HURC 10-K & 10-Q changes, risk factors and insider trading
Hurco Companies Inc. · Nasdaq · Industrial Instruments For Measurement, Display, And Control · CIK 315374 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, financial condition, and results of operations.”
New heading “Our credit facility contains covenants that restrict our business and financing activities, and the property that secures our obligations under the credit facility may be subject to foreclosure in the event of a default.”
Largest changes
“Our credit facility contains covenants that restrict our business and financing activities, and the property that secures our obligations under the credit facility may be subject to foreclosure in the event of a default.”see in full comparison
“Our ability to comply with the provisions under the 2026 Credit Agreement may be affected by events beyond our control and our inability to comply with any of these provisions could result in a default under the 2026 Credit Agreement. If such a default occurs, the lender may elect to declare any borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable, and it would have the right to terminate any commitments it has to provide further borrowings. …”see in full comparison
“Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, financial condition, and results of operations.”see in full comparison
“The credit agreement we entered into with Bank of America, N.A., as the lender, in January 2026 (the “2026 Credit Agreement”) contains a number of customary restrictions and covenants, which, among other things and subject to certain expressly permitted transactions or parameters set forth therein, restrict our ability to acquire or merge with another entity, dispose of our assets, make investments, loans or guarantees, incur additional indebtedness, create liens or other encumbrances, or pay dividends or make other distributions beyond stated thresholds. …”see in full comparison
“The U.S. government has adopted new approaches to trade policy, and in some cases may renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. The U.S. government has also imposed tariffs on most foreign goods and has raised the possibility of imposing significant tariff increases or expanding the tariffs to capture other countries and types of goods. …”see in full comparison
“In addition, in response to these tariffs, other countries have threatened, announced or implemented retaliatory tariffs on U.S. goods. …”see in full comparison
Full comparison: every changed paragraph (10)
Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, financial condition, and results of operations.
The U.S. government has adopted new approaches to trade policy, and in some cases may renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. The U.S. government has also imposed tariffs on most foreign goods and has raised the possibility of imposing significant tariff increases or expanding the tariffs to capture other countries and types of goods. Tariffs on imports from nations from whom we procure products or materials and components used in our manufacturing process have increased our operating costs and, in the future, could require us to incur significant costs to transition to alternative manufacturers or suppliers. Future tariff increases, expanding the tariffs to cover other countries or other changes in U.S. trade policy could exacerbate these challenges.
In addition, in response to these tariffs, other countries have threatened, announced or implemented retaliatory tariffs on U.S. goods. Political tensions and uncertainty as a result of trade policies and ongoing judicial challenges to such policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets, which could in turn have a material adverse impact on our business, financial condition and results of operations.
Our sales to customers located outside of the Americas, which generated approximately 61%62% of our revenues in fiscal year 2024,2025, are invoiced and received in several foreign currencies, primarily the Euro, Pound SterlingSterling, Chinese Yuan and ChineseIndian Yuan.Rupee. Therefore, our results of operations and financial condition are affected by fluctuations in exchange rates between these currencies and the U.S. dollar, both for purposes of actual conversion and for financial reporting purposes. In addition, we are exposed to exchange risk associated with our purchases of materials and components for our Taiwan manufacturing operations, which are primarily made in the New Taiwan Dollar and the Euro. We hedge a portion of our foreign currency exposure with the purchase of forward exchange contracts. These hedge contracts only mitigate the impact of changes in foreign currency exchange rates that occur during the term of the related contract period and carry risks of counterparty failure. There can be no assurance that our hedges will have their intended effects.
We depend on our wholly owned subsidiaries, HML, NHML, Milltronics,HML and LCM, to produce our machine tools and electro-mechanical components and accessories in Taiwan, China, the U.S., and Italy, respectively. We also depend on our 35% owned affiliate, HAL, and other key third-party suppliers to produce our computer control systems and key components, such as motors and drives, for our machine tools. An unplanned interruption in manufacturing or supply, or a significant increase in price from third party suppliers, would have a material adverse effect on our business, results of operations, and financial condition. Such an interruption or increase in price could result from various factors, including a change in the political environment, such as trade wars or tariffs, military conflicts, a natural disaster, such as an earthquake, typhoon, or tsunami, or vulnerabilities in our technology or cyber-attacks against our information systems, such as ransomware attacks. Any interruption in service by one of our key component suppliers, if prolonged, could have a material adverse effect on our business, results of operations and financial condition. In addition, we may not be able to establish additional or replacement suppliers for such components in a reasonable period of time, or on commercially reasonable terms, if at all, which could result in delays or interruptions in our operations, which would adversely affect our business, results of operations and financial condition.
A number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of sensitive personal information, such as social security numbers, financial information, and other personal information. For example, several U.S. territories and all 50 states now have data breach laws that require timely notification to individual victims, and at times regulators, if a company has experienced the unauthorized access or acquisition of sensitive personal data. Other state laws include the California Consumer Privacy Act (“CCPA”), which gives California residents certain privacy rights in the collection and disclosure of their personal information and requires businesses to make certain disclosures and take certain other acts in furtherance of those rights. Additionally, effective starting January 1, 2023, the California Privacy Rights Act (the “CPRA”) revised and significantly expanded the scope of the CCPA. The CPRA also created a new California data protection agency authorized to implement and enforce the CCPA and the CPRA, which could result in increased privacy and information security regulatory actions. Other states have considered and/or enacted similar privacy laws. We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation, and carry significant potential liability for our business.
Our credit facility contains covenants that restrict our business and financing activities, and the property that secures our obligations under the credit facility may be subject to foreclosure in the event of a default.
The credit agreement we entered into with Bank of America, N.A., as the lender, in January 2026 (the “2026 Credit Agreement”) contains a number of customary restrictions and covenants, which, among other things and subject to certain expressly permitted transactions or parameters set forth therein, restrict our ability to acquire or merge with another entity, dispose of our assets, make investments, loans or guarantees, incur additional indebtedness, create liens or other encumbrances, or pay dividends or make other distributions beyond stated thresholds. The 2026 Credit Agreement requires us to maintain compliance with a maximum consolidated leverage ratio of total debt to EBITDA, which also effectively prohibits us from borrowing any amounts under the 2026 Credit Agreement when our consolidated EBITDA for the most recently completed measurement period is negative. As of the date we entered into the 2026 Credit Agreement, and as of the date of the filing of this report, the most recently completed measurement period was our fiscal year ended October 31, 2025, during which our consolidated EBITDA was negative, thereby effectively prohibiting us from currently borrowing under the 2026 Credit Agreement. There can be no assurance that our consolidated EBITDA will be positive, or sufficiently positive, in future periods, and therefore we may be unable to borrow any amounts under the 2026 Credit Agreement.
Our ability to comply with the provisions under the 2026 Credit Agreement may be affected by events beyond our control and our inability to comply with any of these provisions could result in a default under the 2026 Credit Agreement. If such a default occurs, the lender may elect to declare any borrowings outstanding, together with accrued interest and other fees, to be immediately due and payable, and it would have the right to terminate any commitments it has to provide further borrowings. If we are unable to repay any outstanding borrowings when due, the lender under the 2026 Credit Agreement also has the right to proceed against the collateral, including a significant portion of our domestic personal property, granted to it to secure the indebtedness under the facility. If any indebtedness under the 2026 Credit Agreement were to be accelerated, we cannot assure you that our personal property would be sufficient to repay in full that indebtedness. The occurrence of any of these events could have a material adverse effect on our business, financial condition, results of operations and liquidity.
