Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Data and Key Metrics Changes - The company reported sales of $90.2 million for the second quarter, a slight increase of 0.3% from $89.9 million in the prior year period, driven by strength in marine and industrial product groups [13] - Gross profit rose 3.2% to $22.4 million, with gross margin improving by 70 basis points to 24.8% [14] - Net income attributable to the company was $22.4 million, or $1.55 per diluted share, compared to $919,000 or $0.07 per share last year, largely due to a tax benefit of $21.8 million [15] - EBITDA decreased by 25% to $4.7 million compared to the prior year, impacted by higher M&A expenses and tariff-related effects [15] Business Line Data and Key Metrics Changes - Marine and propulsion business sales were flat year-over-year, with strong demand in workboat and government applications offset by challenges in the commercial marine sector in Asia Pacific [8] - Land-based transmission sales decreased by 8.1% year-over-year to $17.5 million, primarily due to shipment delays [9] - Industrial business sales increased by 22% year-over-year to $11.5 million, benefiting from recent acquisitions and steady demand [10] Market Data and Key Metrics Changes - North America and Europe led sales growth, while Asia Pacific and Latin America represented a smaller share of revenue, reflecting regional market dynamics [16] - The defense-related backlog increased by 18% sequentially, supported by elevated defense spending in the U.S. and NATO [6] Company Strategy and Development Direction - The company is focused on global footprint optimization, operational excellence, and disciplined capital allocation to mitigate tariff impacts and enhance capacity utilization [11] - Plans include relocating ARFF assembly to a tariff-advantaged environment to reduce import duties on finished goods [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning due to a record backlog and strong demand across marine, defense, and industrial applications [4] - The company anticipates that tariff-related impacts will moderate and operational strategies will take effect in the coming quarters [5] Other Important Information - Inventory levels increased due to delayed shipments, but inventory as a percentage of backlog improved by approximately 400 basis points sequentially [11] - The company generated $1.2 million in free cash flow during the second quarter, indicating a meaningful improvement from the first quarter [16] Q&A Session Summary Question: Revenue growth expectations for the second half of the year - Management expects good growth in the second half, with Q3 and Q4 being stronger quarters, although specific percentage growth was not provided [25][26] Question: Gross margin changes from the first quarter - Management noted several factors affecting gross margin, including tariff impacts and operational delays, which are expected to normalize [27][29] Question: Tariff mitigation efforts - Management is moving assembly of certain products to a free trade zone to mitigate tariff impacts, with expected benefits in fiscal 2027 [32][33] Question: Veth's margin performance - Management expressed confidence in Veth's ability to maintain and grow margins due to improved cost estimation and pricing discipline [34] Question: Improvements in international oil and gas business - Management noted unexpected order growth in China, indicating a potential shift in domestic production activity [36][37] Question: Strength in military orders - Management highlighted increased orders for unmanned vessels and NATO-related programs, indicating strong demand in the defense sector [38][40]

