HURCO COMPANIES INC

Previous wording

The market for machine tools is international in scope. We have both significant foreign sales and significant foreign manufacturing operations. During the first six months of fiscal 2025, approximately 50% 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 12% 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. Changes in trade policies, tariffs, and other import/export regulations of the U.S. and other nations did not have a material impact on our financial results for the three and six months ended April 30, 2025. However, we do have sales in, and purchases from, foreign countries that could be negatively impacted by recent or future tariff actions.

Current wording

The market for machine tools is international in scope. We have both significant foreign sales and significant foreign manufacturing operations. During the nine months of fiscal 2025, approximately 51% 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 11% 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. Changes in trade policies, tariffs, and other import/export regulations of the U.S. and other nations did not have a material impact on our financial results for the three and nine months ended July 31, 2025. However, we do have sales in, and purchases from, foreign countries that could be negatively impacted by recent or future tariff actions.

Previous wording

Sales and service fees in the first six months of fiscal 2025 decreased by 3%, compared to the same period in fiscal 2024. The decrease in sales occurred primarily in the European region. Orders in the first six months of fiscal 2025 decreased by 11% from the same period in fiscal 2024, reflecting a decrease in orders in the Americas and European regions, partially offset by an increase in orders in Asia Pacific region.

Current wording

Sales and service fees in the nine months of fiscal 2025 increased slightly compared to the same period in fiscal 2024. The increase in sales was due primarily to increased sales of Hurco and Milltronics machines in the Americas, Takumi machines in Asia Pacific, and Hurco machines in the United Kingdom and Italy, partially offset by a decrease in Hurco and Takumi machine sales in France and Germany, as well as a decreased volume of shipments of electro-mechanical components and accessories manufactured by our wholly-owned subsidiary in Italy, LCM Precision Technology S.r.l. (“LCM”). Orders in the nine months of fiscal 2025 decreased by 15% from the same period in fiscal 2024, reflecting a decrease in orders in the Americas and European regions, partially offset by an increase in orders in the Asian Pacific region.

Previous wording

We have three brands of CNC machine tools 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 swill lathes. ProCobots LLC is our wholly-owned subsidiary that provides automation solutions. In addition, through our wholly-owned subsidiary in Italy, LCM Precision Technology S.r.l. (“LCM”), we produce high value machine tool components and accessories.

Current wording

We have three brands of CNC machine tools 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 swill lathes. ProCobots LLC is our wholly-owned subsidiary that provides automation solutions. In addition, through LCM, we produce high value machine tool components and accessories.

Previous wording

We principally sell our products through approximately 180 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. 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.

Current wording

We principally sell our products through approximately 180 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, 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. 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.

Previous wording

*Sales and Service Fees.Sales and service fees for the second quarter of fiscal year 2025 were $40.9 million, a decrease of $4.3 million, or 10%, compared to the corresponding prior year period, and included a favorable currency impact of $0.2 million, or less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. *

Current wording

*Sales and Service Fees.*Sales and service fees for the third quarter of fiscal year 2025 were $45.8 million, an increase of $3.2 million, or 7%, compared to the corresponding prior year period, and included a favorable currency impact of $1.4 million, or 3%, when translating foreign sales to U.S. dollars for financial reporting purposes.

Previous wording

European sales for the second quarter of fiscal year 2025 decreased by 5%, compared to the corresponding period in fiscal year 2024, and included a favorable currency impact of 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. The decrease in European sales for the second quarter of fiscal year 2025 was primarily attributable to a decreased volume of shipments of higher performance Hurco and Takumi machines in Germany, France, and Italy, as well as decreased volume of shipments of LCM electro-mechanical components and accessories, partially offset by increased shipment of higher performance Hurco machines in the United Kingdom.

