Twin Disc, Incorporated

Thank you for standing by. At this time, I would like to welcome everyone to the TwinDisk Inc. Fiscal Fourth Quarter and Full Year 2025 Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. I would now like to turn the conference over to Jeff Knudson. You may begin.

Good morning, and thank you for joining us today to discuss our fiscal 2025 fourth quarter and full year results. On the call with me today is John Batten, TwinDisc'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 are 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. Now I'll turn the call over to John.

Good morning, everyone, and welcome to our fiscal 2025 fourth quarter conference call. We closed out the fiscal year with our strongest quarter, an outcome that reflects our team's consistent execution and resilience in dynamic markets. I'm incredibly proud of how our global organization continues to deliver even amid ongoing global uncertainty, including tariff-related pressures and shifting demand patterns. For the full year, we delivered top-line growth of 15.5%, with sales reaching $340.7 million, supported by a broad-based demand and strong order activity across our portfolio. Although EBITDA margins were hampered by the impacts of non-operating and non-cash items such as currency translation loss and stock-based compensation, we continue to generate consistent free cash flow of $8.8 million. In addition to our strong performance, this year marked a pivotal step forward in modernizing our operating model. We now manage the business across four product-aligned business units, led by Tim Batten in his new role as Executive Vice President, where he will be leading our global business operations. This supports our agile global manufacturing and supply chain structure that allows us to scale effectively, seamlessly integrate acquisitions, all without expanding our fixed infrastructure. We also made meaningful progress on our strategic priorities, including the integration of COXA and Cobalt. These acquisitions have expanded our capabilities, broadened our customer base, and strengthened our long-term platform for growth. I am pleased with our progress to date and look forward to reaping the full benefits of this combined platform. Turning to the fourth quarter, we closed the year with our strongest performance of the fiscal year, as sales grew 14.5% year-over-year to 96.7 million. While organic net sales declined due to reduced activity in oil and gas markets, this was more than offset by continued strength in marine and propulsion systems, as well as ongoing demand for higher content transmissions. Order momentum remained healthy, and our six-month backlog increased to 150.5 million, reflecting strength in government and hybrid marine programs. Looking ahead, we remain confident in our growth trajectory, particularly in the defense market. We are well positioned to capture robust end market demand fueled by increased defense spending across both U.S. and NATO budgets. Given this increased activity, we are seeing strong momentum for our marine transmissions, controls, and steering systems, propulsion systems, gearboxes, and transfer case products across geographies as we serve as an approved supplier to end users such as the U.S. Army, U.S. Navy, and NATO. This is well illustrated in our total backlog as orders related to defense products grew approximately 45% versus fiscal 24, now making up nearly 15% of our total backlog. With $50 to $75 million in defense-related pipelines, we have significant runway for growth. As we further capitalize on end market strength, execute on our clear path to broad geographic reach, and remain committed to disciplined capital deployment strategy, we are poised to build on this year's momentum and continue delivering value for our shareholders. Let me walk you through the segment performance. In marina propulsion systems, sales grew 12.2% in the fourth quarter to $53 million, supported by robust activity in workboats, government contracts, and VETS elite thruster products. Notably, we are seeing strong momentum for orders for unmanned U.S. Navy vessels in the 300 to 400-foot range, autonomous platforms built for extended patrol periods. These orders signal a meaningful shift towards larger, persistent defense platforms and validate the investments that we've made in our marine transmissions and controls technology. And our backlog for vet thrusters in the U.S. continues to grow both in work boat and the cruise vessel segments. Cobalt contributed as expected in this quarter, primarily within our commercial marine controls business, which is now fully integrated into our systems offering. Marine aftermarket also remains strong, driven by continued utilization of military and commercial fleets. Aftermarket revenue for the quarter totaled $4.7 million in marine alone, with a margin contribution exceeding 60%. In land-based transmissions, revenue rose 4.5% year-over-year to $26.1 million in the fourth quarter. While oil and gas shipments into China declined, activity in North America and Asia remained stable. ARC demand stayed strong, and in addition, we continue to see action in our new EFRAC systems with our first meaningful order for this segment representing 14 units totaling $2.3 million. This validates our technical offering and supports a more optimistic medium-term outlook. Aftermarket sales in this segment were down year-over-year at $3 million compared to $5.5 million in the fourth quarter of fiscal 24, reflecting lower rebuild volumes tied to idle fleets. Our industrial segment saw strong sequential growth, with fourth-quarter sales rising 35% sequentially to $13.1 million. Year-over-year, our industrial products grew 82% in the fourth quarter. The improvement was broad-based across customers and supported by strength in CASA's industrial parts business. When excluding this acquisition, the industrial segment grew 13% compared to the prior year period. Lufkin also had a strong quarter, shipping 4.1 million in the fourth quarter versus 3.1 million average run rate. While the recovery is still early, we're encouraged by positive order trends and share gains. Our six-month backlog rose to 150.5 million, up both sequentially and year over year. This reflects healthy demand and the benefit of the COTSA and CoVELP acquisitions. At the same time, we have continued to reduce inventory levels as a percentage of backlog, highlighting our focus on working capital discipline. In closing, I'd like to also address our long-term strategy before Jeff takes us through the financial overview. I remain committed to our strategy built on global footprint optimization, operational excellence, and targeted acquisitions. Our recent purchases of Casa and Covo are clear examples of how we're broadening engineering capabilities and market reach by unlocking meaningful synergies across our operations. These strategic additions complement our core expertise and accelerate our entry into higher-value niches, reinforcing our ability to deliver sustainable growth for customers, employees, and shareholders. A second cornerstone of our plan is to lead the industry in hybrid and electrification solutions. We are intensifying investment in controls and systems integration because these technologies multiply both content and margin potential on every vessel or vehicle we serve. Growing customer interest in hybrid and fully electric propulsion, particularly within marine applications, positions us to capture new opportunities, and our advanced VET and COTSA platforms give us a tangible head start. We are already winning hybrid projects in commercial and defense markets, and ongoing R&D and investment will ensure we remain the partner of choice as sustainability requirements tighten worldwide. Operational resilience is equally critical. Our flexible global manufacturing network and organizational streamlining allows us to shift production swiftly in response to geopolitical dynamics and tariff regimes, preserving both service levels and cost competitiveness. We have quantified tariff exposure at roughly 1% of cost of goods sold and have pricing actions alternative sourcing, and surcharge mechanisms in place to offset any further impact. At the same time, a robust backlog of approximately $150 million provides clear visibility, while continued inventory discipline and efficiency projects underpin margin expansion. Looking further ahead, we remain steadfast in achieving our 2030 objectives of about $500 million in revenue, 30% gross margins, and consistent free cash flow conversion of at least 60%. The cash we generate will be reinvested in organic growth and further bulletins, ensuring we stay on the front foot while maintaining a prudent balance sheet. With that, I'd like to now turn it over to Jeff to discuss the financials.