Twin Disc reported record quarterly sales in its fiscal fourth quarter, but the higher revenue did not translate into higher gross profit as product mix and a difficult prior-year comparison pressured margins.
Fourth-quarter sales increased 18.3% year-over-year to a record $114.4 million. Full-year fiscal 2026 sales increased 11.9% to $381.3 million.
Despite the revenue growth, quarterly gross profit declined 3.5% to $30.1 million from $31.2 million.
Gross margin fell approximately 600 basis points to 26.3%. Twin Disc attributed the decline primarily to product mix and a favorable $3 million adjustment that benefited the prior-year fourth quarter. The comparison also reflects an approximately $1.2 million increase to prior-year gross profit associated with the company’s change to FIFO inventory accounting.
The results show a notable divergence between the top line and gross profitability, with higher volumes being generated at a lower overall margin.
Demand was particularly strong in Twin Disc’s Land-Based Transmissions operations, while Marine and Propulsion Systems also contributed to growth.
The margin pressure did not prevent improvement farther down the income statement.
Net income attributable to Twin Disc increased to $9.4 million, or $0.64 per diluted share, from $2.6 million, or $0.19 per diluted share, in the prior-year quarter. Fourth-quarter EBITDA increased 35.1% to $11.1 million.
Twin Disc also generated $17.2 million of fourth-quarter free cash flow.
The company’s six-month backlog stood at approximately $178.3 million at fiscal year-end, compared with $179.5 million at the end of the third quarter. Inventory as a percentage of the six-month backlog improved to 99.9% from 107.2% sequentially.
Total debt decreased to $29.8 million, while net debt declined to $13.8 million, supported by positive free cash flow.
For the full fiscal year, Twin Disc generated $27.1 million of net income attributable to the company, compared with a $697,000 loss in fiscal 2025. Fiscal 2026 results included a $14 million income-tax benefit related to the reversal of a domestic valuation allowance.
KEY QUOTES:
“Gross margins were lower primarily related to product mix, tariff dilution and a prior year favorable adjustment.”
Jeffrey S. Knutson, Vice President of Finance, Chief Financial Officer, Treasurer and Secretary of Twin Disc
