Executive Summary

Q1 2025 consolidated sales were $5.141M, down 10.2% year over year; gross margin improved to 29.1% (+340 bps YoY) and net loss narrowed materially to $0.056M from $0.424M in Q1 2024 as cost actions lowered operating expenses 19.4% YoY .
Modular Buildings continued to be the growth and profit engine: sales up 47.5% to $2.193M, gross margin 32.3% (vs. 22.3% in Q1 2024), and operating income of ~$0.381M; Agricultural Products sales fell 30.4% to $2.948M with gross margin holding roughly steady at 26.7% .
Backlog reset lower: consolidated backlog of $6.201M as of April 4, 2025 vs. $11.416M a year ago, with Modular Buildings backlog at $4.065M and Agriculture at $2.136M; management expects engineering-phase projects to convert and dealer destocking to support demand as 2025 progresses .
Liquidity improved and cost of capital eased: cash rose to $4,133, new $4.0M revolver at Prime (7.5% current) replaced prior line (8.25% at 2/28/25), supporting operations while the company anticipates ~$1.2M ERC refunds (timing uncertain) .
No formal numerical guidance or consensus estimates were provided; the key stock narrative hinges on execution in Modular Buildings, stabilization in Agriculture aided by destocking and potential rate cuts, and visibility on ERC refunds and backlog conversion .

What Went Well and What Went Wrong

What Went Well

Modular Buildings momentum and profitability: “the momentum continues… very pleased with both our operational performance and the strong demand we are seeing,” delivering $2.193M sales (+47.5%) and significantly better margins and operating income .
Cost discipline and opex reductions: operating expenses down 19.4% YoY, with selling (-$0.113M) and engineering (-$0.075M) reflecting right-sizing and improved efficiency; operating income positive despite lower revenue .
Liquidity and financing improvements: renewed revolver at lower rate (7.5% current vs. 8.25%), cash up, and expectation of ~$1.2M ERC refunds supporting near-term cash flows .

What Went Wrong

Agriculture demand remained weak: segment sales down 30.4% YoY amid high rates, low row-crop prices, and dealer lot oversaturation; net loss in Agriculture was $0.346M despite expense cuts .
Backlog down sharply: consolidated backlog fell 45.7% YoY, including a 54.5% drop in Modular Buildings backlog; management cites engineering-phase projects and leads to sustain revenue but visibility is lower .
Potential tariff/steel cost pressure: notifications of expected tariff charges from some suppliers and risk of short-term cost increases until U.S. steel supply meets demand could pressure gross profit .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD)	$5,876,000	$6,170,008*	$5,141,000
EPS (Diluted) ($USD)	$0.00	$0.06*	$(0.01)
Gross Margin (%)	28.9%	36.1%*	29.1%

Values with asterisk (*) retrieved from S&P Global.

Segment breakdown (Q1 2025 vs. Q1 2024):

Segment	Metric	Q1 2024	Q1 2025
Agricultural Products	Sales ($USD)	$4,236,000	$2,948,000
Agricultural Products	Gross Profit ($USD)	$1,141,000	$788,000
Agricultural Products	Gross Margin (%)	26.9%	26.7%
Agricultural Products	Operating Expenses ($USD)	$1,568,000	$1,167,000
Agricultural Products	Operating Income ($USD)	$(426,000)	$(379,000)
Modular Buildings	Sales ($USD)	$1,487,000	$2,193,000
Modular Buildings	Gross Profit ($USD)	$332,000	$708,000
Modular Buildings	Gross Margin (%)	22.3%	32.3%
Modular Buildings	Operating Expenses ($USD)	$286,000	$327,000
Modular Buildings	Operating Income ($USD)	$46,000	$381,000

KPIs and balance sheet/cash metrics:

KPI	Prior	Current
Consolidated Backlog ($USD)	$11,416,000 (Apr 4, 2024)	$6,201,000 (Apr 4, 2025)
Modular Buildings Backlog ($USD)	$8,940,000 (Apr 4, 2024)	$4,065,000 (Apr 4, 2025)
Agricultural Backlog ($USD)	$2,476,000 (Apr 4, 2024)	$2,136,000 (Apr 4, 2025)
Cash ($USD)	$1,860 (Nov 30, 2024)	$4,133 (Feb 28, 2025)
Net Inventory ($USD)	$10,327,913 (Nov 30, 2024)	$10,881,082 (Feb 28, 2025)
Customer Deposits ($USD)	$180,597 (Nov 30, 2024)	$991,664 (Feb 28, 2025)
Interest Expense (quarter) ($USD)	$165,639 (Q1 2024)	$75,688 (Q1 2025)
Revolver Outstanding ($USD)	$2,199,437 (Feb 28, 2025)	New $4.0M facility at Prime (7.5% current) effective Mar 27, 2025

