GENCOR INDUSTRIES INC

Previous wording

On November 15, 2021, President Biden signed into law a five-year, $1.2 trillion infrastructure bill, the Infrastructure Investment and Jobs Act (the “IIJ Act”), including $550 billion in new spending and reauthorization of $650 billion in previously allocated funds. The IIJ Act provides $110 billion for the nation’s highways, bridges and roads. The IIJ Act is scheduled to expire on September 30, 2026.

Current wording

On November 15, 2021, President Biden signed into law a five-year, $1.2 trillion infrastructure bill, the Infrastructure Investment and Jobs Act (the “IIJA”), including $550 billion in new spending and reauthorization of $650 billion in previously allocated funds. The IIJA provides $110 billion for the nation’s highways, bridges and roads. The IIJA is scheduled to expire on September 30, 2026. If Congress does not reauthorize or fully fund the IIJA when it expires at the end of fiscal year 2026, demand for our products could decline.

Previous wording

Concerns over inflation, geopolitical issues and global financial markets have led to increased economic instability and expectations of slower economic growth. Our business may be adversely affected by any such economic instability or unpredictability. Sanctions and disruptions to the global economy may lead to additional inflation and may disrupt the global supply chain and could have a material adverse effect on our ability to secure supplies. Prolonged periods of inflation would likely increase our costs in the form of higher wages, and increased cost of supplies and equipment necessary to operate our business. Additionally, conflicts and/or tensions involving Russia, Ukraine, Israel, the U.S., Greenland, and various countries in South America, Europe and the Middle East, may cause increased inflation in energy and logistics costs and could further cause general economic conditions in the U.S. or abroad to deteriorate. There is a risk that one or more of our suppliers could be negatively affected by global economic instability, which could adversely affect our ability to operate efficiently and timely complete our operational goals. As of the date of this Quarterly Report, the Company’s operations have not been significantly impacted.

Current wording

Concerns over inflation, geopolitical issues and global financial markets have led to increased economic instability and expectations of slower economic growth. Our business may be adversely affected by any such economic instability or unpredictability. Sanctions and disruptions to the global economy may lead to additional inflation and may disrupt the global supply chain and could have a material adverse effect on our ability to secure supplies. Prolonged periods of inflation would likely increase our costs in the form of higher wages, and increased cost of supplies and equipment necessary to operate our business. Additionally, conflicts and/or tensions involving Russia, Ukraine, Israel, Iran, the U.S., and various countries, may cause increased inflation in energy and logistics costs and could further cause general economic conditions in the U.S. or abroad to deteriorate. There is a risk that one or more of our suppliers could be negatively affected by global economic instability, which could adversely affect our ability to operate efficiently and timely complete our operational goals. As of the date of this Quarterly Report, the Company’s operations have not been significantly impacted.

Previous wording

Net revenues for the quarter ended December 31, 2025 of $23,577,000 decreased $7,839,000 or 25.0% as compared to net revenues for the quarter ended December 31, 2024 of $31,416,000. Lower revenues from contract equipment sales were partially offset by higher parts and component sales and freight revenue. The decrease in contract equipment sales was due primarily to uncertainty around replacement of the current Federal infrastructure spending bill which is scheduled to expire on September 30, 2026.

Current wording

Net revenue for the six months ended March 31, 2026 and 2025 was $57,376,000 and $69,620,000, respectively, a decrease of $12,244,000 or 17.6%. The decrease was primarily in contract equipment sales and was due primarily to uncertainty around replacement of the current Federal infrastructure spending bill which is scheduled to expire on September 30, 2026.

Previous wording

The Company had operating income of $3,101,000 for the quarter ended December 31, 2025 as compared to $4,624,000 for the quarter ended December 31, 2024. The decrease in operating income was due primarily to lower net revenues for the quarter ended December 31, 2025.

Current wording

The Company had operating income of $7,337,000 for the six months ended March 31, 2026, compared to $11,104,000 for the six months ended March 31, 2025. The decrease in operating income was primarily due to higher trade show expenses, lower net revenue, partially offset by increased gross margins.

Previous wording

For the quarter ended December 31, 2025, the Company had net other income of $1,550,000 compared to $534,000 for the quarter ended December 31, 2024. Net interest and dividend income for the quarter ended December 31, 2025 was $1,177,000 compared to $989,000 for the quarter ended December 31, 2024. The increase was primarily due to higher rates earned on fixed income investments and on higher operating cash balances. Net realized and unrealized gains (losses) on marketable securities for the quarter ended December 31, 2025 were $373,000 compared to $(455,000) for the quarter ended December 31, 2024. Bond yields rose during the quarter ended December 31, 2024, due to better economic data and higher inflation. The higher yields negatively impacted the value of our bond holdings for the quarter ended December 31, 2024.