We are subject to taxes in the U.S. and numerous foreign jurisdictions. Due to economic and political conditions, tax rates in various jurisdictions, including the U.S., may be subject to significant change. Our effective tax rates could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or their interpretation, including tax laws in the U.S. Similarly, changes in tax laws or regulations, including those in the U.S., could negatively impact our effective tax rate and results of operations. A change in a statutory tax rate may result in the revaluation of our deferred tax assets and liabilities related to the relevant jurisdiction in which the new tax law is enacted, potentially resulting in a material expense or benefit recorded in our Consolidated Statements of IncomeOperations for that period.
Management's Discussion & Analysis (MD&A)
Largest changes
“The 2026 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $10.0 million); …”see in full comparison
“The 2018 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $10.0 million); …”see in full comparison
We havesee in full comparisonanborrowedinternationalonlycash$1.6poolingmillionstrategyduringthatthegenerallyfiscalprovidesyearsaccessended 2015-2018 toavailablefundcashstart-updepositscosts related to expansion in China andcredithave not had any borrowings under any of our previous debt facilitieswhenatneededany other time over the previous ten fiscal years, even during prolonged recessionary industry cycles. While we are currently in theU.S.,processEuropeoforevaluatingAsiaaPacific.longer-termWeglobal credit solution that aligns with our best interest, we believe our current cash on hand, expected cash flow from operations, access to cash pooling and ourborrowing capacity under ourcurrent credit facilities provide adequate liquidity to fund our global operations over the next twelve months and beyond, and allow us to remain committed to our strategic plan of product innovation, acquisitions, targeted penetration of developing markets, and a balanced capital allocation program.
As of October 31,see in full comparison2024,2025, ourexistingcredit facilities consisted of a €1.5 million revolving credit facility in Germany, the 150 million New TaiwandollarsDollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $40.0 million revolving credit facility under the 2018 Credit Agreement.WeOnhadDecemberno31,debt2025,ortheborrowings150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $40.0 million revolving credit facility underanytheof2018ourCreditcreditAgreementfacilitiesterminatedasinofaccordanceOctoberwith31,their2024.terms.
Gross Profit. Gross profit for fiscal yearsee in full comparison20242025 was $33.0 million, or 18% of sales, compared to $37.7 million, or 20% of sales,compared to $56.2 million, or 25% of sales,for fiscal year2023.2024. The year-over-yeardecreasedecreases in both gross profitwasdollars and as a percentage of sales were primarily due to the lower overall sales volume of vertical millingmachinemachinessalesand the change in mix and volume from higher-performance 5-axis machines to 3-axis machines in the Americas and Europe. Additionally,theregrosswereprofitdecreaseswas negatively impacted by an increase inaveragecostnetofsellinggoodspricessoldforascertainamachinesresultduringof tariffs on goods imported into the U.S. implemented in the second half of fiscal year20242025.thatTheweredecreasedesignedintooverallpenetratesaleskey marketsdollars andreducetheinventories. The decreasesincrease inboth sales volume and pricingtariffs negatively impacted gross profit in dollars andas apercentage of sales, reducingourthe leverage of fixed costs, in comparison to fiscal year2023. Further, certain cost reductions were implemented in the third quarter of fiscal year 2024 to help offset the impact of lower sales volumes and pricing.2024.
“The maximum consolidated leverage ratio covenant effectively prohibits us from borrowing any amounts under the 2026 Credit Agreement when our consolidated EBITDA for the most recently completed measurement period is negative. As of the date we entered into the 2026 Credit Agreement, and as of the date of the filing of this report, the most recently completed measurement period was our fiscal year ended October 31, 2025, during which our consolidated EBITDA was negative. …”see in full comparison
Full comparison: every changed paragraph (40)
During a time of global uncertainty and lower sales volumes,volumes experienced recently, we have turned our attention to adjusting overhead expenses and operating expenses to help minimize the impact of the lower volumes of sales on operating income. We implemented cost reductions in the third quarter of fiscal yearyears 2024,2024 and 2025, adjusted and managed inventories (excluding the impact of foreign currency) and temporary suspended our regular quarterly cash dividend. We used that cashflow to manage our capital allocation strategies to continue investing in new technologies, product development, and necessary capital expenditures to maximize cashflows without incurring any significant indebtedness as we continue to seek new acquisitions and other growth opportunities. The cyclicality of our business requires that we exercise discipline in managing through unexpected changes in the markets and industries in which we operate. We believe that our long history of profitability and the strength of our balance sheet can provide us with stability to manage through these business cycles and we rely on our past experience in making measured decisions for the long-term success of our business.
We have three brands of CNC machine toolstool brands in our product portfolio. Hurco is the technology innovation brand for customers who want to increase productivity and profitability by selecting a brand with the latest software and motion technology. Milltronics is the value-based brand for shops that want easy-to-use machines at competitive prices. The Takumi brand is for customers that need very high speed, high efficiency performance, such as that required in the production, die and mold, aerospace, and medical industries. Takumi machines are equipped with industry standard controls instead of the proprietary controls found on Hurco and Milltronics machines. These three brands of CNC machine tools are responsible for the vast majority of our revenue. However, we have added other non-Hurco branded products to our product portfolio that have contributed product diversity and market penetration opportunity. These non-Hurco branded products are sold by our wholly-owned distributors and are comprised primarily of other general-purpose vertical milling centers and lathes, laser cutting machines, waterjet cutting machines, CNC grinders, compact horizontal machines, metal cutting saws, and CNC swissSwiss lathes. ProCobots is our wholly-owned subsidiary that provides automation solutions. In addition, through our wholly-owned subsidiary in Italy, LCM,LCM Precision Technologies S.r.l. (“LCM”), we produce high value machine tool components and accessories.
We principally sell our products through approximately 180160 independent agents and distributors throughout the Americas, Europe, and Asia. Although some distributors carry competitive products, we are the primary line for the majority of our distributors globally. We also have our own direct sales and service organizations in China, the Czech Republic, France, Germany, India, Italy, the Netherlands, Poland, Singapore, Taiwan, the United Kingdom, and certain parts of the United States, which are among the world's principal machine tool consuming markets. The vast majority of our machine tools are manufactured and assembled to our specifications primarily by our wholly-owned subsidiary in Taiwan, HML. Machine castings to support HML’s production are manufactured at our wholly-owned subsidiary in Ningbo, China, NHML. Components to support our SRT line of five-axis machining centers, such as the direct-drive spindle, swivel head, and rotary table, are manufactured by our wholly-owned subsidiary in Italy, LCM.
Sales and Service Fees. Sales and service fees for fiscal year 20242025 were $186.6$178.6 million, a decrease of $41.2$8.0 million, or 18%,4%, compared to fiscal year 2023,2024, and included a favorable currency impact of $1.8$2.0 million, or less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes.
Sales in the Americas for fiscal year 20242025 decreased by 18%,5%, compared to fiscal year 2023,2024, primarily due to decreaseda change in mix of machine model shipments ofin Hurcothe andfourth Takumi machines.quarter. The decrease in sales of these machines was mainly attributable to decreased shipments of Hurco 5-axis vertical machines and Takumientry-level Hurco and Milltronics 3-axis vertical machines, partially offset by increased sales of higher-performance Hurco 5-axis3-axis vertical machines and Milltronicsmulti-axis 3-axislathes. verticalEven machines.though the mix of machine model shipments in fiscal year 2025 produced lower sales in dollars compared to the prior year, the overall volume of machine shipments in the Americas increased from fiscal 2024 to fiscal 2025.
European sales for fiscal year 20242025 decreased by 21%,4%, compared to fiscal year 2023,2024, and included a favorable currency impact of 2%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year decrease in European sales was primarily attributable to a decreased volume of shipments of Hurco 5-axis vertical machines and Takumientry-level Hurco 3-axis machines in Germany, Italy,Germany and the United Kingdom,France, and of electro-mechanical components and accessories manufactured by LCM, partially offset by an increased volume of shipments of Hurco and Takumi machines in Francethe andUnited increased sales of ProCobots automation solutions.Kingdom.
