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HC

HURCO COMPANIES INC (HURC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 revenue was $53.702M, down 19% year-over-year but up 26% sequentially from Q3; diluted EPS was $(0.23), down from $0.36 YoY, with a gross margin of 23% versus 26% in Q4 FY2023 .
  • Orders were $51.077M (−6% YoY); Asia Pacific orders rose 103% YoY while Americas and Europe declined 11% and 13%, respectively, signaling improving demand mix into FY2025 .
  • Management highlighted second-half FY2024 orders outpacing sales across regions, cost reductions implemented in Q3, and continued investment in AI/autonomous machining initiatives showcased at IMTS, positioning Hurco for recovery .
  • Wall Street consensus (S&P Global) estimates for Q4 FY2024 were unavailable; no formal guidance ranges were provided, and the company had previously suspended its quarterly dividend in June 2024 to enhance financial flexibility .

What Went Well and What Went Wrong

What Went Well

  • Sequential improvement: Revenue rose to $53.702M in Q4 from $42.651M in Q3, and gross margin expanded to 23% from 18%, reflecting improved mix and cost actions .
  • Demand momentum: Management emphasized orders outpacing sales in every region in FY2024 and improving in H2 vs H1, supporting an order-led recovery thesis (“we are prepared for increased customer demand as global markets begin to recover”) .
  • Strategic innovation: AI-driven control features (e.g., ChatCNC, AI feature recognition) and autonomous machining vision were advanced at IMTS, with partnerships integrating ProCobots, Universal Robots, and Kawasaki Robotics to ease adoption of automation .

What Went Wrong

  • Top-line pressure: Q4 sales fell 19% YoY (Americas −21%, Europe −18%), with pricing reductions on certain machines to penetrate key markets, and lower shipments of 3-axis vertical machines impacting volume and margins .
  • Margin headwinds: Gross margin compressed YoY to 23% from 26%; SG&A rose to 24% of sales (vs 21% YoY) due to lower revenue and IMTS-related costs, limiting operating leverage (Q4 operating loss $(0.491)M) .
  • Tax drag: A non-cash valuation allowance and geography mix lifted tax expense; Q4 effective tax rate was −29% and full-year tax expense rose to $6.758M, with no U.S. tax benefit for U.S. net losses due to the valuation allowance .

Financial Results

Consolidated P&L (Quarterly comparison)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$45.172 $42.651 $53.702
Diluted EPS ($)$(0.61) $(1.47) $(0.23)
Gross Margin (%)18% 18% 23%
SG&A (% of Sales)25% 24% 24%
Operating Income ($USD Millions)$(3.442) $(2.533) $(0.491)
Operating Margin (%)−8% −6% −1%
Net Income ($USD Millions)$(3.922) $(9.596) $(1.442)
Effective Tax Rate (%)−1% −270% −29%

Year-over-Year (Q4)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$66.105 $53.702
Diluted EPS ($)$0.36 $(0.23)
Gross Margin (%)26% 23%
SG&A (% of Sales)21% 24%

Geographic Sales ($USD Millions)

RegionQ2 2024Q3 2024Q4 2024
Americas$16.947 $15.389 $23.331
Europe$22.720 $24.068 $25.381
Asia Pacific$5.505 $3.194 $4.990
Total$45.172 $42.651 $53.702

New Orders ($USD Millions)

RegionQ2 2024Q3 2024Q4 2024
Americas$17.069 $17.625 $21.221
Europe$23.873 $28.349 $23.876
Asia Pacific$3.250 $6.841 $5.980
Total$44.192 $52.815 $51.077

KPIs and Balance Sheet Metrics

MetricQ2 2024Q3 2024Q4 2024
Cash and Cash Equivalents ($USD Millions)$37.542 $36.054 $33.330
Working Capital ($USD Millions)$187.575 $181.979 $180.788
Days Sales Outstanding (days)47 46 49
Inventory Turns (x)1.0 1.0 1.0
Capex ($USD Thousands)$479 $735 $830
Depreciation & Amortization ($USD Thousands)$882 $888 $854

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2024/Q4Not providedNot providedMaintained (no formal guidance)
Gross MarginFY2024/Q4Not providedNot providedMaintained (no formal guidance)
SG&AFY2024/Q4Not providedNot providedMaintained (no formal guidance)
Effective Tax RateFY2024/Q4Not providedNot providedMaintained (no formal guidance)
DividendsFY2024Regular quarterly cash dividend ($0.16/share in Jan and Apr 2024) Suspended effective June 14, 2024 Lowered/Suspended