Financial Data and Key Metrics Changes - The company reported sales of $90.2 million for the second quarter, a slight increase of 0.3% from $89.9 million in the prior year period, driven by strength in marine and industrial product groups [13] - Gross profit rose 3.2% to $22.4 million, with gross margin improving by 70 basis points to 24.8% [14] - Net income attributable to the company was $22.4 million, or $1.55 per diluted share, compared to $919,000 or $0.07 per share in the previous year, largely due to a tax benefit [15] - EBITDA decreased by 25% to $4.7 million compared to the prior year, impacted by higher M&A expenses and tariff-related effects [15] Business Line Data and Key Metrics Changes - Marine and propulsion business sales were flat year-over-year, with strong demand in workboat and government applications offset by challenges in the commercial marine sector in Asia Pacific [8] - Land-based transmission sales decreased by 8.1% year-over-year to $17.5 million, primarily due to shipment delays [9] - Industrial business sales increased by 22% year-over-year to $11.5 million, benefiting from recent acquisitions and steady demand [10] Market Data and Key Metrics Changes - North America and Europe led sales growth, while Asia Pacific and Latin America represented a smaller portion of revenue, reflecting regional market dynamics [16] - The defense-related backlog increased by 18% sequentially, supported by elevated defense spending in the U.S. and NATO [6] Company Strategy and Development Direction - The company is focused on global footprint optimization, operational excellence, and disciplined capital allocation to mitigate tariff impacts and enhance capacity utilization [11] - Plans include relocating ARFF assembly to a tariff-advantaged environment to reduce import duties on finished goods [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning due to a record backlog and strong demand across marine, defense, and industrial applications [4] - The company anticipates that tariff-related impacts will moderate and operational strategies will take effect in the coming quarters [5] Other Important Information - Inventory levels increased due to delayed shipments, but inventory as a percentage of backlog improved by approximately 400 basis points sequentially [11] - The company generated $1.2 million in free cash flow during the quarter, indicating a meaningful improvement from the first quarter [16] Q&A Session Summary Question: Revenue growth expectations for the second half of the year - Management expects good growth in the second half, with Q3 and Q4 being stronger quarters, although specific percentage growth was not provided [25][26] Question: Details on sequential gross margin changes - Gross margin was impacted by tariff expenses, operational delays, and a mix effect due to delayed aftermarket shipments [27][29] Question: Mitigation efforts regarding tariffs - The company is moving assembly of certain products to a free trade zone to mitigate tariff impacts, with expected margin improvements in fiscal 2027 [32][33] Question: Confidence in Veth's margins - Management expressed confidence in Veth's ability to maintain and grow margins due to improved cost estimation and pricing discipline [34] Question: Improvements in international oil and gas business - Recent orders from China exceeded expectations, indicating a potential increase in domestic production activity [36][37] Question: Strength in military orders - The defense backlog is growing due to increased orders for unmanned vessels and NATO-related programs, with a focus on ensuring production capacity [40][41]

Financial Data and Key Metrics Changes - The company reported sales of $90.2 million for Q2 2026, a slight increase of 0.3% from $89.9 million in the prior year period, driven by strength in marine and industrial product groups [12] - Gross profit rose 3.2% to $22.4 million, with gross margin improving by 70 basis points to 24.8% [12] - Net income attributable to the company was $22.4 million, or $1.55 per diluted share, compared to $919,000 or $0.07 per share last year, largely due to a tax benefit of $21.8 million [13] - EBITDA decreased by 25% to $4.7 million compared to the prior year, impacted by higher M&A expenses and tariff-related effects [13] Business Line Data and Key Metrics Changes - Marine and propulsion business sales were flat year-over-year, with strong demand in workboat and specialty marine applications, but challenges in the commercial marine sector in Asia Pacific [7] - Land-based transmission sales decreased by 8.1% year-over-year to $17.5 million, primarily due to shipment delays [8] - Industrial business sales increased by 22% year-over-year to $11.5 million, benefiting from recent acquisitions and steady demand [9] Market Data and Key Metrics Changes - North America and Europe led sales growth, while Asia Pacific and Latin America represented a smaller portion of revenue, reflecting regional market dynamics [14] - The defense-related backlog increased by 18% sequentially, supported by elevated defense spending in the U.S. and NATO [6] Company Strategy and Development Direction - The company is focused on global footprint optimization, operational excellence, and disciplined capital allocation to mitigate tariff impacts and improve capacity utilization [10] - Plans include relocating ARFF assembly to a tariff-advantaged environment to reduce import duties on finished goods [5] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's positioning, citing a record backlog and strong demand across core markets [4] - The company anticipates that tariff-related impacts will moderate and that operational improvements will enhance performance in the second half of the fiscal year [10] Other Important Information - Inventory levels increased due to delayed shipments, but inventory as a percentage of backlog improved by approximately 400 basis points sequentially [10] - The company generated $1.2 million in free cash flow during the quarter, indicating a meaningful improvement from the first quarter [14] Q&A Session Summary Question: Revenue growth expectations for the second half of the year - Management expects good growth in the second half, with Q3 and Q4 being stronger quarters, although specific percentage growth was not provided [22][23] Question: Gross margin impacts and factors - Management noted several factors affecting gross margin, including tariff impacts, operational delays, and a mix of project-related revenue [24][25][26] Question: Tariff mitigation efforts - The company is moving assembly of certain products to a free trade zone to mitigate tariff impacts, with expected benefits in fiscal 2027 [30][31] Question: Veth's margin performance - Management expressed confidence in Veth's ability to maintain and grow margins due to improved cost estimation and pricing discipline [32] Question: International oil and gas business improvements - Management noted unexpected order growth in China, suggesting a shift in domestic production activity [39] Question: Strength in military orders - The defense backlog is growing due to increased orders for unmanned vessels and NATO-related programs, with a focus on ensuring production capacity [42][43]

