Furthermore, we remain committed to consistently return capital to shareholders through share repurchases and dividend payments. Overall, our capital allocation strategy reflects a balanced approach aimed at driving sustainable growth and fostering innovation while maintaining financial prudence and flexibility. I’d like to now turn the call back over to John to share his closing remarks.
John Batten: Thanks, Jeff. Before we open the line for questions, I’d like to highlight a few key takeaways from our quarterly results. Our third quarter performance highlights our continued operational excellence, marked by a notable margin expansion and robust cash generation. Our strong balance sheet, bolstered by consistent profitable growth and solid working capital management positions us favorably to navigate market uncertainties and take advantage of strategic growth opportunities. Looking ahead, we maintain our cautiously optimistic outlook driven by sustained demand dynamics. Our resilient amid external challenges reaffirms our agility and adaptability in capturing market opportunities, and our performance not only reflects our operational prowess, but also underscores our commitment to delivering long-term value to shareholders.
I’d like to thank all of our teams for their continued hard work and dedication to supporting our business this quarter. As we approach the end of the fiscal year, we look forward to continuing our growth journey as we drive Twin Disc forward and generate long-term value for our shareholders. That concludes our prepared remarks. Jeff and I will be happy to answer your questions.
Operator: Thank you, we will now begin the question-and-answer session. [Operator Instructions] And we have one question that comes from the line of Simon Wong with Gabelli Funds. Please go ahead.
Unidentified Analyst: Hi, this is [Rita] (ph) filling in for Simon today. Maybe just my first question here. I guess how much of this quarter’s revenue is derived from oil and gas customers? And I guess what is the break that down between new equipment and consumables.
Jeff Knutson: Yes, it’s a good question. I would say it’s been a pretty normal quarter for oil and gas. In terms of percentage of revenue for the quarter. I’m doing some quick math probably around 10% to 15% kind of evenly split between consumables and units.
Unidentified Analyst: Okay. Thanks. And then — and maybe my second question, I guess, what are you seeing — well, I guess what is the company seeing in terms of North American frac customers?
John Batten: I would say — this is John. I’d say we’ve seen an uptick in the calendar year in new spare parts orders and we have some limited units going out. But I’d say that, I mean, our outlook is that will probably pick up through the rest of the calendar year, just given what’s happening in the Middle East, I think we are going to see some more activity here at home as well as in Asia.
Unidentified Analyst: Okay. Thanks. And then I guess you’re working down your inventory for 4Q — fiscal year 4Q ’24. How should we think about inventory as a percentage of backlog for next quarter?
Jeff Knutson: I think it’s going to keep — continue to ratchet down. We are not going to have incredible shift. I think we’ll see a trajectory kind of like what we’ve seen in the last few quarters.
Unidentified Analyst: Okay. And then just my last question here. I guess any update on the timing of closing of the Katsa acquisition? And does the acquisition need approval from Finland’s Economic Minister to close?
John Batten: Yes. So we did get that approval this week, and we should be closing, I would say, around the end of the month within 30 days to 40 days will be closed.
Unidentified Analyst: Okay, thank you, that’s all my question.
John Batten: Thank you.
Operator: Your next question comes from the line of Will Nasgovitz with Heartland. Please go ahead.
Will Nasgovitz: Good morning. Thanks for taking my questions. And congratulations on a strong quarter, particularly on the free cash flow generation. It’s great to see. I’m just curious on the industrial side. just on industrial, I know you commented in your opening remarks — are you seeing signs of stabilization there? You had a kind of sequential pickup in broader ordering in some of that in the industrial bucket, just overall thoughts on the Industrial segment would be helpful.
John Batten: Yes, I’d say that this past quarter has been the best order quarter in a few quarters. And it’s been broad-based as far as the lower horsepower range, both in Europe and in the US, and in Australia, I would kind of be the big markets for us. But we’ve seen it pick up a little bit. Again, this past quarter was a much better order quarter. And we have some of the higher — some of the gearboxes with electronic controls that have been on order. So again, it’s looking up, but it’s still — we got a ways to go to get back to where we were.
Will Nasgovitz: Okay. And then the acquisition, as I recall, maybe it was $30 million in revenue or something around that level. Can you just provide any additional perspective on just like the margin profile of the company? And is it a new end market, new customers? And just some additional color would be useful.
Jeff Knutson: Sure. So I would say the margin profile is really — it kind of falls right in-line with where we are. Depending upon the product line, it’s going to bounce around high 20s to low 30s. But it’s — there’s so much there, Will. They’re going to be a great supplier for us on gears for our product that we build in the US in the Netherlands, in Italy and their product — they started off as a component supplier, so they’re heavily invested in very complex machining centers to do gears. They were I would say the last-third of their life, they’ve been getting into the gearbox business, whether it’s in the industrial space and specialty marine gears, they do transfer cases for all-wheel drive military vehicles. Until recently, it was just Finland.