Asian Pacific sales for fiscal year 20242025 increaseddecreased by 2%,1%, compared to fiscal year 2023,2024, and included an unfavorable currency impact of less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year increasedecrease in Asian Pacific sales for thein fiscal year 2025 was primarily attributabledue to increaseda shipmentsdecrease in sales of Hurco and Takumi machines in India and to one customer with multiple machine orders in China, partially offset by decreasedincreased shipmentssales of Hurco and Takumi machines in Chinathe andAsian SoutheastPacific Asia.region.
Sales of computerized machine tools for fiscal year 20242025 decreased by 22%,4%, compared to fiscal year 2023,2024, primarily due to a decreasedlower sales volume of higher-performance 5-axis machines in the Americas, France, India and Germany, and of electro-mechanical components and accessories manufactured by LCM, partially offset by an increased volume of shipments of Hurco machines in the United Kingdom and increased sales of Takumi machines in allAsia regions where our customers are located, except India and France, partially offset by increased sales of Milltronics vertical machines in North America.Pacific. Sales of computer control systems and software for fiscal year 20242025 decreased by 13%,1%, compared to fiscal year 2023, due to decreased sales of software for Hurco machines in North America and Germany.2024. Sales of service parts for fiscal year 20242025 decreased by 3%,9%, compared to fiscal year 2023,2024, due mainly to a decreased volume of aftermarket sales of Hurco and LCMTakumi parts in Europe and North America. Service fees increaseddecreased by 9%2% for fiscal year 2024,2025, compared to fiscal year 2023,2024, primarily due to increaseddecreased service of Hurco machines in the United Kingdom, France and North America.America, partially offset by increased service of Hurco and Takumi machines in Germany. During fiscal year 2024,2025, sales for all product categories included a favorable currency impact of less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes.
Orders and Backlog. Orders for fiscal year 20242025 were $198.3$171.3 million, a decrease of $11.4$27.0 million, or 5%,14%, compared to fiscal year 2023,2024, and included a favorable currency impact of $1.9$1.8 million, or less than 1%, when translating foreign orders to U.S. dollars. The following table sets forth new orders booked by geographic region for the fiscal years ended October 31, 2025, and 2024 (dollars in thousands):
The following table sets forth new orders booked by geographic region for the fiscal years ended October 31, 2024 and 2023 (dollars in thousands):
Orders in the Americas for fiscal year 20242025 decreased by 5%,10%, compared to fiscal year 2023.2024. The decrease in orders was primarily due to decreaseda shift in customer demand forfrom Hurco 5-axis vertical machines, Milltronics toolroom and 3-axis vertical machines, and non-Hurco branded machine tools sold by one of our wholly owned distributors to a higher volume of Hurco lathes and entry-level and higher-performance Hurco 3-axis vertical machines, partially offset by increased demand for Hurco higher-performing 5-axis machines.
European orders for fiscal year 20242025 decreased by 13%,18%, compared to fiscal year 2023,2024, and included a favorable currency impact of 2%, when translating foreign orders to U.S. dollars. The year-over-year decrease in orders was driven primarily by decreased customer demand for Hurco and Takumi machines in the United Kingdom, Germany, France, and Italy,France, as well as decreased demand for electro-mechanical components and accessories manufactured by LCM, partially offset by increased demand for Hurco higher-performance VMX machines in the United Kingdom and for ProCobots automation solutions sold across the European region.LCM.
Asian Pacific orders for fiscal year 20242025 increaseddecreased by 54%,6%, compared to fiscal year 2023,2024, and included an unfavorable currency impact of 2%,less than 1% when translating foreign orders to U.S. dollars. The increasedecrease in Asian Pacific orders was driven primarily by increased customer demand for Hurco and Takumi machines in China, India, and Southeast Asia. The increaseddecreased customer demand for Hurco machines in China and India for the fiscal year included two customers with multiple machine orders.India.
Backlog as of October 31, 20242025 increaseddecreased to $40.8$34.3 million from $28.3$40.8 million as of October 31, 2023,2024, primarily due to increaseddecreased customer demand during the last six months of fiscal year 2024, compared to the same period in prior year. The increase in backlog was driven primarily by increased demand for higher-performance VMX and 5-axis Hurco machines in the U.S.United Kingdom, as well as decreased demand for electro-mechanical components and Europe,accessories Milltronicsmanufactured toolroomby and 3-axis vertical machines in the U.S., and Hurco 3-axis vertical machines and Takumi bridge mills in Asia Pacific.LCM. We do not believe backlog is a useful measure of past performance or indicative of future performance. Backlog orders as of October 31, 20242025 are expected to be fulfilled in fiscal year 2025.2026.
Gross Profit. Gross profit for fiscal year 20242025 was $33.0 million, or 18% of sales, compared to $37.7 million, or 20% of sales, compared to $56.2 million, or 25% of sales, for fiscal year 2023.2024. The year-over-year decreasedecreases in both gross profit wasdollars and as a percentage of sales were primarily due to the lower overall sales volume of vertical milling machinemachines salesand the change in mix and volume from higher-performance 5-axis machines to 3-axis machines in the Americas and Europe. Additionally, theregross wereprofit decreaseswas negatively impacted by an increase in averagecost netof sellinggoods pricessold foras certaina machinesresult duringof tariffs on goods imported into the U.S. implemented in the second half of fiscal year 20242025. thatThe weredecrease designedin tooverall penetratesales key marketsdollars and reducethe inventories. The decreasesincrease in both sales volume and pricingtariffs negatively impacted gross profit in dollars and as a percentage of sales, reducing ourthe leverage of fixed costs, in comparison to fiscal year 2023. Further, certain cost reductions were implemented in the third quarter of fiscal year 2024 to help offset the impact of lower sales volumes and pricing.2024.
Operating Expenses. Selling, general, and administrative expenses for fiscal year 20242025 were $43.2 million, or 24% of sales, compared to $46.0 million, or 25% of sales, compared to $49.6 million, or 22% of sales, in fiscal year 2023,2024, and included an unfavorable currency impact of $0.4 million, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year reduction in selling, general, and administrative expenses was primarily due to cost reductions implemented in the third quarter of fiscal year 2024 to help offset the impact of lower sales volume, partially offset by increaseddecreased tradeshow costs (fordue to IMTS) being in the fourth quarter of fiscal year 2024.2024 Despiteand additional global cost reductions that we have implemented over the reductionlast fromtwelve anmonths absoluteduring dollarthe perspective,continued selling,recessed general, and administrative expenses increased as a percentageperiod of sales in fiscal year 2024, compared to fiscal year 2023, due to the lower volume of sales year-over-year.sales.
Operating (Loss) Income. Operating loss for fiscal year 20242025 was $10.3 million, or 6% of sales, compared to operating loss of $8.3 million, or 4% of sales, compared to operating income of $6.6 million, or 3% of sales, for fiscal year 2023.2024. The year-over-year decreaseincrease in operating incomeloss was primarily due to lower overall sales volume of vertical milling machinemachines salesand the change in mix and volume from higher-performance 5-axis machines to 3-axis machines in the Americas and Europe. Additionally, operating loss was negatively impacted by increased costs related to tariffs implemented in the second half of fiscal year 2025.
