What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-06-05 compared with 2026-03-06 · 108 added, 56 removed, 144 unchanged (53% of the section changed)

10 unchanged sentences

The following overview is intended to provide a brief explanation of the principal factors that have contributed to our recent financial performance.

This overview is intended to be read in conjunction with the more detailed information included in our financial statements and notes thereto, that appear elsewhere in this report.

This overview is intended to be read in conjunction with the more detailed information included in our condensed consolidated financial statements and notes thereto, that appear elsewhere in this report.

The market for machine tools is international in scope.

We have both significant foreign sales and significant foreign manufacturing operations.

During the first three months of fiscal 2026, approximately 48% of our revenues were attributable to customers in Europe, where we typically sell more of our higher-performance, higher-priced VMX series machines.

During the first six months of fiscal 2026, approximately 45% 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 14% of our revenues were attributable to customers in the Asia Pacific region, where we encounter greater pricing pressures.

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We implemented cost reductions in fiscal years 2024 and 2025, adjusted and managed inventories (excluding the impact of foreign currency), and suspended our regular quarterly cash dividend.

We used that cashflow to manage our capital allocation strategies to continue investing in new technologies, product development, and necessary capital expenditures to maximize cashflows without incurring any significant indebtedness as we continue to seek new acquisitions and other growth opportunities.

In recent periods, we have used our operating cashflow to manage our capital allocation strategies to continue investing in new technologies, product development, and necessary capital expenditures without incurring any significant indebtedness as we continue to seek new acquisitions and other growth opportunities.

The cyclicality of our business requires that we exercise discipline in managing through unexpected changes in the markets and industries in which we operate.

We believe that our long history of profitability and the strength of our balance sheet can provide us with stability to manage through these business cycles, and we rely on our past experience in making measured decisions for the long-term success of our business.

Sales and service fees in the first three months of fiscal 2026 decreased by 8%, compared to the same period in fiscal 2025.

The decrease in sales was due primarily to decreased shipments of Milltronics vertical milling and toolroom machines in the Americas and Hurco machines in the United Kingdom, Germany, China and India, as well as a decreased volume of shipments of electro-mechanical components and accessories manufactured by LCM.

Orders in the first three months of fiscal 2026 increased by 5%, compared to the same period in fiscal 2025, reflecting an increase in customer demand for Hurco and Takumi machines in the Americas and India, partially offset by decreased customer demand for Hurco and Takumi machines in Europe and Hurco machines in China.

Sales and service fees in the first six months of fiscal 2026 increased by 4%, compared to the same period in fiscal 2025.

The increase in sales was due primarily to increased shipments of Hurco and Takumi 5-axis and vertical milling machines in the Americas and Asia Pacific and Takumi 5-axis and vertical milling machines in Europe, partially offset by a decreased volume of shipments of Hurco machines in Europe and electro-mechanical components and accessories manufactured by our wholly-owned subsidiary in Italy, LCM Precision Technology S.r.l.

Orders in the first six months of fiscal 2026 increased by 24%, compared to the same period in fiscal 2025, reflecting an increase in customer demand for Hurco and Takumi 5-axis and vertical milling machines in all three regions, as well as increased customer demand for electro-mechanical components and accessories manufactured by LCM.

We have three CNC machine tool brands in our product portfolio.

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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.

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 LCM.

Our sales to foreign customers are denominated, and payments by those customers are made, in the prevailing currencies in the countries in which those customers are located (primarily the Euro, Pound Sterling, and Chinese Yuan).

Our product costs are incurred and paid primarily in the New Taiwan Dollar and the U.S.

Changes in currency exchange rates may have a material effect on our operating results and consolidated financial statements as reported under U.S.

Changes in currency exchange rates may have a material effect on our operating results and condensed consolidated financial statements as reported under U.S.

Generally Accepted Accounting Principles.

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dollar weakens in value relative to a foreign currency, sales made, and expenses incurred, in that currency when translated to U.S.

dollars for reporting in our financial statements, are higher than would be the case when the U.S.

dollars for reporting in our condensed consolidated financial statements, are higher than would be the case when the U.S.

dollar is stronger.

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RESULTS OF OPERATIONS

Three Months Ended January 31, 2026 Compared to Three Months Ended January 31, 2025

Three Months Ended April 30, 2026 Compared to Three Months Ended April 30, 2025

Sales and Service Fees.

