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The Cummins of heavy-duty transmissions and marine propulsion systems.

Allison Transmission, but for marine vessels and heavy-duty off-highway industrial equipment.

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• Marine Transmissions: Equipment designed to transfer power in marine vessels.
• Azimuth Drives: Propulsion units for marine vessels that can rotate 360 degrees, offering enhanced maneuverability.
• Surface Drives: Propulsion systems for marine vessels that operate partially above the water's surface, often used for high-speed applications.
• Propellers: Rotating blade devices that push marine vessels through water.
• Boat Management Systems: Integrated systems for controlling and monitoring various operational aspects of a boat.
• Power-shift Transmissions: Transmissions that allow gear changes under load without interrupting power flow, typically for heavy-duty off-highway equipment.
• Hydraulic Torque Converters: Devices that transfer and multiply torque using hydraulic fluid, commonly found in automatic transmissions.
• Power Take-Offs (PTOs): Mechanical devices used to transfer power from an engine to an auxiliary component or piece of equipment.
• Industrial Clutches: Mechanical devices used in industrial machinery to engage and disengage power transmission.
• Control Systems: Systems used to regulate and automate the operation of various machinery and equipment.

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Twin Disc (TWIN) sells primarily to other companies (B2B).

The provided background information describes the major markets in which Twin Disc's customers operate, rather than listing specific customer company names. Twin Disc sells its products to manufacturers and operators primarily in the following sectors:

• Pleasure craft marine market
• Commercial marine market
• Military marine market
• Energy and natural resources market
• Government market
• Industrial market

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John H. Batten, Chief Executive Officer

Mr. Batten was elected Chief Executive Officer, effective November 1, 2013, having joined Twin Disc, Inc. in 1996 as an Applications Engineer. He has held various roles including Commercial Manager – Marine, Vice President and General Manager, Marine Products, Executive Vice President, and President and Chief Operations Officer. Mr. Batten became a director of the company in 2002. He earned a BA in History from Yale University and a BS in Mechanical Engineering from the University of Colorado-Boulder, and completed the Advanced Management Program of the Harvard Business School. He is a fourth-generation leader in the family-founded business and is a member of the Board of Directors at Charter Manufacturing and Walker Forge.

Jeffrey S. Knutson, Vice President - Finance, CFO, Treasurer and Secretary

Mr. Knutson was elected Chief Financial Officer and Treasurer effective June 22, 2015, in addition to his roles as Vice President of Finance and Corporate Secretary. He joined Twin Disc in February 2005 as Controller of the North American manufacturing operation and later became Corporate Controller. Prior to Twin Disc, he served as Controller at Tower Automotive - Milwaukee Division and held various financial positions at Invensys, Bucyrus International, and PricewaterhouseCoopers. Mr. Knutson holds a Bachelor of Business Administration degree from the University of Wisconsin - Whitewater and is a Certified Public Accountant in Wisconsin.

Tim Batten, Executive Vice President, Sales & Operations

Mr. Batten serves as the Executive Vice President of Sales & Operations at Twin Disc.

Michael B. Gee, Vice President, Engineering

Mr. Gee holds the position of Vice President, Engineering, and is also involved in Hybrid Engineering efforts for Twin Disc.

Darryl Babu, Vice President, Distribution

Mr. Babu serves as the Vice President of Distribution for Twin Disc.

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Here are the key risks to Twin Disc's business:

1. Macroeconomic and Geopolitical Uncertainty: Twin Disc operates globally, selling marine and heavy-duty off-highway power transmission equipment. The company faces significant uncertainty due to tariff-driven trade wars, a slowing global economy, and other geopolitical tensions. These factors can threaten demand in its core markets, including commercial marine, land-based heavy-duty, and energy equipment. Such an environment also contributes to higher input costs and makes it more challenging to achieve higher profit margins.
2. Profitability and Margin Challenges: Twin Disc has historically faced challenges with maintaining strong profit margins, with gross margins typically capped in the high-20%s and EBITDA margins rarely reaching double digits. While management is actively pursuing strategies such as acquisitions, optimizing product mix, and driving operational efficiencies to improve profitability, achieving sustained higher margins is not guaranteed and remains a critical focus for the company's long-term financial health and valuation.
3. Market Cyclicality and Demand Volatility: The company's financial performance is significantly affected by the cyclical nature of its primary end markets, particularly the oil and gas market. Demand outlook for Twin Disc's products can be mixed, with varying levels of strength and weakness across different segments, such as commercial marine, and land-based heavy-duty and energy equipment, which are susceptible to economic fluctuations.

