Twin Disc (TWIN) 2027 財年第一季法說會：在手訂單創 1.906 億美元新高

Twin Disc, Inc. (NASDAQ: TWIN) 公布強勁的 2027 財年第一季獲利，主要受惠於國防需求、船舶產品以及石油和天然氣活動回溫。營收成長 10.9%，營業利益成長超過一倍，六個月在手訂單達到創紀錄的 1.906 億美元。

重點摘要

• 2027 財年第一季銷售額年增 10.9% 至 8,870 萬美元。扣除收購與匯率影響後，有機銷售額成長 11.8%。
• 營業利益成長超過一倍至 460 萬美元，EBITDA 則成長 62.6% 至 770 萬美元。
• 歸屬於 Twin Disc 的淨利為 340 萬美元，即稀釋後每股盈餘 0.24 美元，相比去年同期為淨虧損 51.8 萬美元（每股虧損 0.04 美元）。
• 六個月在手訂單達到創紀錄的 1.906 億美元，高於 2026 財年底的 1.783 億美元及去年同期的 1.633 億美元。
• 國防業務約占在手訂單的 24%，高於會計年度結束時的 17%。國防業務總在手訂單年增約 104%。
• 自由現金流從負 1,100 萬美元改善至 560 萬美元，淨負債則從去年同期的 2,950 萬美元降至 1,310 萬美元。

主要財務結果

業務與營運表現

國防業務仍是核心成長動力。Twin Disc 為美國海軍無人與自主艦艇計畫提供變速箱，而芬蘭子公司 Katsa 則為北約客戶提供軍用車輛的傳動系統零件。管理層亦提及 Katsa 在中東與亞洲的新興專案。

船舶與推進系統銷售額年增 14%，主要由 Veth、Kobelt 及 Twin Disc 產品領軍。該部門得益於軍用變速箱需求、亞洲更強勁的商業海事活動以及整體良好的市場環境。

財報顯示陸上變速箱銷售額下降 15%。管理層表示，此下滑主要反映了重新歸類至工業部門的影響。基礎需求指標依然正面，北美、拉丁美洲與中國的能源相關訂單皆有所成長。

工業部門銷售額成長約 35%，主要受惠於 Katsa 的歐洲國防車輛業務，以及北美建築與回收客戶的穩定需求。雖然 Katsa 與 Veth 的毛利率低於 Twin Disc 的平均水準，但管理層指出其毛利率持續改善。

石油與天然氣占本季營收略高於 9%，高於去年同期的略高於 8%。以美元計算，該市場的營收成長了約 22%。Twin Disc 擁有電驅壓裂 (e-frac) 訂單，但管理層澄清本季出貨主要是用於天然氣和傳統柴油應用，而非電驅壓裂。

歐洲占銷售額的 46%，北美占 26%，亞太地區占 20%。Twin Disc 在歐洲與亞太地區均錄得雙位數銷售成長，其中歐洲的成長受惠於 Katsa 及國防需求。

存貨占在手訂單的比率為 94%，較去年同期的 117% 及 2026 財年底的 100% 有所改善。管理層將此改善歸功於嚴格的庫存管理，這也有助於降低淨負債。

管理層展望

管理層預計 2027 財年毛利率將大致與 2026 財年持平。公司維持其 2030 年目標：營收達到 5 億美元、毛利率達 30%，以及自由現金流轉化率高於 60%。

對於 2027 財年，管理層預估自由現金流轉化率約為 20% 至 40%，低於長期目標，主因 Twin Disc 正優先投資於產能與技術提升。預計全年資本支出總額約為 2,500 萬美元。

Katsa 位於芬蘭占地 5.4 萬平方英尺的新組裝廠預計於 2027 年 5 月完全投入營運。Katsa 預期在 2028 年前將齒輪箱組裝產能翻倍，以滿足國防、工業發電及重型設備的需求。

風險與關鍵觀察點

• 2027 財年的自由現金流轉化率將部分取決於預定資本支出的時程與執行情況，包括內部與外部的交貨前置時間。
• 管理層預計第二財季美國海軍無人艦艇訂單將再度增加，但在涵蓋首批 30 艘船的訂單進入在手訂單後，可能會暫停數個季度。
• Katsa 和 Veth 成長迅速，但目前毛利率低於公司平均水準，限制了近期毛利率的擴張。
• 財報中的部門比較受到陸上變速箱與工業營運項目之間重新歸類的影響。

