Greetings. Welcome to the Twin Disc, Inc. fiscal second quarter 2022 Earnings Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Stan Berger. You may begin. Thank you, Shamali. On behalf of the management of Twin Disc, we are extremely pleased that you have taken the time to participate in our call, and thank you for joining us to discuss the company's fiscal 2022 second quarter and first-half financial results and business outlook. Before introducing management, I would like to remind everyone that certain statements made during this conference call, especially those statements that represents intentions, hopes, beliefs, 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. By now, you should have received a copy of the news release, which was issued this morning before the market opened. If you have not received a copy, please call Annette Maienhaage at 262-638-4000, and she will send a copy to you. Hosting the call today are John Batten, Twin Disc's Chief Executive Officer, and Jeff Knutson, the company's Vice President of Finance, Chief Financial Officer, Treasurer, and Secretary. At this time, I will now turn the call over to John Batten. John? Thank you, Stan, and good morning, everyone. Welcome to our fiscal 2022 second quarter conference call. As usual, we will begin with a short summary statement, and then Jeff and I will be happy to take your questions. Before we go over the results, I'll touch on some of the operational highlights from the quarter. Looking at demand, as we mentioned in the press release, demand improved nicely across most of our markets. The biggest impact we saw was at our North American operations, where our orders improved in industrial and transmission product lines. Our global marine demand for our North American-produced models remained flat at the factory as we still work through some of the inventory at our distributors. The market activity in our marine product lines improved nicely in the quarter, and we saw significant new orders at our European operations for those models. We also saw, looking at the market in particular, continued elevated high demand in the Australian marine market, particularly pleasure craft. Nice unit orders for our marine transmissions and some other product lines that they sell into the market. As I mentioned, we had a growing number of projects in the Asian, European, and North American workboat markets. Continued application growth for our Veth product line, primarily in some new markets for them, the expedition-style mega yachts. That activity increased. The one activity, the one market that still is a little slow is the inland passenger vessel market. As COVID wanes, we should see that market start to pick up in the calendar year. We did see some initial inquiries for some offshore vessels in Asia. That would be the first time in a long time that we've seen new project activity in any offshore market. As you shouldn't be surprised, a steady flow of hybrid and electric electrification projects for our marine transmissions. With respect to oil and gas, we received good unit orders from Asia for both the 7600 and the 8500, and a significant amount of aftermarket parts order for the North American fleet. Quoting activity for new units also improved in December and January, and we believe that new rig construction should improve this calendar year. Our operation in Lufkin weathered significant supply chain issues on parts coming from India and has turned the quarter on past due, their past due amount. We've continued to see significant growth in demand on new unit orders for our industrial products based in Lufkin. The supply chain continues to be a challenge, as you should not be surprised. Lead times have extended significantly, but they're more predictable. In the quarter, we saw significant inflationary cost increases from our suppliers, and those are reflected in our second quarter margins, and Jeff will cover that. The most significant increases came from castings, forgings, and machine parts. Anything related to steel prices continued to rise in the second quarter. The momentum of these increases continued throughout the quarter. We had previously announced a 4.5% price increase on July 1, 2021. This fall, we announced a 5.5% increase effective January 1, 2022. We've also implemented a 4.9% surcharge on product shipping after January 1, 2022 to combat some of these inflationary increases that we've seen. In this quarter, we'll be evaluating every inflationary input and deciding on future increases to be implemented in the fourth quarter. One of the other things that we had to deal with, as did everyone in the quarter, was the COVID impact. It certainly had a demand impact from some of our customers, but it was also the most significant in supply chain. Many parts were delayed from suppliers due to labor shortages, and we had a noticeable impact in December due to illnesses and quarantines. Thankfully, this situation has improved in January. We're hopeful that that trend continues throughout the balance of the calendar year. Now I'll turn it over to Jeff Knutson to talk about the financials. Thanks, John. Good morning, everyone. I'll briefly run through the fiscal 2022 second quarter and year-to-date numbers. Sales of just under $60 million for the quarter were up $11.3 million or 23.3% from the prior year second quarter, and up $12.1 million or 25.4% from the previous quarter. The sales increase reflects continued growth and demand across our markets, as John mentioned, with shipment performance limited somewhat by supply chain challenges across all our locations. As noted last quarter, we've experienced a significant increase