Twin Disc (TWIN) Q2 2026 Earnings Call Transcript

Motley Fool Transcribing, The Motley Fool

Wed, February 4, 2026 astatine 8:59 AM CST 19 min read

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Wednesday, February 4, 2026 astatine 9 a.m. ET

• Chief Executive Officer — John H. Batten

• Chief Financial Officer — Jeffrey S. Knutson

John H. Batten: Good morning, everyone, and invited to our fiscal 2026 2nd 4th league call. Despite a challenging operating backdrop, our diversified portfolio continued to show resilience. The request remained robust crossed marine, defense, and prime concern applications. This beardown request continues to substance assurance successful the positioning of the concern arsenic our six-month backlog reached a grounds level erstwhile again during the quarter. As anticipated, tariff impacts were elevated successful the quarter, astir 3% of the outgo of sales, arsenic they proceed to make friction crossed the industry, influencing lawsuit behaviour related to bid placement timing and shipping pb times. Importantly, these impacts bespeak humble delays successful timing alternatively than mislaid orders.

In effect to these pressures, we proceed to marque advancement implementing the mitigation strategies we've outlined successful erstwhile quarters, including pricing discipline, operational enhancements, and footprint optimization. During the quarter, we precocious readying efforts focused connected evaluating footprint utilization and operating flexibility crossed our existing manufacturing network. Including actions specified arsenic adjusting accumulation flows, oregon wherever appropriate, overtime, relocating definite activities to trim structural tariff exposure. For example, we are readying to determination RF assembly to our Lufkin facility, which allows america to assemble products successful a tariff-advantaged environment, reducing the interaction of import duties connected finished goods. In the coming quarters, we'll expect tariff-related impacts to moderate, premix to improve, and our mitigation tactics to instrumentality effect.

Our actions, combined with a grounds backlog, permission america well-positioned to seizure underlying request and thrust further advancement toward our semipermanent maturation and profitability objectives. Defense continues to beryllium a strategical maturation operator for Twin Disc arsenic request builds crossed aggregate programs and geographies, supported by elevated defence spending successful The United States and NATO. Defense-related opportunities correspond an progressively diversified and durable information of our full backlog, up 18% sequentially. As governments prioritize the modernization of marine, land-based, and autonomous platforms, we proceed to enactment a wide scope of defence platforms, including naval vessels, autonomous and unmanned systems, and land-based applications.