Twin Disc Incorporated : Q3 2026 Earnings Presentation

Published: 2026-05-06 08:22:09 ET TWIN

Published on 05/06/2026 at 08:22 am EDT

Investor Presentation

INVESTMENT HIGHLIGHTS

A leader in global power transmission technology with an increasingly diversified IP-protected portfolio

Well-positioned to benefit from tailwinds in defense markets and hybrid transmissions supported by robust backlog

Margin enhancement and operational initiatives driving favorable financial results

Track record of successfully integrating acquisitions

Strong cash flow generation and balance sheet to support growth

THIRD QUARTER HIGHLIGHTS

Strategic Financial

Sales growth driven by marine & propulsion strength, Veth demand, and contributions from acquisitions and FX

Margin expansion supported by higher volumes and ongoing improvement initiatives

Board approved Finland facility expansion to support long-term capacity growth and European demand

Defense remains a key long-term growth driver with continued backlog and pipeline strength

Healthy demand with growing backlog providing strong forward visibility

Improving working capital, with inventory as a percentage of backlog trending more optimal

Q3 sales +19.0% vs. YA to $96.7 million

Organic sales +7.0% vs. YA

Net Income of $3.3 million, up significantly vs. YA

EBITDA of $9.4 million, up 135.1% vs. YA

EBITDA margin up 480 basis points vs. YA

Generated positive Operating Cash Flow of $5.3 million and Free Cash Flow of $1.8 million during the quarter, both up significantly vs. YA

Six-month backlog of ~$179.5 million, up sequentially and supported by continued demand strength

Major Geographies

Select Defense End Users

Transmissions, Gearboxes, and Transfer Cases

Propulsions Systems

Marine Transmissions, Controls & Steering Systems

Select Defense Products

TWIN

Well Positioned

Asia Pacific

Europe

North America

Robust Defense Activity

+13%

YoY Increase in 2026 US Defense Spending (1)

+150%

YoY Increase in NATO Defense Spend Target as percentage of GDP (2) (3)

Sources: 1) U.S. Department of Defense, FY2026 Defense Budget Briefing; 2) NATO, "Funding NATO"; 3) Atlantic Council, "Who's at 2 Percent?";

Delivering Results

~15% Defense as a

percentage of

Total Backlog

+20% Q3 YoY Increase of

Defense Total

Backlog*

Defense

$50-75M Related

Pipeline

Note: Total Backlog figures are reflective of greater than six-month period. Defense spend represents management estimates.

CAPTURING ROBUST DEFENSE MARKET DEMAND WITH RUNWAY FOR GROWTH

MARINE & PROPULSION SYSTEMS

Sales up 20.0% vs. YA

Performance driven by continued demand for Veth products

Improved sequential aftermarket execution

Healthy demand across workboat, government, and specialty marine applications

Sustained interest in higher-content propulsion solutions and integrated systems

LAND-BASED TRANSMISSIONS

Sales increased by 22.2% vs. YA, primarily driven by improved shipment volumes

Customer caution persists in North America, with rebuilds and refurbishments outpacing new equipment purchases

Order improvements across Latin America, North America, and China, signaling strengthening demand trends

Some China shipments shifted to Q4 due to customer timing preferences

Continued progress on next-generation electrified and hybrid solutions supporting long-term demand

INDUSTRIAL

Sales increased by 15.2% vs. YA, due in part to the acquisition of Kobelt

Kobelt acquisition counted as inorganic sales for approximately half of our fiscal third quarter

Stable underlying demand across industrial end markets

Continued focus on higher-content solutions and leveraging engineering capabilities across the platform

Operational execution improving, supporting longer-term margin opportunity

CONTINUED BACKLOG GROWTH

$163.3

$150.5

$133.7

103%

101%

97%

93%

89%

Healthy 6-month backlog higher sequentially and on a year-over-year basis

Growth in backlog led by broad-based demand across core markets, led by strength in land-based transmissions and continued defense-related order activity

Negative FX impact of $2.5 million from prior quarter

$175.3 $179.5

3QF25 4QF25 1QF26 2QF26 3QF26

Note: Backlog figures are reflective of a six-month period. The six-month order backlog is considered more representative of operating conditions than total backlog.