Current wording

European sales for the third quarter of fiscal year 2025 increased by less than 1%, compared to the corresponding period in fiscal year 2024, and included a favorable currency impact of 5%, when translating foreign sales to U.S. dollars for financial reporting purposes. The year-over-year increase in European sales was primarily attributable to increased sales of Hurco machines in the United Kingdom and Italy, as well as the favorable impact of currency translation of foreign sales to U.S. dollars for financial reporting purposes, offset by decreased volume of shipments of Hurco and Takumi machines in France and Germany, as well as a decreased volume of shipments of electro-mechanical components and accessories manufactured by LCM

Previous wording

The following table sets forth sales and service fees by product group and services for the second quarter ended April 30, 2025 and 2024 (dollars in thousands):

Current wording

The following table sets forth sales and service fees by product group and services for the third fiscal quarter ended July 31, 2025 and 2024 (dollars in thousands):

Previous wording

Sales of computerized machine tools for the second quarter of fiscal year 2025 decreased by 10%, compared to the corresponding prior year period, primarily due to a decreased volume of shipments of Hurco and Takumi machines in all geographic regions. Sales of computer control systems and software for the second quarter of fiscal year 2025 increased by 12%, compared to the corresponding prior year period, due mainly to increased software sales in the United Kingdom. Sales of service parts for the second quarter of fiscal year 2025 decreased by 14%, compared to the corresponding prior year period, primarily due to decreases in aftermarket service parts sales in Europe. Services fees for the second quarter of fiscal year 2025 increased by 7%, compared to the corresponding prior year period, primarily due to increased aftermarket service fees in Germany and Italy. Sales for all product lines included a favorable currency impact of less than 1% when translating foreign sales to U.S. dollars for financial reporting purposes.

Current wording

Sales of computerized machine tools for the third quarter of fiscal year 2025 increased by 11%, compared to the corresponding prior year period, primarily due to increased sales of Hurco machines in the Americas, Takumi machines in Asia Pacific, and Hurco machines in the United Kingdom and Italy, partially offset by a decrease in Hurco and Takumi machine sales in Germany and France. Sales of computer control systems and software for the third quarter of fiscal year 2025 decreased by 24%, compared to the corresponding prior year period, due mainly to decreased software sales in the Americas and European regions. Sales of service parts for the third quarter of fiscal year 2025 decreased by 3%, compared to the corresponding prior year period, primarily due to decreases in aftermarket service parts sales of Hurco products in the Americas and France, partially offset by increases in aftermarket service parts sales of Milltronics products in the Americas and Hurco and Takumi products in Asia Pacific. Service fees for the third quarter of fiscal year 2025 decreased by 7%, compared to the corresponding prior year period, primarily due to decreased aftermarket service fees in the Americas and European regions. Sales for all product lines included a favorable currency impact of 3% when translating foreign sales to U.S. dollars for financial reporting purposes.

Previous wording

The following table sets forth new orders booked by geographic region for the fiscal quarter ended April 30, 2025 and 2024 (dollars in thousands):

Current wording

The following table sets forth new orders booked by geographic region for the third fiscal quarter ended July 31, 2025 and 2024 (dollars in thousands):

Previous wording

Orders in the Americas for the second quarter of fiscal year 2025 decreased by 1%, compared to the corresponding period in fiscal year 2024, primarily due to reduced demand for OEM machines sold by our wholly-owned domestic distributors, partially offset by increased customer demand for Milltronics machines.

Current wording

Orders in the Americas for the third quarter of fiscal year 2025 decreased by 12%, compared to the corresponding period in fiscal year 2024, primarily due to reduced demand for Hurco and Milltronics machines.

Previous wording

European orders for the second quarter of fiscal year 2025 decreased by 12%, compared to the corresponding prior year period, and included a favorable currency impact of less than 1%, when translating foreign orders to U.S. dollars. The decrease in orders was driven primarily by decreased customer demand for Hurco and Takumi machines in Germany and the United Kingdom, partially offset by increased customer demand for Hurco machines in Italy and electro-mechanical components and accessories manufactured by LCM.

Current wording

European orders for the third quarter of fiscal year 2025 decreased by 28%, compared to the corresponding prior year period, and included a favorable currency impact of 4%, 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 Germany, the United Kingdom and France, as well as for accessories manufactured by LCM.

Previous wording

*Gross Profit.*Gross profit for the second quarter of fiscal year 2025 was $7.8 million, or 19% of sales, compared to $8.0 million, or 18% of sales, for the corresponding prior year period. The year-over-year increase in gross profit as a percentage of sales was primarily due to an increase of European sales contributions to total sales of 3% and lower fixed costs allocated to overhead related to cost savings implemented in the second half of fiscal 2024.