This presentation contains statements that are forward-looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management's current expectations that are based on assumptions that are subject to risks and uncertainties. Actual results may vary because of variations between these assumptions and actual performance. Investors are referred to Twin Disc's fiscal year 2025 Annual Report and Form 10-K, "Management's Discussion and Analysis of Fin ...

Financial Performance - Net sales for the second quarter of fiscal 2026 increased by 0.3%, or $0.3 million, to $90.2 million compared to $89.9 million in the same quarter last year [105]. - For the first half of fiscal 2026, net sales increased by 4.5%, or $7.4 million, to $170.2 million from $162.8 million in the same period last year [112]. - The European region saw a revenue increase of $5.1 million (7.7%) in the first half, driven by demand for Veth and Katsa products [112]. - The distribution segment experienced a decrease in sales of $18.2 million (27.8%) in the first half of fiscal 2026 compared to the prior year [114]. Profitability - Gross profit as a percentage of sales improved to 24.8% in the second quarter of fiscal 2026, up from 24.1% in the same period last year [108]. - Total equity increased by $20.8 million, or 12.6%, to $185.2 million, driven by net earnings of $21.9 million in the first half [126]. Expenses - Marketing, engineering, and administrative expenses increased by $1.7 million (9.2%) in the second quarter, representing 22.9% of sales compared to 21.0% in the prior year [109]. - Interest expense increased by $0.4 million to $1.6 million in the first half of fiscal 2026 due to a higher average outstanding revolver balance following acquisitions [117]. Working Capital and Assets - As of December 26, 2025, net working capital was $133.3 million, an increase of $12.2 million (10.1%) from $121.1 million as of June 30, 2025 [119]. - Trade receivables decreased by $5.3 million (9.0%) to $53.6 million compared to the last fiscal year-end, with trade receivables as a percentage of sales at 59.5% [121]. - Inventories increased by $11.2 million, or 7.4%, to $163.2 million as of December 26, 2025, with a backlog of orders growing to $175.3 million from $150.5 million at June 30, 2025 [122]. - Net property, plant, and equipment rose by $1.8 million (2.6%) to $71.4 million, with capital spending of $6.8 million in the first half of fiscal 2026 [123]. Debt and Financing - Total borrowings and long-term debt increased by $13.1 million to $44.5 million, with negative free cash flow reported at $9.6 million due to inventory and capital spending increases [125]. - The Company entered into a Credit Agreement with Bank of Montreal, securing a Term Loan of $15.0 million, with a maturity date of April 1, 2027 [128]. - The Credit Agreement allows for Revolving Loans up to $50.0 million, with specific conditions on Eligible Receivables and Inventory [130]. - The Company remains compliant with its financial covenants, including a Total Funded Debt to EBITDA ratio not exceeding 3.50 to 1.00 [133]. - The Company utilized increased borrowing capacity to finance the acquisition of Kobelt, which may borrow directly under the Credit Agreement [131]. Future Investments - The Company expects to invest between $12 million and $15 million in capital assets in fiscal 2026, focusing on modernizing manufacturing and improving efficiencies [123]. - The Company plans to contribute $0.5 million to postretirement benefits and $0.7 million to defined benefit pension plans in fiscal 2026 [137]. Acquisition Impact - The acquisition of Kobelt contributed $3.2 million in additional revenue during the second quarter, while commercial marine demand faced temporary weakness, resulting in a $2.9 million decrease [105].

