Twin Disc (TWIN) 16th Annual East Coast IDEAS Conference summary

Strategic positioning and market opportunities

• Leading provider in global power transmission technology with a diverse product and market portfolio, benefiting from strong tailwinds in defense and hybrid transmission markets.

• Recent acquisitions (Veth, Katsa, Kobelt) have enhanced operational margins, cash flow, and global reach, with Europe now the largest customer region.

• Defense market growth is significant, with a $50M–$75M pipeline and increasing backlog share, driven by rising global defense spending and proven product fit.

• Hybrid electric solutions, especially in marine applications, are a strategic focus, with custom projects and regulatory-driven demand, though currently a small revenue share.

• Acquisitions have diversified away from oil and gas, reducing cyclicality and supporting sustainable growth.

Financial performance and targets

• Fiscal 2023 revenue was $340M, with a projected increase to over $380M based on Q3 run rate; gross margin improved from 27% to 28.2%.

• Targets for 2030 include $500M revenue, 30% gross margin, and 60% EBITDA-to-free-cash-flow conversion, with potential to exceed revenue goals without further acquisitions.

• EBITDA margin was 10% last year, with expectations to reach 11–12% as scale increases, translating to $25M–$30M in free cash flow.

• Capital allocation prioritizes deleveraging (currently under 2x leverage), supporting dividends, and funding organic and acquisition-driven growth.

• Share buybacks are a lower priority compared to growth investments, given current market conditions and growth opportunities.

Operational footprint and capacity expansion

• Manufacturing and distribution footprint spans North America, Europe, Asia, and Australia, providing flexibility but also complexity.

• Capacity constraints at Veth are being addressed by shifting production to Belgium and considering facility expansion, with a six-month timeline for new assembly space.

• Katsa is expanding with a new leased facility in Finland, ready by early 2027, designed for phased growth to match defense demand without overexpansion.

• Operational initiatives focus on efficiency and leveraging regional flexibility to meet demand and optimize costs.