Sales and service fees for the first quarter of fiscal year 2026 were $42.9 million, a decrease of $3.5 million, or 8%, compared to the corresponding prior year period, and included a favorable currency impact of $1.8 million, or 4%, when translating foreign sales to U.S.

Sales and service fees for the second quarter of fiscal year 2026 were $47.6 million, an increase of $6.8 million, or 17%, 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.

Sales and Service Fees by Geographic Region

The following table sets forth net sales and service fees by geographic region for the first fiscal quarter ended January 31, 2026 and 2025 (dollars in thousands):

The following table sets forth net sales and service fees by geographic region for the second fiscal quarter ended April 30, 2026 and 2025 (dollars in thousands):

Three Months Ended

Sales in the Americas for the first quarter of fiscal year 2026 decreased by 8%, compared to the corresponding period in fiscal year 2025, primarily due to a decreased volume of shipments of Milltronics vertical milling and toolroom machines.

European sales for the first quarter of fiscal year 2026 decreased by 5%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of 8%, when translating foreign sales to U.S.

Sales in the Americas for the second quarter of fiscal year 2026 increased by 35%, compared to the corresponding period in fiscal year 2025, primarily due to increased shipments of Hurco, Takumi and Milltronics machines.

The increase in machine shipments was mostly attributable to increased shipments of Hurco 5-axis and larger, higher-performance vertical milling machines, Milltronics toolroom machines, and Takumi vertical milling machines.

European sales for the second quarter of fiscal year 2026 decreased by 8%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of 6%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The decrease in European sales for the first quarter of fiscal year 2026 was primarily attributable to a decreased volume of shipments of Hurco VM machines and lathes in the UK and Germany.

In addition to the decreased machine sales for the quarter, European sales also reflected a decline in shipment of accessories manufactured by LCM.

Asian Pacific sales for the first quarter of fiscal year 2026 decreased by 15%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of 2%, when translating foreign sales to U.S.

The year-over-year decrease in European sales was primarily attributable to a decreased volume of shipments of Hurco machines and electro-mechanical components and accessories manufactured by LCM, partially offset by an increased volume of shipments of Takumi 5-axis and vertical milling machines.

Asian Pacific sales for the second quarter of fiscal year 2026 increased by 81%, compared to the corresponding prior year period, and included a favorable currency impact of 2%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The decrease in Asian Pacific sales primarily resulted from a lower volume of shipments of Hurco machines in China and India.

The year-over-year increase in Asian Pacific sales was primarily due to increased shipments in China and India of Hurco 5-axis and larger, higher-performance vertical milling machines, as well as Takumi 5-axis and vertical milling machines.

Sales and Service Fees by Product Category

The following table sets forth sales and service fees by product group and services for the first fiscal quarter ended January 31, 2026 and 2025 (dollars in thousands):

The following table sets forth sales and service fees by product group and services for the second fiscal quarter ended April 30, 2026 and 2025 (dollars in thousands):

Three Months Ended

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† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine tools.

Sales of computerized machine tools for the first quarter of fiscal year 2026 decreased by 11%, compared to the corresponding prior year period, primarily due to a decreased volume of shipments of Milltronics machines in the Americas and of Hurco machines in the United Kingdom, Germany, China and India.

Sales of computer control systems and software for the first quarter of fiscal year 2026 decreased by 31%, 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 first quarter of fiscal year 2026 increased by 17%, compared to the corresponding prior year period, primarily due to increases in aftermarket parts sales of Takumi and Hurco products in the European and Asian Pacific regions.

Service fees for the first quarter of fiscal year 2026 decreased by 4%, compared to the corresponding prior year period, primarily due to decreased aftermarket service fees in the Americas, partially offset by increased aftermarket service fees in the United Kingdom and France.

Sales of computerized machine tools for the second quarter of fiscal year 2026 increased by 22%, compared to the corresponding prior year period, primarily due to increased shipments of Hurco 5-axis and larger, higher-performance vertical milling machines and Takumi vertical milling machines in the Americas and Asia Pacific, partially offset by decreased shipments of Hurco machines in Europe and electro-mechanical components and accessories manufactured by LCM.

Sales of computer control systems and software for the second quarter of fiscal year 2026 decreased by 21%, compared to the corresponding prior year period, due mainly to decreased software sales in the Americas.

Service parts and service fees for the second quarter of fiscal year 2026 changed by immaterial amounts compared to the corresponding prior year period.

