Good morning and welcome to the IDEAS 16th Annual IDEAS Conference here in Chicago. My name is Erke Girgin, Assistant ccount Manager. Here today presenting is Twin Disc Inc., traded on NASDAQ, ticker TWIN. Today we have John Batten and Jeffrey Knutson, CEO and CFO. Take it away, Burt. Thanks, Erke. Thank you, everyone, for spending your early morning with us. I'm John, the CEO, and Jeff Knutson here, our CFO. Safe harbor statement, I know you all know that. Just a couple of themes to leave you with to think about when we're going through just some of the highlights we want to do leave you with. We're a global power transmission provider, kind of in the off-highway markets, whether it's marine and water. Increasingly diversified portfolio with our acquisitions, what I'll get into here in the presentation. Some of the things that have come up most recently are our defense markets have started to heat up, both here in the U.S. and in NATO. A lot of things that we've been working on kind of through COVID and post-COVID and the supply chain crunch was margin enhancement and operational efficiencies with our global footprint. We've done three acquisitions, three of our biggest acquisitions we've done in the last seven years, one in 2018 and the last two I'll talk about here, most recently in the last year. Integrations have been going very well. We folded all of those organizations into ours into one operating model. We're looking at now that that is kind of behind us, a strong operational cash flow generation going forward. Just a quick overview, I'm assuming not many of you know our story. I'll be very brief. We've been around for 107 years. We were founded in Racine, Wisconsin. We have always been in the off-highway market. We started off making gearboxes for ag tractors, Wallace tractor, Case tractor, and then got into the marine transmission market for the Great Lakes fishing boats. In World War II, we did the transmissions for a lot of the landing crafts, and that kind of exploded our business around the world. Today we have just about 1,000 employees. We report manufacturing and distribution. Our revenue, just over $340 million and gross margins of 27.2%. Now, when you look at the fiscal 2025 pie charts here, this is a big shift for us. You go back a decade and we were very much heavily weighted in North America. This would have been two-thirds North America, mostly the U.S. and Canada, heavy in oil and gas, heavy in the offshore supply vessel market. Really through kind of the cycles in oil and gas and our strategic objective to diversify away and the fact that our last three acquisitions have been outside of the U.S., the biggest one in the Netherlands, second biggest in Finland, and then we did one in Canada. You can see where we are today, where Europe is our largest market, North America and Asia are kind of split 50/50. Where we'd once been 50/50 land-based products and marine-based products with our Veth acquisition, which does azimuth drives, we are very much now heavily weighted in the marine markets. The special sauce of our company is, you know, we've been in the off-highway markets for over a century. As these markets, Manitowoc's here, some other customers you probably know, shifting and looking at fully electric solutions and hybrid solutions, we are uniquely qualified with our controls technology that we've developed over the last 30 years to help them into this foray. We have a big push into the hybridization of our markets. Lastly, that last bullet point, you know, COVID got in the way, but Veth is an azimuth drives company that makes steering propellers that propel vessels and steer them, very popular in the European waterways. We saw this market, these products coming into our markets on the river and some of the cruise lines in the U.S., so we jumped at the opportunity to acquire them in 2018. I'm now happy to report that North America is their largest section, largest part of their backlog. Just quickly looking at the evolution here, we started in 1918 and really you go across the top until 1999, most of our growth was organic. We would develop a product, we'd sell it to an OEM, they traditionally would vertically integrate it, we would lose that business and then we would rinse and repeat. It really wasn't until 1999 that we started to go out and acquire companies to add product lines to our portfolio. We did a couple of small ones in the Italian, really focusing kind of on the European market that in 1999 with Technodrive, Rolla does the propellers for our surface drives and now does it for the Veth thrusters. Then BCS, which was a component company for the Italian yacht market. We kind of took a decade off, but as I mentioned, the Veth Propulsion in 2018 was kind of a game changer for us. New product, new technology, they'd already been doing hybrid and diesel electric, so they fully launched us into this space and engineering, and we've now taken that technology to our traditional products, whether it's land-based or marine. Lastly, I would just add in the last year we've done two acquisitions back to back, Katsa and