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Consolidated outlook	FY 2025	Emphasis on cost reductions, reduced debt, improved cashflow; optimism for 2025	Optimistic for balance of year; expect improved performance aided by destocking and cost cuts	Maintained constructive outlook
ERC refunds	FY 2025	N/A	Expect ~$1.2M net ERC refunds; timing uncertain	New item
Revolving credit facility	Effective Mar 27, 2025	$5.5M LOC; Prime +0.75% (8.25% at 2/28/25); matures Mar 30, 2025	$4.0M LOC; Prime (floor 6%); 7.5% current rate; matures Mar 30, 2026	Lower rate and extended maturity
Segment-specific	FY 2025	Modular backlog strong exiting FY24; Agriculture weak amid rates/commodities	Focus on converting engineering-phase modular leads; expect dealer destocking to aid Ag demand	Execution focus, demand stabilization

No formal numerical guidance (revenue/EPS/margins) was issued .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (FY 2024/Q4 context)	Current Period (Q1 2025)	Trend
Agriculture demand/commodities	Ag sales down 46% in Q3; weak corn/soy/wheat; dealer inventory oversupply; cost cuts initiated	FY24 Ag down 34.7%; cost reductions; industry-wide cuts	Ag sales -30.4%; destocking progressing; margins steady; cautious outlook	Stabilizing from trough
Modular Buildings execution	Two large research projects driving Q3; profitability positive	FY24 Modular sales +25.9%, margin 32.1%; strong project performance	Q1 sales +47.5%; gross margin 32.3%; focus on converting contracts; leadership transition in sales	Strengthening
Interest rates/financing	High rates pressured bottom line; expectation of 12 months to stabilize	Reduced interest expense via debt retirement; optimism for FY25 cashflow	Revolver renewal at lower rate; Fed’s anticipated cuts supportive	Improving cost of capital
Tariffs/steel costs	Not highlighted	FY24 steel price volatility; inflationary pressures	Supplier tariff charge notifications; short-term cost increase risk until U.S. steel supply meets demand	Cost risk to monitor
Backlog/lead funnel	Anticipated strong finish in Q4 from research project closings	Modular backlog strong entering FY25; Ag backlog lower	Consolidated backlog -45.7% YoY; management expects engineering-phase leads to convert	Lower visibility; execution critical

Management Commentary

“We are pleased to finish the first quarter with meaningful operational and profitability improvements despite challenging conditions that persist… In our modular buildings segment, the momentum continues… Amid quite a lot of uncertainty we do remain optimistic for how we will perform the balance of the year.” — Marc McConnell, President, CEO and Chairman .
“Fiscal 2024… demonstrated the benefits of our diversification strategy… We responded to challenges in our Agricultural Products segment by focusing closely on cost reductions, reducing debt, and improving cashflow… We are confident these measures position the company for improving markets in the future… we anticipate that solid demand, reduced overhead expenses, improved liquidity and reduced interest expense from debt reduction will result in improved profitability and cashflow in fiscal 2025.” — Marc McConnell .

Q&A Highlights

No Q1 2025 earnings call transcript or Q&A was available in the document set searched; thus no call-specific Q&A themes to report [Search: none returned for earnings-call-transcript 2025-03 to 2025-05].

Estimates Context

S&P Global consensus estimates for Q1 2025 EPS and Revenue were not available; the S&P dataset returned actual revenue only, preventing a beat/miss determination versus consensus. Values retrieved from S&P Global.
In absence of Street numbers, we anchor on company-reported results: revenue $5.141M, diluted EPS $(0.01), gross margin 29.1% .

Key Takeaways for Investors

Cost actions are working: despite a 10.2% revenue decline, operating income turned positive and net loss narrowed sharply, with opex down 19.4% YoY; this increases operating leverage to any uptick in Agriculture demand .
Modular Buildings is the near-term profit driver: 47.5% sales growth and 32.3% gross margin with ~$0.381M operating income in Q1 support consolidated resilience while Agriculture normalizes .
Watch backlog conversion and engineering-phase projects: consolidated backlog reset lower, but management expects conversions in Modular and steadier Ag orders as dealer destocking continues; execution here is the key stock catalyst .
Funding and rates tailwind: revolver repriced to Prime (7.5%) from 8.25% and extended to 2026; any Fed easing and ERC refund cash (~$1.2M expected) would further aid liquidity and interest expense .
Cost/inputs risk: potential tariffs and steel supply tightness could temporarily pressure gross profit; monitor supplier cost pass-through and pricing discipline .
No formal guidance or Street estimates: trading dynamics will be driven by realized margin delivery, backlog conversion cadence, and signs of Agriculture stabilization rather than guidance beats/misses .
Near-term setup: constructive bias if Modular continues to outperform and Agriculture benefits from destocking/rate relief; medium-term thesis rests on diversification and disciplined cost structure to expand margins as cycle turns .

ARTS WAY MANUFACTURING CO INC (ARTW)·Q1 2025 Earnings Summary