Twin Disc Inc ((TWIN)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Twin Disc Inc. painted a generally positive picture, with the company showcasing strong sales growth and a robust backlog. Notable improvements were observed in the defense segment and overall profitability, although some challenges, such as tariff impacts and a reported net loss, were acknowledged. Despite these hurdles, the highlights of the call significantly outweighed the lowlights, indicating an optimistic sentiment for the company’s future.
Strong Start to Fiscal 2026
Sales for Twin Disc Inc. grew by 9.7% year-over-year, reaching $80 million, with significant contributions from the marine and propulsion business, as well as the integration of Katsa and Kobelt. The company also reported an increase in gross margins by 220 basis points to 28.7%, supported by operational improvements and a favorable product mix.
Defense Segment Growth
The defense segment showed remarkable growth, with orders increasing by $4 million sequentially and up 45% year-over-year. This segment now comprises 15% of the total backlog, highlighting strong momentum in defense-related projects.
Improved EBITDA and Profitability
Twin Disc Inc. saw a significant increase in EBITDA, which rose by 172% to $4.7 million compared to the previous year. This improvement reflects higher operating income and reduced currency losses, contributing to enhanced profitability.
Record Backlog
The company reported a record six-month backlog of $163.3 million, up 13% year-over-year. This robust backlog indicates sustained demand across various end markets, providing a solid foundation for future growth.
Marine and Propulsion Success
Sales in the marine and propulsion segment increased by 14.6% year-over-year, reaching $48.2 million. This growth was driven by increased work boat activity and government programs, underscoring the segment’s success.
Tariff Increases Impact Costs
Tariffs are expected to impact the second quarter cost of sales by 1% to 3%, up from roughly 1%. However, this increase is anticipated to be temporary, with expectations of a return to normal levels in the second half of the fiscal year.
Net Loss Reported
Despite reporting a net loss of $518,000 or $0.04 per diluted share, this was an improvement from the prior year’s loss of $2.8 million, indicating progress in the company’s financial health.
Challenges in Oil and Gas Segment
The oil and gas segment faced challenges, with shipments remaining nearly flat. Declines in China and cautious North American customers focusing on rebuilds and refurbishments contributed to the segment’s struggles.
Forward-Looking Guidance
Looking ahead, Twin Disc Inc. provided detailed guidance on its future performance. The company aims to sustain profitability and long-term value creation with a strategic focus on global footprint optimization and operational excellence. While tariffs are expected to temporarily impact costs, the company anticipates a return to normal levels in the latter half of the fiscal year. With a robust backlog and strong defense sector growth, Twin Disc is well-positioned for continued success.
In summary, Twin Disc Inc.’s earnings call reflected a positive sentiment, with significant sales growth, a strong backlog, and notable improvements in profitability. Despite challenges such as tariff impacts and a reported net loss, the company’s strategic focus and robust performance in key segments suggest a promising outlook for the future.