Shares of Hurco Companies, Inc. (HURC) have lost 3.9% since the company reported its earnings for the quarter ended Oct. 31, 2024. This compares to the S&P 500 Index’s 1.3% decline over the same time frame. Over the past month, the stock lost 2.8% compared with the S&P 500’s 3.9% decline.Performance OverviewHurco reported a net loss of $1.4 million, or $(0.23) per diluted share, for the fourth quarter of fiscal 2024 against net income of $2.4 million, or $0.36 per diluted share, in the year-ago period. For ...

Industry Overview - Weak demand observed across a range of manufacturing end markets in 2024 [2] - Higher interest rates and uncertainties surrounding the US election cycle contributed to a challenging environment for industrial companies [2] Company Performance (Hurco) - Hurco experienced a difficult year in 2024, as anticipated [2] - The company faced headwinds from broader industry challenges, including weak demand and economic uncertainties [2]

Foreign Currency and Revenue - 61% of the company's revenue in fiscal year 2024 was derived from customers outside the Americas, with transactions conducted in various foreign currencies[233] - The company sources products from foreign suppliers and subsidiaries in Taiwan, the U.S., Italy, and China, with purchases predominantly in foreign currencies, primarily the New Taiwan Dollar and the Euro[234] - The company entered into foreign currency forward exchange contracts to hedge cash flow risks, with notable contracts including €7.5 million in Euro, £3.4 million in Sterling, and NT$490 million in New Taiwan Dollar[236] - A forward contract with a notional amount of €3.0 million was entered into in November 2023 to hedge net investment in Euro-denominated assets, maturing in November 2024 with a realized gain of $1.2 million[238] Product Line Enhancements - The TMX product line was enhanced with higher speed 20,000rpm motorized spindles and refreshed designs for the TM-Mi and TMXi product lines, including the introduction of TM8MY and TM10MY multi-axis live tooling lathes[40] - The Milltronics line introduced the INSPIRE+ control console in 2024, featuring enhanced hardware and graphics, and launched two new product lines: TRL toolroom flatbed lathes and X5 five-axis integrated machines[51] - The Takumi brand offers high-precision, high-speed milling machines, with the H Series featuring direct-drive spindles up to 20,000rpm and options for 24,000rpm and 36,000rpm, targeting die and mold and aerospace customers[56] - The U Series product line consists of six models, with four offering trunnion table sizes of 10, 16, 24, and 31.5 inches, and the UB version featuring a 12,000rpm built-in spindle and a spacious X-axis travel of 126 inches[58] - The G Series product line includes three models with X-axis travels of 22, 30, and 40 inches, designed for machining graphite or copper electrodes with up to 20,000rpm spindles[59] - The BC Series models are available in eight sizes, with X-axis travels ranging from 83 to 197 inches, designed for heavy cutting applications[60] - The HMX Series high-speed horizontal machining centers are available in 400-, 500-, and 630-millimeter pallet sizes, with expandable automatic tool changers holding up to 220 tools[61] - In fiscal year 2024, Takumi introduced the UVC600 five-axis machine with a 600-millimeter cantilever table and the UA400 five-axis model, both featuring 15,000rpm direct drive spindles[63] Research and Development - Research and development expenses totaled $3.9 million, $4.2 million, and $3.4 million in fiscal years 2024, 2023, and 2022, respectively[298] - Estimated amortization expense for software development costs is projected to be $1,065,000 in 2025, $931,000 in 2026, and $1,302,000 in 2027[301] - Intangible asset amortization expense was $237,000, $271,000, and $272,000 for fiscal years 2024, 2023, and 2022, respectively[303] Financial Performance - Net loss for fiscal year 2024 was $16.6 million, compared to net income of $4.4 million in 2023 and $8.2 million in 2022[306] - Inventories decreased to $153,037 thousand in 2024 from $157,952 thousand in 2023, with finished goods remaining stable at $104,224 thousand compared to $104,574 thousand in 2023[319] Credit Facilities and Borrowings - The company has a $40.0 million unsecured revolving credit facility under the 2018 Credit Agreement, with a scheduled maturity date of December 31, 2025[321] - Borrowings under the 2018 Credit Agreement bear interest at floating rates, with letters of credit carrying an annual rate of 1.00%[322] - The 2018 Credit Agreement requires the company to maintain a minimum working capital