.7 $166.3 $168.2 applica
Slide 21: Leverage Profile
LEVERAGE PROFILE TOTAL DEBT $50 $40 { Qloffering proceeds reduced net leverage, which had increased ! significantly following the Veth Propulsion acquisition, allowing Twin H to remain flexible to capitalize on market conditions and be y $30 { opportunistic with attractive future M&A opportunities $
Slide 22: Historical Financial Performance
HISTORICAL FINANCIAL PERFORMANCE GROSS MARGIN 33.3% = FY18 gross margins were favorably impacted by higher sales volume and a arily related to 244% favorable product mix, p increased demand from North American fracking customers for transmission and aftermarket products = FYA7 gross margins were fav
Slide 23: Product Images
Confidential ale lem YEARS PRODUCT IMAGES
Slide 24: Marine & Propulsion Products
MARINE & PROPULSION PRODUCTS UCI kt QUICKLY at You've gto feet to bekve it You've got to feeitto believe Marine Transmission Marine Transmission Marine Control Drive MGX 5065 MGX 5600 (MCD) 270hp- 570hp 1300hp-2100hp 5 Models 245hp— 6035hp
Slide 25: Marine & Propulsion Products
MARINE & PROPULSION PRODUCTS Surface Drive ROLLA ~ A Twin Disc Company Se Controls ; EC 300 Express Joystick _ a rTWINDEcy t
Slide 26: Marine & Propulsion Products - Veth
MARINE & PROPULSION PRODUCTS - VETH Tunnel Thrusters Z-Drives L-Drives VethJet Diesel Engines / Electronics Generator Sets ai 0 sc
Slide 27: Transmission Products
TRANSMISSION PRODUCTS TA90-8501 TA90-7500 TD61-1180 Fracing Transmission Fracing Transmission ARFF Transmission 3000hp (2300kW) 2600hp (1939kW) 705hp (526kW)
Slide 28: Transmission Products: Frac Rig Diagram
TRANSMISSION PRODUCTS Frac Rig Diagram
Slide 29: Industrial Products
INDUSTRIAL PRODUCTS Power Take-Off HP1200 Released 3/16 Pump Drive Power Take-Off AM370 ‘SP314 Gear Box Universal Control Drive _ — i>
Slide 30: Appendix
Confidential lO lem APPENDIX
Slide 31: Reconciliation of Net Income to EBITDA
RECONCILIATION OF NET INCOME TO EBITDA (Sin housones) FvI6 ray rvs Netincome ($13,108) ($6,294) $9,528 Income Taxes (22,282) (ana) 773 Interest Expense 426 303, 282 Depreciation & Amortization 3887 7017 664 Netsales $166,282 $168,182 $240,733, EBITDA as 87% Pini ‘ae ies Te ene ne 50. tn Papin B Conf
Slide 32: Income Statement Summary
INCOME STATEMENT SUMMARY (Sin housance) Netsales Gross Profit 40,595 si Margin 24486 MEA Expense 57,13 Restructuring Impairment 9523 Interest Expense 426 Misc. Exp / (ine) (172) Pretax Earnings (925,295) Income Taxes (12,282) Minority Interest (91) Netincome (13,108) EBITDA ($16,113) ‘ae ies Te ene
Slide 33: Income Statement Summary — Quarter
INCOME STATEMENT SUMMARY — 15 QUARTER (Sin housance) FvI6 a7 ras Fug Net sales $37,373 $35,835, $45,068 $74,689 Gross Profit 8,190 9473 13,992 23,985 si Margin 219% 25.6% 31.0% 32.1% MEA Expense 15,240 12475 13,398 18,986 Restructuring Impairment (600) 258 1218 173 Interest Expense Bt 33 o m7 Misc.
Slide 34: Non-GAAP Financial Disclosures
NON-GAAP FINANCIAL DISCLOSURES Non-GAAP Financial Disclosures Financial information excluding the impact of certain significant items in this presentation are not measures that are defined in U.S. Generally Accepted Accounting Principles (“GAAP”). These items are measures that management believes ar