Hurco(HURC) - 2025 Q3 - Quarterly Results

Third Quarter and Nine Months Fiscal Year 2025 Financial Highlights This section provides an overview of Hurco's financial performance for the third quarter and first nine months of fiscal year 2025, highlighting net loss, sales, and strategic commentary Net Loss and Earnings Per Share Hurco reported a net loss for both the third quarter and nine months of fiscal year 2025, significantly narrowing losses compared to the prior year due to reduced non-cash tax valuation allowances Net Loss and Earnings Per Share (Diluted) | Metric | Q3 FY2025 | Q3 FY2024 | Nine Months FY2025 | Nine Months FY2024 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | ($3,693,000) | ($9,596,000) | ($12,076,000) | ($15,166,000) | | Diluted Loss Per Share | ($0.58) | ($1.47) | ($1.87) | ($2.33) | | Non-Cash Tax Valuation Allowance | $1,639,000 | $8,158,000 | $5,294,000 | $8,158,000 | Sales and Service Fees Overview Third-quarter sales and service fees increased by 7% year-over-year to $45.8 million, with favorable foreign currency exchange rates contributing 3%, while nine-month sales saw a slight increase of less than 1% Sales and Service Fees | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | Nine Months FY2025 | Nine Months FY2024 | YOY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales and Service Fees | $45,806,000 | $42,651,000 | +7% | $133,087,000 | $132,882,000 | <1% | | Favorable FX Impact (Q3) | $1,379,000 | - | +3% | - | - | - | | Favorable FX Impact (9 Months) | - | - | - | $1,156,000 | - | <1% | CEO's Strategic Commentary CEO Greg Volovic expressed encouragement regarding quarterly progress, noting improved financial performance through enhanced gross margins and reduced operating costs despite macroeconomic uncertainties - Despite macroeconomic uncertainties leading to cautious capital purchasing decisions, the company made progress this quarter in improving gross profit and reducing operating costs, enhancing financial performance[3] - Americas sales grew 10% and Asia Pacific sales grew nearly 50%, with the balance sheet strengthened and cash and cash equivalents exceeding $44 million[3] - The company maintains a healthy cash position and continues to invest in technology, positioning Hurco for a return to profitability and long-term shareholder value creation[3] Detailed Sales and Order Performance This section details Hurco's sales and new order performance across various geographic regions for the third quarter and first nine months of fiscal year 2025 Sales and Service Fees by Geographic Region Americas and Asia Pacific regions experienced strong sales growth in Q3 FY2025, with 10% and 48% increases respectively, while European sales remained flat Net Sales and Service Fees by Geographic Region (Thousands of USD) | Region | Q3 FY2025 | Q3 FY2024 | USD Change | Percentage Change | Nine Months FY2025 | Nine Months FY2024 | USD Change | Percentage Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | $16,901 | $15,389 | $1,512 | 10% | $50,370 | $48,986 | $1,384 | 3% | | Europe | $24,166 | $24,068 | $98 | 0% | $67,388 | $69,538 | ($2,150) | (3)% | | Asia Pacific | $4,739 | $3,194 | $1,545 | 48% | $15,329 | $14,358 | $971 | 7% | | Total | $45,806 | $42,651 | $3,155 | 7% | $133,087 | $132,882 | $205 | 0% | Americas Sales Performance Americas sales grew by 10% in Q3 and 3% in the first nine months of FY2025, driven by increased shipments of Hurco and Milltronics machines - Americas sales increased by 10% in Q3 FY2025 and 3% for the nine-month period, primarily due to increased shipments of Hurco and Milltronics machines, particularly lathes, toolroom machines, and vertical machining centers[4] Europe Sales Performance European sales saw a marginal increase of less than 1% in Q3 FY2025 (including a 5% favorable currency impact) and a 3% decline for the nine-month period - European sales marginally increased by less than 1% in Q3 FY2025 (including a 5% favorable foreign currency impact) and decreased by 3% for the nine-month period (including a 2% favorable foreign currency impact)[5] - The decline was mainly due to reduced shipments of Hurco and Takumi machines in France and Germany, and fewer electromechanical components and accessories from LCM Precision Technology, partially offset by increased Hurco machine sales in the UK and Italy[5] Asia Pacific Sales Performance Asia Pacific sales surged by 48% in Q3 and 7% for the nine months of FY2025, primarily due to increased sales of Takumi machines - Asia Pacific sales increased by 48% in Q3 FY2025 (including a 4% favorable foreign currency impact) and 7% for the nine-month period (including a less than 1% unfavorable foreign currency impact), primarily driven by increased sales of Takumi vertical, gantry, horizontal, and 5-axis machines in the region[6] New Orders Booked