Twin Disc's Q4 2025: Unraveling Contradictions in Defense Growth, Pricing Strategies, and Oil Revenue Impact

Defense revenue and growth expectations, pricing strategy and tariff mitigation, operational efficiency and cost reduction, oil and gas business impact on revenue, and defense and propulsion systems growth are the key contradictions discussed in Twin Disc's latest 2025Q4 earnings call.



Revenue Growth and Market Diversification:
- Twin Disc, Inc. reported $340.7 million in sales for fiscal 2025, marking a 15.5% increase year-on-year.
- The growth was driven by broad-based demand across the portfolio, especially in marine and propulsion systems, along with strategic acquisitions like Katsa and Kobelt.

Defense Market Opportunity:
- Defense-related orders grew 45% compared to fiscal 2024, with defense orders now making up nearly 15% of the total backlog.
- This increase is attributed to strong demand in the marine sector, particularly for U.S. Army and Navy, and NATO end-users, as well as the integration of Katsa and Kobelt acquisitions.

Inventory Management and Cash Flow:
- Twin Disc achieved positive free cash flow of $8.8 million for the year, with inventory levels reduced as a percentage of backlog.
- This is due to disciplined working capital management and focus on reducing inventory, which supports the company's strategic objectives.