Hurco(HURC) - 2026 Q1 - Quarterly Report

Financial Performance - Sales and service fees for the first quarter of fiscal year 2026 were $42.9 million, a decrease of $3.5 million, or 8%, compared to the same period in fiscal year 2025[89]. - Orders for the first quarter of fiscal year 2026 were $42.0 million, an increase of $1.9 million, or 5%, compared to the corresponding period in fiscal year 2025[95]. - Sales in the Americas decreased by 8% to $16.7 million, while European sales decreased by 5% to $20.5 million, and Asia Pacific sales decreased by 15% to $5.7 million[90][91][92]. - Gross profit for the first quarter of fiscal year 2026 was $7.9 million, or 19% of sales, compared to $8.3 million, or 18% of sales, for the corresponding prior year period[99]. - Operating loss for the first quarter of fiscal year 2026 was $3.2 million, compared to an operating loss of $2.1 million for the same period in fiscal year 2025[101]. - Selling, general, and administrative expenses for the first quarter of fiscal year 2026 were $11.1 million, or 26% of sales, compared to $10.4 million, or 22% of sales, in the corresponding fiscal year 2025 period[100]. Cost Management and Financial Strategy - The company implemented cost reductions in fiscal years 2024 and 2025 to manage lower sales volumes and adjusted overhead expenses[83]. - The regular quarterly cash dividend was suspended on June 14, 2024, to enhance financial flexibility and focus on core business reinvestment and R&D[107]. - The company announced a share repurchase program of up to $25.0 million, with $5.3 million repurchased to date, leaving $19.7 million available for future repurchases[106]. - As of January 31, 2026, the company had cash and cash equivalents of $48.0 million, a decrease from $48.7 million at October 31, 2025, with approximately 19% in U.S. dollars[104]. - Working capital decreased to $169.5 million at January 31, 2026, from $173.1 million at October 31, 2025, primarily due to increased accounts payable and decreased inventories[105]. - The company entered into a new credit agreement on January 5, 2026, providing a secured revolving credit facility of up to $20.0 million, maturing on December 31, 2026[110]. - As of January 31, 2026, the company had no outstanding borrowings under any credit facilities, maintaining a €1.5 million revolving credit facility in Germany[114]. Revenue Sources and Market Focus - Approximately 48% of revenues in the first three months of fiscal 2026 were from Europe, while 13% were from the Asia Pacific region[83]. - Approximately 61% of revenues in the first three months of fiscal year 2026 were derived from customers outside the Americas, invoiced in various foreign currencies[125]. Foreign Currency Management - The company has entered into foreign currency forward exchange contracts to hedge cash flow risks related to inter-company sales and purchases, primarily in Euro, Pound Sterling, and New Taiwan Dollar[127]. - As of January 31, 2026, the company has forward contracts for the sale of Euro amounting to €9.404 million, with a weighted average forward rate of 1.1821, translating to a contract value of $11.117 million[129]. - The company has forward contracts for the purchase of New Taiwan Dollar totaling NT$1,411,672, with a weighted average forward rate of 30.2379, resulting in a contract value of $46.686 million[129]. - The company maintains a forward contract with a notional amount of €3.0 million designated as a hedge for its net investment in Euro-denominated assets, maturing in November 2026[129]. - As of January 31, 2026, the company reported a realized gain of $1.0 million and an unrealized loss of $0.1 million related to the hedging of its net investment in Euro-denominated assets[129]. - The forward contract for the sale of Euro designated as a net investment hedge has a contract value of $3.517 million, with a weighted average forward rate of 1.1723, maturing in November 2026[129]. Growth and Investment Strategy - The company has focused on investing in new technologies and product development despite the cyclical nature of the industry[83]. - The company continues to evaluate potential acquisitions, including intellectual property assets, to support growth strategies[116]. - The maximum consolidated leverage ratio covenant under the 2026 Credit Agreement prohibits borrowing when consolidated EBITDA is negative, which was the case for the first quarter ended January 31, 2026[113].