Art’s-Way(ARTW) - 2025 Q3 - Quarterly Results

Company Overview Art's Way Manufacturing is a small, publicly traded company with over 65 years of experience in equipment manufacturing, specializing in high-quality machinery for agricultural and research needs About Art's Way Manufacturing Co., Inc. Art's Way Manufacturing Co., Inc. is a small, publicly traded company with over 65 years of experience in equipment manufacturing, specializing in high-quality machinery for agricultural and research needs - Art's Way Manufacturing is a small, publicly traded company specializing in equipment manufacturing for over 65 years, with approximately 100 employees across two locations[11] - The company operates with two reporting segments: Agricultural Products and Modular Buildings, offering products like manure spreaders, forage boxes, and custom research/laboratory buildings[11] Third Quarter Fiscal 2025 Highlights Art's Way Manufacturing reported improved results for Q3 fiscal 2025, driven by growth in its Modular Buildings segment, which helped offset ongoing challenges in the agricultural market - Improved results in Q3 fiscal 2025, with Modular Buildings growth offsetting Ag market challenges[1] Consolidated Financial Results The company reported improved financial performance for both the third quarter and the first nine months of fiscal 2025, driven by increased net income and strategic cost reductions Three Months Ended August 31, 2025 For the third quarter of fiscal 2025, the company reported a significant increase in net income and operating income, with sales also showing a positive year-over-year growth | Metric | August 31, 2025 ($) | August 31, 2024 ($) | YoY Change | | :--- | :--- | :--- | :--- | | Sales | 6,432,000 | 5,876,000 | +9.5% | | Operating Income | 345,000 | 154,000 | +124.0% | | Net Income | 254,000 | 2,000 | +12600.0% | | EPS (Basic) | 0.05 | 0.00 | N/A | | EPS (Diluted) | 0.05 | 0.00 | N/A | Nine Months Ended August 31, 2025 For the first nine months of fiscal 2025, the company achieved a significant turnaround from a net loss to a net income, primarily driven by improved operating income, reduced operating expenses, and a positive impact from an Employee Retention Credit refund, despite a slight decline in overall sales | Metric | August 31, 2025 ($) | August 31, 2024 ($) | YoY Change | | :--- | :--- | :--- | :--- | | Sales | 17,910,000 | 18,329,000 | -2.3% | | Operating Income (Loss) | 858,000 | (58,000) | N/A (from loss to profit) | | Net Income (Loss) | 1,680,000 | (427,000) | N/A (from loss to profit) | | EPS (Basic) | 0.33 | (0.08) | N/A (from loss to profit) | | EPS (Diluted) | 0.33 | (0.08) | N/A (from loss to profit) | - Nine-month gross profit as a percentage of sales improved by 1.2% compared to the first nine months of fiscal 2024[4] - Operating expenses decreased by 13.1% for the nine months ended August 31, 2025, compared to the same period in fiscal 2024[4] - Net income for the nine months ended August 31, 2025, was positively impacted by a $1,154,000 Employee Retention Credit refund[4] CEO's Commentary The CEO expressed satisfaction with operational progress and improved profitability despite agricultural market headwinds, highlighting strong performance in Modular Buildings and modest demand in Agricultural Products - Operational progress and improved profitability achieved despite persistent headwinds in the ag equipment space[3] - Modular Buildings segment showed strong performance, while Agricultural Products experienced modest demand[3] - Company remains focused on enhancing products, customer experience, improving market position, and strengthening balance sheet and cash flow[3] - Cautiously optimistic that strong profitability among livestock producers will lead to improved demand in the near term and into 2026 for the ag sector[3] Segment Performance Analysis This section analyzes the distinct financial and operational performance of the Agricultural Products and Modular Buildings segments, highlighting market challenges and growth drivers Agricultural Products Segment The Agricultural Products segment continued to face decreased demand for six consecutive quarters due to challenging market conditions, including high interest rates and low crop prices Market Conditions and Strategic Response The Agricultural Products segment faced six consecutive quarters of decreased demand due to challenging market conditions, but saw strong grinder mixer sales and implemented cost reduction measures - Experienced decreased demand for six fiscal quarters due to difficult agricultural market conditions (high interest