Kobelt. Katsa is a Finnish company. They started off as purely a machining company making parts for the Scandinavian, but primarily the Finnish engine companies. Over the last, I would say, 15- 20 years, they developed their own gearbox line, and that was growing and getting more popular. Serendipitously, they're supplying some of the manufacturers of the NATO vehicles, Patria is the number one. As we went through the process, Finland was not in NATO. When we closed the deal, Finland was in NATO, Sweden joined soon after, and this opportunity for us is beginning to explode. Just looking quickly at our product overview, give you a visualization. That is that on the top left, you know, our marine propulsion systems. This is a vessel that's driven by our Veth diesel electric thrusters. It can also be fully diesel. Basically, this is kind of the size of boat that is in our sweet spot, whether it's for marine transmissions or thrusters, and from here, we only go bigger. Land-based transmissions, we kind of have stationary applications and mobile applications. For mobile applications, this is by far our biggest airport rescue firefighting. We supply the top two producers in the world, Rosenbauer and NAFCO. Rosenbauer's out of Austria and Minnesota, and NAFCO's out of the UAE. Our technology, very robust, very specialized application. These are basically NASCAR race cars, all-wheel drive, 8x8 and 6x6s. These are the trucks at international airports that have to get any place. The plane would crash within, you know, a few miles of the airport over any terrain. Very specialized application. Our transmissions allow for power dividing. You only need one engine. You can run the vehicle, and when you get to the crash site, you can run the vehicle and the pump off of the engine. In the industrial space, you know, it's a huge market, all sorts of products, reduction gearboxes, increasers, power take-offs. This was the area of the business that we were trying. If you go back to that pie chart, marine is by far the biggest, transmission second biggest, and industrial was third. We have really focused on our acquisitions with Katsa and Kobelt, which has a huge line of industrial brakes, which is new for us, focusing on those products to make this market, this business for us, roughly in the same order of magnitude as marine and transmission. As I mentioned at the beginning, really what's changed, I would say, in the last 18 months is the amount of defense. All of these projects that we've been working on that were somewhat dormant are starting to increase. The number of projects and orders are increasing rapidly. You can see just the year-over-year increase in spending for the U.S. Department of Defense, 13%, 150% in NATO. I think the big beautiful bill added another $40 billion for shipbuilding, primarily focused on the defense space, and we're seeing that. We have a great array of products up there. You can see our transmissions, our propulsion systems, and as I mentioned with Katsa for NATO, they're doing, they have transmissions, gearboxes, and transfer cases for those markets. Patria seems to be the truck that is winning a lot of the contracts right now. In our, it's 15%, so the defense is a part of our backlog is now up to 15%, which is a 45% growth year- over- year, and the pipeline just continues to grow, and we see that that will probably, you know, increase nicely again this year. Just touching on our strategy here for a second before I turn it over to Jeff. As I mentioned, we've been in these markets for 100 years and not much changed, I would say, for the better part of 95 years. It was really with diesel electric in our marine markets and then the push to hybridization where things started to change and we were starting to re-engineer a lot of what we've done. We started investing in electronic controls technology in the '90s and had a complete product portfolio of electronic controls for our marine transmissions, our power-shift transmissions. About five years ago, we invested heavily in developing hybrid controllers for all of our products, trying to make it something standard that could work with dual inputs, whether it was a battery, motor, two engines, natural gas, diesel, whatever it is. We've been working on that for the better part of five years. We are now starting to get very good traction in the marine space and some of our industrial customers with bringing this technology into the market. As I mentioned, with our acquisitions, expanding them, Veth, when we acquired them in the Netherlands, they were very much European focused. Most of their business was in Northern Europe, primarily in the Netherlands along the rivers there. As I said, we've expanded their reach now to the U.S. with our global distribution network and in Asia. As I mentioned, their number one market right now in backlog is North America, and that continues to grow. They've had incredible growth over the last few years, and we're looking to do that with Katsa and Kobelt as well. In the age of tariffs, I would say we have a global footprint that not many of our competitors have. We're