Twin Disc, Incorporated · NASDAQ:TWIN
Twin Disc — Q3 FY2023 Earnings Presentation
22 slides from Twin Disc's earnings presentation, Apr 28, 2023
Slide 1: Twin Disc, Inc. Investor Presentation
a TWIN DISC, INC Investor Presentation
Slide 2: Disclosures
DISCLOSURES Fown(oisc) He ‘This presentaton contains statements that ae fowvardooking wihin the meaning of Secton 21€ ofthe Secures Exchange Actof 1934, as amended ‘These stements are based on management’ curent expecatons that are based on assumptions that are subjectto nsks and uncertainties. Actu
Slide 3: Third Quarter Highlights
THIRD QUARTER HIGHLIGHTS ee Sales increased 24% to $73.8 million Double-digit sales growth in North America and Asia Pacific regions Gross margin decreased 370-basis points EPS increased 20% year-over-year or 150% sequentially Improved operating cash flow of $6.9 million Record backlog for Veth busi
Slide 4: Marine & Propulsion
MARINE & PROPULSION = Strong demand across end markets « Opportunisticsales in some markets due to longer lead-timesfrom competition = Increased Oil & Gas activityleading to offshore supplyvessel inquiries = Significantincrease in U.S. and European governmentinquiries for small military marine trans
Slide 5: Land-Based Transmissions
ND-BASED TRANSMISSIONS * Oil & Gas demand continues to be elevated * Delays by third-party engine manufacturers pushing orders for new transmissions = More orders to rebuild existing transmissions, something Twin Disc is uniquely positioned to do * Lack of investmentover past few years has led to an
Slide 6: Industrial
STRI. Stable demand globally across end markets Maintaining volume levels since spike in 2022 Exploring several sizable project opportunities with key domestic OEMs Electrification and Hybrid systems are drivers of margin profile expansion
Slide 7: Backlog and Inventory % of Backlog
BACKLOG AND INVENTORY % OF BACKLOG 126 $1240 $1089 $1089 s1012 3022 4ar22 10523 20F23 1mm Backlog SMM) —Inventory(% Backlog) IMPROVING INVENTORY & HEALTHY BACKLOG Highest backlog levels in more than four years Significantly improved shipments in Q3 Inventory reduced on an absolute dollar and percent
Slide 8: Long-Term Strategy
ONG-TERM STRATE! Leading Hybrid/Electric solution provider for niche marine and land-based applications Continued expansion of Veth MM _ Rationalize global footprint product to reach new for efficiency and customer markets and geographies response Increased focus on controls and system integration r
Slide 9: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Debt Reduction Return Capital to Shareholders (Dividends) Organic Growth Investments Bolt-On & Transformational Acquisitions Return Capital to Shareholders (Share Repurchases) Focus Areas Research& Development Geographic diversification / expansion Marketing Strategic Fi
Slide 10: Near-Term Expectations
NEAR-TERM EXPECTATIO! External Factors = Supply chain headwinds continue to moderate = Continued material and component shortages, especially European suppliers = Raw material inflation negativelyimpacting margins = Legacy facilities, equipment, and processes = Operational improvement enabling incre
Slide 11: Financial Overview
FINANCIAL OVERVIEW Crwnn(bisc
Slide 12: Financial Performance
FINANCIAL PERFORMANCE sates coed 160 sea soa | ins yon saree 10a3 2a EARNINGS PER SHARE 3058 sare 4ar22 10923 20823 $738 3023 30R23 Strong demand across end markets Sales driven by Marine & Propulsion systems and Land-Based Transmission product groups Significant improvement in shipments and supply
Slide 13: Sales Diversity
SALES DIVERSITY SALES BY PRODUCT GROUP Siemans $16 es sare 4ar22 1023 20823 30F23 imMarine & Propulsion ystems m Land:-Based Transmissions m Industrial m Other SALES MIX BY GEOGRAPHY a 20% sara 4aF22 10723 20523 3aF23 North America mEurope mAslaPacific Other Marine and Propulsion Systems and Land- B
Slide 14: Margins & Near-Term Expectations
MARGINS & NEAR-TERM EXPECTATIONS ‘TWIN DISC GROSS MARGIN 209% 26.1% 30F22 3023 THIRD QUARTER GROSS PROFIT BY PRODUCT GROUP ‘mMarine & Propulsion Systems i Land-Based Teansmissions mt Industral Other THIRD QUARTER GROSS MARGIN DRIVERS + LIFO related adjustment impact across product groups + Partial q
Slide 15: Strong Balance Sheet
STRONG BALANCE SHEET BALANCE SHEET Siena) = sau3 $240 LEVERAGE RATIO $173 a a L | " Total Debt Net Debt ox mrv22 930523 EBITDA — Stentend 3234 re we 3073 22 gas23.cm 15
Slide 16: Reaffirming Medium-Term Targets
REAFFIRMING MEDIUM-TERM TARGETS MEDIUM-TERM: 3-5 YEARS + Hybrids Electric leadership Revenue + Veth global expansion ne Industrial focus $400 million ar Gross Margin = European cost structure = Operational efficiencies 30% * Greater pass-through content Free Cash Flow Conversion * Manufacturing foot
Slide 17: Key Takeaways
KEY TAKEAWAYS Fown(oisc) = Robust product group and end market demand driving performance improvement and expected to continue through Q4 = Legacy supply chain headwinds are moderating; addressing component and material shortages that have impacted margins = Sales and shipment momentum setting the f
Slide 18: Q&A
Q&A Fiscal 2023 Third Quarter Earnings Call
Slide 19: Appendix
APPENDIX
Slide 20: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO REPORTED FINANCIAL MEASURES RECONCILIATION OF TOTAL DEBT TONET DEBT (In thousands; unaudited) June 30,2022 March31,2023 Current maturities of long-term debt 2,000 2,000 Long-termdebt 34,503 29,276 Total debt $36,546 $31,276 jeasdacti $12,521 $14,024 N
Slide 21: Reconciliation of Non-GAAP Financial Measures to Reported Financial Measures
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO REPORTED FINANCIAL MEASURE! RECONCILIATION OF CONSOLIDATED NETINCOME TO EBITDA (In thousands; unaudited) Faz sF22 4qF22 10723 2923 3023 3923 UTM ‘Net Income (oss) attributable to Twin ize $12,028) tnverest expense 2aze 490 oa 366 so s2 aus income tare
Slide 22: Net Debt to EBITDA Leverage Ratio Calculation
RECONCILIATION OF NON-GAAP FINANCIAL c> MEASURES TO REPORTED FINANCIAL MEASURES NET DEBT TO EBITDALEVERAGE RATIO CALCULATION Net debe $245002 Esrroa 23593 Leverage Ratio aa 22