Current wording

*Gross Profit.*Gross profit for the third quarter of fiscal year 2025 was $9.1 million, or 20% of sales, compared to $7.8 million, or 18% of sales, for the corresponding prior year period. The quarter-over-quarter increase in gross profit as a percentage of sales was primarily due to a higher concentration of machine sales in Europe and lower fixed costs allocated to overhead related to cost savings implemented in the last twelve months.

Previous wording

Operating Expenses. Selling, general, and administrative expenses for the first six months of fiscal year 2025 were $21.3 million, or 24% of sales, compared to $23.0 million, or 25% of sales, in the corresponding fiscal year 2024 period, and included an immaterial favorable currency impact of less than $0.1 million, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year reduction in selling, general and administrative expenses for the first six months of fiscal year 2025 reflected lower levels of discretionary spending, reduced sales commissions, and reduced employee health insurance costs.

Current wording

*Operating Expenses.*Selling, general, and administrative expenses for the third quarter of fiscal year 2025 were $10.8 million, or 23% of sales, compared to $10.4 million, or 24% of sales, in the corresponding fiscal year 2024 period, and included an unfavorable currency impact of $0.3 million, or 3%, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year increase in selling, general, and administrative expenses was due mainly to the unfavorable impact of currency when translating foreign expenses to U.S. dollars for financial reporting purposes.

Previous wording

*Operating Income/Loss.*Operating loss for the second quarter of fiscal year 2025 was $3.1 million, compared to $3.4 million for the corresponding period in fiscal year 2024. The change was primarily due to a higher concentration of machines sales in Europe and lower fixed costs allocated to overhead and operating expenses related to cost savings implemented in the second half of 2024, partially offset by the lower volume of sales of vertical milling machines.

Current wording

*Operating Income/Loss.*Operating loss for the third quarter of fiscal year 2025 was $1.7 million, compared to $2.5 million for the corresponding period in fiscal year 2024. The year-over-year reduction in operating loss was primarily due to a higher concentration of machine sales in Europe and lower fixed costs allocated to overhead related to cost savings implemented in the last twelve months.

Previous wording

*Other (Expense) Income, Net.*Other expense, net for the second quarter of fiscal year 2025 was $0.6 million compared to $0.5 million for the corresponding period in fiscal year 2024, due mainly to a decrease in income from our equity investment.

Current wording

*Other (Expense) Income, Net.*Other expense, net for the third quarter of fiscal year 2025 was $1.5 million compared to $0.1 million for the corresponding period in fiscal year 2024. The year-over-year increase in other expense, net was due mainly to an increase in foreign currency exchange loss anda decrease in income from our equity investment.

Previous wording

*Income Taxes.*Income tax expense for the second quarter of fiscal year 2025 was $0.5 million, compared to an income tax expense of less than $0.1 million, for the corresponding prior year period. The year-over-year change was primarily due to a $1.3 million non-cash valuation allowance recorded on our Italian, U.S. and Chinese deferred tax assets, as well as changes in geographic mix of income and loss that include jurisdictions with differing tax rates, and discrete items related to unvested stock compensation. Because we have a valuation allowance recorded against our Italian, U.S. and Chinese deferred tax assets, we did not record a tax benefit of $1.3 million for our U.S., Italian and Chinese pre-tax losses for the three months ended April 30, 2025. The valuation allowance recorded during the second quarter of fiscal 2025 reflected a full valuation allowance of the U.S. and 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. and Italy for the first six months of fiscal year 2025.

Current wording

*Income Taxes.*Income tax expense for the third quarter of fiscal year 2025 was $0.6 million, compared to $7.0 million for the corresponding prior year period. The year-over-year reduction in income tax expense was due mainly to a lower valuation allowance recorded against our U.S. deferred tax assets, as well as changes in geographic mix of income and loss that include jurisdictions with differing tax rates. We recorded a valuation allowance of $1.6 million for the third quarter of fiscal year 2025, compared to $8.2 million for the corresponding prior year period. Because we have a valuation allowance recorded against our U.S. and Chinese deferred tax assets, we did not record a tax benefit for our U.S. and Chinese net losses for the third quarter of fiscal 2025. The valuation allowance recorded in the third quarter of fiscal year 2025 reflected a full valuation allowance of our U.S. and Chinese 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. and China for the nine months of fiscal year 2025.