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The clear emerging threat for Twin Disc is the accelerating global shift towards electrification, hybrid, and alternative fuel propulsion systems in the marine and heavy-duty off-highway markets. As their customers (boat builders, equipment manufacturers) increasingly adopt these new powertrain technologies to meet emission regulations and market demand, the need for Twin Disc's traditional mechanical power transmission equipment designed for internal combustion engines could significantly diminish. This fundamental technological transition mirrors historical disruptions where new technologies rendered incumbent products obsolete.

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Twin Disc (symbol: TWIN) operates in several addressable markets for its diverse product offerings. The estimated market sizes for its main products and services are as follows:

• Marine Transmissions: The global market for Marine Transmission Systems was valued at approximately USD 34.1 billion in 2024.
• Azimuth Drives: The global azimuth thrusters market size was valued at USD 550.0 million in 2024.
• Surface Drives: null
• Propellers: The global marine propeller market size is USD 6.3 billion in 2024.
• Boat Management Systems: The global boat monitoring market size was valued at USD 608.78 million in 2024.
• Power-shift Transmissions: The global market for Assembly and Power Shift Transmission is projected to reach USD 21.13 billion by 2025.
• Hydraulic Torque Converters: The global torque converter market size was estimated at USD 7,590.0 million in 2024.
• Power Take-offs: The global Power Take Off (PTO) market size was valued at approximately USD 1.3 billion in 2023.
• Industrial Clutches: The global industrial brakes and clutches market was valued at approximately USD 1,885.50 million in 2024.
• Control Systems: The Global Industrial Control Systems Market size was valued at USD 193.12 billion in 2024.

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Twin Disc (symbol: TWIN) is expected to experience future revenue growth over the next 2-3 years driven by several key factors:

1. Growth in the Defense Market: Twin Disc anticipates significant revenue growth from the global defense sector. The company has a growing backlog of defense-related orders, specifically benefiting from increased defense spending by the U.S. Army, U.S. Navy, and NATO programs. This sector is a strategic focus and is expected to contribute substantially to future sales.
2. Strategic Acquisitions: Recent acquisitions, such as Kobelt Manufacturing Co. Ltd. (completed in early 2025) and Katsa Oy (completed in the first half of 2024), are contributing to revenue growth by expanding Twin Disc's product portfolio, technological capabilities, and market reach. These integrations are expected to enhance the company's presence in Europe and diversify its offerings, particularly in hybrid and electric applications.
3. Strong Demand in Marine Markets and Hybrid/Electric Propulsion: The marine and propulsion systems segment continues to be a robust driver, with particular strength noted in luxury craft, workboats, autonomous vessel applications, and demand for Veth products (such as Veth's ELITE thrusters). Furthermore, the company is expanding its market presence in hybrid and electric propulsion systems, a growth area enhanced by recent acquisitions.
4. Continued Demand in Land-Based Transmissions and Industrial Markets: Beyond marine and defense, Twin Disc expects sustained demand and solid performance from its land-based transmissions and broader industrial markets. These segments continue to be important contributors to the company's overall revenue.

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Capital Allocation Decisions (Last 3-5 Years)

Share Repurchases

• Twin Disc did not repurchase any shares during fiscal year 2025.
• As of September 5, 2025, the company had 315,000 shares authorized for repurchase under its existing plan.
• Between September 27, 2025, and December 26, 2025, no share repurchases were reported.

Share Issuance

• In October and November 2025, directors received restricted stock grants under the Amended and Restated 2021 Omnibus Incentive Plan, including 5,378 shares at $14.875 and 272 shares at $14.944, among others.

Outbound Investments

• Twin Disc acquired Katsa Oy, a Finnish manufacturer of power transmission components and gearboxes, for approximately $23 million (€21 million) in the first half of calendar year 2024. This acquisition expanded the company's European market presence and added complementary products.
• In February 2025, the company completed the acquisition of Kobelt Manufacturing Co. Ltd. for $16.5 million, which added brake, control, and steering systems to its product lines.
• These acquisitions led to increased leverage, with total debt rising from $24.9 million in Q2 FY25 to $44.5 million in Q2 FY26, primarily due to the Kobelt acquisition.

Capital Expenditures

• In fiscal year 2025, Twin Disc invested $15.2 million in property, plant, and equipment to support growth and operational efficiency.
• For fiscal year 2026, anticipated capital expenditures are approximately $17 million to $19 million, focused on investing in modern equipment for growth, efficiencies, and quality improvements.
• Investments in capacity for fiscal 2026 are expected to be related to European demand, specifically for test stands and assembly capacity.