分析師問答焦點

管理層預計國防淨新訂單將在第二財季再度上升。對 Katsa 而言，北約卡車專案仍是最大機遇，而中東與亞洲的其他專案預計也將對第二季訂單做出貢獻。

Katsa 對資料中心業務的曝險來自向生產備用發電機組的歐洲引擎製造商供應零件。本季與資料中心相關的銷售額仍低於 100 萬美元，但管理層表示訂單正在成長，該業務可能為 Katsa 帶來數百萬美元的銷售額。這些零件需要的是加工產能，而非新組裝廠的空間。

Twin Disc 表示，隨著專案轉化為正式訂單，其規模達 3,000 萬至 5,000 萬美元的航太與國防機會管道持續得到補充。與其他海軍合作的新海事機會以及經由 Katsa 進行的陸用車輛專案正在支撐此管道。

完整法說會逐字稿

完整財報電話會議逐字稿

管理層陳述

Operator

Thank you for standing by, and welcome to the Twin Disc, Inc. Fiscal First Quarter 2027 Conference Call. [Operator Instructions]

I'd now like to turn the conference over to Jeff Knutson, Chief Financial Officer. Please go ahead.

Jeffrey Knutson

Good morning, and thank you for joining us today to discuss our fiscal 2027 first quarter results.

On the call with me today is John Batten, Twin Disc'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.

John Batten

Good morning, everyone, and welcome to our fiscal 2027 first quarter conference call. Our first quarter results continued to build on the strong momentum we established in fiscal 2026. Demand remains strong across our end markets, and our performance in the quarter drove solid revenue of $88.7 million, a 10.9% increase over the first quarter of last year as well as a net income of $3.5 million, a 63% year-over-year increase in EBITDA and free cash flow of $5.6 million.

Importantly, defense continues to be a key growth driver, supported by growing U.S. Navy and NATO demand. Katsa, our subsidiary in Finland, booked significant defense orders in the first quarter and U.S. Navy orders related to their initial unmanned vessel program have begun to reach our order book. I'll say more about defense shortly.

While reported land-based transmission revenue was down, this is primarily related to a reclassification of revenue from transmission to industrial. Oil and gas demand was strong in the quarter, and we continue to see growing opportunities in e-frac, which carry a higher margin profile than both traditional fracking and our company-wide margins.

Our first quarter results drove 6-month backlog of $191 million, a 7% increase over the fourth quarter of fiscal 2026 and a company record. We expect to maintain a strong backlog level as we continue to see strong interest and sales momentum, supporting a robust project pipeline.

Looking at our liquidity, we generated strong free cash flow compared to negative free cash flow a year ago, and we reduced our net debt even as we continue to increase capital expenditures to support our growth.

As we mentioned on last quarter's call, we also made the decision to increase our quarterly cash dividend by 25% to $0.05 per share, demonstrating the confidence that our Board and management team have in the underlying strength of our business.

Turning now to our operations. Defense remains one of our most important long-term growth opportunities. And today, we serve 2 main groups of customers. In the U.S., we supply transmissions to shipbuilders for the U.S. Navy's unmanned and autonomous vessel programs. And in Europe, our Finnish subsidiary, Katsa provides driveline components for military vehicles to NATO customers.

To provide some context around the momentum we're seeing from defense, as of the end of the first quarter of fiscal 2027, defense accounted for approximately 24% of total backlog compared with approximately 17% of total backlog at year-end and a total defense backlog increased approximately 104% year-over-year.

Marine and Propulsion Systems sales rose 14% from a year ago. Similar to last quarter, revenue in this segment was led by continued demand for Veth, Kobelt and Twin Disc products and continues to benefit from strong military demand for marine transmissions, better commercial maritime demand in Asia and a generally strong market conditions.

Land-based transmission sales declined 15% year-over-year. Before getting into Land-Based Transmissions and industrial segments, I'd like to note that starting at the beginning of 2027 fiscal year, all cost of sales previously classified in Land-Based Transmission are now classified in Industrial.