Sales for all product lines included a favorable currency impact of 3%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Orders for the first quarter of fiscal year 2026 were $42.0 million, an increase of $1.9 million, or 5%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of $1.5 million, or 4%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the first fiscal quarter ended January 31, 2026 and 2025 (dollars in thousands):

Orders for the second quarter of fiscal year 2026 were $61.6 million, an increase of $17.9 million, or 41%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of $1.8 million, or 4%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the second fiscal quarter ended April 30, 2026 and 2025 (dollars in thousands):

Three Months Ended

Orders in the Americas for the first quarter of fiscal year 2026 increased by 18%, compared to the corresponding period in fiscal year 2025, primarily due to increased customer demand for Hurco and Takumi machines.

European orders for the first quarter of fiscal year 2026 decreased by 2%, compared to the corresponding prior year period, and included a favorable currency impact of 8%, when translating foreign orders to U.S.

The decrease in orders was driven primarily by decreased customer demand for Hurco and Takumi machines in Germany, France, Italy and the UK, partially offset by increased customer demand for electro-mechanical components and accessories manufactured by LCM.

Asian Pacific orders for the first quarter of fiscal year 2026 decreased 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.

The decrease in Asian Pacific orders was driven primarily by a decrease in customer demand for Hurco machines in China, partially offset by increased customer demand for Hurco and Takumi machines in India.

Orders in the Americas for the second quarter of fiscal year 2026 increased by 63%, compared to the corresponding period in fiscal year 2025, primarily due to increased demand for Hurco 5-axis and larger, higher-performance vertical milling machines and for Takumi vertical milling machines.

European orders for the second quarter of fiscal year 2026 increased by 17%, compared to the corresponding prior year period, and included a favorable currency impact of 7%, when translating foreign orders to U.S.

The increase in orders was driven primarily by increased customer demand for Hurco higher-performance milling machines in the United Kingdom and Germany and for Takumi 5-axis machines in France.

Asian Pacific orders for the second quarter of fiscal year 2026 increased by 66%, compared to the corresponding prior year period, and included a favorable currency impact of 4%, when translating foreign orders to U.S.

The increase in orders was driven primarily by increased customer demand for Takumi machines across the Asian Pacific region where our customers are located, as well as for Hurco vertical milling machines in China.

Gross Profit.

Gross profit for the first quarter of fiscal year 2026 was $7.9 million, or 19% of sales, compared to $8.3 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 a greater sales mix of Hurco and Takumi higher-performance machines and improved leverage of fixed costs allocated to sales and production volumes.

Gross profit for the second quarter of fiscal year 2026 was $10.3 million, or 22% of sales, compared to $7.8 million, or 19% of sales, for the corresponding prior year period.

The year-over-year increase in gross profit was primarily due to an increased volume of machine sales and a greater mix of higher-performance machine sales.

Although not significant factors, gross profit for the second quarter of fiscal year 2026 also benefited from price increases implemented in 2026 and tariff refund claims filed with the United States Customs and Border Protection, both of which were partially offset by incremental tariffs compared to prior year.

Operating Expenses.

Selling, general, and administrative expenses for the first quarter of fiscal year 2026 were $11.1 million, or 26% of sales, compared to $10.4 million, or 22% of sales, in the corresponding fiscal year 2025 period, and included an unfavorable currency impact of $0.4 million, when translating foreign expenses to U.S.

Selling, general, and administrative expenses for the second quarter of fiscal year 2026 were $11.1 million, or 23% of sales, compared to $10.9 million, or 27% of sales, in the corresponding fiscal year 2025 period, and included an unfavorable currency impact of $0.3 million, when translating foreign expenses to U.S.

dollars for financial reporting purposes.

The year-over-year increase in selling, general, and administrative expenses for the quarter reflected the unfavorable currency impact and increased employee benefits costs.

The year-over-year increase in selling, general, and administrative expenses was primarily due to the unfavorable currency impact.

Operating Income (Loss).

Operating loss for the first quarter of fiscal year 2026 was $3.2 million, compared to $2.1 million for the corresponding period in fiscal year 2025.

The year-over-year increase in operating loss was primarily due to a decreased volume of shipments of Hurco and Milltronics machines.

Other Income (Expense), Net.

Other income, net for the first quarter of fiscal year 2026 was less than $0.1 million compared to other expense, net of $0.4 million for the corresponding period in fiscal year 2025.

The year-over-year change was due mainly to gains from sale of an business and a decrease in foreign currency exchange loss.