in Europe, we're in North America, we are in Asia with our joint venture in Japan. It's an interesting time right now with tariffs, trying to figure out where we're going to manufacture things. We're lucky to have the footprint that we have because we're about to burst at the seams in Finland with NATO business, and we see the same thing in the Netherlands with our Veth business. Some of these products that we've been producing in Finland and the Netherlands are going to find their way to Texas and to some other manufacturing locations where we have capacity. As I mentioned, not just in the hybridization area, but a lot of our customers are looking to streamline their supply base, and it's providing us great opportunity to package a bunch of our industrial components and marine components together with our control system and be that one solution provider, whether it's hybrid or standard diesel propulsion. I'm happy to say that we're probably not done on the M&A front. There are a couple of things that are also ticking, but it's just the right time, the right opportunity, and we're working very hard to assimilate the two that we just made, but we think we'll be ready, you know, and I would say six to 12 months to continue to move forward. We're going to need to do something. We've stated publicly that our goal is to be at a minimum $500 million, 30% gross margins, and the free cash flow conversion. We have the bones and the infrastructure to get to $400 million. We should be very close this year, but to reach that $500 million goal is going to take another acquisition, and we have some in target. The other way to get to $500 million is for the hybrid and electric market to take off. Just to put it into context of what it means for a company like Twin Disc that's just provided mechanical components, it's usually in the area of 5x to 10x more content. For a, let's just say, a 50 ft vessel, we'd probably be spending, or the customer would spend probably $30,000 on a pair of marine transmissions and maybe another $10,000 on a control system. When we do the hybrid system and supply the motors and the battery and put it all together, it's in the area of a $330,000 price tag. Whether the market will bear it, people are willing to go there is another thing, but it is, it's a huge leverage for us. We have orders for these, we've delivered them, market hasn't quite taken off yet, but we're in a very good position for this and across our portfolio. One of the things that we're trying to do in that is we're trying to make it less expensive and less hodgepodge. What we've done is we have a test boat, a 48 ft Riviera in Australia, and we've pulled out the 700 horsepower diesel engines. We've replaced them with 470 horsepower diesel engines, electric batteries, electric motors, inverters, the whole system, and we're just about to launch this in Australia this fall. The reason we're doing this is we're trying to come to a market solution that is less expensive and more streamlined and more market-ready than just each one of the individual boat builders doing their own thing. You can see the goal is there to be able to supply a skid with the engine, motor, and inverter all there for the boat builder to use. We'll continue to tell you how we're doing on this going forward, but this is one of the ways that we can see that we can help our market with our background kind of launch into the hybrid and electrification for a broader range of vessels. That'll turn it over to Jeff. Hey everybody. Yeah, I will go through just a little bit of some of the background, some of the financial stuff, and some of maybe our strategic direction. In terms of the footprint, as John pointed out, we've got a lot of options, right? As we look at the global tariff situation and where we manufacture and where we sell into, we have the ability to move production around the world to sort of tariff-safe areas depending on where we're selling into. The red stars that you see there are all manufacturing locations, the newest being the one in Vancouver, that's the Kobelt acquisition. We have company-owned distribution, the blue dots that you see primarily in Asia and the Pacific. We have customers, again, all over the world. We've got global sales, global support, and I think the way we look at it, we're well positioned to manage through any sort of tariff regime that comes through. John mentioned M&A, right? We've done more than we've ever done as a company in the last few years. Looking back, the Veth acquisition in 2018, which was just prior to COVID, that caused a little bit of a delay in our ability to capitalize on that acquisition, but the growth has been incredible in the last few years, and we don't see a pause in that. The Katsa and Kobelt acquisitions, very accretive day one, generating cash, really strong strategic fit within our markets and our products. We fully intend to continue that. We still have a strong balance sheet. We were below 2x debt to EBITDA. We have support of our lenders. We feel like we can certainly continue in the kind of range that we've been doing. The focus right