Twin Disc, Incorporated

Welcome to the TwinDisk, Inc. Fiscal Four Quarter 2026 Conference Call. We will begin with introductory remarks from Jeff Kennison, TwinDisk CFO. Please go ahead.

Good morning and thank you for joining us today to discuss our Fiscal 2026 Fourth Quarter results. On the call with me today is John Batten, TwinDisk 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 2026 fourth quarter conference call. We closed out the fiscal year with record revenue in the fourth quarter of 2026 as we continue to build on the strong demand and order momentum that we saw throughout the fiscal year. Our 18% top line growth for the quarter resulted in an operating income of $7.8 million, net income of $9.4 million, $11.1 million in EBITDA, and free cash flow of $17.2 million. Defense activity is strong and continues to be a key structural growth driver for us supported by increasing demand from customers that include the US Navy and NATO. More to come on this. Oil and gas also performed well in the quarter and is trending positively as we prioritize EFRAC opportunities that drive a higher margin profile. While gross margins were down in the quarter, primarily related to product mix, tariff dilution and a prior year favorable adjustment, we continue to pursue higher margin opportunities like EFRAC that we expect to enhance our gross margins over the long term. Thanks to our strong order activity in the quarter, our six month backlog was level with the third quarter of 2026 at 178.3 million, despite strong shipments and a concerted effort to reduce past due backlog. Both our six month and total backlogs remain strong, and are supported by a robust project pipeline and considerable sales momentum in the markets we serve. Our cash flow improved meaningfully in the quarter to 17.2 million. As a result of this strong performance and our confidence in the business going forward, our board recently approved a 25% increase in our quarterly dividend to 5 cents per share. Overall, our fourth order performance capped off a strong year of operational execution for TwinDivs and we believe that we are well positioned with strong demand, a healthy backlog and robust project pipeline to continue this trend into fiscal 2027. Before getting into our individual product groups, I'd like to provide an update on our defense related business. As I mentioned before, defense is a key structural growth driver for our business and represents a significant long-term revenue opportunity. Our current defense customers include shipbuilders for the U.S. Navy, for which we provide transmissions to be used in unmanned autonomous U.S. Navy vessel programs, and NATO, to whom we supply driveline components through our Finnish subsidiary, Katsa, for military vehicles across an expanding NATO-wide order book. On that front, we've broken ground on our new facility in Finland to add test stand and assembly capacity and to further support expected growth in the European defense demand. With global defense becoming more of a priority given the current geopolitical environment, we believe that we're well positioned to benefit from increased spending as defense budgets grow. As of year end, defense comprises 17% of our total backlog, representing a 56% increase year over year. Sales momentum is also strong, with defense-related projects contributing $30 to $50 million to our pipeline as of June 30th. Results have been encouraging, and looking ahead, we view defense as a reliable and durable multi-year growth driver for our business. Now let's get into our product groups. Sales in our marine propulsion systems grew 20% in the quarter when compared to the prior year period, primarily driven by strong demand for our vet propulsion platform. Other factors contributing to revenue growth include performance of the CoVelt product line, as well as improved military demand for marine transmission, improved commercial maritime demand in Asia, and overall strong market conditions driving increased demand across the product group. Land-based transmission sales grew 26% year-over-year, primarily due to improved shipment volumes in the quarter. Specifically, oil and gas performed well. As we continue to prioritize higher margin EFRAC opportunities, we expect this segment to be a key driver of our improved margin profile. We also took meaningful steps to reduce our tariff impact in the quarter as we worked to relocate our art assembly to Lufkin, Texas, which would help reduce tariff exposure on components sourced in India. Similar to last quarter, land-based transmission also continues to benefit from strengthening demand trends across our core geographic markets in North America and Asia, increasing global demand for energy-related products and continued progress on next-generation electrified and hybrid solutions that support long-term demand. Additionally, improving sentiment from North American energy customers points to additional investment in frac rigs, both rebuilds and new units, positioning the company well for enhanced performance. While industrial sales decreased modestly compared with the prior year, we remain encouraged by the opportunities that we're seeing as this segment continues to stabilize. The Cobalt product line provides considerable market opportunity, and our Finnish subsidiary, Katte, is positioned to be a strong near-term growth driver thanks to increasing global military demand for defense vehicle components. We're also seeing consistent demand from North American construction and recycling markets, as well as stable underlying demand from industrial and markets. Also, we were pleased to see that Katte has received orders in the emerging data center vertical. This opportunity represents a large part of the total backlog and is encouraged to see initial demand for our products in this fast-growing market segment. Our six-month backlog at the end of the fourth quarter was approximately $178.3 million, which is consistent with the backlog at the end of the third quarter of $179.5 million. We are particularly pleased with this backlog given that during the quarter we made solid progress on shipment and continue to make a concerted effort to reduce past-due backlog during the fourth quarter. In light of this, our backlog demonstrates the strength of our pipeline and demand across our product groups. Inventory as a percentage of backlog decreased to 100% in a quarter, and we expect inventory as a percentage of backlog to continue to improve as we focus on operational execution. Looking ahead, we remain confident in our long-term strategy and are focused on driving profitable growth for our shareholders. TwinDisk is well established as a leading hybrid and electric solution provider for niche marine and land-based applications. And through organic growth, continued strategic acquisitions that expand our addressable market, and ongoing disciplined capital allocation across the enterprise, we believe that we are well-positioned to expand our footprint and to meet our stated 2030 full-year targets of $500 million in revenue, 30% gross margins, and greater than 60% free cash flow conversion. With that, I'll turn the call over to Jeff to discuss our financial results in greater detail.