in lead times from our suppliers, unpredictable vendor delivery performance and difficulty in getting shipping containers. Despite supply chain challenges, strong demand and improved operational performance have resulted in a 46% increase in industrial product shipments, a 14.5% increase in marine and propulsion shipments, and a 13.4% increase in off-highway transmission sales for the second quarter. By region, sales into North America were up 30%. Sales into Asia Pacific were up 17%, and sales into Europe up 5%. While foreign currency exchange was a net negative $1 million impact to sales in the second quarter. Through the first half, we are now 13.6% or $12.9 million ahead of the prior year. The second quarter margin percent was 22.5% compared to 18.3% in the prior year second quarter. The improved margin in the current year is a result of increased revenue and a more profitable mix of product, partially offset by the impact of inflationary pressures on cost, as we have seen significant price increases across our supply base. We have taken action, as John detailed, to implement price increases and surcharges to offset these inflationary pressures going forward, and we'll continue to monitor this area very closely to identify any additional required pricing actions. Spending on marketing, engineering, and administrative costs for the fiscal 2022 second quarter increased $1.9 million or 14% compared to fiscal 2021. The increase in the quarter is primarily due to increased salaries and benefits, the return of a global bonus program, professional fees, marketing expenses, and other inflationary increases. Essentially a return to a somewhat normalized level of spending in areas of activity that had been dormant for some time. These increases were partially offset by the favorable impact of a Dutch COVID relief subsidy recorded in the quarter. As a percent of revenue for the second quarter, ME&A expenses were 25.5% compared to 27.5% in the prior year second quarter. For the first half, ME&A expenses were 26.3% of revenue compared to 27.2% in the first half of fiscal 2021. We recorded restructuring charges of $1.2 million during the quarter, primarily related to the final negotiated settlement related to the Belgian restructuring program announced this past June. The total cost of this program is now approximately $3.3 million and is expected to drive annualized savings of approximately $1.6 million once complete. Including the restructuring charge, the operating loss for the quarter was $3 million, compared to an operating loss of $4.6 million in the prior year second quarter. The first half operating income of $200,000, which includes a $2.9 million gain on the sale of our Swiss facility recorded in the first quarter, is nearly $8 million improved from the fiscal 2021 first half. The effective tax rate for the first half of fiscal 2022 was -131% compared to 30.3% in the prior year first half. The current year rate is quite unusual and was impacted by the domestic full valuation allowance, which results in no tax benefits being recognized on current domestic losses. The net loss for the second quarter of fiscal 2022 is $3.8 million or $0.29 per diluted share compared to a net loss of $4.3 million or $0.33 per diluted share in the prior year first half. EBITDA of $0.2 million for the quarter was improved from a loss of $3.6 million in the prior year second quarter. For the first half, EBITDA improved by $10.4 million from the prior year from an EBITDA loss of $5.2 million to positive EBITDA of $5.2 million in the current year. Turning to the balance sheet, inventory was up $9 million in the first half, driven primarily by supply chain imbalances. Despite a significant increase in inventory, operating cash was only slightly negative at $1 million. Capital spending at $1.8 million for the half is well behind schedule, impacted by the lead times on machine tools. Given the slower start in capital spending, we now anticipate that we will invest in the $7 million-$10 million range in fiscal 2022. With that, I'll turn it back to John for some final comments. Thanks, Jeff. Now just spend a quick moment on the outlook. Obviously, our backlog and project activity has improved significantly, both year-over-year and sequentially versus the first quarter and the end of the prior fiscal year. We are also anticipating improving conditions in North American oil and gas. Our challenge will be to match our internal and supply chain capacity to meet this improving demand. We have the inventory to meet the improving oil and gas trends in North America, and we'll be building in advance when possible to get ahead of this wave. Hopefully, in one of the next calls, we can highlight more hybrid and electrification applications that we've been working on with our customer base as they are testing it in their prototype process. The R&D and engineering activity has continued in earnest this fiscal year, and we are extremely excited about the future developments in all of our markets with respect to hybridization electrification. That concludes our prepared remarks. Now Jeff and I will be happy to take your questions. Shamali, can you open up the line for questions now? Thanks. Sure. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question comes from the line of Joshua Chan with Baird. Please proceed with your question. Good morning, John and Jeff. Thanks for taking my questions. Thanks, Josh. Right. I guess first question on oil and gas. Clearly the backdrop has improved, but I think, you know, this CapEx discipline is kind of the phrase for the industry this cycle. I guess I was wondering, John, if you could talk about sort of the conversations that you're having with the customers and how you think about the trajectory of when you might see orders within this calendar year. Yeah. You know, the conversations and the quoting activity with the OEMs is going on. Certainly before we've ever historically looked back at every cycle, before we've had new rig construction, there's been a rebuild. Why we had seen a trickle of spare parts orders last, you know, I would say the first quarter of this fiscal year in fiscal 2021, that activity has clearly picked up in the last couple of months. If I go by empirical evidence from prior cycles, that would mean that there would be new unit orders and building in the next three to six months. I think that we should. You know, I would expect to see new unit orders this fiscal year for us. Whether or not they come soon enough that we deliver them or the units are going to Asia this fiscal year, but certainly I see we will see orders improving within a quarter or two. Okay. No, that's encouraging. I think you mentioned in the press release that you have some completed products, right? I guess, would you be able to serve some demand immediately, or how does that work? Yeah. We would be able to, you know, for the first few dozen, Josh, we would be able to react very quickly, because we have somewhat of a very balanced inventory. Once we get out, you know, the lead times, they won't go to 12 months, but they'll be a few months lead time once we get past the initial amount. But it's, you know, that as orders are improving in China, that ability to react quickly in North America is, you know, it won't be a month or weeks, it'll be a couple months on lead times. Sure. That really, Josh, is driven by, you know, our internal capacity here on assembly and test, and some parts we need from suppliers. We are on top of it. Yeah. Yeah. Absolutely. No, that's encouraging. I guess on the price increase and the surcharge side, historically, we haven't talked too much about it. You know, could you just talk about how that works? You know, is it broadly across all your portfolio that's a hit immediately? Then maybe if you could fold in, you know, how much impact do you think that can have on your gross margin improvement in the second half that you kinda alluded to? Typically, you know, historically for anyone, I would say 60 or under, it's an annual price increase. You know, we're no different than anyone. We have one price increase per year. You'd have to go back to the early eighties to find something similar where you are raising prices multiple times per year. Typically, we like to do it and give everyone advanced notice that, you know, a two-month notice that our price is gonna go up July 1, 2022 so we would announce that by May 1, 2022. We did that this year for a price increase in July. I think like many people, we thought that what we announced two months ahead of time for July would be enough, but it became obvious in August, September that inflationary pressures had increased past that. We had announced in, I think it was October timeframe that we'd have another price increase in January. Really in that November timeframe and into early December, the increases, particularly anything related, you know, a lot of our products obviously is steel, whether it's forgings, castings, parts that we outsource, you know, steel prices went up dramatically. In that October-November timeframe, we were getting, you know, more increases from parts suppliers that are providing us things that are just 100% metal, that are high double-digit. That clearly had an impact, and it was effective on time of shipment. It was basically we were getting it with a surcharge or a price increase, and you saw the impact of the timing of that in our second quarter. Our surcharge was effective on shipments as of January 1, 2022. I know that is, it's a bit of a shock, because that's coming on top of another price increase. The inflationary pressure starting from steel mills to people who are making bearings, clutch plates, supplying us forgings or castings, you know, they're getting steel increases. They have inflationary pressures. They're passing them on to us. We have to pass them on. Honestly, Josh, what we've done, what we've implemented is basically to get us to, you know, that gross margin, I would say neutral. Our desire is that what we have passed on to our customers gets us back to where we were on those gross margins prior to the, I would say, rapid inflation that we saw in the middle to the late 2021. It's imperfect, and that's why we're evaluating it and I will never say never that we won't do something additionally in the fourth quarter, sometime in the beginning of the fiscal year, beginning of next fiscal year. There definitely, Josh, there'll definitely be one for the beginning of fiscal 2023. The question is, will it come sooner? Because it's one of these things that you know, for the past whatever, however many years, you would evaluate the cost increases coming in over your fiscal year, and you'd implement, depending. Historically, in North America, it would be July 1, 2022 or October 1, 2022. Historically, in Europe, it would be January 1, 2022. You'd have one price increase a year to keep to catch the inflation. That. Right now, that's out the window. We're looking at it quarterly now, and we'll have to make adjustments because steel mills and our suppliers are keeping their margins in check by passing on increases to us. We need to make sure that those increases are shared everywhere, and it's just not us taking the punishment. Right. That makes sense. The 4.5% surcharge, does that mathematically get you back