Provision for Income Taxes. Income taxtaxes expense for fiscal year 20242025 was $6.8$2.9 million, compared to $2.4$6.8 million for fiscal year 2023.2024. The year-over-year increasedecrease in annual income tax expense was primarily due to an $8.4 million non-cash change in valuation allowance recorded in fiscal year 2024 on U.S. and China deferred tax assets, ascompared wellto asa changes$4.8 million non-cash change in valuation allowance recorded in fiscal year 2025 on U.S., China, and certain Italian deferred tax assets. Additionally, income taxes were also impacted by a change in geographic mix of income and loss that includes jurisdictions with differing tax rates,rates and discrete items related to unvested stock compensation. Because weWe have ana $8.3$13.2 million full valuation allowance recorded against our U.S.U.S., Chinese and certain Italian deferred tax assets,assets and we did not record a tax benefit for our U.S. net losses forin fiscalthese year 2024. The valuation allowance recorded during fiscal year 2024 reflected a full valuation allowance of the U.S. deferred tax assets and was recorded after evaluating changes to tax laws, statutory tax rates, and our cumulative three-year income (loss) levels for the U.S. for fiscal year 2024.countries.
Net (Loss) Income. Net loss for fiscal year 20242025 was $16.6$15.1 million, or $(2.56)$2.34 per diluted share, compared to a net incomeloss of $4.4$16.6 million, or $0.66$2.56 per diluted share, for fiscal year 2023.2024. The year-over-year decrease in net incomeloss was primarily due to decreaseda volume of machine shipments, as well as thelower valuation allowance recorded against our U.S. and China deferred tax assets.
As of October 31, 2024,2025, we had cash and cash equivalents of $33.3$48.7 million, compared to $41.8$33.3 million as of October 31, 2023.2024. The decreaseincrease in cash and cash equivalents was primarily a result of net cash usedprovided forby paymentsthe ofreductions outstandingin inventories and accounts payable, stock repurchases and dividend payments.receivable. Approximately 12%21% of our $33.3$48.7 million of cash and cash equivalents is held in the U.S. The balance is attributable to our foreign operations and is held in the local currencies of our various foreign entities, subject to fluctuations in currency exchange rates. We do not believe that the indefinite reinvestment of these funds offshore impairs our ability to meet our domestic working capital needs.
Working capital as of October 31, 20242025, was $180.8$173.1 million, compared to $193.3$180.8 million as of October 31, 2023.2024. The decrease in working capital was primarily driven by decreases in cashinventories and cash equivalents, inventories, accounts receivable, net, and prepaid and other assets, as well as increases in customeraccounts deposits,payable and derivative liabilities, partially offset by decreasesan increase in accounts payablecash and accruedcash payroll and employee benefits.equivalents.
Inventories were $142.9 million as of October 31, 2025, compared to $153.0 million as of October 31, 2024, compared to $158.0 million as of October 31, 2023, and included a favorable currency impact of $3.2$4.2 million, or 2%,3%, when translating foreign inventories to U.S. dollars for financial reporting purposes. Inventory turns as of October 31, 20242025, wereremained 1.0the comparedsame to 1.1 as ofat October 31, 2023.2024 at 1.0.
Capital expenditures were $3.0 million in fiscal year 2025, compared to $2.9 million in fiscal year 2024, compared to $2.6 million in fiscal year 2023.2024. Capital expenditures for fiscal year 20242025 were primarily for software development costs, purchases of factory equipment for production facilities, building and leasehold improvements, and purchases of general software and equipment for sales and service divisions. We funded these expenditures with cash flows from operations.
On January 6, 2023, we announced approval of a share repurchase program in an aggregate amount of up to $25.0 million.million and later extended this program through November 10, 2026. Repurchases under the program may be made in the open market or through privately negotiated transactions from time to time, subject to applicable laws, regulations,regulations and contractual provisions. On September 25, 2024, we announced an extension of the term of this $25.0 million repurchase program from November 10, 2024 to November 10, 2026. The program may be amended, suspended, or discontinued at any time and does not commit us to repurchase any shares of our common stock. During fiscal year 2024,2025, we repurchased $1.5$2.0 million, or 87,635104,472 common shares, under thethis program,program. and $21.7 million remained available under the program asAs of October 31, 2024.2025, we had repurchased $5.3 million, or 259,620 common shares, under this program since inception, leaving $19.7 million available for future repurchases thereunder.
During fiscal year 2024, we paid cash dividends to our shareholders of $2.1 million. On June 14, 2024, we announced a temporary suspension of our regular quarterly cash dividend as we seek to enhance our financial flexibility and improve our ability to manage market volatility while focusing on strengthening our balance sheet, reinvesting in our core business and research and development related to emerging technologies, and returning value to shareholders via the appropriate channels in both the near-near and long-term. Future dividends are subject to approval of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, regulatory and contractual restrictions, our business strategystrategy, and other factors deemed relevant by our Board of Directors from time to time.
On December 31, 2018, we and our subsidiary Hurco B.V. entered into a credit agreement with Bank of America, N.A., as the lender, which was subsequently amended on each of March 13, 2020, December 23, 2020, December 17, 2021, January 4, 2023, and December 19, 2023 (as amended, the “2018 Credit Agreement”). The 2018 Credit Agreement providesprovided for an unsecured revolving credit and letter of credit facility in a maximum aggregate amount of $40.0 million. The 2018 Credit Agreement providesprovided that the maximum amount of outstanding letters of credit at any one time maycould not exceed $10.0 million, the maximum amount of outstanding loans made to our subsidiary Hurco B.V. at any one time maycould not exceed $20.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time maycould not exceed $20.0 million. Under the 2018 Credit Agreement, we and Hurco B.V. are borrowers, and certain of our other subsidiaries are guarantors. The scheduled maturity date of the 2018 Credit Agreement iswas December 31, 2025.2025, and on that date, the 2018 Credit Agreement terminated in accordance with its terms.
Borrowings under the 2018 Credit Agreement bear interest at floating rates based on, at our option, either (i) a rate based upon the secured overnight financing rate (“SOFR”), the Sterling Overnight Index Average Reference Rate, the Euro Interbank Offering Rate, or another alternative currency-based rate approved by the lender, depending on the term of the loan and the currency in which such loan is denominated, plus 1.00% per annum, or (ii) a base rate (which is the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate or (c) the one month SOFR-based rate plus 1.00%), plus 0.00% per annum. Outstanding letters of credit will carry an annual rate of 1.00%.
The 2018 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $10.0 million); (2) restricting us from making certain payments, including (a) cash dividends, except that we may pay cash dividends as long as immediately before and after giving effect to such payment, the sum of the unused amount of the commitments under the 2018 Credit Agreement plus our cash on hand is not less than $10.0 million, and as long as we are not in default before and after giving effect to such dividend payments and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $25.0 million; (3) requiring that we maintain a minimum working capital of $125.0 million; and (4) requiring that we maintain a minimum tangible net worth of $176.5 million. We may use the proceeds from advances under the 2018 Credit Agreement for general corporate purposes.
In March 2019, our wholly-owned subsidiaries in Taiwan, HML, and China, NHML, closed on uncommitted revolving credit facilities with maximum aggregate amounts of 150 million New Taiwan dollarsDollars and 32.5 million Chinese Yuan, respectively. As uncommitted facilities, both the Taiwan and China credit facilities arewere subject to review and termination by the respective underlying lending institution from time to time. In February and December 2023, NHML and HML, respectively, renewed the above-referenced credit facilities on substantially similar terms and identical maximum aggregate limits.
As of October 31, 2024,2025, our existing credit facilities consisted of a €1.5 million revolving credit facility in Germany, the 150 million New Taiwan dollarsDollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $40.0 million revolving credit facility under the 2018 Credit Agreement. WeOn hadDecember no31, debt2025, orthe borrowings150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $40.0 million revolving credit facility under anythe of2018 ourCredit creditAgreement facilitiesterminated asin ofaccordance Octoberwith 31,their 2024.terms.
