Twin Disc (TWIN) Q3 2026 Earnings Transcript

Motley Fool Transcribing, The Motley Fool Wed, May 6, 2026 at 9:13 PM GMT+7 12 min read TWIN Image source: The Motley Fool. Chief Executive Officer — John H. Batten Chief Financial Officer — Jeffrey S. Knutson Twin Disc (NASDAQ:TWIN) reported its latest quarterly results and provided updates on operational and strategic developments during its recent conference call. Need a quote from a Motley Fool analyst? Email pr@fool.com John H. Batten, Twin Disc, Incorporated’s CEO. I would like to remind everyone that certain statements made during this conference call, especially statements expressing hopes, beliefs, expectations, or predictions for the future, are forward-looking statements. It is important to remember that the company’s actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company’s annual report on Form 10-K, copies of which may be obtained by contacting either the company or the SEC. Any forward-looking statements that are made during this call are based on assumptions as of today, and the company undertakes no obligation to publicly update or revise these statements to reflect subsequent events or new information. During today’s call, management will also discuss certain non-GAAP financial measures. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the earnings release issued earlier today. I will now turn the call over to John. John H. Batten: Good morning, everyone, and welcome to our fiscal 2026 third quarter conference call. Let me start with a few highlights from the third quarter. As we noted during our previous earnings call, we expected a stronger second half, and our third quarter results marked the beginning of that. We delivered meaningful sales growth, margin expansion, and improved free cash flow generation through solid execution and healthy demand across our end markets. Sales increased 19% year-over-year to $96.7 million, supported by strength in Marine and Propulsion Systems with continued demand for our Veth products, along with contributions from acquisitions and favorable foreign exchange. On an organic basis, sales grew 7%, reflecting healthy demand across Marine and Propulsion, defense, and select industrial applications. Profitability also improved meaningfully in the quarter. Gross margin expanded to 28.1%, driven by higher volumes and operational improvements. EBITDA increased to $9.4 million, and EBITDA margin expanded by approximately 480 basis points versus the prior-year period, reflecting higher volumes as well as the benefit of our margin improvement initiatives. From an operating and cash flow standpoint, we made solid progress as well. Inventory improved again as a percentage of backlog, and together with higher profitability that supported free cash flow generation of $1.8 million in the quarter. Looking ahead, our six-month backlog increased sequentially to approximately $179.5 million, supported by healthy order momentum across core markets, including demand for our land-based transmission products and continued strength in defense-related activity, which continues to serve as an important long-term growth driver for Twin Disc, Incorporated. At the same time, our third quarter results demonstrated improved execution on that backlog, as reflected in meaningful sales growth and margin expansion. Overall, this growing backlog, together with improved execution, gives us solid visibility into near-term demand and supports our confidence in the path ahead. Turning to our defense-related business, we continue to see robust demand across multiple programs and geographies, supported by elevated defense spending both in the United States and across NATO markets. As a result, defense continues to become an increasingly meaningful and durable component of our overall backlog, and we view this as a secular trend given the increased geopolitical environment we are currently navigating. Today, defense represents approximately 15% of our backlog, and we continue to see encouraging momentum in both backlog and pipeline activity. Defense backlog increased year-over-year by roughly 20%, and the opportunity moving forward remains sizable with a pipeline of roughly $50 million to $75 million. That continued momentum reinforces our confidence in the durability of demand we are seeing across this part of our business and supports our outlook for future growth. From a product perspective, we are well positioned across a broad range of defense applications, including marine transmissions, controls and steering systems, propulsion systems, transmissions, gearboxes, and transfer cases. These offerings support a diverse set of end users and programs across North America, Europe, and Asia Pacific, and we believe that bread

Twin Disc (TWIN) Q3 2026 Earnings Transcript

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Twin Disc (TWIN) Q3 2026 Earnings Transcript

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