Slides
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Investor Presentation TWIN DISC, INC
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DISCLOSURES Safe Harbor Statement This presentation contains statements that are forward-looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management’s current expectations that are based on assumptions that are subject to risks and uncertainties. Actual results may vary because of variations between these assumptions and actual performance. Investors are referred to Twin Disc’s fiscal year 2025 Annual Report and Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Forward-Looking Information,” which outlines certain risks regarding the Company’s forward-looking statements. Copies of the Company’s SEC filings may be obtained from the SEC, and are available on Twin Disc’s web site (www.twindisc.com ), or by request from the Investor Relations department at the Company. Non-GAAP Financial Disclosures Financial information excluding the impact of asset impairments, restructuring charges, foreign currency exchange rate changes and the impact of acquisitions, if any, in this presentation are not measures that are defined in U.S. Generally Accepted Accounting Principles (“GAAP”). These items are measures that management believes are important to adjust for in order to have a meaningful comparison to prior and future periods and to provide a basis for future projections and for estimating our earnings growth prospects. Non-GAAP measures are used by management as a performance measure to judge profitability of our business absent the impact of foreign currency exchange rate changes and acquisitions. Management analyzes the company’s business performance and trends excluding these amounts. These measures, as well as EBITDA, provide a more consistent view of performance than the closest GAAP equivalent for management and investors. Management compensates for this by using these measures in combination with the GAAP measures. The presentation of the non-GAAP measures in this press release are made alongside the most directly comparable GAAP measures. Definitions Organic net sales is defined as net sales excluding the recent acquisition of Kobelt while adjusting for the effects of foreign currency exchange. Earnings before interest, taxes, depreciation and amortization (EBITDA) is calculated as net earnings or loss excluding interest expense, the provision or benefit for income taxes, depreciation and amortization expenses. Net debt is calculated as total debt less cash. Leverage Ratio is calculated as net debt divided by the sum of EBITDA over the last twelve months. Free cash flow is calculated as net cash provided (used) by operating activities less acquisition of fixed assets. 2
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INVESTMENT HIGHLIGHTS 3 A leader in global power transmission technology with an increasingly diversified IP-protected portfolio Well-positioned to benefit from tailwinds in defense markets and hybrid transmissions supported by robust backlog Margin enhancement and operational initiatives driving favorable financial results Track record of successfully integrating acquisitions Strong cash flow generation and balance sheet to support growth
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SECOND QUARTER HIGHLIGHTS 4 Q2 sales +30 bps vs. YA to $90.2 million Organic sales -7.9% vs. YA EBITDA of $4.7 million, down 25.0% vs. YA, including higher expenses and tariff-related impacts Generated positive Operating Cash Flow of $4.6 million and Free Cash Flow of $1.2 million during the quarter Robust six-month backlog of $175.3 million higher sequentially and supported by healthy ongoing demand Financial Sales growth supported by execution across diversified global portfolio and enhanced market reach from acquisitions Sequential margin improvements from successfully streamlined operations Defense orders sustaining tailwinds across segments Healthy demand with a record six-month backlog supporting future growth Strategic