Current wording

For the six months ended March 31, 2026, the Company had net other income of $2,487,000, compared to $2,290,000 for the six months ended March 31, 2025. Interest and dividend income, net of fees, was $2,288,000 for the six months ended March 31, 2026, as compared to $2,147,000 for the six months ended March 31, 2025. The increase in interest and dividend income, net of fees, for the six months ended March 31, 2026, was primarily due to higher rates earned on fixed income investments and higher cash balances. Net realized and unrealized gains on marketable securities were $199,000 for the six months ended March 31, 2026, compared to $143,000 for the six months ended March 31, 2025.

Previous wording

The effective income tax rate for both the quarters ended December 31, 2025 and December 31, 2024 was 26.0%. Net income for the quarter ended December 31, 2025 was $3,442,000, or $0.23 per basic and diluted common share, compared to net income of $3,817,000, or $0.26 per basic and diluted common share, for the quarter ended December 31, 2024.

Current wording

The effective income tax rate for both the six month periods ended March 31, 2026 and March 31, 2025 was 26% based on the expected annual effective income tax rate. Net income for the six months ended March 31, 2026 was $7,285,000, or $0.50 basic and diluted net income per common share, compared to $9,912,000, or $0.68 basic and diluted net income per common share for the six months ended March 31, 2025. The lower net income and earnings per share resulted primarily from higher trade show expenses and lower net revenue.

Previous wording

The Company had no long-term or short-term debt outstanding as of December 31, 2025 or September 30, 2025. In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers. The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000. The letter of credit expires on February 25, 2026, unless terminated earlier, and can be extended, as provided by the agreement. The Company intends to renew the letter of credit for as long as the Company does business with the beneficiary insurance carrier. The letter is collateralized by restricted cash of the same amount on any outstanding drawings. To date, no amounts have been drawn under the letter of credit.

Current wording

The Company had no long-term or short-term debt outstanding at March 31, 2026 or September 30, 2025. In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers. The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000. The letter of credit expires in March 2027, unless terminated earlier, and can be extended, as provided by the agreement. The Company intends to renew the letter of credit for as long as the Company does business with the beneficiary insurance carrier. The letter is collateralized by restricted cash of the same amount on any outstanding drawings. To date, no amounts have been drawn under the letter of credit.

Previous wording

As of December 31, 2025, the Company had $36,731,000 in cash and cash equivalents, and $111,003,000 in marketable securities, including $5,292,000 in equities, $30,791,000 in corporate bonds, $11,448,000 in exchange-traded funds, $59,972,000 in government securities, $3,087,000 in mutual funds and $413,000 in cash and money funds. The marketable securities are invested through a professional investment management firm. These securities may be liquidated at any time into cash and cash equivalents.

Current wording

As of March 31, 2026, the Company had $43,464,000 in cash and cash equivalents, and $111,670,000 in marketable securities, including $5,849,000 in equities, $28,960,000 in corporate bonds, $12,137,000 in exchange-traded funds, $4,150,000 in mutual funds, $54,636,000 in government securities, and $5,938,000 in cash and money funds. The marketable securities are invested through a professional investment management firm. These securities may be liquidated at any time into cash and cash equivalents.

Previous wording

The Company’s backlog was $57.4 million at December 31, 2025 compared to $54.4 million at December 31, 2024. The Company’s working capital (defined as current assets less current liabilities) was $200.9 million at December 31, 2025 and $197.7 million at September 30, 2025. Cash flows provided by operations during the quarter ended December 31, 2025, were $11,117,000. Contract assets decreased $7,117,000 with the completion and shipment of several contract equipment plant sales where revenue is recognized over time. Marketable securities increased $1,289,000 due to net unrealized gains of $169,000, and net realized gains and interest earned on corporate bonds and U.S. treasuries of $1,120,000. Prepaid expenses increased $1,520,000 reflecting prepayments of insurance premiums to be amortized over fiscal 2026 and prepayments of expenses related to the March 2026 ConExpo-Con/Agg international construction trade show. Customer deposits increased $2,133,000 reflecting progress payments on contract equipment sales where revenues are recognized at a point in time that have not yet shipped.

Current wording

The Company’s backlog was $60.5 million at March 31, 2026 compared to $27.8 million at March 31, 2025. The Company’s net working capital (defined as current assets less current liabilities) was $205.2 million at March 31, 2026 and $197.7 million at September 30, 2025. Cash flows provided by operating activities during the six months ended March 31, 2026 was $18,029,000. Contract assets decreased $4,656,000 and contract liabilities increased $1,233,000 with the timing of inventory build, customer payments and percentage of completion recognition on plant sales where revenue is recognized over time. Marketable securities increased $1,956,000 due to net unrealized losses of $340,000, and net realized gains and interest earned on corporate bonds and U.S. treasuries of $2,296,000. Inventories decreased $2,432,000 due to paver sales and the completion and shipment on contract orders. Prepaid expenses increased $1,768,000 reflecting prepayments of insurance premiums to be amortized over fiscal 2026 and prepaid income taxes. Accounts payable increased $2,992,000 reflecting primarily open payables related to the March 2026 ConExpo Con/Agg trade show and the timing of purchase order receipts. Customer deposits increased $3,216,000 reflecting progress payments on contract equipment sales where revenues are recognized at a point in time that have not yet shipped as well as initial deposits on contract equipment sales where revenues are recognized overtime but manufacturing is yet to begin.