now is on integrating the ones that we have done, but we continue to work that pipeline, and as John said, within the next 12 months or so, we feel like we should be in a position to continue that. We're focused on, as we have been, diversifying away from oil and gas. That's always been a cyclical hangover for us. It's great when it's going, but when it goes away, we really struggled, and we haven't walked away from that market in any way. We continue to be as strong as we've ever been in that market, but we've grown the other sides of the business to make us a much healthier company. Everything that we, we don't buy fixer-uppers, right? We buy successful companies that, the playbook in the last three has been regional companies that have a great product, great technology, that do very well in their home markets and struggle to grow globally. We bring that global sales and support and reputation for quality, and it's been a great success for all three of the companies that we bought recently. These are two of them, right? Katsa and Kobelt. John mentioned them. Some of the details, maybe not worth going through all this, but reasonably sized for us in that $20 million- $40 million range. From a financial perspective, we can manage those, we can integrate those, and they're very accretive from day one. We're becoming, in some ways, the acquirer of choice for this type of industrial company around the world, privately held, looking to, family looking to exit. We get a lot of feelers for those types of companies. We treat them well. We understand their products, their customers, their markets, and it's been a really nice win for us in the last few years. As we look at what we're going to do with capital allocation, I think it's a similar approach that we have had. Right now, bringing debt down. We just did an acquisition a few months ago. We're focused on bringing debt down, getting the balance sheet ready to do something else. We brought the dividend back, I think, seven quarters ago now, after an extended pause. We'll evaluate that dividend in terms of leaving it flat or increasing it on an annual basis, but right now, we only brought it back because we felt we could, we would maintain that. Continue to focus on organic growth. John mentioned the explosion in the military segment for us, and that will require some investment in our facilities to be able to satisfy that demand. We'll be investing there and acquisitions. Those are two obviously critical things for us to continue the momentum that we've got. We'll look at share repurchases. I think it's always a battle for us because we see such an opportunity for us to grow through acquisition, and buying our stock doesn't really help that. I think what we have seen, and if you've looked at, we released earnings last week, I think we're getting now some good traction in the market for our execution and our strategy. I think if you look at the profile of us in the pamphlet, we're listed at $8.50 a share. As of yesterday, we closed at $12.44. We're up something short of 50% since that was printed. I think we're starting to get some good traction, some good understanding of where we're going, and belief in our ability to execute that strategy. As you look at us, what are the highlights? Why would you invest in Twin Disc? We are global, very global, and we're seen as a leader in our markets, in those niche markets where we're delivering solutions in a way that local private companies couldn't, and the larger companies like a Caterpillar aren't focused on it. We do well in those markets. We're well positioned to benefit from the defense market and hybrid transmission markets, both driving a lot of backlog growth for us, and we see a lot of momentum in those markets. We have a lot of operational initiatives going on. I think we've seen through last year, quarter- over- quarter, good increases in our margin performance. We see that continuing again with our target of delivering at least 30% gross margin by 2030 and hopefully sooner than that. We've done, I think, very well. The last three acquisitions that we've done, we're just getting better at it, identifying them, getting them integrated into our global sales and support network, and helping them grow and them helping us grow. Through that, we continue to generate strong cash. We have a strong balance sheet. We've always been poised and in a position to see what's next, and I think we'll continue to do that. Any questions for John and I? Are the newer acquisitions, are you generally acquiring companies that have more growth trajectory? Because if you look at the year post, you thought you were able to double the sales against kind of a big profile periods. The smaller niche companies that you're getting, do you expect like a similar kind of result over the long term or are you thinking about the companies that you acquire? Yeah, so I would say they're all, it's similar. They're all regional. I would say, Katsa is definitely a similar, the company in Finland, definitely similar in that regional Scandinavia focus. We think their growth trajectory could be