Operating loss for the second quarter of fiscal year 2026 was $0.8 million, compared to $3.1 million for the corresponding period in fiscal year 2025.

The year-over-year decrease in operating loss was primarily due to an increased volume of machine sales and a greater mix of higher-performance machine sales.

Other Expense, Net.

Other expense, net for the second quarter of fiscal year 2026 was $0.8 million compared to $0.6 million for the corresponding period in fiscal year 2025.

The year-over-year increase in other expense, net was due mainly to an increase in foreign currency exchange loss.

Income Taxes.

Income tax expense for the first quarter of fiscal year 2026 was $0.5 million, compared to $2.0 million for the corresponding prior year period.

The year-over-year change was primarily due to a $1.2 million valuation allowance recorded during the first quarter of 2025 on our Italian deferred tax assets and changes in geographic mix of income and loss that includes jurisdictions with differing tax rates.

A full valuation allowance has been recorded against our Italian, U.S., and Chinese deferred tax assets as of January 31, 2026 based on our conclusion that the deferred tax assets were not more likely than not to be recognized.

Income tax expense for the second quarter of fiscal year 2026 was $0.8 million, compared to $0.5 million for the corresponding prior year period.

The year-over-year change was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates.

Six Months Ended April 30, 2026, Compared to Six Months Ended April 30, 2025

Sales and Service Fees.

Sales and service fees for the first six months of fiscal year 2026 were $90.5 million, an increase of $3.2 million, or 4%, compared to the corresponding prior year period, and included a favorable currency impact of $3.2 million, or 4%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Sales and Service Fees by Geographic Region

The following table sets forth sales and service fees by geographic region for the six months ended April 30, 2026 and 2025 (dollars in thousands):

Six Months Ended

Sales in the Americas for the first six months of fiscal year 2026 increased by 12%, compared to the corresponding period in fiscal year 2025, primarily due to increased shipments of Hurco 5-axis as well as larger, higher-performance vertical milling machines and Takumi vertical milling machines.

European sales for the first six months of fiscal year 2026 decreased by 7%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of 7%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Asian Pacific sales for the first six months of fiscal year 2026 increased by 20%, compared to the corresponding prior year period, and included a favorable currency impact of 2%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Sales and Service Fees by Product Category

The following table sets forth sales and service fees by product group and services for the six months ended April 30, 2026 and 2025 (dollars in thousands):

Six Months Ended

Computerized Machine Tools

Computer Control Systems and Software †

Service Parts

† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine tools.

Sales of computerized machine tools for the first six months of fiscal year 2026 increased by 4%, compared to the corresponding prior year period, primarily due to increased shipments of Hurco 5-axis and larger, higher-performance vertical milling machines and Takumi vertical milling machines in the Americas and Asia Pacific, partially offset by decreased shipments of Hurco machines in Europe and electro-mechanical components and accessories manufactured by LCM.

Sales of computer control systems and software for the first six months of fiscal year 2026 decreased by 26%, compared to the corresponding prior year period, due mainly to decreased software sales in the Americas and Europe.

Sales of service parts for the first six months of fiscal year 2026 increased by 8%, compared to the corresponding prior year period, primarily due to increases in aftermarket service parts sales in the United Kingdom and Germany.

Service fees for the first six months of fiscal year 2026 decreased by 2%, compared to the corresponding prior year period, primarily due to decreased aftermarket service fees in the Americas.

Sales for all product lines included a favorable currency impact of 4%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Orders for the first six months of fiscal year 2026 were $103.6 million, an increase of $19.8 million, or 24%, compared to the corresponding period in fiscal year 2025, and included a favorable currency impact of $3.4 million, or 4%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the six months ended April 30, 2026, and 2025 (dollars in thousands):

Six Months Ended

Orders in the Americas for the first six months of fiscal year 2026 increased by 42%, compared to the corresponding period in fiscal year 2025, primarily due to increased demand for Hurco 5-axis and larger, higher-performance vertical milling machines and for Takumi vertical milling machines.

European orders for the first six months of fiscal year 2026 increased by 8%, compared to the corresponding prior year period, and included a favorable currency impact of 8%, when translating foreign orders to U.S.

The year-over-year increase was primarily due to increased customer demand for Hurco and Takumi 5-axis and higher-performance vertical milling machines in the United Kingdom, Germany and France, and increased customer demand for electro-mechanical components and accessories manufactured by LCM, partially offset by a decreased volume of machine demand in Italy and Germany.