We had no debt or borrowings outstanding under any of our credit facilities as of October 31, 2025, or December 31, 2025. As of October 31, 2024,2025, we had an aggregate of approximately $50.9$51.2 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.
On January 5, 2026, we entered into a credit agreement with Bank of America, N.A., as the lender (the “2026 Credit Agreement”). The 2026 Credit Agreement provides for a secured revolving credit and letter of credit facility in a maximum aggregate amount of $20.0 million. The 2026 Credit Agreement provides that the maximum amount of outstanding letters of credit at any one time may not exceed $10.0 million and the maximum amount of all outstanding loans denominated in alternative currencies at any one time may not exceed $20.0 million. Under the 2026 Credit Agreement, we are the borrower, and certain of our subsidiaries are guarantors. Our obligations under the 2026 Credit Agreement are secured by a security interest in substantially all of our personal property and substantially all of the personal property of each subsidiary guarantor. The scheduled maturity date of the 2026 Credit Agreement is December 31, 2026.
Borrowings under the 2026 Credit Agreement bear interest at floating rates based on, at our option, either (i) a rate based upon the SOFR, the Sterling Overnight Index Average Reference Rate, the Euro Interbank Offering Rate, or another alternative currency-based rate approved by the lender, depending on the term of the loan and the currency in which such loan is denominated, plus 2.50% per annum, or (ii) a base rate (which is the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate or (c) the one month SOFR-based rate plus 1.00%), plus 1.50% per annum. Outstanding letters of credit will carry an annual rate of 2.50%.
The 2026 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $10.0 million); (2) restricting us from making certain payments, including (a) cash dividends, except that we may pay cash dividends as long as immediately before and after giving effect to such payment, the sum of the unused amount of the commitments under the 2026 Credit Agreement plus our cash on hand is not less than $10.0 million, we are in pro forma compliance with the maximum consolidated leverage ratio covenant as described below, and we are not in default before and after giving effect to such dividend payments and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $10.0 million; and (3) requiring that we maintain a maximum consolidated leverage ratio of total debt to EBITDA no greater than 2.00 to 1.00, with EBITDA defined as the greater of (i) consolidated EBITDA for the most recently completed measurement period and (ii) $1.00. We may use the proceeds from advances under the 2026 Credit Agreement for general corporate purposes.
The maximum consolidated leverage ratio covenant effectively prohibits us from borrowing any amounts under the 2026 Credit Agreement when our consolidated EBITDA for the most recently completed measurement period is negative. As of the date we entered into the 2026 Credit Agreement, and as of the date of the filing of this report, the most recently completed measurement period was our fiscal year ended October 31, 2025, during which our consolidated EBITDA was negative. In order to borrow in compliance with the maximum consolidated leverage ratio covenant set forth above, we are effectively prohibited from borrowing under the 2026 Credit Agreement until we have positive consolidated EBITDA for our most recently completed four fiscal quarters.
We also have an international cash pooling strategy that generally provides access to available cash deposits and credit facilities when needed in the U.S., Europe, or Asia Pacific.
We have anborrowed internationalonly cash$1.6 poolingmillion strategyduring thatthe generallyfiscal providesyears accessended 2015-2018 to availablefund cashstart-up depositscosts related to expansion in China and credithave not had any borrowings under any of our previous debt facilities whenat neededany other time over the previous ten fiscal years, even during prolonged recessionary industry cycles. While we are currently in the U.S.,process Europeof orevaluating Asiaa Pacific.longer-term Weglobal credit solution that aligns with our best interest, we believe our current cash on hand, expected cash flow from operations, access to cash pooling and our borrowing capacity under ourcurrent credit facilities provide adequate liquidity to fund our global operations over the next twelve months and beyond, and allow us to remain committed to our strategic plan of product innovation, acquisitions, targeted penetration of developing markets, and a balanced capital allocation program.
We expect capital spending in fiscal year 20252026 to be approximately $4.1$4.5 million, which includes investments for software development, leasehold improvement, factory equipment, and production facilities, as well as general software and equipment for sellingour manufacturing and sales facilities. We expect to fund these commitments with cash on hand and cash generated from operations.
From time to time, our subsidiaries guarantee third party payment obligations in connection with the sale of machines to customers that use financing. We follow Financial Accounting Standards Board (“FASB”) guidance for accounting for guarantees (codified in Accounting Standards Codification (“ASC”) 460). As of October 31, 2024,2025, we had ninefour outstanding third party payment guarantees totaling approximately $0.9$0.4 million. The terms of these guarantees are consistent with the underlying customer financing terms. Upon shipment of a machine, the customer assumes the risk of ownership. The customer does not obtain title, however, until the customer has paid for the machine. A retention of title clause allows us to recover the machine if the customer defaults on the financing. We accrue liabilities under these guarantees at fair value, which amounts are insignificant.
Income Taxes – We account for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are measured using enacted income tax rates in each jurisdiction in effect for the year in which the temporary differences are expected to be recovered or settled. These deferred tax assets are reduced by a valuation allowance, which is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We operate in multiple jurisdictions through wholly-owned subsidiaries, and our global structure is complex. Accordingly, the ultimate outcome with respect to taxes we may owe may differ from the amounts recognized. Our judgment regarding the realization of deferred tax assets may change due to future profitability and market conditions, change in U.S. or foreign tax laws, and other factors. These changes, if any, may require material adjustments to these deferred tax assets and an accompanying reduction or increase in net income. During fiscal yearyears 2025 and 2024, we recorded an $8.6 million non-cash valuation allowanceallowances of $4.8 million and $8.6 million, respectively, on our U.S. and China deferred tax assets,assets ofand whichon $8.3our millionU.S., reflectedChina aand fullcertain valuation allowance of the U.S.Italian deferred tax assets, and was recorded after evaluating changes to tax laws, statutory tax rates, and our cumulative three-year income (loss) levels for the U.S. for fiscal year 2024.respectively. Because we have a $13.2 million full valuation allowance recorded against our U.S.U.S., China and certain Italian deferred tax assets, we did not record a tax benefit for our U.S. net losses forin these countries in either fiscal year 2025 or 2024.
What changed in the latest 10-Q
Risk Factors
There have been no material changes from the risk factors disclosed in Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended October 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
Gross Profit. Gross profit for the firstsee in full comparisonsixnine months of fiscal year 2026 was$18.3$31.5 million, or20%23% of sales, compared to$16.1$25.2 million, or18%19% of sales, for the corresponding prior year period.TheMostyear-over-yearof the increase in gross profit wasprimarily dueattributable to an increased volume of machine sales and a greater mix of higher-performancemachinemachinessales.sold,Althoughasnotwellsignificant factors, gross profit for the first six months of fiscal 2026 also benefited fromas price increases implemented in2026theandfirst quarter of fiscal 2026. Additionally, a smaller portion of the gross profit improvement included tariff refund claims filed with the United States Customs and BorderProtection, both of which were partially offset by incremental tariffs compared to prior year.Protection.
Gross Profit. Gross profit for thesee in full comparisonsecondthird quarter of fiscal year 2026 was$10.3$13.2 million, or22%28% of sales, compared to$7.8$9.1 million, or19%20% of sales, for the corresponding prior year period. Theyear-over-yearincrease in gross profit wasprimarily dueattributable to an increased volume of machine sales and a greater mix of higher-performancemachinemachinessales.sold,Althoughasnotwellsignificant factors, gross profit for the second quarter of fiscal year 2026 also benefited fromas price increases implemented in the first quarter of fiscal 2026 and tariff refund claims filed with the United States Customs and BorderProtection, both of which were partially offset by incremental tariffs compared to prior year.Protection.