of $125.0 million and a minimum tangible net worth of $176.5 million[323] - The company has uncommitted revolving credit facilities in Taiwan (150 million New Taiwan Dollars) and China (32.5 million Chinese Yuan), renewed in 2023[324] - As of October 31, 2024, the company had no borrowings under its credit facilities and approximately $50.9 million of available borrowing capacity[326] International Operations and Assets - Long-lived tangible assets in foreign countries increased significantly to $13,025 thousand in 2024 from $4,034 thousand in 2023[384] - Net assets in Europe grew to $88,810 thousand in 2024 from $81,730 thousand in 2023, while Americas decreased to $45,798 thousand from $70,649 thousand[384] - The company operates through approximately 180 independent agents and distributors across the Americas, Europe, and Asia, with direct sales and service organizations in key regions[315] Competitive and Intellectual Property Risks - The company faces competition from larger companies with greater financial resources, which may impact its ability to remain competitive[116] - The company's success depends on its ability to protect intellectual property, which may be inadequately protected in some foreign countries[118]

Financial Performance - Net loss for Q4 2024 was $1.442 million, compared to net income of $2.422 million in Q4 2023, including a non-cash tax valuation allowance of $193,000[1] - Gross profit for Q4 2024 was $12.186 million, or 23% of sales, compared to $17.419 million, or 26% of sales, in Q4 2023[11] - Gross profit for the twelve months ended October 31, 2024, was $37.7 million, down from $56.2 million in 2023[18] - Net loss for the twelve months ended October 31, 2024, was $16.6 million, compared to a net income of $4.4 million in 2023[18] - Gross margin for the twelve months ended October 31, 2024, was 20%, down from 25% in 2023[19] - Operating loss as a percentage of sales was 4% for the twelve months ended October 31, 2024, compared to an operating income of 3% in 2023[19] Sales and Orders - Sales and service fees for Q4 2024 decreased by 19% to $53.702 million, with a favorable currency impact of 2%[2] - Americas sales for Q4 2024 decreased by 21% to $23.331 million, primarily due to decreased shipments of Hurco and Takumi machines[4] - European sales for Q4 2024 decreased by 18% to $25.381 million, with a favorable currency impact of 3%[5] - Asian Pacific sales for Q4 2024 decreased by 11% to $4.990 million, with a favorable currency impact of less than 1%[6] - Orders for Q4 2024 decreased by 6% to $51.077 million, with a favorable currency impact of 2%[7] - Asian Pacific orders for Q4 2024 increased by 103% to $5.980 million, with a favorable currency impact of 2%[8] - Sales and service fees for the three months ended October 31, 2024, were $53.7 million, a decrease from $66.1 million in the same period in 2023[18] - Global orders for fiscal year 2024 outpaced sales in every region, with orders improving from the first half to the second half of the year[3] Expenses and Efficiency - SG&A expense as a percentage of sales increased to 25% for the twelve months ended October 31, 2024, from 22% in 2023[19] - Days sales outstanding increased to 49 days as of October 31, 2024, from 41 days in 2023[19] - Inventory turns decreased to 1.0 as of October 31, 2024, from 1.1 in 2023[19] Cash and Assets - Cash and cash equivalents totaled $33.330 million as of October 31, 2024, compared to $41.784 million as of October 31, 2023[14] - Total assets decreased to $268.6 million as of October 31, 2024, from $290.6 million in 2023[21] - Shareholders' equity decreased to $207.2 million as of October 31, 2024, from $222.2 million in 2023[21]

Financial Performance - Sales and service fees for Q4 FY2024 were $53,702,000, a 19% decrease compared to the same period in FY2023, with a favorable currency impact of $1,008,000 [1] - Full-year sales and service fees for FY2024 were $186,584,000, an 18% decrease compared to FY2023, with a favorable currency impact of $1,804,000 [1] - Gross profit for Q4 FY2024 was $12,186,000 (23% of sales), down from $17,419,000 (26% of sales) in Q4 FY2023 [10] - Full-year gross profit for FY2024 was $37,743,000 (20% of sales), compared to $56,168,000 (25% of sales) in FY2023 [10] - Net loss for Q4 FY2024 was $1,442,000 ($0.23 per diluted share), compared to net income of $2,422,000 ($0.36 per diluted share) in Q4 FY2023 [17] - Full-year net loss for FY2024 was $16,608,000 ($2.56 per diluted share), compared to net income of $4,389,000 ($0.66 per diluted share) in FY2023 [17] Regional Sales Performance - Americas sales for Q4 FY2024 