Previous wording

*Sales and Service Fees.*Sales and service fees for the first six months of fiscal year 2025 were $87.3 million, a decrease of $3.0 million, or 3%, compared to the corresponding prior year period, and included an unfavorable currency impact of $0.2 million, or less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes.

Current wording

*Sales and Service Fees.*Sales and service fees for the nine months of fiscal year 2025 were $133.1 million, an increase of $0.2 million, or less than 1%, compared to the corresponding prior year period, and included a favorable currency impact of $1.2 million, or less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes.

Previous wording

European sales for the first six months of fiscal year 2025 decreased by 5%, compared to the corresponding period in fiscal year 2024, and included an unfavorable currency impact of less than 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. The decrease in European sales for the first six months of fiscal year 2025 was primarily attributable to a decreased volume of shipments of Hurco and Takumi machines in Germany, France, and Italy, as well as a decreased volume of shipments of LCM electro-mechanical components and accessories, partially offset by increased shipments of higher performance Hurco machines in the United Kingdom.

Current wording

European sales for the nine months of fiscal year 2025 decreased by 3%, compared to the corresponding period in fiscal year 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 in the nine month period was primarily attributable to a decreased volume of shipments of Hurco and Takumi machines in France and Germany, as well as a decreased volume of shipments of electro-mechanical components and accessories manufactured by LCM, partially offset by increased sales of Hurco machines in the United Kingdom and Italy as well as the favorable impact of currency translation of foreign sales to U.S. dollars for financial reporting purposes.

Previous wording

Asian Pacific sales for the second quarter of fiscal year 2025 decreased by 29%, compared to the corresponding period in fiscal year 2024, and included an unfavorable currency impact of 1%, when translating foreign sales to U.S. dollars for financial reporting purposes. The decrease in Asian Pacific sales primarily resulted from decreased sales of higher-performance and 5-axis Hurco and Takumi machines in India, partially offset by increased shipment volume of Hurco VM and Takumi bridge mill and horizontal machines in China and Southeast Asia.

Current wording

Asian Pacific sales for the nine months of fiscal year 2025 increased by 7%, compared to the corresponding prior year period, 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 increase in Asian Pacific sales was primarily due to increased sales of Takumi vertical, bridge mill, horizontal, and 5-axis machines in the Asian Pacific region.

Previous wording

The following table sets forth sales and service fees by product group and services for the six months ended April 30, 2025 and 2024 (dollars in thousands):

Current wording

The following table sets forth sales and service fees by product group and services for the nine months ended July 31, 2025 and 2024 (dollars in thousands):

Previous wording

Sales of computerized machine tools for the first six months of fiscal year 2025 decreased by 2%, compared to the corresponding prior year period, primarily due to a decreased volume of shipments of Hurco and Takumi machines in all geographic regions. Sales of computer control systems and software for the first six months of fiscal year 2025 increased by 12%, compared to the corresponding prior year period, due mainly to increased software sales in the United Kingdom. Sales of service parts for the first six months of fiscal year 2025 decreased by 13%, compared to the corresponding prior year period, primarily due to decreases in aftermarket service parts sales in the Americas and Europe. Services fees for the first six months of fiscal year 2025 increased by 5%, compared to the corresponding prior year period, primarily due to increased aftermarket service fees in the Americas, Germany, and France. Sales for all product lines included an unfavorable currency impact of less than 1% when translating foreign sales to U.S. dollars for financial reporting purposes.

Current wording

Sales of computerized machine tools for the nine months of fiscal year 2025 increased by 2%, compared to the corresponding prior year period, primarily due to increased sales of Hurco and Milltronics machines in the Americas, Takumi machines in Asia Pacific, and Hurco machines in the United Kingdom and Italy, partially offset by a decrease in Hurco and Takumi machine sales in Germany and France. Sales of computer control systems and software for the nine months of fiscal year 2025 decreased by 1%, compared to the corresponding prior year period, due mainly to decreased software sales in Germany and the United Kingdom, partially offset by increased software sales in the Americas. Sales of service parts for the nine months of fiscal year 2025 decreased by 10%, compared to the corresponding prior year period, primarily due to decreases in aftermarket service parts sales in the Americas and Europe. Service fees for the nine months of fiscal year 2025 increased by 1%, compared to the corresponding prior year period, primarily due to increased aftermarket service fees in the Americas and Asia Pacific, partially offset by decreased aftermarket service fees in Europe. Sales for all product lines included a favorable currency impact of less than 1% when translating foreign sales to U.S. dollars for financial reporting purposes.

