Hurco Companies, Inc. — Q2 FY2024 Form 10-Q
Reporting period: Three and six months ended April 30, 2024. Unaudited consolidated results. Hurco designs, manufactures, and sells CNC machine tools and related software, parts, automation solutions, and services to the metal-cutting industry.
Financial performance
Amounts below are in millions of U.S. dollars, except per-share data and percentages.
| Metric | Q2 FY2024 | Q2 FY2023 | Six months FY2024 | Six months FY2023 |
|---|---|---|---|---|
| Sales and service fees | $45.2 | $53.8 | $90.2 | $108.5 |
| Gross profit / margin | $8.0 / 18% | $12.6 / 23% | $17.7 / 20% | $25.3 / 23% |
| Operating income (loss) | $(3.4) | $1.0 | $(5.3) | $2.2 |
| Net income (loss) | $(3.9) | $0.4 | $(5.6) | $1.7 |
| Diluted earnings (loss) per share | $(0.61) | $0.06 | $(0.86) | $0.26 |
| Operating cash flow | $1.9 | $1.0 | $(0.7) | $(7.0) |
Revenue and operating trends
- Q2 sales declined 16% year over year; six-month sales declined 17%. Computerized machine tool sales fell 20% in Q2 and 21% for the six-month period, the principal driver of the decline.
- Europe, the largest region, recorded Q2 sales down 24% and six-month sales down 22%. Americas sales declined 8% and 17%, respectively. Asia Pacific Q2 sales were essentially flat, while six-month sales rose 17%.
- Q2 orders were $44.2 million, down 27%; six-month orders were $94.4 million, down 17%. Q2 orders fell across all regions, including 28% in Europe and 23% in the Americas.
- Management attributed weaker gross profit and operating results to lower shipment volumes of higher-performance vertical milling machines, lower average selling prices on certain machines to penetrate markets and reduce inventory, and reduced fixed-cost absorption at lower production volumes. SG&A dollars were nearly flat, but rose to 25% of sales in both Q2 and the six-month period.
Cash, liquidity, and capital
- Cash and cash equivalents were $37.5 million at April 30, 2024, down from $41.8 million at October 31, 2023. Approximately 19% of cash was denominated in U.S. dollars; the remainder was held by foreign operations in local currencies.
- Working capital was $187.6 million, compared with $193.3 million at fiscal year-end. Current assets were $239.0 million and current liabilities were $51.4 million.
- Cash flow from operations was negative $0.7 million for the first six months, versus negative $7.0 million a year earlier. Investing cash outflow was $1.2 million; financing cash outflow was $2.4 million, including $2.1 million of dividends. Cash declined by $4.2 million over the period.
- No borrowings were outstanding under credit facilities. Available borrowing capacity was approximately $50.7 million; the main unsecured revolving facility is $40 million and matures December 31, 2025. Hurco reported compliance with its covenants.
- Operating lease liabilities totaled approximately $11.8 million. No shares were repurchased in Q2 or the first six months; $23.2 million remained available under the repurchase program at April 30, 2024. Dividends paid were $0.16 per share in Q2.
Outlook, risks, and unusual items
- The filing provides no specific revenue, earnings, or order guidance. Management says cash pooling and available credit are adequate for global operations over the next twelve months and beyond, and describes continued priorities of product innovation, acquisitions, developing markets, and balanced capital allocation.
- Management emphasizes the cyclical nature of machine-tool demand and uncertainty in global markets. Principal disclosed risks include weaker demand, international operations and foreign exchange, tariffs and other government actions, supply-chain concentration and raw-material costs, competition, product development and technology risks, cybersecurity, and acquisition execution.
- Foreign-exchange movements affected results: Q2 included $0.5 million of other expense, while the six-month period included $1.0 million of other expense versus $0.3 million of other income a year earlier. The filing cites foreign-currency exchange losses as the main reason for the six-month change. The company uses forward contracts to hedge currency exposures; total derivative notional amounts were $90.0 million at April 30.
- Six-month net loss included a $0.6 million income-tax benefit; the reported effective tax rate was 9%, compared with 35% in the prior-year period. Management cites geographic income mix, a stock-compensation tax item, and valuation allowances.
- Nine customer-financing guarantees totaled approximately $0.9 million, with recorded liabilities described as insignificant. The company does not expect ordinary-course claims and litigation to have a material adverse effect. No material changes to reported risk factors were disclosed.
Most important facts for investors to verify
- Whether new orders and machine shipments stabilize, particularly in Europe and the Americas; the filing does not provide a clear backlog value.
- Whether pricing actions and inventory reduction improve gross margin without further weakening demand or profitability.
- Whether operating cash flow turns positive as inventories and working capital are managed, and how much cash remains accessible across currencies and jurisdictions.
- Whether foreign-exchange movements, hedge outcomes, and tax effects continue to add earnings volatility.
- Whether the company maintains covenant compliance and liquidity while funding dividends, investment, and any future acquisitions or share repurchases.