decreased by 21% compared to Q4 FY2023, primarily due to decreased shipments of Hurco and Takumi machines [15] - European sales for Q4 FY2024 decreased by 18% compared to Q4 FY2023, with a favorable currency impact of 3% [18] - Asian Pacific sales for Q4 FY2024 decreased by 11% compared to Q4 FY2023, with a favorable currency impact of less than 1% [2] - Full-year Asian Pacific sales for FY2024 increased by 2% compared to FY2023, with an unfavorable currency impact of 1% [16] Orders and Market Trends - Total orders for Q4 FY2024 were $51,077,000, a 6% decrease compared to Q4 FY2023, with a favorable currency impact of $1,077,000 [19] - Full-year orders for FY2024 were $198,302,000, a 5% decrease compared to FY2023, with a favorable currency impact of $1,923,000 [19] - Asian Pacific orders for Q4 FY2024 increased by 103% compared to Q4 FY2023, driven by increased demand in China, India, and Southeast Asia [4] - European orders for Q4 FY2024 decreased by 13% compared to Q4 FY2023, with a favorable currency impact of 4% [9] Operational Highlights - Selling, general, and administrative expenses for Q4 FY2024 were $12,677,000 (24% of sales), compared to $14,040,000 (21% of sales) in Q4 FY2023 [5] - Full-year SG&A expenses for FY2024 were $46,029,000 (25% of sales), compared to $49,552,000 (22% of sales) in FY2023 [5] - The company implemented global cost reductions in Q3 FY2024 to offset the impact of lower sales volumes and pricing [10][11] - Cash and cash equivalents totaled $33,330,000 as of October 31, 2024, compared to $41,784,000 as of October 31, 2023 [12] Industry and Company Outlook - The machine tool market was down almost 19% according to Oxford Economics U.S. machine tool forecasts [15] - The company focused on technological innovations, showcasing next-generation controls and CNC machines with ProCobots at IMTS [15] - The company believes its strong balance sheet and focus on technological advancement differentiate it from competitors [15] - The company is prepared for increased customer demand as global markets begin to recover [15]

Core Vision and Strategy - The company aims to drive the future of Autonomous Machining Centers by leveraging AI, mechatronics, motion, and simulation technologies [1] - The vision includes reshaping industry standards and revolutionizing market presence with cutting-edge technologies to address labor challenges and enhance automation and connectivity [1] - AI-driven capabilities such as feature detection, operation sequencing, and process control are critical to realizing the vision of Autonomous Machining Centers as the cornerstone of manufacturing [1] - The company is committed to commercializing incremental advancements in hybrid AI-assisted solutions to enhance productivity and operational efficiency [1] Operational Excellence and Efficiency - The company is leveraging the scalability of its three global CNC brands to drive operational excellence and efficiency through standardized industrial hardware components and smart manufacturing processes [3] - Strategies include streamlining manufacturing processes, optimizing resource allocation, and reducing the global energy footprint to improve cost efficiency and align with sustainable practices [3] - Data-driven analytics for inventory management and R&D of innovative technologies like polymer-mineral castings support sustained and responsible growth [3] Market Expansion and Innovation - The company plans to expand market share through product development, partnerships, and acquisitions, with a focus on robotics, automation, and AI-driven applications across all product categories [4] - Strategic partnerships and collaborations with other OEMs, both within and outside the company's business segments, will diversify offerings and address global demand for automated and autonomous systems [4] - The company aims to position itself as a leader in Industry 5.0, where connected and automated systems drive sustainable, workforce-centric productivity and scalability [4] Talent Management and Development - The company prioritizes talent and career development initiatives to support its leadership in the Industry 5.0 manufacturing revolution [5] - Strategic partnerships with universities and research groups globally provide opportunities to acquire top talent and foster innovation [5] - Continuous investment in employee skill development and knowledge growth is seen as a catalyst for innovation and business advancement [5] Technological Advancements - The company is enabling smarter, safer, and more autonomous manufacturing practices through cloud computing, edge computing, and digital