Previous wording

The following table sets forth new orders booked by geographic region for the six months ended April 30, 2025, and 2024 (dollars in thousands):

Current wording

The following table sets forth new orders booked by geographic region for the nine months ended July 31, 2025, and 2024 (dollars in thousands):

Previous wording

Orders in the Americas for the first six months of fiscal year 2025 decreased by 17%, compared to the corresponding period in fiscal year 2024, primarily due to decreased customer demand for Hurco and Takumi machines and reduced demand for OEM machines sold by our wholly-owned domestic distributors, partially offset by increased customer demand for Milltronics machines.

Current wording

Orders in the Americas for the nine months of fiscal year 2025 decreased by 15%, compared to the corresponding period in fiscal year 2024, primarily due to decreased customer demand for Hurco and Takumi machines, as well as reduced demand for OEM machines sold by our wholly-owned domestic distributors.

Previous wording

European orders for the first six months of fiscal year 2025 decreased by 15%, compared to the corresponding prior year period, and included an unfavorable currency impact of less than 1%, when translating foreign orders to U.S. dollars. The year-over-year decrease was primarily due to decreased customer demand for Hurco machines in Germany, the United Kingdom, and France, and decreased customer demand for electro-mechanical components and accessories manufactured by LCM, partially offset by increased customer demand for Hurco machines in Italy.

Current wording

European orders for the nine months of fiscal year 2025 decreased by 20%, compared to the corresponding prior year period, and included a favorable currency impact of 1%, 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 Germany, the United Kingdom and France, as well as for accessories manufactured by LCM.

Previous wording

Asian Pacific orders for the first six months of fiscal year 2025 increased by 28%, compared to the corresponding prior year period, and included an unfavorable currency impact of 2%, when translating foreign orders to U.S. dollars. The increase in Asian Pacific orders was driven primarily by increased customer demand for Hurco and Takumi machines across the Asian Pacific region where our customers are located.

Current wording

Asian Pacific orders for the nine months of fiscal year 2025 increased by 6%, compared to the corresponding prior year period, and included an unfavorable currency impact of less than 1%, when translating foreign orders to U.S. dollars. The increase in orders was due mainly to an increased volume of Takumi machine orders throughout the Asian Pacific region where our customers are located, partially offset by decreased Hurco machine orders in China.

Previous wording

*Operating Expenses.*Selling, general, and administrative expenses for the second quarter of fiscal year 2025 were $10.9 million, or 27% of sales, compared to $11.5 million, or 25% of sales, in the corresponding fiscal year 2024 period, and included an immaterial unfavorable currency impact of less than $0.1 million, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year reduction in selling, general and administrative expenses for the quarter reflected lower levels of discretionary spending, reduced sales commissions, and reduced employee health insurance costs.

Current wording

Operating Expenses. Selling, general, and administrative expenses for the nine months of fiscal year 2025 were $32.0 million, or 24% of sales, compared to $33.4 million, or 25% of sales, in the corresponding fiscal year 2024 period, and included an unfavorable currency impact of $0.2 million, or less than 1%, when translating foreign expenses to U.S. dollars for financial reporting purposes. The year-over-year reduction in selling, general, and administrative expenses, reflected lower levels of discretionary spending and reduced employee health insurance costs.

Previous wording

Operating Income/Loss. Operating loss for the first six months of fiscal year 2025 was $5.2 million, compared to $5.3 million for the corresponding period in fiscal year 2024. The change was primarily due to lower fixed costs allocated to overhead and operating expenses related to cost savings implemented in the second half of fiscal 2024, partially offset by the lower volume of sales of vertical milling machines.

Current wording

Operating Income/Loss. Operating loss for the nine months of fiscal year 2025 was $6.8 million, compared to $7.8 million for the corresponding period in fiscal year 2024. The year-over-year reduction in operating loss was primarily due to lower fixed costs allocated to overhead related to cost savings implemented in the last twelve months, lower levels of discretionary spending, and reduced employee health insurance costs.

Previous wording

Other (Expense) Income, Net. Other expense, net for the first six months of fiscal year 2025 was $1.0 million compared to $1.0 million for the corresponding period in fiscal year 2024.