Previous wording

Cash flows used in investing activities for the quarter ended December 31, 2025 of $973,000 were related to capital expenditures, primarily for building additions and improvements, and handling equipment.

Current wording

Cash flows used in investing activities for the six months ended March 31, 2026 of $1,152,000 were related to capital expenditures, primarily for building additions and improvements, and capital equipment.

Previous wording

The Company believes the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of the financial condition and results of operations and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Accounting policies, in addition to the critical accounting policies referenced below, are presented in Note 1 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025, “Nature of Operations and Summary of Significant Accounting Policies.” There were no material changes to the accounting policies during the quarter ended December 31, 2025.

Current wording

The Company believes the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of the financial condition and results of operations and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Accounting policies, in addition to the critical accounting policies referenced below, are presented in Note 1 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025, “Nature of Operations and Summary of Significant Accounting Policies.” There were no material changes to the accounting policies during the six months ended March 31, 2026.

Previous wording

The Company recognizes revenue under ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the performance obligation is satisfied by transferring control of the equipment. Control of the equipment transfers over time, as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the Company. Revenues and costs are recognized in proportion to actual labor costs incurred, as compared with total estimated labor costs expected to be incurred, during the entire contract. All incremental costs related to obtaining a contract are expensed as incurred, as the amortization period is less than one year. Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined.

Current wording

The Company recognizes revenue under ASUNo. 2014-09, Revenue from Contracts with Customers (Topic 606). Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the performance obligation is satisfied by transferring control of the equipment. Control of the equipment transfers over time, as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the Company. Revenues and costs are recognized in proportion to actual labor costs incurred, as compared with total estimated labor costs expected to be incurred, during the entire contract. All incremental costs related to obtaining a contract are expensed as incurred, as the amortization period is less than one year. Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined.

Previous wording

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. These contract assets were $5,091,000 and $12,208,000 at December 31, 2025 and September 30, 2025, respectively, and are included in current assets on the Company’s condensed consolidated balance sheets. The Company anticipates that all of the contract assets at December 31, 2025 will be billed and collected within one year.

Current wording

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. These contract assets were $7,552,000 and $12,208,000 at March 31, 2026 and September 30, 2025, respectively, and are included in current assets on the Company’s condensed consolidated balance sheets. Contract liabilities (excluding customer deposits) under contracts with customers represent amounts billed in excess of revenue recognized on equipment sales recognized over time. These contract liabilities were $1,233,000 and zero at March 31, 2026 and September 30, 2025, respectively, and are included in current liabilities on the Company’s condensed consolidated balance sheets. The Company anticipates that all of the contract assets at March 31, 2026, will be billed and collected within one year.

Previous wording

Payment for equipment under contract with customers is typically due prior to shipment. Payment for services under contract with customers is due as services are completed. Accounts receivable related to contracts with customers for equipment sales were $101,000 and $80,000 at December 31, 2025 and September 30, 2025, respectively.

Current wording

Payment for equipment under contract with customers is typically due prior to shipment. Payment for services under contract with customers is due as services are completed. Accounts receivable related to contracts with customers for equipment sales were $126,000 and $80,000 at March 31, 2026 and September 30, 2025, respectively.

Previous wording

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance. There were no contract liabilities other than customer deposits at December 31, 2025 and September 30, 2025. Customer deposits related to contracts with customers were $6,022,000 and $3,889,000 at December 31, 2025 and September 30, 2025, respectively, and are included in current liabilities on the Company’s condensed consolidated balance sheets.

Current wording

Under certain contracts with customers, recognition of a portion of the consideration received may be deferred and recorded as a contract liability if the Company has to satisfy a future obligation, such as to provide installation assistance. There were no such contract liabilities at March 31, 2026 and September 30, 2025. Customer deposits related to contracts with customers were $7,105,000 and $3,889,000 at March 31, 2026 and September 30, 2025, respectively, and are included in current liabilities on the Company’s condensed consolidated balance sheets.

Previous wording

Property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess over its fair value of the asset’s carrying value. Fair value is generally determined using a discounted cash flow analysis. There were no impairment losses in the quarters ended December 31, 2025 and December 31, 2024.

Current wording

Property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess over its fair value of the asset’s carrying value. Fair value is generally determined using a discounted cash flow analysis. There were no impairment losses in the six months ended March 31, 2026 and March 31, 2025.