Hurco(US:HURC)2023-03-10 18:50Financial Performance - Sales and service fees for Q1 fiscal 2023 were $54.7 million, a decrease of $12.2 million, or 18%, compared to Q1 fiscal 2022, including an unfavorable currency impact of $3.2 million, or 5%[91] - Sales in the Americas decreased by 8% to $22.0 million, while European sales decreased by 16% to $28.6 million, and Asia Pacific sales decreased by 53% to $4.1 million[92][93][96] - Orders for Q1 fiscal 2023 were $53.2 million, a decrease of $17.6 million, or 25%, compared to the same period in fiscal 2022, with an unfavorable currency impact of $3.3 million, or 5%[99] - Gross profit for Q1 fiscal 2023 was $12.7 million, or 23% of sales, down from $16.9 million, or 25% of sales in Q1 fiscal 2022, primarily due to lower sales volumes[102] - Operating income for Q1 fiscal 2023 was $1.2 million, a decrease from $5.2 million in Q1 fiscal 2022, attributed to lower sales volumes and fixed cost allocation[104] - Selling, general, and administrative expenses for Q1 fiscal 2023 were $11.5 million, or 21% of sales, compared to $11.7 million, or 17% of sales in the prior year[103] - The effective tax rate for Q1 fiscal 2023 was 31%, down from 32% in the prior year, due to changes in the geographic mix of income and loss[106] Market Environment - The company operates in a highly competitive environment, facing challenges such as inflation, supply chain disruptions, and fluctuating currency exchange rates[90] - Approximately 52% of revenues in Q1 fiscal 2023 were from Europe, with 8% from the Asia Pacific region, indicating significant reliance on foreign markets[85] - The company continues to focus on product diversity and market penetration through its various brands, including Hurco, Milltronics, and Takumi[86] Cash and Capital Management - As of January 31, 2023, the company had cash and cash equivalents of $56.9 million, down from $63.9 million at October 31, 2022[107] - Working capital increased to $204.3 million at January 31, 2023, compared to $194.7 million at October 31, 2022, primarily due to increases in inventories and prepaid assets[108] - Capital expenditures for the first three months of fiscal year 2023 were $0.6 million, mainly for improvements in existing facilities and software development[109] - The company announced a share repurchase program of up to $25.0 million, effective until November 10, 2024, with no shares purchased as of January 31, 2023[110] - During the first quarter of fiscal 2023, approximately 26,819 shares were repurchased under a prior $7.0 million program, totaling approximately $0.7 million, leaving $3.4 million available[111] - Cash dividends paid to shareholders amounted to $1.0 million, with future dividends subject to Board approval and dependent on various factors[113] - As of January 31, 2023, the company had no debt or borrowings under its credit facilities, with approximately $51.4 million available for borrowing[118][119] Foreign Currency Management - Approximately 60% of revenues in the first three months of fiscal year 2023 were derived from customers outside the Americas, invoiced in various foreign currencies[131] - As of January 31, 2023, the company has forward contracts for the sale of Euro totaling €24,451,000 at a weighted average forward rate of 1.0576, with a contract amount of $25,859,000 maturing between April 2023 and December 2023[135] - The company has a forward contract for the purchase of New Taiwan Dollar amounting to NT$887,810,000 at a weighted average forward rate of 30.5440, translating to a contract amount of $29,067,000, maturing between February 2023 and April 2023[135] - The company has designated a forward contract with a notional amount of €3.0 million as a hedge for its net investment in Euro-denominated assets, maturing in November 2023[135] - As of January 31, 2023, the company reported a realized gain of $1.3 million and an unrealized loss of $0.2 million related to its Euro-denominated asset hedging[135] - The company has cash flow hedges for Euro sale contracts totaling €14,500,000 at a weighted average forward rate of 1.0681, with a contract amount of $15,488,000 maturing between February 2023 and January 2024[134] - The company has also entered into forward contracts for the sale of Sterling totaling £4,850,000 at a weighted average forward rate of 1.2158, amounting to $5,896,000, maturing between February 2023 and January 2024[134] - The predominant exchange rate risk associated with the company's product purchases relates to the New Taiwan Dollar and the Euro[132] - The company does not engage in speculative trading and uses forward contracts solely to hedge against foreign currency fluctuations[133] - As of January 31, 2023, the company had no outstanding borrowings under its credit facilities, indicating a low interest rate risk exposure[130] Strategic Initiatives - The company has an international cash pooling strategy to ensure adequate liquidity for global operations and strategic initiatives[120] - The company continues to explore potential acquisitions, including intellectual property assets[121]