Current wording

Other (Expense) Income, Net. Other expense, net for the nine months of fiscal year 2025 was $2.5 million compared to $1.1 million for the corresponding period in fiscal year 2024. The year-over-year increase in other expense, net was due mainly to an increase in foreign currency exchange loss anda decrease in income from our equity investment.

Previous wording

Income Taxes. Income tax expense for the first six months of fiscal year 2025 was $2.6 million, compared to an income tax benefit of $0.6 million, for the corresponding prior year period. The year-over-year change was primarily due to a $3.7 million non-cash valuation allowance recorded on our Italian, U.S. and Chinese deferred tax assets, as well as changes in geographic mix of income and loss that includes jurisdictions with differing tax rates and discrete items related to unvested stock compensation. Because we have a valuation allowance recorded against our Italian, U.S. and Chinese deferred tax assets, we did not record a tax benefit of $2.4 million for our U.S., Italian and Chinese pre-tax losses for the six months ended April 30, 2025. The valuation allowance recorded during the first six months of fiscal 2025 reflected a full valuation allowance of the U.S. and 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. and Italy for the first six months of fiscal year 2025.

Current wording

*Income Taxes.*Income tax expense for the nine months of fiscal year 2025 was $3.1 million, compared to $6.4 million for the corresponding prior year period. The year-over-year reduction in income tax expense was due mainly to a lower valuation allowance recorded against our U.S. deferred tax assets, as well as changes in geographic mix of income and loss that include jurisdictions with differing tax rates, partially offset by an increase in valuation allowance recorded against our Italian deferred tax assets. We recorded a valuation allowance of $5.3 million for the nine months of fiscal year 2025, compared to $8.2 million recorded for the corresponding prior year period. Because we have a valuation allowance recorded against our U.S., Chinese and Italian deferred tax assets, we did not record a tax benefit for our U.S., Chinese and Italian net losses for the nine months of fiscal 2025. The valuation allowance recorded in the nine months of fiscal year 2025 reflected a full valuation allowance of our U.S., Chinese and 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., China and Italy for the nine months of fiscal year 2025.

Previous wording

At April 30, 2025, we had cash and cash equivalents of $43.8 million, compared to $33.3 million at October 31, 2024. Approximately 27% of the $43.8 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.

Current wording

At July 31, 2025, we had cash and cash equivalents of $44.5 million, compared to $33.3 million at October 31, 2024. Approximately 21% of the $44.5 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.

Previous wording

Working capital was $175.9 million at April 30, 2025, compared to $180.8 million at October 31, 2024. The decrease in working capital was primarily driven by decreases in inventories and accounts receivable, net, partially offset by an increase in cash and cash equivalents.

Current wording

Working capital was $176.8 million at July 31, 2025, compared to $180.8 million at October 31, 2024. The decrease in working capital was primarily driven by decreases in accounts receivable, net and inventories and increases in accounts payable and derivative liabilities, partially offset by increases in cash and cash equivalents and derivative assets.

Previous wording

Capital expenditures of $1.4 million during the first six months of fiscal year 2025 were primarily for software development costs and capital improvements in existing facilities. We funded these expenditures with cash on hand.

Current wording

Capital expenditures of $2.3 million during the nine months of fiscal year 2025 were primarily for software development costs and capital improvements in existing facilities. We funded these expenditures with cash on hand.

Previous wording

On January 6, 2023, we announced a share repurchase program in an aggregate amount of up to $25.0 million. 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. 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. We did not repurchase any shares during the first six months of fiscal 2025. As of April 30, 2025, $21.7 million remained available under the program.

Current wording

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. During the third quarter of fiscal 2025, we repurchased $2.0 million, or 104,472 common shares, under this program. As of July 31, 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.

Previous wording

At April 30, 2025, we had an aggregate of approximately $50.8 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.

Current wording

At July 31, 2025, we had an aggregate of approximately $51.2 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.

Previous wording

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 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, 2024, 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 six months of fiscal year 2025, 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, 2024.

Current wording

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 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, 2024, 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 nine months of fiscal year 2025, 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, 2024.

Previous wording

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 April 30, 2025, we had seven outstanding third party payment guarantees totaling approximately $0.8 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.

Current wording

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 July 31, 2025, we had four outstanding third party payment guarantees totaling approximately $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.