Twin Disc (TWIN) Q1 2025 earnings summary

Executive summary

• Q1 sales rose 14.7% year-over-year to $72.9 million, driven by the Katsa Oy acquisition and strong marine and propulsion demand, with gross margin up 30 bps to 26.5%.

• Net loss widened to $2.8 million ($0.20/share), compared to $1.2 million loss ($0.09/share) last year, impacted by FX losses, higher interest, and pension amortization.

• Backlog reached $144.3 million, a historical high, reflecting robust and sequentially growing demand across end markets.

• Strategic focus on hybrid electrification, systems integration, and Veth product line expansion is broadening global reach and margin potential.

• Distribution segment sales declined 7.8% due to delayed deliveries in Asia, while manufacturing and industrial segments saw strong growth from Katsa.

Financial highlights

• Q1 sales were $72.9 million, up $9.3 million or 14.7% year-over-year, with $9.2 million from Katsa.

• Adjusted for the BCS sale, revenue rose 18% year-over-year.

• Gross profit margin increased to 26.5% from 26.2%; gross profit rose 16.1% to $19.3 million.

• EBITDA was $1.7 million, down 23% year-over-year.

• Net loss was $2.8 million, with basic and diluted loss per share of $(0.20).

Outlook and guidance

• Free cash flow expected to return to positive, targeting 60% of EBITDA for the remainder of the year.

• Backlog and inventory increases support future revenue growth, with management expecting inventory improvements and large order shipments in the next quarter.

• Construction and agricultural markets expected to remain soft through FY2025, but share gains anticipated.

• Inflationary and supply chain headwinds expected to ease as the year progresses, though near-term shipment delays may impact product mix.

• Capital spending for fiscal 2025 projected at $13–$15 million, focused on modernization and efficiency.