to the sort of mid to high, maybe 20% gross margin in the back half? Is that a reasonable guess? Yeah. I mean, that's where we're looking, Josh, right? Is that we should be north of 25% the rest of the year. Obviously, you know, the inflationary pressures will continue. Like John said, we'll need to continue to react to that. That's what we're looking at, is to get back to the, you know, certainly north of 25% in the 26%-28% range for the rest of the year. Yeah, Josh, it's you know, some of the increases coming in. It's not. What we've implemented is, I would say, somewhat broad-based and, you know, surcharges on everything. I think we will be looking at specific product lines because the increases, it hasn't been on average. You know, some product lines have been hit harder than others. We will be addressing that, too, in the next couple of months. All right. That's great. Thanks for the call, and thanks for the time, guys. Yep. Thanks, Josh. As a reminder, if anyone has any questions, you may press star one to join the question and answer queue. Our next question comes from the line of Noah Kaye with Oppenheimer. Please proceed with your question. Thanks for taking the questions. Just following up on price cost commentary, you look at the six-month backlog, what is the price cost for that? Is that a headwind to margins? Is it, you know, about neutral? If you assume that sort of pricing initiatives you put in place are generally retained throughout the year, when does price cost turn positive? Yeah. Well, I think one thing to remember is that what's in the backlog or what's the reported backlog doesn't reflect the price increase. When those products are shipped, the price increase will be impacting that shipment. You know, technically, that backlog is going to be shipped at a higher price as of the 12/31 backlog will be shipped at a higher price. You know, I think generally, the backlog that we have would be a positive impact to current margins. You know, it'll be trending up once that starts shipping. Right. Look, I mean, steel prices are elevated year-over-year. They've started to back off a little bit. When would you start to see potentially, just based off of, you know, what we're watching with commodity indices, when would you start to see potentially a little bit of relief or at least stability on some of your key input costs? I mean, maybe, you know, just given other supply constraints, you know, suppliers may not be cutting prices, but certainly, you know, if the raw input prices are starting to back off a little bit, what would that mean for kind of your cost profile? Yeah, no, I think I'm crossing my fingers and knocking on wood. I'm hopeful that the increases have stabilized and that we're flat. I agree with you. What I've been reading is that, you know, hopefully steel and fuel may start to back off a little bit, and that we'll see some. I haven't seen evidence of any price decreases, or I should say, surcharge easing for us, haven't seen that yet. That's why a surcharge for us, it's the first time in memory that we've done a surcharge. We typically just do pricing. I think we recognize that some of this, some of these inflationary costs may be easing in calendar 2022, so that's why we elected to go with the surcharge. We're thinking that it might turn back. You know, so we have that variable that we can ratchet back as we start to see those inflationary prices ease on us. We've seen it stabilize, Noah. We haven't seen it improve as far as actual dollar costs coming down. Great. Helpful. Then I guess, John, maybe a little bit of historical context around, you know, types of spend in the oil and gas market in North America particularly would be maybe helpful for folks here. You know, you've seen over the cycles, obviously, a varying mix of new builds versus, you know, repair versus replace in the field. You know, obviously, we got to some points over this past cycle where there was almost no new construction related activity. I guess just how do you see kind of the mix of spend, you know, trending as you're looking at these improving activity levels, and how does that kind of compare to past periods? Well, I would say anecdotally, we have been told by several customers in different regions that they like to rebuild, let's just say in that 25%-30% range of their fleet. If they're gonna be 100 rigs being built, they wanna repair 25 to 30. That's I think in an ideal situation, we've heard that. I don't know if we've ever seen that because we see the rebuild activity start and then a wave of new rig construction because it's faster, they're spending time and dollars on something that's brand new. We'll see this time. I mean, if it's whatever the percentage is, it's very good to see the rapid increase in aftermarket parts. That means that they are bringing rigs back online that were sitting idle. We'll see. Usually what happens is that demand of getting sidelined rigs back online is not enough capacity for what's needed. My sense is that that's gonna happen again. What's the amplifier from our aftermarket parts order to what our new rig orders? I don't wanna predict it, but it's certainly when you're coming off of, you know, several quarters of no new units going into North America, you know that this rebuild activity is signaling that they're gonna be ordering new units soon for new rig construction. Right. Helpful. Thanks so much. Thanks, Noah. Our next question comes from the line of Robert Fetch, who is a Private Investor. P.lease proceed with your question. Good morning. If you can just elaborate on that last comment. What is your content per new rig, just in general ballpark? If a rig