Operating Income (Loss). Operatingsee in full comparisonlossincome for thesecondthird quarter of fiscal year 2026 was$0.8$2.3 million, compared to$3.1anmillionoperating loss of $1.7 million, for the corresponding period in fiscal year 2025. Theyear-over-yearimprovementdecrease infrom operating loss to operating income was primarilydueattributable to an increased volume of machine sales and a greater mix of higher-performancemachinemachinessales.sold, as well as price increases implemented in the first quarter of fiscal 2026 and tariff refund claims filed with the United States Customs and Border Protection.
Operating Incomesee in full comparison/Loss.(Loss). Operating loss for the firstsixnine months of fiscal year 2026 was$4.0$1.7 million, compared to$5.2$6.8 million for the corresponding period in fiscal year 2025. The year-over-year decrease in operating loss was primarily due to an increased volume of machine sales and a greater mix of higher-performance machinesales.sales, as well as price increases implemented in the first quarter of fiscal 2026 and tariff refund claims filed with the United States Customs and Border Protection.
Asian Pacific orders for the firstsee in full comparisonsixnine months of fiscal year 2026 increased by29%,41%, compared to the corresponding prior year period, and includedaanfavorableunfavorable currency impact of2%,1%, when translating foreign orders to U.S. dollars. Theyear-over-yearincrease in Asian Pacific orders was driven primarily by increased customer demand for Takumi machinesacross the Asia Pacific region where our customers are locatedand forhigher-performanceprivate labeled machine frames produced for third parties, partially offset by decreased customer demand for Hurcovertical millingmachines inIndia.China.
see in full comparisonSixNine Months EndedAprilJuly30,31, 2026, Compared toSixNine Months EndedAprilJuly30,31, 2025
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The market for machine tools is international in scope. We have both significant foreign sales and significant foreign manufacturing operations. During the first sixnine months of fiscal 2026, approximately 45% of our revenues were attributable to customers in Europe, where we typically sell more of our higher-performance, higher-priced VMX series machines. Additionally, approximately 14% of our revenues were attributable to customers in the Asia Pacific region, where we encounter greater pricing pressures. We operate in a cyclical industry where sales and order trends often change periodically and can vary from region to region.
During a time of global uncertainty and lower sales volumes experienced recently, we have turned our attention to adjusting overhead expenses and operating expenses to help minimize the impact of the lower volumes of sales on operating income. We implemented cost reductions in fiscal years 2024 and 2025, adjusted and managed inventories (excluding the impact of foreign currency), and suspended our regular quarterly cash dividend. In recent periods, we have used our operating cashflow to manage our capital allocation strategies to continue investing in new technologies, product development, and necessary capital expenditures without incurring any significant indebtedness as we continue to seek new acquisitions and other growth opportunities. The cyclicality of our business requires that we exercise discipline in managing through unexpected changes in the markets and industries in which we operate. We believe that our long history ofhistorical profitability and the strength of our balance sheet can provide us with stability to manage through these business cycles, and we rely on our past experience in making measured decisions for the long-term success of our business.
Sales and service fees in the first sixnine months of fiscal 2026 increased by 4%, compared to the same period in fiscal 2025. The increase in sales was due primarily to increased shipments of Hurco and Takumi 5-axis and higher-performance vertical milling machines in the Americas and Asia Pacific and Takumi 5-axis and vertical milling machines in Europe, partially offset by a decreased volume of shipments of Hurco machines in Europe and electro-mechanical components and accessories manufactured by our wholly-owned subsidiary in Italy, LCM Precision Technology S.r.l. (“LCM”). Orders in the first six months of fiscal 2026 increased by 24%, compared to the same period in fiscal 2025, reflecting an increase in customer demand for Hurco and Takumi 5-axis and vertical milling machines in all three regions,Pacific, as well as increased customershipments demandof Milltronics and Takumi machines in the Americas and Takumi vertical milling machines and private labeled machine frames produced for electro-mechanicalthird componentsparties andin accessoriesAsia manufactured by LCM.Pacific.
Three Months Ended AprilJuly 30,31, 2026 Compared to Three Months Ended AprilJuly 30,31, 2025
Sales and Service Fees. Sales and service fees for the secondthird quarter of fiscal year 2026 were $47.6$47.3 million, an increase of $6.8$1.5 million, or 17%,3%, compared to the corresponding prior year period, and included aan favorableunfavorable currency impact of $1.4less than $0.1 million, or 3%,less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes.
The following table sets forth net sales and service fees by geographic region for the secondthird fiscal quarter ended AprilJuly 30,31, 2026 and 2025 (dollars in thousands):
Sales in the Americas for the secondthird quarter of fiscal year 2026 increased by 35%,11%, compared to the corresponding period in fiscal year 2025, primarily due to increased shipments of Hurco, Takumi and Milltronics machines. The increase in machine shipments was mostly attributable to increased shipments of Hurco 5-axis and larger, higher-performance vertical milling machines,machines and increased shipments of Milltronics toolroom machines, and Takumi verticaltoolroom milling machines.lathes.
European sales for the secondthird quarter of fiscal year 2026 decreased by 8%,12%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of 6%,less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year decrease in European sales was primarily attributable to a decreased volume of shipments of Hurco machines and electro-mechanical components and accessories manufactured by LCM, partially offset by an increased volume of shipments of Takumi 5-axis and vertical milling machines.machines and increased sales of ProCobots automation solutions.
Asian Pacific sales for the secondthird quarter of fiscal year 2026 increased by 81%,51%, compared to the corresponding prior year period, and included aan favorableunfavorable currency impact of 2%,3%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year increase in Asian Pacific sales was primarily due to increased shipments of Hurco vertical milling machines in China and IndiaSoutheast of Hurco 5-axis and larger, higher-performance vertical milling machines,Asia, as well as increased shipments of Takumi 5-axis and vertical milling machines.machines and private labeled machine frames produced for third parties.
The following table sets forth sales and service fees by product group and services for the secondthird fiscal quarter ended AprilJuly 30,31, 2026 and 2025 (dollars in thousands):
Sales of computerized machine tools for the secondthird quarter of fiscal year 2026 increased by 22%,3%, compared to the corresponding prior year period, primarily due to increased shipments of Hurco 5-axis and larger, higher-performance vertical milling machines and Takumi vertical milling machines in the Americas and Asia Pacific, partiallyas offsetwell byas decreasedincreased shipments of Hurcoprivate machineslabeled machine frames produced for third parties in EuropeAsia and electro-mechanical components and accessories manufactured by LCM.Pacific. Sales of computerservice controlparts systems and software for the second quarter of fiscal year 2026 decreasedincreased by 21%,6% compared to the corresponding prior year period, primarily due mainly to decreasedincreases softwarein sales inof theaftermarket Americas. Serviceservice parts in Europe and serviceAsia fees for the second quarter of fiscal year 2026 changed by immaterial amounts compared to the corresponding prior year period.Pacific. Sales for all product lines included aan favorableunfavorable currency impact of 3%,less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes.
Orders. Orders for the secondthird quarter of fiscal year 2026 were $61.6$51.4 million, an increase of $17.9$10.4 million, or 41%,25%, compared to the corresponding period in fiscal year 2025, and included aan favorableunfavorable currency impact of $1.8$0.3 million, or 4%,less than 1%, when translating foreign orders to U.S. dollars.
The following table sets forth new orders booked by geographic region for the secondthird fiscal quarter ended AprilJuly 30,31, 2026 and 2025 (dollars in thousands):
Orders in the Americas for the secondthird quarter of fiscal year 2026 increased by 63%,37%, compared to the corresponding period in fiscal year 2025, primarily due to increased demand for Hurco 5-axis and larger, higher-performance vertical milling machinesmachines, Takumi lathes and for Takumi vertical milling machines.machines, as well as Milltronics toolroom lathes.
