Twin Disc (NASDAQ:TWIN) Chief Financial Officer Jeff Knutson outlined the power-transmission company’s growth priorities, reporting record fiscal 2026 revenue and describing defense, marine electrification and acquisitions as major areas of opportunity.
Knutson said Twin Disc operates globally across marine propulsion, land-based transmissions and industrial equipment markets. Marine propulsion accounts for about 60% of the company’s business and serves applications including tugboats, fishing vessels, mega yachts, patrol craft, ferries and river cruise vessels.
Defense Opportunity Expands
Defense is becoming a larger component of Twin Disc’s outlook, Knutson said. Defense represented about 17% of backlog, or roughly $30 million to $40 million, and was up more than 50%. Customers have identified a pipeline of known defense projects in the $30 million to $50 million range, he said, while management expects the longer-term opportunity to extend beyond that amount.
Knutson pointed to rising European military spending and expected U.S. naval investment as key demand drivers. The company’s Katsa acquisition in Finland provides exposure to military transmission applications, including transmissions used in Finnish-made defense vehicles. He said Finland’s military manufacturing base is drawing greater demand from European and NATO countries.
The CFO also highlighted unmanned naval vessels as a potential source of growth. He said Twin Disc is the only North American and U.S. manufacturer of transmissions in its applicable horsepower range for those vessels. The company is working with Saronic, which has launched the Marauder autonomous vessel, according to Knutson. He said the company expects the primary addressable vessel range to be about 60 to 150 feet.
Marine Electrification and Acquisitions
Twin Disc is also pursuing hybrid and electric propulsion opportunities, primarily in marine applications. Knutson said the company has supplied systems for electric ferries in Sydney, the electric Maid of the Mist vessel at Niagara Falls and an electric Picnic Boat for Hinckley Yachts. He said stricter requirements at some marinas, particularly in Europe, are increasing the need for electric propulsion systems.
These projects can increase Twin Disc’s content per vessel because the company packages systems beyond transmissions and controls, including inverters and batteries sourced from other suppliers, Knutson said. While the market is relatively niche, he said small orders can be meaningful for Twin Disc and have helped position the company as a supplier for complex hybrid-electric projects.
The company has completed three recent acquisitions: Veth, Katsa and Kobelt. Veth, acquired before the COVID-19 pandemic, manufactures azimuth thrusters used in marine propulsion. Knutson said Veth generated about $55 million in revenue when acquired and has since grown by more than 80%.
Kobelt, a Vancouver-based industrial products business, added industrial brake products. Knutson said Twin Disc continues to seek acquisitions of roughly $40 million to $60 million, particularly privately held or family-owned businesses with products that can be expanded through Twin Disc’s global sales and support network.
Backlog, Frac and Capital Plans
Knutson said management’s focus on backlog is centered on reducing past-due orders rather than lowering total backlog. The company reduced past-due backlog by approximately $8 million to $9 million during the fourth quarter while maintaining record backlog levels, he said.
In oil and gas, Knutson described frac-market conditions as “steady as she goes,” adding that the market has become less cyclical than in prior periods. Oil and gas represented about 10% of business at the end of the fiscal year, compared with roughly 5% to 7% during the prior eight or nine quarters. He cited traction in electric-frac applications and natural-gas engines.
Twin Disc increased its quarterly cash dividend to $0.05 per share, a 25% increase. Knutson said the increase reflected the board’s confidence in the company’s financial position and outlook. As of June 30, the company had a new credit agreement with BMO and JPMorgan that provided about $60 million of available capacity, he said.
For 2030, Twin Disc is targeting $500 million in revenue, a 30% gross margin and conversion of 60% of EBITDA into free cash flow. Knutson said the company expects to invest in facilities, machinery and other capacity before reaching its free-cash-flow conversion target.
About Twin Disc (NASDAQ:TWIN)
Twin Disc, Inc (NASDAQ: TWIN) is a global designer and manufacturer of power transmission equipment for marine and industrial applications. Headquartered in Racine, Wisconsin, the company develops a range of mechanical and digital solutions that control power delivery in demanding environments. Its portfolio includes marine gears, power take-offs, clutches, brakes, transmissions and controllable pitch propeller systems engineered to withstand heavy loads and corrosive conditions.
In addition to original equipment manufacturing, Twin Disc offers aftermarket parts and services, including maintenance, repair and overhaul support through a network of service centers worldwide.