by Geographic Region Global new orders decreased by 22% year-over-year in Q3 FY2025 and 15% for the nine-month period, with significant declines in Americas and Europe New Orders by Geographic Region (Thousands of USD) | Region | Q3 FY2025 | Q3 FY2024 | USD Change | Percentage Change | Nine Months FY2025 | Nine Months FY2024 | USD Change | Percentage Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | $15,557 | $17,625 | ($2,068) | (12)% | $47,145 | $55,490 | ($8,345) | (15)% | | Europe | $20,274 | $28,349 | ($8,075) | (28)% | $60,730 | $75,757 | ($15,027) | (20)% | | Asia Pacific | $5,165 | $6,841 | ($1,676) | (24)% | $16,906 | $15,978 | $928 | 6% | | Total | $40,996 | $52,815 | ($11,819) | (22)% | $124,781 | $147,225 | ($22,444) | (15)% | Overall Order Trends Total new orders for Q3 FY2025 were $40.996 million, marking a 22% year-over-year decrease, with a 15% decline for the nine-month period - New orders for Q3 FY2025 totaled $40,996,000, a 22% decrease year-over-year (including a 2% favorable foreign currency impact)[7] - New orders for the nine-month period were $124,781,000, a 15% decrease year-over-year (including a less than 1% favorable foreign currency impact)[7] Americas Order Performance Americas orders declined by 12% in Q3 and 15% for the nine months of FY2025, driven by reduced demand for various machine types - Americas orders decreased by 12% in Q3 FY2025 and 15% for the nine-month period, primarily due to reduced demand for Hurco, Milltronics, and Takumi machines, as well as OEM machines[8] Europe Order Performance European orders decreased by 28% in Q3 and 20% for the nine months of FY2025, primarily due to reduced demand in Germany, the UK, and France - European orders decreased by 28% in Q3 FY2025 (including a 4% favorable foreign currency impact) and 20% for the nine-month period (including a 1% favorable foreign currency impact), mainly due to reduced demand for Hurco and Takumi machines and LCM accessories in Germany, the UK, and France[9] Asia Pacific Order Performance Asia Pacific orders decreased by 24% in Q3 FY2025 due to lower Hurco machine orders in China, but grew 6% for the nine-month period - Asia Pacific orders decreased by 24% in Q3 FY2025 (including a 1% favorable foreign currency impact), primarily due to fewer Hurco machine orders in China[10] - For the nine-month period, orders increased by 6% (including a less than 1% unfavorable foreign currency impact), driven by increased Takumi machine orders, partially offset by reduced Hurco machine orders in China[10] Profitability and Expense Analysis This section analyzes Hurco's gross profit, selling, general, and administrative expenses, and income tax expenses for the third quarter and first nine months of fiscal year 2025 Gross Profit Analysis Gross profit increased by 16.2% in Q3 FY2025, with the gross margin improving to 20%, driven by higher European machine sales and reduced fixed costs Gross Profit (Thousands of USD) | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | Nine Months FY2025 | Nine Months FY2024 | YOY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $9,112 | $7,843 | +16.2% | $25,231 | $25,557 | -1.3% | | Gross Margin | 20% | 18% | +2% | 19% | 19% | 0% | - The increase in Q3 gross margin is primarily attributable to a higher concentration of European machine sales and reduced fixed costs allocated to overhead due to cost-saving initiatives implemented over the past twelve months[11] Selling, General, and Administrative Expenses (SG&A) SG&A expenses slightly increased in Q3 FY2025 due to unfavorable currency impacts but decreased as a percentage of sales, while nine-month SG&A declined year-over-year Selling, General, and Administrative Expenses (Thousands of USD) | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | Nine Months FY2025 | Nine Months FY2024 | YOY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | SG&A Expenses | $10,762 | $10,376 | +3.7% | $32,041 | $33,352 | -3.9% | | SG&A as % of Sales | 23% | 24% | -1% | 24% | 25% | -1% | | Unfavorable FX Impact (Q3) | $276 | - | +3% | - | - | - | | Unfavorable FX Impact (9 Months) | - | - | - | $221 | - | <1% | - The year-over-year decrease in SG&A expenses for the nine-month period reflects lower discretionary spending and reduced employee health insurance costs[12] Income Tax Expense Income tax expense significantly decreased in Q3 and the nine months of FY2025, primarily due to a reduction in the valuation allowance for U.S. deferred tax assets and changes in the geographic mix of income and losses Income Tax Expense (Thousands of USD) | Metric | Q3 FY2025 | Q3 FY2024 | YOY Change | Nine Months FY2025 | Nine Months FY2024 | YOY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Income Tax Expense | $567 | $6,999 | -91.9% | $3,126 | $6,438 | -51.4% | | Valuation Allowance | $1,639 | $8,158 | -79.9% | $5,294 | $8,158 | -35.1% | - The decrease in income tax expense is primarily attributable to a lower valuation allowance for U.S. deferred tax assets and changes in the geographic mix of income and losses across different tax rate jurisdictions[13] - The company has recorded a full valuation allowance against its deferred tax assets in the U.S., China, and Italy, thus no tax benefit was recorded for net losses in the U.S. and China[13] Financial Position and Capital Management This section outlines Hurco's balance sheet highlights, share repurchase program, and capital allocation strategy for future growth and shareholder value Balance Sheet Highlights As of July 31, 2025, cash and cash equivalents significantly increased to $44.494 million, while working capital slightly decreased due to changes in receivables and inventory Balance Sheet Key Data (Thousands of USD) | Metric | July 31, 2025 | October 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | $44,494 | $33,330 | +$11,164 | | Working Capital | $176,755 | $180,788 | ($4,033) | - The decrease in working capital was primarily driven by reductions in net accounts receivable and inventory, along with increases in accounts payable and derivative liabilities, partially offset by increases in cash and cash equivalents and derivative assets[14] Share Repurchase Program The company repurchased nearly $2 million of common stock in Q3 FY2025, with over $5.3 million repurchased since the program's inception and approximately $19.7 million remaining Share Repurchase Program | Metric | Q3 FY2025 | Since Program Inception (as of July 31, 2025) | Remaining Available for Repurchase | | :--- | :--- | :--- | :--- | | Repurchase Amount | $1,999,820 | $5,304,548 | $19,682,471 | | Number of Common Shares Repurchased | 104,472 | 259,620 | - | | Total Program Amount | - | - | $25,000,000 | - The share repurchase program has been extended through November 10, 2026[15] Capital Allocation Strategy and Future Outlook The CEO emphasized a balanced capital allocation strategy prioritizing a strong balance sheet, liquidity, value-added growth, and shareholder value, with continued investment in technology and potential acquisitions - The company is committed to a balanced capital allocation strategy, prioritizing a strong balance sheet and available liquidity while focusing on value-added growth and shareholder value[16] - Continued investment in capital expenditures, emerging technologies, and research and development is planned, with a re-evaluation of dividend payments upon a return to profitability[16] - The company will continue to evaluate potential acquisitions while maintaining financial discipline, positioning for long-term sustainable growth[16] Company Overview and Disclosures This section provides a business description of Hurco Companies, Inc., outlines forward-looking statements and risk factors, and includes contact information for inquiries Business Description Hurco Companies, Inc. is an international industrial technology company selling CNC machine tools under three brands (Hurco, Milltronics, Takumi) to the global metal cutting and forming industries - Hurco Companies, Inc. is an international industrial technology company that sells computer numerical control (CNC) machine tools under its three brands (Hurco, Milltronics, and Takumi) to the global metal cutting and metal forming industries[17] - Hurco and Milltronics brand machines feature the company's proprietary interactive control technology and software, while Takumi brand machines are equipped with third-party industrial control systems[17] - The company also manufactures high-value machine tool components and accessories and provides automation solutions that integrate with any machine tool, serving customers in aerospace, defense, medical equipment, energy, transportation, and computer equipment industries[17] Forward-Looking Statements and Risk Factors The press release contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from expectations - Certain statements in the press release are forward-looking statements involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from expectations[17] - Risk factors include the cyclical nature of the machine tool industry, uncertain economic conditions, international operations risks, government actions, foreign currency exchange rate fluctuations, competition, reliance on new product development, need for intellectual property protection, supply chain constraints, rising raw material prices, loss of key personnel, acquisition integration risks, data privacy and security compliance, technological obsolescence, asset impairment, tax consequences, uncertainty of tax loss carryforwards, SOFR rate changes, and the impact of the COVID-19 pandemic[17] Contact Information Investors and media can