twin technologies [6] - These technologies allow seamless adaptation to global market demands, heralding a new era of innovation and excellence in manufacturing [6] Company Overview - The company is an international industrial technology firm specializing in CNC machine tools for the metal cutting and metal forming industry [7] - It operates three brands: Hurco, Milltronics, and Takumi, each with unique control systems and software capabilities [7] - The company serves independent job shops, short-run manufacturing operations, and production-oriented manufacturers across industries such as aerospace, defense, medical equipment, energy, transportation, and computer equipment [7] - Manufacturing operations are located in Taiwan, Italy, the U.S., and China, with a global sales and support network spanning the Americas, Europe, and Asia [7]

Company Overview - Hurco Companies Inc is an international industrial technology company specializing in CNC machine tools for the metal cutting and metal forming industry [4] - The company operates three brands: Hurco, Milltronics, and Takumi, with proprietary software for the first two brands and third-party controls for Takumi [4] - Hurco produces high-value machine tool components, accessories, and automation solutions that can integrate with any machine tool [4] - The company serves independent job shops, short-run manufacturing operations in large corporations, and production-oriented manufacturers across industries including aerospace, defense, medical equipment, energy, transportation, and computer equipment [4] - With manufacturing operations in Taiwan, Italy, the US, and China, Hurco maintains a global presence through direct and indirect sales forces across the Americas, Europe, and Asia [4] Technological Advancements - Hurco unveiled cutting-edge AI-driven features in its next-generation control systems at the 2024 International Manufacturing Technology Show (IMTS) [1] - The company's AI implementation significantly reduces programming time from several minutes to seconds, enhancing machine tool operation efficiency [2] - Hurco's AI technology is embedded at the core of control technology, enabling faster, smarter, and more precise outcomes for customers [2] - The company's vertical integration allows complete control over CNC machines, controls, and software, facilitating rapid testing and integration of new technologies [3] Strategic Advantages - Hurco's complete vertical integration provides unparalleled agility in technology development and implementation [3] - The company maintains a strong commitment to innovation across economic cycles, supported by a robust balance sheet and disciplined financial strategy [3] - AI-driven tools like ChatCNC™ Chatbot and AI Feature Recognition are transforming manufacturing efficiency and profitability for customers [3] - With a strong innovation pipeline and solid financial strength, Hurco is positioned to continue leading the AI manufacturing revolution [3] Market Position - Hurco's technological advancements position the company as a leader in machine tool technology [1] - The company's AI-driven innovations are expected to redefine the competitive landscape in the manufacturing industry [3] - Hurco's global presence and comprehensive product offerings strengthen its position in the international CNC machine tool market [4]

Company Performance at IMTS 2024 - Hurco Companies showcased groundbreaking advancements in CNC technology and control systems at the 2024 International Manufacturing Technology Show (IMTS) in Chicago, attracting a significant number of visitors to its 16,000-square-foot booth [1] - The company's new control system, featuring an ergonomic design and fully customizable interface, integrated AI tools like ChatCNC™ and AI feature recognition, which simplified machine operations and reduced programming time [2] - ChatCNC™ and AI-driven features were particularly well-received, offering real-time support and efficiency gains for operators [3] - Hurco's strategic partnerships, including seamless integration with Universal Robots and Kawasaki Robotics, highlighted its commitment to advancing automation and flexibility on the shop floor [3] - The company's presence at IMTS 2024 demonstrated its strength and reputation in driving innovation and setting new benchmarks in manufacturing technology [4] Industry and Market Position - Hurco Companies is an international industrial technology company specializing in CNC machine tools for the metal cutting and metal forming industry, with brands including Hurco, Milltronics, and Takumi [5] - The company designs and develops