Core Insights - Twin Disc, Inc. reported a solid start to fiscal 2026 with a 9.7% year-over-year increase in sales to $80.0 million, driven by the acquisition of Kobelt and strong performance in Marine and Propulsion Systems [5][9] - The company experienced significant growth in the Defense market, with a 8.5% increase in the six-month backlog since the end of fiscal 2025 [3][9] - Despite a net loss of $518 thousand, EBITDA improved significantly by 172.3% year-over-year to $4.7 million, reflecting higher sales and improved margins [10][12] Financial Performance - Sales increased by 9.7% year-over-year to $80.0 million, with organic sales growth of 1.1% [5][9] - Gross profit rose 18.7% to $22.9 million, with gross margin expanding by 220 basis points to 28.7% [7][9] - Marketing, engineering, and administrative expenses increased by 6.2% to $20.7 million, primarily due to the Kobelt acquisition and inflationary wage impacts [8][9] Product Group Performance - Marine and Propulsion Systems sales increased by 14.6% to $48.2 million, while Land-Based Transmissions saw a modest increase of 1.6% to $17.6 million [6] - Industrial product sales grew by 13.2% to $10.4 million, while the "Other" category experienced a decline of 11.7% [6] Market Outlook - The company remains focused on executing its growth strategy through operational discipline, innovation, and customer engagement, with a healthy backlog of $163.3 million [4][12] - Continued momentum in the Defense sector is expected, with accelerating orders and an expanding pipeline in both the U.S. and Europe [9][12] Balance Sheet and Cash Flow - Cash decreased by 14.8% to $14.2 million, while total debt increased by 46.7% to $43.7 million, primarily due to the Kobelt acquisition [11][12] - The company reported a net cash used in operating activities of $7.5 million for the quarter, reflecting normal seasonal patterns and investments in growth [31]

Core Insights - Twin Disc's shares have increased by 44.3% since the earnings report for the quarter ended June 30, 2025, significantly outperforming the S&P 500 index, which gained only 0.8% during the same period [1] - The company reported a net income of 10 cents per share for the fourth quarter of fiscal 2025, a decrease from 53 cents per share in the prior-year quarter, despite a 14.5% year-over-year increase in sales to $96.7 million [2][3] Financial Performance - Net income attributable to Twin Disc fell sharply to $1.4 million from $7.4 million in the prior-year quarter, with EBITDA declining 40.4% to $7 million due to higher expenses and currency translation losses [3] - For fiscal 2025, the company reported a net loss of $1.9 million, or 14 cents per share, compared to earnings of nearly $11 million or 79 cents per share a year earlier, while revenue increased by 15.5% to $340.7 million [4] - Gross margin contracted by approximately 100 basis points to 27.2%, indicating ongoing cost pressures, and EBITDA for the year declined 28.3% to $19 million [4] Business Metrics - Gross profit for the quarter rose 19.7% to $30 million, with margins expanding by 130 basis points to 31%, supported by a favorable mix of marine and propulsion sales [5] - Segment performance varied, with Marine and Propulsion Systems sales increasing 12.2% to $53 million, Land-Based Transmissions up 4.5% to $26.1 million, and Industrial sales surging 82% to $13.1 million, aided by acquisitions [6] Backlog and Cash Flow - The company reported a strong six-month backlog of $150.5 million, up from $133.7 million in the prior quarter, indicating healthy demand across marine and industrial markets [7] - Operating cash flow for the year totaled $24 million, while free cash flow fell to $8.8 million due to higher capital expenditures [7] Management Commentary - CEO John H. Batten described the quarter as the strongest of the year, highlighting resilience in marine and propulsion markets and progress in electrification initiatives [8] - CFO Jeffrey S. Knutson noted strong integration progress and a healthy balance sheet, with total debt increasing to $31.4 million due to acquisitions, while cash reserves stood at $16.1 million [9] Challenges and Guidance - The decline in net income and EBITDA was attributed to foreign currency translation losses, stock-based compensation, and increased marketing and administrative expenses [11] - Management reaffirmed long-term targets through fiscal 2030, aiming for $500 million in revenue and gross margins of 30%, while focusing on defense demand and expanding hybrid and electric system capabilities [12] Strategic Acquisitions - Strategic acquisitions, including Katsa and Kobelt, played a significant role in Twin Disc's growth, contributing to industrial sales and diversifying the company's product and geographic reach [13]