LONG-TERM STRATEGY

M&A priorities: Industrial and Marine Technology (Hybrid focus)

Increased focus on controls and system integration rather than individual components

Rationalize global footprint for efficiency and customer response

Continued expansion of acquisitions to reach new markets and geographies

Leading Hybrid/Electric solution provider for niche marine and land-based applications

2030 FY Targets

>60% FCF Conversion

30% Gross Margins

$500M Revenue

FINANCIAL PERFORMANCE

SALES

($ in millions)

Continued healthy demand across global markets

Contribution from acquisitions and operational execution driving performance and sales growth

$96.7

$81.2

3QF25 3QF26

EPS improvement attributable to higher operating income from increased sales and margin expansion

$0.23

($0.11)

3QF25 3QF26 12

SALES DIVERSITY

SALES BY PRODUCT GROUP

$11.2

$21.7

$9.7

$17.8

$49.3

$59.1

Sales growth driven by strength and contributions from acquisitions:

Consistent demand across core marine and propulsion end markets, particularly Veth products

Incremental revenue contribution from acquisitions, including Kobelt, supporting overall growth

Marine & Propulsion Systems Land-Based Transmissions Industrial Other

3QF26

3QF25

$4.4

$4.6

($ in millions)

30%

26%

43%

22%

20%

Increased proportion of sales in North American markets with strong marine demand

3QF25 3QF26

STRONG BALANCE SHEET

BALANCE SHEET

($ in millions)

$45.1

$40.8

$29.0

$24.5

$16.2 $16.1

Total Debt Cash Net Debt

1.0x 1.1x

LTM EBITDA

($ in millions)

$23.8 $25.8

3QF25 3QF26

Increase primarily due to acquisition of Kobelt

MARGINS & NEAR-TERM EXPECTATIONS

Gross margin increased by ~134 basis points vs. YA, driven by higher volumes, and improved operational execution

Benefits of successful margin improvement initiatives and operating leverage on stronger revenue growth

28.1%

26.7%

INFLATION & SUPPLY CHAIN EXPECTATIONS

Monitoring evolving tariff landscape and executing mitigation tactics, adjusting manufacturing strategy accordingly

Tariff impact expected ~1-3% of COGS in upcoming quarter driven by favorable regional mix

3QF25 3QF26

CAPITAL ALLOCATION FRAMEWORK

Research & Development

Geographic diversification / expansion

Marketing

Focus Areas

Debt Reduction

Diversification away from Oil & Gas

Acquisition logic immediately evident

Strategic Fit

Return Capital to Shareholders (Dividends)

Clear value creation potential

Consistent business performance

Internal Rate of Return > WACC

Financial Fit

Organic Growth Investments

Platform for transformative expansion

Can enhance network and capabilities

Other Considerations

Bolt-On & Transformational Acquisitions

Return Capital to Shareholders (Share Repurchases)

KEY TAKEAWAYS

Delivered a solid quarter with strong revenue growth, significant margin expansion, and improved free cash flow generation, reflecting improved execution and healthy demand

Demand environment remains constructive, with backlog increasing sequentially and providing strong visibility into the balance of the fiscal year

Operational execution improving, as higher shipments drove inventory reduction and supported a more favorable working capital setup heading into Q4

Defense momentum continues to build in backlog and pipeline, supporting longer-term growth, while strategic investments and footprint optimization initiatives position the business for sustained profitability

Fiscal 2026 Third Quarter Earnings Call

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO REPORTED FINANCIAL MEASURES

(In thousands; unaudited)

3Q26

3Q25

Net Sales

$96,694

$81,242

Less: Acquisition(1)

2,248

Less: Foreign Currency Impact

7,518

Organic Net Sales

$86,928

$81,242

(1)Accounts for sales contributed by the acquisition of Kobelt

Disclaimer

Twin Disc Incorporated published this content on May 06, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 06, 2026 at 12:21 UTC.