Twin Disc (TWIN) investor relations material

Executive summary

• Sales reached $90.2 million, up 0.3% year-over-year, with growth in North America and Europe and contributions from the Kobelt acquisition; organic sales declined 7.9% due to shipment delays and FX adjustments.

• Net income surged to $22.5 million, primarily due to a $22.8 million tax benefit from the release of a domestic valuation allowance.

• EBITDA was $4.7 million, down 25% year-over-year, impacted by higher expenses, tariffs, and non-recurring items.

• Record backlog of $175.3 million, up 41.4% year-over-year and 7% sequentially, driven by robust demand, especially in defense and hybrid propulsion.

• Gross margin improved by 70 basis points to 24.8% year-over-year, despite less favorable product mix and operational issues.

Financial highlights

• Net sales for the first half were $170.2 million, up 4.5% from the prior year.

• Gross profit for the first half was $45.3 million (26.6% margin), up from $41.0 million (25.2% margin) in the prior year.

• Free cash flow was $1.2 million, with positive operating cash flow of $4.6 million.

• Net debt increased to $29.7 million, reflecting the Kobelt acquisition.

• Total borrowings increased to $44.5 million, up 79% year-over-year.

Outlook and guidance

• Management expects to convert record backlog into shipments as shipment timing normalizes and tariff impacts moderate.

• Margin improvement anticipated in fiscal 2027 as ARFF assembly moves to a tariff-advantaged facility.

• Defense and industrial backlogs provide solid visibility for the remainder of fiscal 2026.

• Management expects to invest $12–$15 million in capital assets in fiscal 2026, focusing on modernization and efficiency.

• Available cash, credit facilities, and future operations are expected to be sufficient to fund requirements for the foreseeable future.