Shares of Hurco Companies, Inc. (HURC Quick QuoteHURC - Free Report) have lost 5.6% since the company released its second-quarter fiscal 2025 earnings for the period ended April 30, 2025. This performance contrasts sharply with the S&P 500 Index, which gained 1.7% over the same time frame. Over the past month, Hurco stock declined 13.6%, while the S&P 500 rose 3.6%.

Hurco’s Revenue and Profit Metrics

For the second quarter of fiscal 2025, Hurco posted a net loss of $4.1 million, or $0.62 per diluted share compared with a net loss of $3.9 million, or $0.61 per share, in the same quarter last year—a marginal year-over-year increase in losses. A $1.3 million non-cash tax valuation allowance contributed significantly to the quarter’s net loss. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Revenues also declined, with sales and service fees totaling $40.9 million, a drop of 9.5% from the prior-year period’s $45.2 million. The company attributed part of this decrease to lower shipments of Hurco and Takumi machines across key markets.Cumulatively, the first half of fiscal 2025 reflected a 3.3% decrease in total sales, amounting to $87.3 million from $90.2 million in the comparable period in 2023.

Gross profit stood at $7.8 million, or 19.2% of sales, compared with $8 million or 17.8% in the same quarter last year, showing a modest improvement in margin despite the sales decline. This margin expansion was attributed to a favorable sales mix and lower fixed costs. Operating loss narrowed to $3.1 million from $3.4 million, while selling, general and administrative (SG&A) expenses decreased 4.9% to $10.9 million from $11.5 million, reflecting lower discretionary spending and reduced commissions. Despite these efforts, SG&A as a percentage of sales increased to 26.7% from 25.4% due to lower revenues.

Segmentally, the Americas reported a 9.4% decline in quarterly sales to $15.4 million from $16.9 million, Europe saw a 4.9% decrease to $21.6 million from $22.7 million and the Asia Pacific region experienced a 29.2% fall to $3.9 million from $5.5 million.

HURC’s Orders and Segment Dynamics

Total new orders booked during the second quarter were $43.7 million, down 1.1% from the prior-year quarter’s $44.2 million. Regionally, order trends varied significantly. Orders in the Americas declined 0.7%, hampered by weak demand for OEM machines. European orders fell 11.7%, attributed largely to reduced demand for Hurco and Takumi machines in Germany and the U.K. Meanwhile, the Asia Pacific region saw a striking 74.4% surge in orders, primarily due to rising demand across the region, notably in China and Southeast Asia.

For the six-month period, total orders declined 11.3% to $83.8 million from $94.4 million, with notable softness in the Americas (down 16.6%) and Europe (down 14.7%). However, Asia Pacific continued to outperform, registering a 28.5% increase.

Hurco’s Other Key Business Metrics

Hurco’s effective tax rate was (15%) compared with (1%) in the year-ago period, influenced by valuation allowances recorded against U.S., Italian and Chinese deferred tax assets. No tax benefit was recognized for the losses due to the full valuation allowance taken during the quarter.

Hurco’s balance sheet remains relatively stable, with cash and equivalents rising to $43.8 million as of April 30, 2025, compared with $33.3 million as of Oct. 31, 2024. Working capital decreased to $175.9 million as of April 30, 2025, from $180.8 million as of Oct. 31, 2024, mainly due to lower inventories and receivables. The company maintained zero debt, underscoring its conservative capital structure.

On the efficiency front, HURC’s inventory turnover remained static at 1x, and days sales outstanding increased slightly from 49 to 51 days. Capital expenditures for the quarter rose to $800,000 from $479,000 a year earlier, indicating modest reinvestment in operational capabilities.

HURC’s Management Commentary

CEO Greg Volovic addressed the challenges faced across global markets, citing significant uncertainty in both international and domestic demand forecasts. Volovic emphasized Hurco’s commitment to its long-term strategy, including efforts to bolster cash flow and reduce costs. Importantly, he reaffirmed the company's dedication to product development and innovation, underlining that strategic investment will continue irrespective of short-term headwinds.

Factors Influencing Hurco’s Performance

Hurco’s performance in the fiscal second quarter was adversely affected by reduced machine shipments across multiple regions. In the Americas, lower sales of Hurco VMX and Takumi bridge mill and horizontal machines weighed on revenue. European sales were dragged down by weak performance in Germany, France and Italy, partially offset by better performance in the U.K. The steep decline in Asia Pacific sales was due to decreased demand in India, partially offset by increased shipments in China and Southeast Asia.

Gross margin improvement was aided by a more favorable regional sales mix — Europe contributed a greater share — and lower overhead costs due to efficiencies implemented in late 2024. However, lower overall volumes, particularly of high-margin vertical milling machines, pressured profitability.

HURC’s Other Developments

There were no acquisitions, divestitures, or major restructuring announcements reported during the quarter. Hurco did not declare any dividends for the fiscal second quarter, compared to a $0.16 per share payout in the year-ago period, further signaling a focus on conserving cash.