is $1 million-$1.2 million, I'm going from a year ago, so we're gonna have inflationary pressure in there. A pressure pumping transmission is gonna be $175,000-$200,000 of that. Not quite 20%, but you know, it's the big components are the engine, the cooling system, the pump, and then the transmission. Okay. Can you talk also generally about the transition in your product line serving various end markets of the transition from diesel to electric, and what the opportunity is there, or is it cannibalizing some of the diesel products to a greater extent? You know, we're exclusively off-highway. It's the challenge for us in the hybrid and electrification is just the number of projects that you have to do to satisfy that. We're not like an automotive manufacturer where you can design one electric powertrain or hybrid powertrain for a number of different vehicles. What we do for one OEM on a crane, the solution may be different from what we do for a different OEM on a crane, and those will be 10-12 per year. Then what we do for one boat manufacturer is gonna be different for A, B, and C. There's a lot more engineering and effort required to get it. The opportunity is, Robert, huge because our markets have been doing the same thing relatively the same way for decades. A diesel engine, a gearbox. The gearbox could be a manual gearbox with a clutch. It could be an automatic transmission with a torque converter. By and large, it's been a diesel engine, a transmission, clutch, torque converter, and then the driveline. The engine has been the primary focus of whatever application it is. What's different now is, we'll see where the market takes this, but now it's, you know, the diesel engine for hybrid is still a significant part of it being able to generate the power and the electricity, but the other components are equally as important. The gearbox has to take multiple inputs, whether it's from an electric motor or battery pack or an engine. The control system is more complicated to manage all of that. It's exciting. It's redesigning the commercial off-highway markets and marine markets. It's challenging because there's only so many motor suppliers, there's only so many battery suppliers, and automotive is just driving, you know, they're driving the demand and taking that up a lot. It's developing supply chains to take care of the off-highway markets, developing the control systems. It's a big opportunity for companies like Twin Disc who are in the power transmission business because effectively you are rethinking every type of application. If we develop the right partnerships and the right system solution, you know, for a crane that is just diesel, driven by a diesel engine and transmission and one of our products, the potential for our content goes up if we go into hybrid and electrification. Some of the challenges we face are, you know, when are the markets ready to handle that extra cost? Because one of the trade-offs, you have lower emissions with hybrid and electrification, but the cost of providing that is higher than a traditional application. There's a big demand out there, and it's just trying to shake that through the sifter and figure out what markets will take off first and when and how it's all gonna happen. It's a huge opportunity for Twin Disc. Understood with your broad customer base. Do they pay you for the engineering for products that may be custom to their needs? Yeah, Robert, it's different in each market. A lot of it right now, and that's a model that you're trying to perfect, is how you get paid for that. Some of the first, you know, I would say we've been all over the map, but we've been paid for engineering. A lot of these initial applications, they're joint development projects, so we're learning as the OEM is learning. You know, it depends on the application. If there's significant volume on the backside, you know, you just amortize those engineering costs over, you know, what you ship. One of the things that's, you know, also important is, you know, picking the right customer. You got to pick the winners. You got to pick, know our customers, know our markets, and be able to analyze what they're trying to do and work with the customers and the OEMs and their products that you know are gonna be a market success. That's also one of the challenges that everyone's facing right now is the timing of when certain markets will accept the increased cost of these hybrid and electric systems. Did you mention what level of cash flow you expect this year or next? You know, we've been trying to stay free cash flow positive. The second quarter was a little short of that. Year to date, we're a little short of that. We expect to be cash flow positive, free cash flow positive in the second half, despite what should be a ramp up of capital spending as some of the things that are on order start to arrive. You know, in the $1 million-$9 million free cash flow positive in the next few quarters is- Is, is, uh, is it- If we have it. I was gonna say. Sorry, Robert. is working capital the greatest pressure on how much is free or not in the next 12, 18 months? Yeah. I mean, a lot has to do with that number could get significantly better depending on the level of North American or 8500 Series demand for fracking rigs and transmissions. We can liquidate and turn a lot of inventory into cash if that demand ramps up. We have demand. The demand we have would support what I just projected. But yeah, inventory is really the one lever that can make that number better. Should you begin to approach a couple turns of inventory annually again? Yes. Yeah. Certainly as we exit this year, I think we should be there. Do