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CAPTURING ROBUST DEFENSE MARKET DEMAND WITH RUNWAY FOR GROWTH 5 Robust Defense Activity TWIN Well Positioned Delivering Results +13% YoY Increase in 2026 US Defense Spending (1) Select Defense Products Marine Transmissions, Controls & Steering Systems Propulsions Systems Transmissions, Gearboxes, and Transfer Cases North America Europe Asia Pacific $50-75M Defense Related Pipeline +18% Q2 Sequential Increase of Defense Total Backlog* Major Geographies ~15% Defense as a percentage of Total Backlog Select Defense End Users +150% YoY Increase in NATO Defense Spend Target as percentage of GDP (2) (3) Note: Total Backlog figures are reflective of greater than six- month period. Defense spend represents management estimates. Sources: 1) U.S. Department of Defense, FY2026 Defense Budget Briefing; 2) NATO, “Funding NATO”; 3) Atlantic Council, “Who’s at 2 Percent?”;
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MARINE & PROPULSION SYSTEMS 6 Sales flat vs. YA Continued strength in workboats, government contracts, and Veth’s ELITE thruster products Softness in Asia Pacific commercial marine Sustained demand for higher-content solutions, including hybrid propulsion, advanced maneuvering, and integrated systems Growing traction for unmanned U.S. Navy vessels Aftermarket softness late in the quarter driven by customer timing and year-end dynamics, with early signs of improving activity in the subsequent period
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LAND-BASED TRANSMISSIONS 7 Sales decreased by 8.1% vs. YA, primarily driven by shipment delays to ARFF customers Customer behavior cautious in North America; rebuilds and refurbishments continue to outpace new equipment purchases Early signs of improvement internationally, including significant transmissions order in China Continued progress on next-generation electrified and hybrid solutions supporting longer-term fleet upgrade opportunities
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INDUSTRIAL 8 Sales increased by 22.0% vs. YA, largely due to the acquisition of Kobelt Steady sequential recovery in demand and order trends with growth in customer activity Expanded use of Katsa capabilities to support higher-content, differentiated solutions across industrial end markets Focused on mix enhancement and product differentiation
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CONTINUED BACKLOG GROWTH $124.0 $133.7 $150.5 $163.3 $175.3 103% 103% 101% 97% 93% 50.0% 70.0% 90.0% 110.0% 130.0% 150.0% 170.0% 190.0% $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0 $160.0 $180.0 2QF25 3QF25 4QF25 1QF26 2QF26 Backlog ($MM) Inventory (% Backlog) BACKLOG AND INVENTORY % OF BACKLOG Note: Backlog figures are reflective of a six-month period. The six-month order backlog is considered more representative of operating conditions than total backlog. 9 Healthy 6-month backlog higher sequentially and on a year-over-year basis Growth in backlog led by propulsion and defense applications, with sustained demand across other product groups Positive FX impact of $0.7 million from prior quarter
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LONG-TERM STRATEGY 10 Rationalize global footprint for efficiency and customer response M&A priorities: Industrial and Marine Technology (Hybrid focus) Leading Hybrid/Electric solution provider for niche marine and land-based applications Continued expansion of acquisitions to reach new markets and geographies Increased focus on controls and system integration rather than individual components 2030 FY Targets $500M Revenue 30% Gross Margins >60% FCF Conversion
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FINANCIAL OVERVIEW 11
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SALES ($ in millions) FINANCIAL PERFORMANCE EARNINGS PER SHARE $89.9 $90.2 2QF25 2QF26 $0.07 $1.55 2QF25 2QF26 12 Continued healthy demand across global markets Contribution from acquisitions and operational execution driving performance and sales growth EPS improvement attributable to an income tax benefit of $21.8 million primarily due to the reversal of the domestic valuation allowance, accounting for $1.58 per diluted share
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Increased proportion of sales in North American and European markets with strong Veth demand in the region SALES BY PRODUCT GROUP ($ in millions) SALES DIVERSITY SALES MIX BY GEOGRAPHY $56.7 $56.7 $19.0 $17.5 $9.5 $11.5 $4.8 $4.5 2QF25 2QF26 Marine & Propulsion Systems Land-Based Transmissions Industrial Other 26% 28% 41% 45% 23% 17% 10% 10% 2QF25 2QF26 North America Europe Asia Pacific Other 13 Sales growth driven by strength within Marine and Propulsion Systems and Industrials: Consistent market demand Geographic expansion Recovery in Industrials sales supported by acquisitions