proprietary software for its Hurco and Milltronics brands, while Takumi CNC machine tools are equipped with third-party industrial controls [5] - Hurco serves independent job shops, short-run manufacturing operations within large corporations, and production-oriented manufacturers in industries such as aerospace, defense, medical equipment, energy, transportation, and computer equipment [5] - The company operates manufacturing facilities in Taiwan, Italy, the U S, and China, with a global sales and support network spanning the Americas, Europe, and Asia [5] Innovation and Technology - Hurco's focus on advanced technologies, such as AI-driven features and automation solutions, aligns with the evolving needs of manufacturers for productivity and profitability [2][3] - The company's ProCobots automated machine-tending solution, integrated with Universal Robots and Kawasaki Robotics, exemplifies its leadership in combining technological capabilities through powerful CNC control systems [3]

Financial Performance - The company reported a loss per share of $1.47 in Q3 FY2024, compared to earnings per share of 4 cents in the same quarter last year [1] - Revenues declined 19.8% year-over-year to $42.7 million in Q3 FY2024 [2] - Gross profit decreased 41.7% year-over-year to $7.8 million, with gross margin contracting 689 basis points to 18.4% [10] - Operating loss totaled $2.5 million in Q3 FY2024, compared to an operating profit of $1 million in the prior-year quarter [12] - Net loss was $9.6 million in Q3 FY2024, compared to net income of $0.3 million in the same quarter last year [12] Geographic Sales Performance - Americas sales declined 15.8% year-over-year to $15.4 million, primarily due to decreased shipments of Hurco and Takumi machines [4] - Europe sales decreased 22.8% year-over-year to $24.1 million, driven by reduced shipments in Germany, Italy, and the UK [5] - Asia Pacific sales fell 15.2% year-over-year to $3.2 million, with declines in China and Southeast Asia partially offset by growth in India [6] Order Performance - Total orders increased 25.5% year-over-year to $52.8 million in Q3 FY2024 [7] - Americas orders grew 20.7% year-over-year to $17.6 million, driven by demand for higher-performing 5-axis machines and lathes [7] - Europe orders rose 14.5% year-over-year to $28.3 million, with increased demand in the UK, France, and Italy [8] - Asia Pacific orders surged 151.2% year-over-year to $6.8 million, primarily due to increased demand in China and India [9] Operating Expenses and Liquidity - Selling, general and administrative expenses decreased 16.6% year-over-year to $10.4 million in Q3 FY2024 [11] - The company ended Q3 FY2024 with $36.1 million in cash and cash equivalents, down from $37.5 million at the end of Q2 FY2024 [13] - Cumulative net cash used for operating activities was $1.3 million, compared to $16.2 million in the prior-year quarter [13] - The company had no outstanding debt at the end of Q3 FY2024 [13]

Sales Performance - Sales and service fees for Q3 FY2024 were $42.7 million, a 20% decrease compared to Q3 FY2023, with an unfavorable currency impact of less than 1%[82] - European sales for Q3 FY2024 decreased by 23% compared to Q3 FY2023, with a favorable currency impact of less than 1%[84] - Asian Pacific sales for Q3 FY2024 decreased by 15% compared to Q3 FY2023, with an unfavorable currency impact of 2%[86] - Sales of computerized machine tools for Q3 FY2024 decreased by 23% compared to Q3 FY2023, with an unfavorable currency impact of less than 1%[88] - Sales and service fees for the nine months ended July 31, 2024, were $132.9 million, down 18% YoY, with a favorable currency impact of $0.8 million[95] - Americas sales for the nine months ended July 31, 2024, decreased by 16% YoY to $48.986 million, driven by lower shipments of Hurco and Takumi machines[96] - European sales for the nine months ended July 31, 2024, decreased by 23% YoY to $69.538 million, with a 1% favorable currency impact[97] - Asian Pacific sales for the nine months ended July 31, 2024, increased by 8% YoY to $14.358 million, despite a 2% unfavorable currency impact[98] - Sales of computerized machine tools for the nine months ended July 31, 2024, decreased by 21% YoY to $104.176 million[99] Orders and Demand - Orders for Q3 FY2024 were $52.8 million, a 26% increase compared to Q3 FY2023, with an unfavorable currency impact of less than 1%[89] - Asian Pacific orders for Q3 FY2024 increased by 151% compared to Q3 FY2023, with an unfavorable currency impact of 5%[90] - Orders for the nine months ended July 31, 2024, were $147.2 million, down 5% YoY, with a favorable