Demand indicators in this segment remain constructive. Oil and gas is growing as a percentage of our backlog and is less volatile than in previous periods. Global demand for energy-related products and orders for energy applications have also increased. Demand trends are strengthening across North America, Latin America and China, and North American energy customers appear more inclined to invest in frac rig, including rebuilds and new units.

We also continue to advance next-generation electrified and natural gas solutions that support long-term demand. Industrial sales increased approximately 35% in the first quarter of fiscal 2027 when compared to the prior year. Katsa is a strong near-term growth driver through defense vehicle components in Europe, supported by a strong global military demand.

The Kobelt product line continues to offer considerable market opportunity, and we are seeing steady demand from North American construction and recycling customers, along with stable underlying demand across industrial end markets.

Katsa continues to make progress on the construction of its new 54,000 square foot assembly plant in Finland. The new plant is expected to be fully operational in May of 2027. And by 2028, Katsa expects to double its gearbox assembly capacity to meet rising global demand from the defense industry as well as industrial power generation and heavy equipment.

As we mentioned last quarter, Katsa is also benefiting from data center construction by providing components to major engine manufacturers who design and install backup power systems for these facilities.

Overall, our business segments performed well, and we ended the first quarter of fiscal 2027 with a 6-month backlog of approximately $190.6 million, up from $178.3 million at fiscal year-end and $163.3 million a year ago and a record on a reported basis.

Inventory as a percentage of backlog also improved, falling to 94% compared with 117% in the first quarter of fiscal 2026 and 100% at year-end. This trend represents our disciplined inventory management, which played a key role in the reduction of our net debt during the quarter. Jeff will provide more information on this in his prepared remarks.

Our strategy is clear. We continue to position Twin Disc as a leading provider of hybrid and electric solutions for niche marine and land-based applications, and we are pursuing that through organic growth, acquisitions that open new markets and geographies and a disciplined capital allocation across the enterprise. We have a strong team and plan in place to execute on all our strategic goals.

With our visibility today, we remain confident in our 2030 target of $500 million in revenue, a 30% gross margin and free cash flow conversion above 60%.

With that, I'll hand the call to Jeff to walk through the financial results in more detail.

Jeffrey Knutson

Thanks, John. Good morning, everyone. Sales in the first quarter of fiscal '27 totaled $88.7 million, a 10.9% increase over the first quarter of fiscal '26. Revenue growth was primarily driven by strength in our Veth product line, expanding demand from the defense sector, improved oil and gas demand and generally strong market conditions across the global enterprise.

On an organic basis, which excludes the impact of acquisitions and foreign currency exchange, sales increased 11.8%. Gross profit increased 10.9% to $25.4 million compared to $22.9 million for the first quarter of fiscal '26. First quarter gross margin was 28.7%, consistent with the prior year period.

Marketing, Engineering and Administrative, or ME&A expense was $20.8 million, consistent with $20.7 million in the prior year quarter. The slight increase was primarily driven by an inflationary impact on wages and benefits, offset by ongoing expense control. With ME&A roughly flat on higher sales, we saw stronger operating leverage in the quarter.

Operating income more than doubled to $4.6 million compared with $2.2 million in the first quarter of fiscal '26. Net income attributable to Twin Disc for the first quarter was $3.4 million or $0.24 per diluted share compared to a net loss of $518,000 or a loss of $0.04 per diluted share in the prior year period. The improvement was primarily driven by an increase in operating income and a decrease in interest expense and other expense.

EBITDA was $7.7 million in the first quarter, an increase of 62.6% compared to the first quarter of fiscal '26. Geographically, Europe accounted for 46% of sales in the first quarter, followed by North America at 26% and Asia Pacific at 20%. In the prior year period, Europe accounted for 39% North America, 33%; and Asia Pacific, 18%.

We delivered double-digit sales growth in both Europe and Asia Pacific. Increased sales in Europe were primarily driven by contributions from our acquisitions, namely Katsa, which continues to benefit from increasing demand in the defense sector.

As I noted before, gross margin was 28.7% in the first quarter of fiscal '27, consistent with the prior year period. Our margin profile in the quarter reflects the strong growth we continue to see with Katsa and Veth, which operate at gross margins below the company average but continue to improve. Margins were also impacted by favorable product mix in land-based transmissions, including higher alternative fuel unit sales.