rates, increasing input costs, low row crop prices)[6] - Strategically building inventory through fiscal year-end to capitalize on retail opportunities and year-end tax buying, despite low current demand[6] - Strong grinder mixer sales activity driven by all-time high livestock prices, particularly cattle[6] - Anticipates market conditions to improve in the next 9 to 15 months, believing this is the bottom of the cycle[6] - Operating expenses reduced through right-sizing production and administrative staff in fiscal 2024[6] - Expects to pass on a 3-5% price increase to customers with the fall early order program due to rising supplier costs, steel prices, and tariff charges[6] Financial Performance The Agricultural Products segment reported a slight Q3 sales decline and a more significant 9-month sales decline, but net income improved substantially due to decreased operating expenses and an Employee Retention Credit refund | Metric | Q3 2025 ($) | Q3 2024 ($) | YoY Change (Q3) | 9 Months 2025 ($) | 9 Months 2024 ($) | YoY Change (9 Months) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | 2,983,000 | N/A | -0.2% | 9,956,000 | N/A | -15.5% | - Nine-month gross profit as a percentage of sales declined 3.4% compared to the first nine months of fiscal 2024[7] - Operating expenses decreased by 23.0% for the nine months ended August 31, 2025, compared to the same period in fiscal 2024[7] - Net income of $139,000 for the nine months ended August 31, 2025, an improvement of $1,337,000 from the same period in fiscal 2024, positively impacted by a $976,000 Employee Retention Credit refund[7] Modular Buildings Segment The Modular Buildings segment demonstrated strong growth in both Q3 and year-to-date sales, driven by consistent execution on backlog and a growing reputation in custom research and laboratory fields Operational Highlights and Growth Strategy The Modular Buildings segment achieved strong sales growth through consistent backlog execution and reputation building, while exploring new markets and maintaining strong margins - Consistent execution on backlog and growing reputation in custom research and laboratory fields drove approximately 20% sales increase for the quarter and year-to-date[9] - Quoting activity and custom build inquiries remain strong, despite earlier concerns about government funding pullbacks[9] - Exploring new markets including datacenters, wastewater treatment facilities, petroleum and mining analysis labs, and chemical production offices[9] - Strong margins maintained due to increased workforce proficiency and software improvements enhancing data analytics and budget adherence[9] Financial Performance The Modular Buildings segment reported robust sales growth for both Q3 and the nine months ended August 31, 2025, with significant improvements in gross profit and net income | Metric | Q3 2025 ($) | Q3 2024 ($) | YoY Change (Q3) | 9 Months 2025 ($) | 9 Months 2024 ($) | YoY Change (9 Months) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | 3,449,000 | N/A | +19.4% | 7,954,000 | N/A | +21.4% | - Nine-month gross profit as a percentage of sales improved 8.9% compared to the first nine months of fiscal 2024[12] - Operating expenses increased by 40.3% for the nine months ended August 31, 2025, due to overlap in sales positions and increased commission expense from higher sales[12] - Net income of $1,542,000 for the nine months ended August 31, 2025, an improvement of $771,000 from the same period in fiscal 2024, positively impacted by a $179,000 Employee Retention Credit refund[12] Forward-Looking Statements This section serves as a cautionary notice regarding forward-looking statements within the release, identifying them by specific terminology and outlining various risks and uncertainties that could cause actual results to differ materially from management's expectations - The release contains forward-looking statements identifiable by terms such as 'may,' 'should,' 'anticipate,' 'believe,' 'expect,' 'plan,' 'future,' 'intend,' 'could,' 'estimate,' 'predict,' 'hope,' 'potential,' 'continue,' 'foresee,' 'optimistic,' 'opportunity,' or their negatives[13] - Statements of anticipated future results are subject to various risks and uncertainties, including customer demand, credit-worthiness, operational efficiency, financing, debt obligations, inflation, tariffs, economic conditions, labor market, raw material costs, and unexpected segment performance[13] - Readers are cautioned not to place undue reliance on forward-looking statements, and the Company does not intend to update them other than as required by law[13]