contact Sonja K. McClelland, Executive Vice President, Treasurer, and Chief Financial Officer, for further information - Contact: Sonja K. McClelland, Executive Vice President, Treasurer, and Chief Financial Officer, at 317-293-5309[18] Condensed Consolidated Financial Statements This section presents Hurco's condensed consolidated financial statements, including statements of operations, other financial data, and balance sheets for the specified periods Statements of Operations This section provides Hurco's condensed consolidated statements of operations for Q3 and the first nine months of FY2025, detailing key financial metrics like sales, gross profit, and net income Condensed Consolidated Statements of Operations (Thousands of USD, except per share data) | Metric | Q3 FY2025 | Q3 FY2024 | Nine Months FY2025 | Nine Months FY2024 | | :--- | :--- | :--- | :--- | :--- | | Sales and Service Fees | $45,806 | $42,651 | $133,087 | $132,882 | | Cost of Sales and Service | $36,694 | $34,808 | $107,856 | $107,325 | | Gross Profit | $9,112 | $7,843 | $25,231 | $25,557 | | Selling, General, and Administrative Expenses | $10,762 | $10,376 | $32,041 | $33,352 | | Operating (Loss) Income | ($1,650) | ($2,533) | ($6,810) | ($7,795) | | (Loss) Income Before Income Taxes | ($3,126) | ($2,597) | ($8,950) | ($8,728) | | Income Tax Provision (Benefit) | $567 | $6,999 | $3,126 | $6,438 | | Net (Loss) Income | ($3,693) | ($9,596) | ($12,076) | ($15,166) | | Basic (Loss) Earnings Per Share | ($0.58) | ($1.47) | ($1.87) | ($2.33) | | Diluted (Loss) Earnings Per Share | ($0.58) | ($1.47) | ($1.87) | ($2.33) | | Dividends Per Share | $ - | $ - | $ - | $0.32 | Other Financial Data This section presents additional consolidated financial data for Q3 and the first nine months of FY2025, including gross margin, SG&A as a percentage of sales, and balance sheet metrics Other Consolidated Financial Data | Operating Data | Q3 FY2025 | Q3 FY2024 | Nine Months FY2025 | Nine Months FY2024 | | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 20% | 18% | 19% | 19% | | SG&A as % of Sales | 23% | 24% | 24% | 25% | | Operating (Loss) Income as % of Sales | (4)% | (6)% | (5)% | (6)% | | (Loss) Income Before Income Taxes as % of Sales | (7)% | (6)% | (7)% | (7)% | | Effective Tax Rate | (18)% | (270)% | (35)% | (74)% | | Depreciation and Amortization (Thousands of USD) | $642 | $888 | $2,000 | $2,678 | | Capital Expenditures (Thousands of USD) | $932 | $735 | $2,288 | $2,046 | Balance Sheet Data (Thousands of USD) | Metric | July 31, 2025 | October 31, 2024 | | :--- | :--- | :--- | | Working Capital | $176,755 | $180,788 | | Days Sales Outstanding | 47 | 49 | | Inventory Turns | 1.0 | 1.0 | | Total Debt | -- | -- | | Shareholders' Equity | $203,672 | $207,172 | Balance Sheets This section provides Hurco's condensed consolidated balance sheets as of July 31, 2025, and October 31, 2024, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets (Thousands of USD) | Assets | July 31, 2025 | October 31, 2024 | | :--- | :--- | :--- | | Current Assets: | | | | Cash and Cash Equivalents | $44,494 | $33,330 | | Accounts Receivable, Net | $27,645 | $36,678 | | Inventories | $147,538 | $153,037 | | Derivative Assets | $2,782 | $323 | | Prepaid and Other Assets | $5,835 | $5,209 | | Total Current Assets | $228,294 | $228,577 | | Noncurrent Assets: | | | | Property and Equipment, Net | $8,319 | $8,796 | | Software Development Costs, Net | $7,684 | $7,044 | | Intangible Assets, Net | $663 | $763 | | Operating Lease Right-of-Use Assets, Net | $11,929 | $11,313 | | Deferred Income Taxes | $641 | $1,349 | | Investments | $8,821 | $8,216 | | Other Assets | $2,737 | $2,585 | | Total Noncurrent Assets | $32,475 | $31,270 | | Total Assets | $269,088 | $268,643 | | Liabilities and Shareholders' Equity: | | | | Current Liabilities: | | | | Accounts Payable | $27,343 | $24,951 | | Customer Deposits | $4,453 | $4,308 | | Derivative Liabilities | $2,038 | $705 | | Operating Lease Liabilities | $4,190 | $3,829 | | Accrued Payroll and Employee Benefits | $6,819 | $7,786 | | Accrued Income Taxes | $1,622 | $866 | | Accrued Expenses | $4,113 | $4,258 | | Accrued Warranty | $961 | $1,086 | | Total Current Liabilities | $51,539 | $47,789 | | Noncurrent Liabilities: | | | | Deferred Income Taxes | $47 | $53 | | Accrued Tax Liabilities | $29 | $537 | | Operating Lease Liabilities | $8,116 | $7,852 | | Deferred Credits and Other | $5,685 | $5,240 | | Total Noncurrent Liabilities | $13,877 | $13,682 | | Shareholders' Equity: | | | | Common Stock | $640 | $644 | | Additional Paid-in Capital | $60,781 | $61,500 | | Retained Earnings | $149,346 | $161,422 | | Accumulated Other Comprehensive Loss | ($7,095) | ($16,394) | | Total Shareholders' Equity | $203,672 | $207,172 | | Total Liabilities and Shareholders' Equity | $269,088 | $268,643 |