European orders for the secondthird quarter of fiscal year 2026 increased by 17%,6%, compared to the corresponding prior year period, and included a favorable currency impact of 7%,less than 1%, when translating foreign orders to U.S. dollars. The increase in orders was driven primarily by increased customer demand for Hurco higher-performance vertical milling machines in the United Kingdom and Germanyelectro-mechanical components and accessories manufactured by LCM, partially offset by decreased customer demand for Takumi 5-axisHurco machines in Germany and France.
Asian Pacific orders for the secondthird quarter of fiscal year 2026 increased by 66%,68%, compared to the corresponding prior year period, and included aan favorableunfavorable currency impact of 4%,7%, when translating foreign orders to U.S. dollars. The increase in orders was driven primarily by increased customer demand for Takumi machines acrossand thefor Asianprivate Pacificlabeled regionmachine whereframes ourproduced customersfor arethird located,parties, aspartially welloffset asby decreased customer demand for Hurco vertical milling machines in China.
Gross Profit. Gross profit for the secondthird quarter of fiscal year 2026 was $10.3$13.2 million, or 22%28% of sales, compared to $7.8$9.1 million, or 19%20% of sales, for the corresponding prior year period. The year-over-year increase in gross profit was primarily dueattributable to an increased volume of machine sales and a greater mix of higher-performance machinemachines sales.sold, Althoughas notwell significant factors, gross profit for the second quarter of fiscal year 2026 also benefited fromas price increases implemented in the first quarter of fiscal 2026 and tariff refund claims filed with the United States Customs and Border Protection, both of which were partially offset by incremental tariffs compared to prior year.Protection.
Operating Expenses. Selling, general, and administrative expenses for the secondthird quarter of fiscal year 2026 were $11.1$10.9 million, or 23% of sales, compared to $10.9$10.8 million, or 27%23% of sales, in the corresponding fiscal year 2025 period, and included an unfavorable currency impact of $0.3$0.1 million, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year increase in selling, general, and administrative expenses was primarily due to the unfavorable currency impact.impact and increased global wages, sales commissions, and employee benefits.
Operating Income (Loss). Operating lossincome for the secondthird quarter of fiscal year 2026 was $0.8$2.3 million, compared to $3.1an millionoperating loss of $1.7 million, for the corresponding period in fiscal year 2025. The year-over-yearimprovement decrease infrom operating loss to operating income was primarily dueattributable to an increased volume of machine sales and a greater mix of higher-performance machinemachines sales.sold, as well as price increases implemented in the first quarter of fiscal 2026 and tariff refund claims filed with the United States Customs and Border Protection.
Other Expense,Income (Expense), Net. Other expense,income, net for the secondthird quarter of fiscal year 2026 was $0.8$0.3 million compared to $0.6other millionexpense, net of $1.5 million, for the corresponding period in fiscal year 2025. The year-over-year increase in other expense, netchange was due mainly to ana increasedecrease in foreign currency exchange loss.
Income Taxes. Income tax expense for the secondthird quarter of fiscal year 2026 was $0.8$0.4 million, compared to $0.5$0.6 millionmillion, for the corresponding prior year period. The year-over-yearreduction changein income tax expense was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates.
SixNine Months Ended AprilJuly 30,31, 2026, Compared to SixNine Months Ended AprilJuly 30,31, 2025
Sales and Service Fees. Sales and service fees for the first sixnine months of fiscal year 2026 were $90.5$137.8 million, an increase of $3.2$4.7 million, or 4%, compared to the corresponding prior year period, and included a favorable currency impact of $3.2$3.1 million, or 4%,2%, when translating foreign sales to U.S. dollars for financial reporting purposes.
The following table sets forth sales and service fees by geographic region for the sixnine months ended AprilJuly 30,31, 2026 and 2025 (dollars in thousands):
Sales in the Americas for the first sixnine months of fiscal year 2026 increased by 12%, compared to the corresponding period in fiscal year 2025, primarily due to increased shipments of Hurco 5-axis asmachines well asand larger, higher-performance vertical milling machinesmachines, increased shipments of Takumi lathes and Takumi vertical milling machines.machines, and increased shipments of Milltronics toolroom lathes.
European sales for the first sixnine months of fiscal year 2026 decreased by 7%,8%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of 7%,5%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year decrease in European sales was primarily attributable to a decreased volume of shipments of Hurco machines and electro-mechanical components and accessories manufactured by LCM, partially offset by an increased volume of shipments of Takumi 5-axis and vertical milling machines.machines and increased sales of ProCobots automation solutions.
Asian Pacific sales for the first sixnine months of fiscal year 2026 increased by 20%,30%, compared to the corresponding prior year period, and included aan favorableunfavorable currency impact of 2%,less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year increase in Asian Pacific sales was primarily due to increased shipments of Hurco vertical milling machines in China and IndiaSoutheast of Hurco 5-axis and larger, higher-performance vertical milling machines,Asia, as well as increased shipment of Takumi 5-axis and vertical milling machines.machines and private labeled machine frames produced for third parties.
The following table sets forth sales and service fees by product group and services for the sixnine months ended AprilJuly 30,31, 2026 and 2025 (dollars in thousands):
Sales of computerized machine tools for the first sixnine months of fiscal year 2026 increased by 4%, compared to the corresponding prior year period, primarily due to increased shipments of Hurco 5-axis and larger, higher-performance vertical milling machines and Takumi vertical milling machines in the Americas and Asia Pacific, partiallyas offsetwell byas decreasedincreased shipmentsshipment of Hurcoprivate machineslabeled machine frames produced for third parties in EuropeAsia and electro-mechanical components and accessories manufactured by LCM.Pacific. Sales of computer control systems and software for the first sixnine months of fiscal year 2026 decreased by 26%,19%, compared to the corresponding prior year period, due mainly to decreased software sales in the Americas and Europe.Americas. Sales of service parts for the first sixnine months of fiscal year 2026 increased by 8%, compared to the corresponding prior year period, primarily due to increases in sales of aftermarket service parts salesfor Hurco and Takumi products in the United KingdomKingdom, Germany, and Germany.Asia Pacific. Service fees for the first sixnine months of fiscal year 2026 decreased by 2%, compared to the corresponding prior year period, primarily due to decreased aftermarket service fees in the Americas. Sales for all product lines included a favorable currency impact of 4%,2%, when translating foreign sales to U.S. dollars for financial reporting purposes.
Orders. Orders for the first sixnine months of fiscal year 2026 were $103.6$155.0 million, an increase of $19.8$30.2 million, or 24%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of $3.4$3.1 million, or 4%,2%, when translating foreign orders to U.S. dollars.
The following table sets forth new orders booked by geographic region for the sixnine months ended AprilJuly 30,31, 2026, and 2025 (dollars in thousands):
Orders in the Americas for the first sixnine months of fiscal year 2026 increased by 42%,40%, compared to the corresponding period in fiscal year 2025, primarily due to increased demand for Hurco 5-axis and larger, higher-performance vertical milling machinesmachines, Takumi lathes and for Takumi vertical milling machines.machines, as well as Milltronics toolroom lathes.
European orders for the first sixnine months of fiscal year 2026 increased by 8%,7%, compared to the corresponding prior year period, and included a favorable currency impact of 8%,5%, when translating foreign orders to U.S. dollars. The year-over-yearincrease increasein orders was driven primarily due toby increased customer demand for Hurco and Takumi 5-axis and higher-performance vertical milling machines in the United Kingdom, GermanyKingdom and France, and increased customer demand for electro-mechanical components and accessories manufactured by LCM, partially offset by a decreased volume of machinecustomer demand for Hurco machines in ItalyGermany and Germany.France.
