Twin Disc, Inc. (NASDAQ: TWIN) Q2 2025 Earnings call | 08/21/2025

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AI Summary

Company: Twin Disc, Inc. (a manufacturer of marine and heavy-duty off-highway power transmission equipment)
Quarter: Fiscal Q2 2025 (Ended December 27, 2024)
Call Date: February 5, 2025

Key Financial Highlights:

Strong Revenue Growth: Achieved sales of $89.9 million, a 23.2% increase year-over-year. This growth was driven by the acquisition of CASA ($10 million benefit) and strong organic growth of 10.1%.
Return to Profitability: Reported net income of $900,000 ($0.07 per diluted share), a significant improvement from a net loss of $900,000 in the same quarter last year.
Margin Pressure: Gross profit margin declined to 24.1% (from 28.3%) due to a $1.6 million inventory write-down related to integrating CASA, purchase accounting amortization, and an unfavorable product mix.
Improved Cash Flow: Generated strong operating cash flow of $4.3 million in the quarter, a significant improvement.

Operational & Segment Performance:

Marine Propulsion (23.9% growth): Strength was driven by record demand for VET (Vector Electric Technologies) electric, hybrid, and conventional propulsion systems. Demand was fueled by commercial projects, the luxury yacht market, and increased government defense spending for patrol boats due to geopolitical conflicts.
Land-Based Transmission (19.8% growth): Momentum continued in the Airport Rescue and Firefighting (ARFF) vehicle business, driven by international airport development and fleet replacement cycles.
Oil and Gas (~8% of revenue): Sales were down 24% year-over-year due to macroeconomic headwinds in Asia-Pacific. However, quoting activity has recently increased, indicating a potential future rebound. Aftermarket demand remained stable.
Industrial (44.8% growth): This surge was primarily due to the CASA acquisition and a rebound in orders from the Lufkin facility, showing signs of stabilization in this segment.

Strategic Initiatives & Outlook:

Successful Acquisition Integration: The integration of CASA is proceeding well, expanding Twin Disc's global footprint (especially in Europe and North America), engineering capabilities, and industrial product portfolio.
Healthy Backlog: The company maintains a healthy backlog across all end markets, though it is lower sequentially due to high shipment volumes and foreign exchange impacts.
Focus on Efficiency: Management is focused on streamlining operations, optimizing the cost structure, rationalizing inventory, and improving supply chain efficiency to drive future margin expansion.
Future Growth Drivers: The company is prioritizing:
- Electrification: Continued investment and growth in VET hybrid and electric systems.
- Strategic Acquisitions: Pursuing deals that complement core expertise in industrial and marine technology.
- Organic Investment: Funding R&D and geographic expansion to capture new opportunities.

In summary, Twin Disc delivered a quarter of robust revenue growth and returned to profitability, successfully integrating a key acquisition while navigating some margin headwinds.

About this video

Twin Disc reported second quarter 2025 results with revenues rising 23.2% year over year to $89.9 million, driven by the contribution from the Katsa acquisition which added $10 million in sales. Despite the top-line growth, net income remained flat at $0.9 million, impacted by $1.6 million in inventory write-downs related to acquisition integration and a 420 basis point decline in gross margin to 24.1%. EBITDA increased 13.5% to $6.3 million despite higher operating expenses. The company's backlog of $124 million underscores long-term growth potential, particularly in the hybrid/electric propulsion markets. Twin Disc is strategically focusing on electrification and geographical diversification, with European sales growth now outpacing Asia-Pacific. Operational challenges include the stabilization of the Asian oil and gas markets and sector-specific volatilities, with debt increasing 40.5% to $24.9 million post-acquisition. Management emphasized that margin expansion hinges on delivering operational efficiencies and integrating acquisitions successfully. For fiscal 2025, Twin Disc expects incremental benefits from electrification strategies and continued demand in marine and propulsion systems. Investors are advised to monitor Q3 guidance closely for margin stabilization and debt management progress. About Inside Ticker: Inside Ticker delivers timely, in-depth financial news and earnings analysis to empower investors with actionable insights on global companies across sectors. For comprehensive video analysis and real-time updates, visit https://www.insideticker.com/. HashTags: #TwinDisc #TWIN #Q22025 #Earnings #FinancialResults #RevenueGrowth #NetIncome #EBITDA #GrossMargin #KatsaAcquisition #Electrification #HybridPropulsion #GeographicDiversification #OperationalEfficiency #Marine #PropulsionSystems #Debt #StockMarket #Investing #InsideTicker

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