We expect gross margins in fiscal '27 to be broadly in line with fiscal '26, and we remain confident in our longer-term target of 30% gross margin by 2030. We generated free cash flow of $5.6 million in the quarter compared with negative free cash flow of $11 million in the prior year period, and we reduced net debt due in large part to disciplined inventory management despite increased capital expenditures in the quarter as we continue to invest in our future growth.

Operating cash flow was $11.5 million and capital expenditures were $5.8 million. While we expect long-term free cash flow conversion above 60%, it's important to remember that we're prioritizing investments in our growth in the near term. Therefore, while 60% free cash flow conversion represents a key long-term goal. We do not expect free cash flow conversion at this rate in fiscal '27.

We ended the quarter with cash of approximately $26.7 million. Total debt was $39.8 million and net debt was $13.1 million compared with $29.5 million in the prior year period. Our net debt, coupled with trailing 12-month EBITDA of $32.9 million provides us with a net leverage ratio of 0.4x as of September 25, 2026, compared with a ratio of 1.3x in the prior year.

Our capital allocation framework is unchanged. We continue to invest in organic growth, focusing on R&D, geographic expansion and marketing. On the M&A front, we remain selective on acquisitions, bolt-on or transformational, looking for strategic fit, returns above our cost of capital and the ability to strengthen our network and capabilities while further diversifying our offerings. We're also prioritizing returning capital to shareholders through our dividend, which was $0.05 per share in the quarter as well as reducing our net debt.

I'll now turn the call back to John for his closing remarks.

John Batten

Thanks, Jeff. To wrap up, the first quarter showed that the momentum from fiscal 2026 is carrying forward. Demand is healthy. Our 6-month backlog is at a record and defense momentum continues to build in both backlog and pipeline, which supports our longer-term growth. We are confident that gross margins will improve over time as we diversify our end markets and benefit from greater operating leverage.

In the meantime, we are investing for growth, including the expansion of our European footprint and the build-out of our manufacturing capabilities in Racine, and we are doing so with the financial discipline that has strengthened our balance sheet.

With a strong balance sheet and a robust backlog, our priorities for fiscal 2027 are to execute on our operational initiatives, optimize our global footprint and invest in long-term growth by carefully allocating capital, which includes returning capital to our shareholders.

Operator, please open the call for questions.

Operator

[Operator Instructions]

And your first question comes from the line of Max Michaelis with Lake Street Capital Markets.

分析師問答

Maxwell Michaelis

Congrats on the quarter. First one for me. So backlog, obviously up 104% on the defense side. Katsa seems like it grew significantly in terms of backlog. But if we look at the U.S. Navy portion of that, it sounds like orders are just starting to come in. Should we expect more of a ramp in the December quarter? Or is that going to be pushed out towards the March quarter? How should we think about the unmanned vessel opportunity ramping as a portion of backlog?

John Batten

Thank you. Max, it's John. I think -- so for the first 30 boats that are the, I would say, the official orders from the U.S. Navy, I think there's -- you'll see some of those also came in, in the second quarter. So you'll see a bump. I'm not sure you'll see the same bump in our third quarter. So this will kind of get us to a level for the first 30 boats.

Don't know when we will -- we have -- there are some orders in, but let's just say, I don't know when that next bump would be. So I think you'll see another one this quarter, and then there'll probably be a pause for a few quarters.

Maxwell Michaelis

Okay. And then for Katsa, I mean, is that just going to be sort of linear through Q2 and Q3? Or is there going to be any sort of bump as there will be with the unmanned vessel opportunity?

John Batten

Yes. I think you'll see another bump in this quarter. And yes, because there's 3 dynamics going on. There's NATO, there's a customer in the Middle East with a program going and then a new program in Asia. So they're kind of all coming online. Obviously, the biggest magnitude are the NATO trucks. And I think you'll see all 3 of those will have some impact on the second quarter in net new orders.

Maxwell Michaelis

Okay. Perfect. And then last one for me, and I'll take the rest of mine offline. You mentioned the data center build-out or data center opportunity with Katsa. I mean, is there -- I know this may be early on, early innings in terms of this opportunity, but is there any way you can help size this opportunity? Or is it just too early to tell, I guess?