Asian Pacific orders for the first sixnine months of fiscal year 2026 increased by 29%,41%, compared to the corresponding prior year period, and included aan favorableunfavorable currency impact of 2%,1%, when translating foreign orders to U.S. dollars. The year-over-year increase in Asian Pacific orders was driven primarily by increased customer demand for Takumi machines across the Asia Pacific region where our customers are located and for higher-performanceprivate labeled machine frames produced for third parties, partially offset by decreased customer demand for Hurco vertical milling machines in India.China.
Gross Profit. Gross profit for the first sixnine months of fiscal year 2026 was $18.3$31.5 million, or 20%23% of sales, compared to $16.1$25.2 million, or 18%19% of sales, for the corresponding prior year period. TheMost year-over-yearof the increase in gross profit was primarily dueattributable to an increased volume of machine sales and a greater mix of higher-performance machinemachines sales.sold, Althoughas notwell significant factors, gross profit for the first six months of fiscal 2026 also benefited fromas price increases implemented in 2026the andfirst quarter of fiscal 2026. Additionally, a smaller portion of the gross profit improvement included tariff refund claims filed with the United States Customs and Border Protection, both of which were partially offset by incremental tariffs compared to prior year.Protection.
Operating Expenses. Selling, general, and administrative expenses for the first sixnine months of fiscal year 2026 were $22.2$33.1 million, or 25%24% of sales, compared to $21.3$32.0 million, or 24% of sales, in the corresponding fiscal year 2025 period, and included an unfavorable currency impact of $0.7$0.8 million, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year increase in selling, general and administrative expenses was primarily due to the unfavorable impact of currency impact.translation and increased global wages, sales commissions, and employee benefits.
Operating Income/Loss. (Loss). Operating loss for the first sixnine months of fiscal year 2026 was $4.0$1.7 million, compared to $5.2$6.8 million for the corresponding period in fiscal year 2025. The year-over-year decrease in operating loss was primarily due to an increased volume of machine sales and a greater mix of higher-performance machine sales.sales, as well as price increases implemented in the first quarter of fiscal 2026 and tariff refund claims filed with the United States Customs and Border Protection.
Other Expense,Income (Expense), Net. Other expense, net for the first sixnine months of fiscal year 2026 wasdecreased $0.8to $0.5 million comparedfrom to $1.0$2.5 million for the corresponding period in fiscal year 2025. The year-over-year decrease in other expense, net was2025, due mainly to gains from sale of a business.decrease in foreign currency exchange loss.
Income Taxes. Income tax expense for the first sixnine months of fiscal year 2026 was $1.2$1.7 million, compared to $2.6$3.1 million for the corresponding prior year period. The year-over-year decrease in income tax expense was primarily due to a $1.2 million valuation allowance recorded during the first quarter of 2025 on our Italian deferred tax assets and changes in geographic mix of income and loss that include jurisdictions with differing tax rates. A full valuation allowance has been recorded against our Italian, U.S., and Chinese deferred tax assets as of AprilJuly 30,31, 2026, based on our conclusion that the deferred tax assets were not more likely than not to be realized.realized under generally accepted accounting principles.
At AprilJuly 30,31, 2026, we had cash and cash equivalents of $50.1$52.1 million, compared to $48.7 million at October 31, 2025. Approximately 34%18% of the $50.1$52.1 million of cash and cash equivalents was denominated in U.S. dollars. The balance was attributable to our foreign operations and is held in the local currencies of our various foreign entities, subject to fluctuations in currency exchange rates. We do not believe that the indefinite reinvestment of these funds offshore impairs our ability to meet our domestic working capital needs.
Working capital was $166.9$166.7 million at AprilJuly 30,31, 2026, compared to $173.1 million at October 31, 2025. The decrease in working capital was primarily driven by a decrease in inventories and an increase in accounts payable and customer deposits, partially offset by increases in cash and cash equivalents and prepaid and other assets.
Capital expenditures of $1.3$2.4 million during the first sixnine months of fiscal year 2026 were primarily for software development costs and capital improvements in existing facilities. We funded these expenditures with cash on hand.
On January 6, 2023, we announced approval of a share repurchase program in an aggregate amount of up to $25.0 million and later extended this program through November 10, 2026. Repurchases under the program may be made in the open market or through privately negotiated transactions from time to time, subject to applicable laws, regulations and contractual provisions. We did not repurchase any shares of our common stock during the first sixnine months of fiscal 2026. As of AprilJuly 30,31, 2026, we had repurchased $5.3 million, or 259,620 common shares, under this program since inception, leaving $19.7 million available for future repurchases thereunder.
Borrowings under the 2026 Credit Agreement bear interest at floating rates based on, at our option, either (i) a rate based upon the SOFR, the Sterling Overnight Index Average Reference Rate, the Euro Interbank Offering Rate, or another alternative currency-based rate approved by the lender, depending on the term of the loan and the currency in which such loan is denominated, plus 2.50% per annum, or (ii) a base rate (which is the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate or (c) the one month SOFR-based rate plus 1.00%), plus 1.50% per annum. OutstandingAny outstanding letters of credit will carry an annual rate of 2.50%.
The maximum consolidated leverage ratio covenant effectively prohibits us from borrowing any amounts under the 2026 Credit Agreement when our consolidated EBITDA for the most recently completed measurement period is negative. As of the date of this report, the most recently completed measurement period was our secondtwelve quartermonths ended AprilJuly 30,31, 2026, during which our consolidated EBITDA was negative. In order to borrow in compliance with the maximum consolidated leverage ratio covenant set forth above, we are effectively prohibited from borrowing under the 2026 Credit Agreement until we have positive consolidated EBITDA for our most recently completed four fiscal quarters.
As of AprilJuly 30,31, 2026, our credit facilities consisted of a €1.5 million revolving credit facility in Germany and the $20.0 million secured revolving credit and letter of credit facility. We had no debt or borrowings outstanding under any of our credit facilities as of AprilJuly 30,31, 2026.
We have borrowed only $1.6 million during the fiscal years ended 2015-2018 to fund start-up costs related to expansion in China and have not had any borrowings under any of our previous debt facilities at any other time over the previouslast ten fiscal years, even during prolonged recessionary industry cycles. While we are currently in the process of evaluating a longer-term global credit solution that aligns with our best interest,solution, we believe our current cash on hand, expected cash flow from operations, and access to cash pooling and our current credit facilities provide adequate liquidity to fund our global operations over the next twelve months and beyond, and allow us to remain committed to our strategic plan of product innovation, acquisitions, targeted penetration of developing markets, and a balanced capital allocation program.
Our MD&A is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles. The preparation of financial statements in conformity with those accounting principles requires us to make judgments and estimates that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Those judgments and estimates have a significant effect on the condensed consolidated financial statements because they result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Actual results could differ from those estimates. Our critical accounting estimates, which are described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, are frequently evaluated as our judgment and estimates are based upon historical experience and on various other assumptions that we believe to be reasonable under the circumstances. During the first sixnine months of fiscal year 2026, there were no material changes to our critical accounting estimates as described in the MD&A included in our Annual Report on Form 10-K for the year ended October 31, 2025.
From time to time, our subsidiaries guarantee third party payment obligations in connection with the sale of machines to customers that use financing. We follow FASB guidance for accounting for guarantees (codified in ASC 460). As of AprilJuly 30,31, 2026, we had four outstanding third party payment guarantees totaling approximately $0.3 million. The terms of these guarantees are consistent with the underlying customer financing terms. Upon shipment of a machine, the customer assumes the risk of ownership. The customer does not obtain title, however, until the customer has paid for the machine. A retention of title clause allows us to recover the machine if the customer defaults on the financing. We accrue liabilities under these guarantees at fair value, which amounts are insignificant.
HURC insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding HURC (13F)
None of the 59 investors we track reported a position in their latest 13F.