Financial Performance - Sales for the fiscal 2026 second quarter increased 0.3% year-over-year to $90.2 million, driven by the addition of Kobelt and strength in Marine and Propulsion Systems[6] - Gross profit increased 3.2% to $22.4 million, with a gross margin of 24.8%, expanding 70 basis points over the prior year[8] - Net income attributable to Twin Disc was $22.4 million, or $1.55 per diluted share, compared to $919 thousand, or $0.07 per diluted share for the same quarter last year[11] - EBITDA for the second quarter was $4.7 million, down 25.0% compared to the same quarter last year[11] - Net sales for the quarter ended December 26, 2025, were $90,180 million, a slight increase from $89,921 million for the same quarter in 2024, representing a growth of 0.3%[21] - Gross profit for the quarter was $22,367 million, compared to $21,680 million in the prior year, reflecting a year-over-year increase of 3.2%[21] - Net income attributable to Twin Disc, Incorporated for the quarter was $22,371 million, significantly up from $919 million in the same quarter last year[23] - Basic earnings per share for the quarter were $1.58, compared to $0.07 in the prior year, indicating a substantial increase[21] Cash Flow and Debt - Operating cash flow was positive at $4.6 million and free cash flow was $1.2 million during the quarter[9] - Free cash flow for the quarter was $1,235 million, down from $5,878 million in the same quarter last year, showing a decrease of 79%[27] - Total debt as of December 26, 2025, was $44,515 million, an increase from $24,873 million in the previous year, representing an increase of 79.5%[25] - Net debt increased to $29,626 million from $8,967 million year-over-year, indicating a rise of 230%[25] Order Backlog and Market Trends - The backlog of orders to be shipped over the next six months is approximately $175.3 million, compared to $163.3 million at the end of the first quarter[12] - The company remains focused on converting its record backlog into shipments as timing normalizes, with capacity in place to support growth[5] - The company anticipates continued momentum in defense-related programs and an expanding pipeline across the U.S. and Europe[9] Regional Performance - The company experienced year-over-year growth in North American and European regions, while sales from Latin America and Asia Pacific declined[7] Expenses - Marketing, engineering and administrative (ME&A) expenses increased by $1.7 million, or 9.2%, to $20.7 million, primarily due to the addition of Kobelt and inflationary impacts[10] Asset Growth - Current assets totaled $251,877 million, compared to $246,915 million in the previous year, showing a growth of 2.4%[31] - Total assets increased to $384,015 million from $355,562 million, reflecting a growth of 8.0% year-over-year[31]

Core Viewpoint - Twin Disc, Inc. is set to release its fiscal 2026 second-quarter results on February 4, 2026, at 8:00 am Eastern, followed by a conference call at 9:00 am Eastern to discuss the results and engage with the investment community [1]. Group 1: Company Overview - Twin Disc, Inc. designs, manufactures, and sells marine and heavy-duty off-highway power transmission equipment [3]. - The product offerings include marine transmissions, azimuth drives, surface drives, propellers, boat management systems, power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, and control systems [3]. - The company serves customers primarily in the pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government, and industrial markets [3]. - Sales are conducted through a direct sales force and a distributor network, targeting both domestic and foreign customers [3].

Core Insights - Twin Disc, Incorporated (TWIN) is experiencing improved results driven by increasing end-market demand and new market opportunities [1] Group 1 - The company is characterized as a small industrial entity that is largely uncovered and has low liquidity in terms of average daily trading volume [1] - Management continues to focus on leveraging market trends to enhance performance [1]

Core Insights - Twin Disc, Incorporated (TWIN) is experiencing improved results driven by increasing end-market demand and new market opportunities [1] Company Performance - The company is characterized as a small industrial entity that is largely uncovered and has low liquidity in terms of average daily trading volume [1] - Management continues to focus on leveraging market demand to enhance performance [1]