Summary of Twin Disc, Inc. Q4 2026 Earnings Call

1Key Financial Results and Metrics:

Revenue:: Q4 2026 revenue reached $114.4 million, an 18.3% increase year-over-year. Full-year revenue totaled $381.3 million.

Operating Income:: Increased by 19.5% to $7.8 million in Q4; full-year operating income was $18 million.

Net Income:: Q4 net income was $9.4 million ($0.64 per diluted share), up from $2.6 million ($0.19 per diluted share) in Q4 2025. Full-year net income was $27.1 million ($1.86 per diluted share), compared to a net loss in the previous year.

EBITDA:: Q4 EBITDA was $11.1 million, a 35.1% increase year-over-year, with an EBITDA margin of 9.7%.

Free Cash Flow:: Strong performance with $17.2 million in free cash flow for the quarter.

Backlog:: Six-month backlog remained stable at $178.3 million.

2Strategic Updates and Business Highlights:

Defense Sector Growth:: Defense business is a key growth driver, comprising 17% of total backlog, with a 56% year-over-year increase. The company is expanding its defense capabilities, including a new facility in Finland to support U.S. Navy and NATO contracts.

Marine and Propulsion Systems:: Sales grew 20% driven by strong demand for propulsion platforms and military transmissions.

Land-Based Transmission Sales:: Increased by 26%, with a focus on higher-margin e-frac opportunities in the oil and gas sector.

Operational Improvements:: The company is relocating certain operations to mitigate tariff impacts and enhance capacity.

3Forward Guidance and Outlook:

Twin Disc is optimistic about continued demand and expects to build on its momentum into fiscal 2027, supported by a robust project pipeline and backlog.

The company aims for $500 million in revenue, 30% gross margins, and over 60% free cash flow conversion by 2030.

Management remains focused on operational execution, strategic acquisitions, and disciplined capital allocation to support long-term growth.

4Bad News, Challenges, or Points of Concern:

Gross Margins:: Gross margins decreased to 26.3%, down from 32.3% year-over-year, primarily due to product mix and tariff impacts.

Tariff Exposure:: Ongoing tariff issues continue to affect margins, although the company is taking steps to mitigate these impacts.

Operational Capacity:: While there are plans for expansion, the transition and ramp-up of new facilities may take time, with full operational capacity in Finland expected by fiscal 2028.

5Notable Q&A Insights:

Facility Updates:: The new facility in Finland is expected to be enclosed by year-end 2026, with full operational impact anticipated by fiscal 2028. The Racine facility is also undergoing capacity enhancements.

Defense Pipeline:: The defense-related backlog grew 53% in the quarter, with significant interest in fast patrol boats and military vehicle components.

Oil and Gas Performance:: The oil and gas segment is recovering, contributing over 10% of overall revenue in Q4, with e-frac opportunities gaining traction.

Capital Expenditures:: Expected CapEx for fiscal 2027 is projected to exceed $20 million, driven by facility expansions and equipment upgrades. Overall, Twin Disc reported a strong fourth quarter, with significant growth in revenue and net income, while also addressing challenges related to margins and operational capacity. The company remains focused on strategic growth initiatives, particularly in the defense sector and higher-margin opportunities.