Notes: No formal numerical guidance ranges were provided in Q4 FY2024; management reiterated focus on cost reductions, balance sheet strength, and technology investments .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/Technology InitiativesPreparing IMTS showcase of novel control and “AI-powered autonomous CNC” technologies; debut of Milltronics INSPIRE+; strategic emphasis on R&D despite cycle AI innovations unveiled at IMTS (ChatCNC™, AI feature recognition); vision for Autonomous Machining Centers leveraging AI, mechatronics, simulation Accelerating
Supply Chain/OperationsCost actions, overhead adjustments, inventory optimization to maximize cash flows; standardization of components; energy footprint reduction discussed later Continued cost discipline; global cost reductions implemented in Q3 carried into Q4 Improving efficiency
Macro/IndustryMarket softness; orders down in H1; U.S. machine tool market decline referenced later; regional shipment declines Management cites machine tool market down ~19% (Oxford Economics); orders outpaced sales H2 vs H1 Stabilizing with H2 order improvement
Product PerformanceLower shipments of Hurco/Takumi 3-axis verticals; offset by higher-performing 5-axis and Milltronics 3-axis Similar mix comments; stronger 5-axis and Milltronics offset some weakness; targeted price reductions to penetrate markets Mix improving; pricing tactical
Regional TrendsEurope and Americas soft; Asia India strength; China mixed; Q3 orders strong in Europe and Asia Q4 sales down in Americas/Europe; Asia orders +103% YoY on China/India/SEA demand Asia strengthening; Americas/Europe soft
Automation PartnershipsIntegration with Kawasaki; ProCobots; Universal Robots collaboration announced Continued emphasis via IMTS showcases; automation embedded in control strategy Expanding ecosystem
R&D ExecutionSustained investment across cycles; unveiling next-gen control concepts Advancing AI-assisted and autonomous machining roadmap Persistent investment
Regulatory/LegalGeneric SEC “Risk Factors” references (tariffs, FX, data security) Similar cautionary language in Q4 press materials Stable (no new issues flagged)

Management Commentary

  • “We are focused on this order growth and are prepared for increased customer demand as global markets begin to recover...we implemented global cost reductions this year, but we did so while advancing the future of Hurco with many technological innovations” — Greg Volovic, CEO .
  • “Hurco’s AI implementation isn’t just a buzzword—it’s real AI delivering real results...Tools like Hurco’s ChatCNC™ Chatbot...and AI Feature Recognition...drastically reduce part programming times” — Greg Volovic, CEO .
  • “Building on the successful consolidation of Hurco, Milltronics, and Takumi PC hardware, we plan to transform manufacturing...with cutting-edge technologies that advance automation and connectivity...” — Greg Volovic, CEO .
  • “Orders...improved both year-over-year and compared to the previous two fiscal quarters...orders this quarter also outpaced sales by more than $10,000,000” — Greg Volovic, CEO (Q3) .

Q&A Highlights

  • No Q4 FY2024 earnings call transcript was available in our document set; consequently, specific Q&A themes and guidance clarifications could not be assessed. Management’s press releases emphasized H2 order momentum, cost reductions, and the AI/autonomous machining roadmap .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) consensus for Q4 FY2024 (EPS, revenue), but the data was unavailable due to access limits; therefore, comparisons to consensus and beat/miss determinations are omitted. Where estimates are absent, investors should focus on sequential improvement in revenue/margins and H2 orders outpacing sales as likely drivers of future estimate revisions .
  • If and when consensus becomes available, we would compare actual revenue of $53.702M and diluted EPS of $(0.23) to the Street and assess margin trajectory implications for FY2025 .

Key Takeaways for Investors

  • Sequential recovery: Q4 revenue and gross margin improved meaningfully vs Q3 (53.702M and 23%), supported by order momentum in Asia Pacific; watch order conversion and mix into FY2025 .
  • Pricing strategy: Targeted price reductions to penetrate key markets helped drive demand but pressured margins; mix shift toward higher-performing 5-axis and Milltronics is a partial offset .
  • Operating discipline: Cost reductions implemented in Q3 and continued in Q4; SG&A still elevated on lower sales and IMTS costs—monitor operating leverage as volumes recover .
  • Tax dynamics: Valuation allowance and geography mix drove elevated tax expense and negative effective tax rate; no U.S. tax benefit recorded for U.S. net losses—this may obscure underlying operating improvements in reported EPS .
  • Balance sheet: Cash of $33.330M and working capital of $180.788M provide flexibility to pursue R&D and automation initiatives; DSO increased to 49 days—monitor cash conversion and inventory turns (1.0x) .
  • Strategic differentiation: AI-infused control software (ChatCNC, feature recognition) and autonomous machining vision, plus partnerships (UR, Kawasaki, ProCobots), are compelling medium-term catalysts for share gain and margin uplift as adoption ramps .
  • Dividend policy: Suspension enhances flexibility amid cyclical softness; reassessment contingent on profitability and capital allocation priorities—consider total return via potential future buybacks during undervaluation windows .