very similar to Veth's, maybe even higher. They have higher meaning if we can bring our global presence to there, but they're going to achieve a growth trajectory just on their defense with their traditional customers. The issue we're going to have with Katsa is a good one. It's a new one for us, meaning that potentially the volume is growing so fast we're having to pull stuff out and produce at other places. We think that that one is, Katsa will probably have the quickest growth trajectory like what Veth has had. Kobelt has been more established in some of the international markets. Right now, we're rationalizing their dealer network and our distribution network and seeing where we can, where 1+1 = 3. We think certainly with their industrial brake line that we have a chance to grow that part of the business fairly quickly. I think they're both, all three of those companies, Veth, Katsa, and Kobelt, will probably see growth, a higher growth rate than what we see as the traditional Twin Disc because we're taking them to new markets, new customers, new distributors. I think that part of those three parts of the business are going to be our catalysts for higher growth. Having said that, oil and gas is starting to heat back up here as far as new units for us. We just had our first order for e-frac. We have prototypes out there for natural gas engines in the oil and gas space. I can't overemphasize the amount of money that the U.S. Navy is now going to spend on building ships. That part of our business is seeing some strong tailwinds too. The three acquisitions for sure, better than average growth for, they're going to be accelerating our growth. Okay. Yeah. Yeah. Anybody else? Yep. Can you talk about seasonality? It is, now we have more, it's always been, our first, we're a July 1 company. It's usually, almost always, we build through the year. Our weakest quarter is our first fiscal quarter, and it builds, and our strongest quarter is our fourth quarter, which would be the second calendar quarter. There are really two markets that can change that traditionally. One is oil and gas, and two is defense. It's really, for us, the number of shipping days. All of our European subs have two to three week shutdowns in the summer, which is our calendar first quarter. As we have more subs in Europe, it just makes the herd, so the first quarter is always going to be our weakest. It really is a function now of shipping days, and that builds through our, the second quarter for us, fourth calendar quarter, has the next fewest shipping days, and then our third and fourth quarter. It's usually, it's almost always like that. It builds through the year sequentially. On the back of it, defense assignments, are you disclosed like what kinds you're working with or what programs you're doing? I think we've mentioned, I mentioned it in the call, Saronic. Just Google Saronic, they're a very new, relatively new company with, I think they have $1 billion in investing. They're run by a former Navy SEAL. This company is one of the best things that's happened to U.S. defense shipbuilding in my career. They are looking to take over, you know, be the lead in the unmanned vessels. They started with jet ski size, and now they're coming up into where our transmissions fit. They're doing 100- 200 ft vessels, 200- 300, and they're going to 300- 400. When you get up to the 150 ft and above, those are either going to be four of our marine transmissions or five, each one's $150,000. The amount of vessels that are on order is staggering. You go back in time, what it is, is these are transmissions we have built for crew boats and supply boats, fast supply vessels. It's a product that's tried and true, and we know it, so it's right in our wheelhouse. We're the only American company that provides that transmission, so it really makes it a nice opportunity for us. If you just Google Saronic, it'll give you a window into the amount of activity and money that they're throwing at catching up to China as far as building vessels for the Pacific. You talk a little bit about the resonated factoring, you know, the Racine versus Texas. Sure. Part of mine there was the idea that you get a little more efficiency at Texas. Yeah, we always, sorry, historically always been in Racine for over a hundred years. We had taken in 2017, we had moved our PTO or industrial business to India for assembly. That was a logistical nightmare, and I won't go into it, but we moved assembly back, and we moved it back to Racine and quickly realized that that was probably a worse decision than keeping it in India. We built the plant in Texas after a quick search. It's in a free trade zone. It's more, we built the plant specifically to focus on assembly and quick response assembly. We're building $150,000 transmissions in Racine, and we're trying to build $1,000 PTOs next to it. The cadence and everything was completely different. That's why we built the facility in Texas. Texas is only going to continue to grow because of the free trade zone aspect of it. We can bring parts in, assemble them, and ship them out. I would look to see