John Batten

I think it's -- it's -- we don't sell the finished product. So we're basically selling components to engine OEMs in Europe that are the backup power gensets for these. They're expensive components. Hard for me to put on the whole potential, but it's certainly -- it's significant for Katsa. We're talking -- the sales in the millions, so which is for a $50 million business and growing, it's good business for sure.

Maxwell Michaelis

Yes. I guess because the way I see it, I mean, you're already expanding capacity with Katsa in Finland, and that's primarily due to the defense opportunity. And I mean now that if this data center opportunity explodes, I mean, I was just curious if this 54,000 square feet facility will be enough?

John Batten

So Max, since these are just one-off components, they wouldn't be going through the assembly facility. So they wouldn't be putting the pressure on that facility, which is nice. It's just machining capacity.

Operator

And your next question comes from the line of Simon Wong with Gabelli Funds.

Tze-Kiang Wong

Just continuing with Max's question on data center. How much revenue did you get from data center this quarter?

Jeffrey Knutson

Yes, that's a tough question. I think we're still early on in that ramping. So I wouldn't call it a significant contributor in the quarter necessarily.

John Batten

Yes, Simon, I wouldn't put the sales in this past quarter. It's probably right now still under $1 million, but the orders are growing. So yes, I think it's going to be more of a story going forward.

Tze-Kiang Wong

Got it. Okay. And then oil and gas, how much -- what percentage of revenue was oil and gas this quarter? And how does it compare to last year?

Jeffrey Knutson

Yes. So it was just over 9% in the quarter, which is a little bit higher than last -- last year's Q1 was a little over 8%. So in terms of just raw dollars, we're up about 22% in oil and gas year-over-year.

Tze-Kiang Wong

Okay. Now you mentioned that you -- it sounds like you sold some e-frac units in the quarter. Can you quantify how much e-frac units that you sold?

John Batten

Yes, Simon, I think we have orders. I'm not -- I don't think actually anything for e-frac. We shipped some of the models that go into e-frac, but they were for natural gas applications. So we shipped last fiscal year, and we have orders for this fiscal year. But what went out was actually natural gas and traditional diesel this quarter as far as shipments.

Tze-Kiang Wong

Okay. All right. And then looking at your slide on aerospace and defense, you still see a pipeline opportunity of $30 million to $50 million despite booking some orders during the quarter. So that was unchanged -- look like the pipeline is unchanged sequentially quarter-to-quarter. Are you -- is that a rolling number? Or are you seeing new opportunity?

John Batten

Yes. So it's good, Simon. So we -- from that pipeline that we identified, we definitely brought stuff in that are firm orders now, but the pipeline continues to grow both on -- with other navies for marine transmissions and more importantly, land-based vehicles out of Katsa. Again, new business that's coming up in the Middle East and new business that's coming up in Asia. So the pipeline continues to grow as well as converting what was in the pipeline into firm orders.

Tze-Kiang Wong

Okay. Great. And then last question for me. The free cash flow conversion, I know you're targeting 60% long term. but don't expect to be at that level this year. What level are you -- should I be thinking about for 2027 or fiscal '27?

Jeffrey Knutson

Yes. I think in the, let's say, between the 20% to 40% range. And a lot of that will depend on how successful we are in getting the CapEx in that we want to get in, right? Because there are a lot of variables there, both internal and external lead times, et cetera. But we have a strong initiative to build out some capacity and capabilities. And that's probably one of the bigger variables in terms of what free cash flow turns out to be for the year.

Tze-Kiang Wong

And CapEx for this year, $25 million?

Jeffrey Knutson

Yes. I think we'll still get to around $25 million. That's -- I think Q1 hopefully will be our lowest quarter at around $5.7 million, $5.8 million, I think. So hopefully, we were ramping through the year.

Operator

[Operator Instructions]

And I'm showing no further questions at this time. I would like to hand it back to John Batten for closing remarks.

John Batten

Thank you, Priya, and thank you for joining us today and your continued interest in Twin Disc. If you have any further questions, please reach out either to Jeff or myself, and we look forward to speaking with you in February after our fiscal 2027 second quarter call. Priya, I'll now turn the call back to you.

Operator

Thank you, presenters. And this concludes today's conference call. Thank you all for joining. You may now disconnect.