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Introduction & Market Context
Twin Disc Incorporated (NASDAQ:TWIN) presented its fiscal year 2025 results and strategic outlook on August 21, 2025, highlighting revenue growth driven by strategic acquisitions while acknowledging profitability challenges. The power transmission technology company saw its stock trading at $8.62, representing a recovery from the $6.82 level reported after its Q3 earnings announcement earlier this year.
The company emphasized its positioning to capitalize on defense market tailwinds and its strategic acquisitions that have expanded its product portfolio and global reach. Despite reporting a full-year net loss, Twin Disc’s fourth quarter showed signs of margin improvement, suggesting potential stabilization.
Quarterly Performance Highlights
Twin Disc reported full-year fiscal 2025 sales of $340.7 million, a 15.5% increase compared to the previous year, with organic sales growth of 1.0%. The fourth quarter saw sales of $96.7 million, up from $84.4 million in the same period last year.
As shown in the following chart of quarterly sales and earnings per share performance:
Quarterly earnings per share remained volatile throughout fiscal 2025, with Q4 returning to positive territory at $0.10 per share after a loss of $0.11 in Q3. However, the full-year results showed a net loss of $1.89 million, compared to net income of $10.99 million in fiscal 2024.
The company’s sales diversity by product group and geography reveals the growing importance of its Marine & Propulsion Systems segment and the impact of recent acquisitions:
Strategic Initiatives
Twin Disc highlighted its strong positioning in the defense market, which now represents approximately 15% of the company’s total backlog, a 45% year-over-year increase. The company cited robust defense activity with a 13% year-over-year increase in 2026 US Defense Spending and a 150% year-over-year increase in NATO defense spending targets as a percentage of GDP.
The company’s defense market strategy is illustrated in this overview:
Strategic acquisitions have been central to Twin Disc’s growth strategy, with recent additions including Kobelt expanding the company’s market reach and capabilities across hybrid and electric systems. These acquisitions align with the company’s long-term vision of becoming a leading provider of hybrid/electric solutions for niche marine and land-based applications.
Twin Disc’s long-term strategy and 2030 financial targets demonstrate its ambition for substantial growth:
Detailed Financial Analysis
While revenue growth was strong, profitability metrics showed pressure throughout most of fiscal 2025. EBITDA decreased to $19.0 million from $26.5 million in the previous year. Full-year gross margin declined to 27.2% from 28.2% in fiscal 2024, though Q4 showed improvement with a 31.0% gross margin compared to 29.7% in the same quarter last year.
The company’s margin trends and near-term expectations are illustrated in this chart:
Twin Disc’s balance sheet remains relatively strong despite increased leverage from acquisitions. Net debt increased to $15.3 million from $5.7 million at the end of fiscal 2024, with the leverage ratio rising to 0.8x from 0.2x, primarily due to the acquisition of Kobelt.
The company’s debt position is summarized in the following chart:
Free cash flow for fiscal 2025 was $8.8 million, down from $25.0 million in fiscal 2024, with operating cash flow of $24.0 million offset by $15.5 million in capital expenditures.
Forward-Looking Statements
Twin Disc outlined several key investment highlights that form the basis of its forward-looking strategy:
The company is monitoring the evolving tariff landscape, noting that tariffs impact approximately 1% of its cost of goods sold. This aligns with concerns raised during its Q3 earnings call, where management estimated a $500,000 tariff impact for Q4.
Twin Disc’s capital allocation framework emphasizes research and development, geographic diversification, and strategic acquisitions that provide evident value creation potential:
Looking ahead, Twin Disc reaffirmed its fiscal 2030 targets of $500 million in revenue, 30% gross margins, and greater than 60% free cash flow conversion, demonstrating confidence in its long-term value creation strategy despite near-term challenges.
The company summarized its key takeaways with the following points:
With a six-month backlog of $150.5 million and continued demand across product lines, Twin Disc appears positioned for potential growth in fiscal 2026, particularly if margin improvements seen in Q4 can be sustained and defense market opportunities continue to materialize.
Full presentation:
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