more of our business there. We are actually assembling Veth thrusters for the North American market there. We're already starting to move other products into Texas. Right now, it's strictly just an assembly facility. You moved your headquarters to. We moved our headquarters to the Third Ward in Milwaukee. I had thought that that was probably going to be necessary, but familiar story. During COVID, people got used to not commuting. At the end of the day, when you looked at the executive team and that next level that was there, it was a longer commute for three of us and a shorter commute for 18 of us. It only made sense. It's done wonders for recruiting at that level. We're Racine, Wisconsin. It's the largest city in the Midwest. It's the farthest away from an interstate. It's, you know, it's 31, when you get to the exit, you still have 30, 35 minutes to get to our office. It's a challenge. For your activity, the last bullet, I'd like to hear them there on the back. What suddenly changed? I think what changed, it started with the Veth acquisition. It started with this management team living through a bunch of oil and gas, primarily pressure pumping cycles, and figuring out that we got to do something different. The number one thing, we had known the Veth family and known their company, and he was, Eric was 50 years old, and he didn't like cycles, and he wanted to exit. That really was the catalyst. We acquired them in 2018. We're going through the integration. It was really our first major integration as a management team. We had COVID. That just kind of threw everything out. You're in survival mode for the better part of a year, a year and a half, which quickly went into the supply chain crisis, which was a completely different crisis. You could see the effect of bringing in these companies into the morale, and just everyone's like, oh, we have opportunity, we have new products. Our distributors were ecstatic. There was new life, new product. That was okay. Let's look at the next one. We think we've got this down. We think we've found something that fit. We can do this. We can bring in new product, new people, integrate them, different language. We started that, the Katsa was the next one, which quickly morphed into Kobelt. To answer your question, there's new product, new opportunity. You definitely get the excitement from your distributors that, oh, you're bringing us new product, new opportunity, and it's been feeding on it. It's just an affirmation of the strategy of, we're not trying to get rid of oil and gas, but there's a much bigger world out there. As Jeff said, it's decades of relationships with these companies. None of these companies that, my grandfather tried to acquire Kobelt in 1973, and Jack Kobelt said no. I tried in 2012. They said we lost out to private equity. The management team lived through private equity, bought themselves out just before COVID, and were having a hell of a time. They came to, they came, I said no. I'm like, we haven't even finished the Katsa acquisition. We can't do another one, but they were insistent. They're like, this is the home for us. I said, all right, I'll take it to the board. To Jeff's point, it's been amazing to see in our market, in our relationships with companies that are smaller and private, that there's definitely a generational shift, and there's more opportunity there for us, for sure. Anything else? What's your how many EPS done this year? Wait till now to ask the hard question. Let me think about that because what we tried to do in the press release was to lay out those things that we would say are non-operational, non-cash. That should give you a bridge to that. The currency loss that we had, which is sort of an intercompany balance sheet translation kind of thing, defined benefit amortization, which is a pension non-cash thing. I can do some math on that for you, but that should go to the release. It's in the release. It's in the release. We have a table in there for the quarter and the year. Talking about the currency translation, I'll just pontificate on that. We have corporatists here in the U.S. By far, the majority of those 1,000 employees, probably a little bit more than 700 or more, are outside of the U.S. We have this corporate overhang and the European subs. The currency translation affects us more. It's just because we're generating cash and earnings outside the U.S., but we have this overhead cost. One, we would love to find one of these acquisitions here in the U.S. to grow sales here. Two, and I touched on it in the conference call, we restructured our organization and we're trying to make the corporate overhead less and push more of the management and the operation of the business into the businesses. We split the business up into four product segments, and the people that are running those product segments are out at the facilities. We've shifted leadership and responsibility to the plants to try to, you know, again, and it makes sense. There's more ownership. There's more, it's more 360 running, and it's lowering our overhead here in corporate at the same time. All right.