you have a variable outlook related to your U.S. versus non-U.S. business? You know, they're such different businesses. It's hard to give a quick answer to that. I mean, they're very different markets. Obviously, you know, the Asian oil and gas market has been stable and consistent through the last two years, probably our most stable market. Australia is, you know, the Australian Pleasure Craft market has been growing. I think it's up 40% over the prior year. It's a little bit all over the map, I think, but everything is going in the right direction, just at varying degrees. I think the North American marine is probably the one that isn't hitting where we think it should be yet, I think because of the buildup of inventory at our distribution locations. I think we expect that to start catching up as well. I don't know if that answers your question. Yeah, that's great. Outside of oil and gas, kind of what kind of end markets do you feel best and/or most visible about as you kind of look out in the intermediate term? I would say, you know, the most positive, just our global marine markets. Our orders on our European operations improved significantly, both in the first quarter and the second quarter. Industrial, with the operation in Lufkin, has seen a tremendous increase in new unit orders. We have a team down there focused on that market. Feeling, you know, Robert, feeling good about all our markets. You know, the one that I mentioned at the beginning is just offshore. Offshore oil and gas has been very, very slow. I'm hoping to see some activity, and then there's been an announcement of, you know, some wind farm activity down in the Gulf. You know, I'm hopeful that there will be activity there for vessels going out. You know, I just. Jeff said it, everything is pointing in the right direction. It's just some are moving faster than others. I would say most confident in the recovery of our global marine market, you know, and just beyond the transmissions that are produced here in North America, our industrial business is seeing strong demand growth. I do think there'll be another wave of North American oil and gas sometime this calendar year, so feeling good about that. Okay. Just last two questions. Should we expecting growth in the next year to maybe principally or solely organic? I would say in this fiscal year, in the next few quarters, yeah, the growth will be almost exclusively organic. By organic, it's you know, things that we're buying from partners to include in our hybrid and electrification system. Beyond just an organic would, you know, we don't manufacture it inside, but it's part of a system that we're buying and reselling. I think you might have to go out beyond that window a little bit to see something more in the M&A activity. Okay. Lastly, just on the labor front, are there constraints to your growth, either at the manufacturing or at the, say, admin and engineering level? So definitely, you know, a concern is being able to grow the workforce here in Racine. It's been in Southeastern Wisconsin finding you know sometimes we feel like a duck swimming upstream. There's a lot of activity on the feet, you know, going underneath the water just replacing retirements here. We also have Lufkin. Yeah, it's the challenge and then the ones that you know that are just one step removed is it's hard to express the supply chain issues with quarantines and people being out sick, everything finding out last minute. I think that's getting better, Robert. If there's one... Yeah, the one that we have to work on the hardest is making sure that we have the people in the shop to make it all happen and get product out the door. And that will be and it's really being sure that we have everyone available 100% of the time. I think we've crested there, and that's getting better. It's being able to add workforce both here and in Lufkin. It doesn't seem to be as much of an issue at our the global operations. It's been honestly more of an impact here in North America than it has been in other parts of the world. Okay. I guess I wasn't honest. I got one more question. Obviously, you guys have been quite cyclical over the years, but can your assets and staff largely support sales and revenue levels that you've had any time in the last 10, 15 years without meaningful capital spend? I'd say not mid. If we can get the machine tools that we've planned for this year and next year, I think our capital spend can do it. We're spending more time on developing supply chain strategies on partners outside of our four walls to supply key components. To support growth back to our prior level, and that it is a very good question, we will need more internal capacity on assembly and test and, you know, and primarily in North America. We'll need to find those resources either in Racine or in Lufkin to get back. Yeah, we need to increase both capital and headcount within our four walls, are two things that we have to do. I appreciate your frank responses. Thank you very much. Okay. Thanks, Robert. We have reached the end of the question and answer session. I'll now turn the call back over to CEO John H. Batten for closing remarks. Thank you, Shamali. Thank you everyone for joining our conference call today. We truly appreciate your continuing interest in Twin Disc and hope that we have answered all of your questions. If not, please feel free to call either Jeff or myself, and we'll get your question answered as quickly as possible. We look forward to speaking with you again following the close of our fiscal 2022 third quarter. Shamali, I'll turn the call back to you. Thank you, John. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.