currency impact of $0.8 million[101] Financial Performance - Gross profit for Q3 FY2024 was $7.8 million, or 18% of sales, compared to $13.4 million, or 25% of sales, for Q3 FY2023[91] - Selling, general, and administrative expenses for Q3 FY2024 were $10.4 million, or 24% of sales, compared to $12.4 million, or 23% of sales, for Q3 FY2023[92] - Operating loss for Q3 FY2024 was $2.5 million, compared to operating income of $1.0 million in Q3 FY2023, primarily due to lower sales of vertical milling machines and fixed cost impacts[93] - Income tax expense for Q3 FY2024 was $7.0 million, up from $0.4 million in Q3 FY2023, driven by an $8.2 million non-cash valuation allowance on U.S. deferred tax assets[94] - Gross profit for the nine months ended July 31, 2024, was $25.6 million, or 19% of sales, down from $38.7 million, or 24% of sales, in the prior year period[104] - Operating loss for the nine months ended July 31, 2024, was $7.8 million, compared to operating income of $3.2 million in the prior year period[106] Capital and Shareholder Activities - Cash dividends paid to shareholders totaled $2.1 million for the nine months ended July 31, 2024[111] - The company repurchased $1.3 million (73,765 shares) of its common stock through August 30, 2024[111] Credit Facilities and Financial Obligations - The 2018 Credit Agreement provides for a maximum aggregate amount of $40.0 million in revolving credit and letter of credit facilities[112] - The company must maintain a minimum working capital of $125.0 million and a minimum tangible net worth of $176.5 million under the 2018 Credit Agreement[114] - As of July 31, 2024, the company had no debt or borrowings under its credit facilities, which include a €1.5 million facility in Germany, a 150 million New Taiwan Dollars facility in Taiwan, a 32.5 million Chinese Yuan facility in China, and the $40.0 million 2018 Credit Agreement[115] - The company had approximately $50.7 million available for borrowing under its credit facilities as of July 31, 2024[116] - The company had no borrowings outstanding under any of its credit facilities as of July 31, 2024[121] Foreign Exchange and Currency Risk - Approximately 63% of the company's revenues in the nine months of fiscal year 2024 were derived from customers located outside the Americas[122] - The company had nine outstanding third-party payment guarantees totaling approximately $0.9 million as of July 31, 2024[119] - Forward contracts for the sale or purchase of foreign currencies as of July 31, 2024 included €6.9 million at a weighted average forward rate of 1.0912 and £3.5 million at a weighted average forward rate of 1.2601[125] - The company entered into a forward contract to purchase 470,000 New Taiwan Dollars at a weighted average forward rate of 30.7976 as of July 31, 2024[125] - The company has a forward contract with a notional amount of €3.0 million to hedge its net investment in Euro-denominated assets, maturing in November 2024, with a realized gain of $1.2 million as of July 31, 2024[126] - Approximately 63% of the company's revenues in the nine months of fiscal year 2024 were derived from customers located outside the Americas, invoiced and received in foreign currencies[122] - The company's purchases are predominantly in foreign currencies, with significant exchange rate risk related to the New Taiwan Dollar and the Euro[123] - Forward contracts for the sale or purchase of foreign currencies as of July 31, 2024, include Euro sale contracts with a notional amount of 10,146 and a weighted average forward rate of 1.0824, maturing between August 2024 and November 2024[126] - Forward contracts for the purchase of New Taiwan Dollars as of July 31, 2024, include a notional amount of 1,315,881 and a weighted average forward rate of 31.7645, maturing between August 2024 and February 2025[126] - The company has forward contracts for the sale of Euro with a notional amount of 6,900 and a weighted average forward rate of 1.0912, maturing between August 2024 and July 2025[125] - Forward contracts for the sale of Sterling as of July 31, 2024, include a notional amount of 3,500 and a weighted average forward rate of 1.2601, maturing between August 2024 and July 2025[125] - The company has forward contracts for the purchase of New Taiwan Dollars with a notional amount of 470,000 and a weighted average forward rate of 30.7976, maturing between August 2024 and July 2025[125] Internal Controls and Procedures - The company's disclosure controls and procedures were evaluated and found to be effective as of July 31, 2024, under the supervision of management, including the CEO and CFO[126]