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STRONG BALANCE SHEET $24.9 $15.9 $9.0 $44.5 $14.9 $29.6 Total Debt Cash Net Debt 2QF25 2QF26 BALANCE SHEET ($ in millions) LTM EBITDA ($ in millions) $26.8 $22.0 2QF25 2QF26 0.3x 1.3x 2QF25 2QF26 NET LEVERAGE RATIO 14 Increase primarily due to acquisition of Kobelt
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MARGINS & NEAR-TERM EXPECTATIONS SECOND QUARTER GROSS MARGIN DRIVERS 15 INFLATION & SUPPLY CHAIN EXPECTATIONS 24.1% 24.8% 2QF25 2QF26 SECOND QUARTER TWIN DISC GROSS MARGIN Gross margin increased by 70 basis points vs. YA, largely due to the absence of inventory-related charges recorded last year Benefits of incremental volume and successful margin improvement initiatives Monitoring evolving tariff landscape and reviewing global manufacturing strategy accordingly Tariff impact expected ~1-3% of COGS in upcoming quarter, improving in 2H driven by more favorable mix
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CAPITAL ALLOCATION FRAMEWORK Debt Reduction Return Capital to Shareholders (Dividends) Organic Growth Investments Bolt-On & Transformational Acquisitions Strategic Fit Diversification away from Oil & Gas Acquisition logic immediately evident Financial Fit Other Considerations Clear value creation potential Consistent business performance Internal Rate of Return > WACC Platform for transformative expansion Can enhance network and capabilities Focus Areas Research & Development Geographic diversification / expansion Marketing 16 Return Capital to Shareholders (Share Repurchases)
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KEY TAKEAWAYS 17 Navigated challenging operating environment with resilient demand across diversified portfolio supporting record backlog levels and solid 2H visibility Tariff-related impacts elevated during the quarter, influencing shipment timing and margins, with mitigation actions underway and exposure expected to moderate over time Defense momentum continues to build, with expanding participation across multiple programs, platforms, and geographies supporting durable long-term growth Margins improved year over year, benefiting from the absence of prior-year inventory-related charges, despite near-term pressure from unfavorable mix and tariff-related dynamics Continued focus on operational execution, tariff mitigation, and disciplined capital allocation to convert backlog into revenue and cash as conditions normalize
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Q&A Fiscal 2026 Second Quarter Earnings Call 18
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APPENDIX 19
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20 2Q26 2Q25 Net Sales $90,180 $89,921 Less: Acquisition(1) (3,191) - Less: Foreign Currency Impact (4,149) - Organic Net Sales $82,839 $89,921 RECONCILIATION OF REPORTED NET SALES TO ORGANIC NET SALES (In thousands; unaudited) RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO REPORTED FINANCIAL MEASURES (1)Accounts for sales contributed by the acquisition of Kobelt
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO REPORTED FINANCIAL MEASURES 21 December 26, 2025 December 27, 2024 Current maturities of long-term debt $3,000 $2,000 Long-term debt 41,515 22,873 Total debt $44,515 $24,873 Less cash 14,889 15,906 Net debt $29,626 $8,967 LTM EBITDA 21,981 26,759 Net Leverage Ratio 1.3x 0.3x RECONCILIATION OF TOTAL DEBT TO NET DEBT TO EBITDA LEVERAGE RATIO CALCULATION (In thousands; unaudited)
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO REPORTED FINANCIAL MEASURES 22 2Q26 1Q26 FY25 4Q25 3QF25 2QF25 Net Income (loss) attributable to Twin Disc $22,371 ($518) ($1,894) $1,424 ($1,472) $919 Interest expense 772 800 2,646 855 660 495 Income tax expense (21,780) 983 3,368 47 1,142 1,552 Depreciation and amortization 3,336 3,464 14,899 4,705 3,659 3,296 Earnings before interest, taxes, depreciation and amortization (EBITDA) $4,699 $4,729 $19,019 $7,031 $3,989 $6,262 RECONCILIATION OF CONSOLIDATED NET INCOME TO EBITDA (In thousands; unaudited)
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO REPORTED FINANCIAL MEASURES 23 For the Quarter Ended December 26, 2025 December 27, 2024 Net cash provided (used) by operating activities $4,555 $8,658 Acquisition of property, plant, and equipment (3,320) (2,780) Free cash flow $1,235 $5,878 RECONCILIATION OF NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES TO FREE CASH FLOW (In thousands; unaudited)