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- **Revenue Growth**: Q1 sales up 9.7% YoY to $80M, driven by marine and industrial segments.
- **Margin Expansion**: Gross margin improved 220bps to 28.7%, with EBITDA up 172% YoY.
- **Defense Strength**: Defense orders up 45% YoY, 15% of $163.3M backlog, with autonomous vessel programs doubling annually.
- **Tariff Mitigation**: 1-3% Q2 cost impact expected to normalize to 1% in H2FY26.
- **Cash Flow Target**: 60% EBITDA conversion, with Q1 inventory investments to be recovered in Q2.
- **Sustainability**: 40% incremental margin target for future growth, supported by Veth supply chain stabilization.

**【Management Opening Remarks】**
- CFO Jeff Knutson provided standard disclaimers on forward-looking statements and non-GAAP financial measures, emphasizing caution regarding potential future results and the use of non-GAAP metrics for performance evaluation.

**【CEO Commentary】**
- **Revenue Growth**: Q1 sales of $80 million (+9.7% YoY), driven by marine and industrial segments, with organic growth of 1.1% excluding acquisitions.
- **Gross Margin Expansion**: 28.7% (up 220bps YoY) due to cost initiatives and improved product mix, particularly in Veth thrusters.
- **Defense Momentum**: Defense-related orders up 45% YoY, comprising 15% of $163.3M backlog, with key contracts in NATO vehicles and U.S. Navy autonomous vessels.
- **Tariff Impact**: 1-3% Q2 cost of sales impact from tariffs, expected to normalize to 1% in H2FY26.
- **Backlog Strength**: 6-month backlog up 13% YoY, supported by sustained demand across marine, land, and industrial segments.

**【CFO Financial Commentary】**
- **Profitability**: Net loss of $0.04M (-89% YoY loss reduction), EBITDA of $4.7M (+172% YoY), reflecting margin improvements and reduced currency losses.
- **Cash Flow**: Q1 cash balance $14.2M (down 14.8% YoY) due to seasonal working capital needs, with net debt at 1.3x leverage.
- **Free Cash Flow Target**: 60% of EBITDA, aiming to recover Q1 inventory investments in Q2.

**【Q&A Highlights】**
- **Military Growth Timing**: Finland NATO vehicle program to double in 12-18 months; U.S. Navy autonomous vessels to double annually.
- **Oil & Gas Resilience**: Despite China slowdown, ARFF rebuilds and e-frac orders ($2.3M) offset volume declines, with natural gas demand supporting long-term outlook.
- **Gross Margin Sustainability**: 220bps improvement driven by Veth supply chain stabilization; 40% incremental margin target for future growth.
- **Free Cash Flow Outlook**: Targeting 60% EBITDA conversion, with Q1 drag from tariffs and inventory expected to normalize in Q2.
- **Land-Based Transmission**: Flat sales due to ARFF capacity constraints, offset by Katsa integration and emerging rebuild demand.

Twin Disc, Incorporated (TWIN) Q1 2026 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

TWIN

TWIN fundamentals

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