Asian Pacific orders for the first six months of fiscal year 2026 increased by 29%, compared to the corresponding prior year period, and included a favorable currency impact of 2%, when translating foreign orders to U.S.

The year-over-year increase in Asian Pacific orders was driven primarily by increased customer demand for Takumi machines across the Asia Pacific region where our customers are located and for higher-performance Hurco vertical milling machines in India.

Gross Profit .

Gross profit for the first six months of fiscal year 2026 was $18.3 million, or 20% of sales, compared to $16.1 million, or 18% of sales, for the corresponding prior year period.

The year-over-year increase in gross profit was primarily due to an increased volume of machine sales and a greater mix of higher-performance machine sales.

Although not significant factors, gross profit for the first six months of fiscal 2026 also benefited from price increases implemented in 2026 and tariff refund claims filed with the United States Customs and Border Protection, both of which were partially offset by incremental tariffs compared to prior year.

Operating Expenses .

Selling, general, and administrative expenses for the first six months of fiscal year 2026 were $22.2 million, or 25% of sales, compared to $21.3 million, or 24% of sales, in the corresponding fiscal year 2025 period, and included an unfavorable currency impact of $0.7 million, when translating foreign expenses to U.S.

dollars for financial reporting purposes.

The year-over-year increase in selling, general and administrative expenses was primarily due to the unfavorable currency impact.

Operating Income/Loss .

Operating loss for the first six months of fiscal year 2026 was $4.0 million, compared to $5.2 million for the corresponding period in fiscal year 2025.

The year-over-year decrease in operating loss was primarily due to an increased volume of machine sales and a greater mix of higher-performance machine sales.

Other Expense, Net .

Other expense, net for the first six months of fiscal year 2026 was $0.8 million compared to $1.0 million for the corresponding period in fiscal year 2025.

The year-over-year decrease in other expense, net was due mainly to gains from sale of a business.

Income Taxes .

Income tax expense for the first six months of fiscal year 2026 was $1.2 million, compared to $2.6 million for the corresponding prior year period.

The year-over-year decrease in income tax expense was primarily due to a $1.2 million valuation allowance recorded during the first quarter of 2025 on our Italian deferred tax assets and changes in geographic mix of income and loss that include jurisdictions with differing tax rates.

A full valuation allowance has been recorded against our Italian, U.S., and Chinese deferred tax assets as of April 30, 2026, based on our conclusion that the deferred tax assets were not more likely than not to be realized.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2026, we had cash and cash equivalents of $48.0 million, compared to $48.7 million at October 31, 2025.

At April 30, 2026, we had cash and cash equivalents of $50.1 million, compared to $48.7 million at October 31, 2025.

Approximately 34% of the $50.1 million of cash and cash equivalents was denominated in U.S.

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We do not believe that the indefinite reinvestment of these funds offshore impairs our ability to meet our domestic working capital needs.

Working capital was $169.5 million at January 31, 2026, compared to $173.1 million at October 31, 2025.

The decrease in working capital was primarily driven by an increase in accounts payable and a decrease in inventories.

Capital expenditures of $0.6 million during the first three months of fiscal year 2026 were primarily for software development costs and capital improvements in existing facilities.

Working capital was $166.9 million at April 30, 2026, compared to $173.1 million at October 31, 2025.

The decrease in working capital was primarily driven by a decrease in inventories and an increase in customer deposits, partially offset by increases in cash and cash equivalents and prepaid and other assets.

Capital expenditures of $1.3 million during the first six months of fiscal year 2026 were primarily for software development costs and capital improvements in existing facilities.

We funded these expenditures with cash on hand.

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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.

We did not repurchase any shares of our common stock during the first quarter of fiscal 2026.

As of January 31, 2026, 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.

We did not repurchase any shares of our common stock during the first six months of fiscal 2026.

As of April 30, 2026, 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.

On June 14, 2024, we announced a suspension of our regular quarterly cash dividend as we seek to enhance our financial flexibility and improve our ability to manage market volatility while focusing on strengthening our balance sheet, reinvesting in our core business and research and development related to emerging technologies, and returning value to shareholders via the appropriate channels in both the near and long-term.

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The maximum consolidated leverage ratio covenant effectively prohibits us from borrowing any amounts under the 2026 Credit Agreement when our consolidated EBITDA for the most recently completed measurement period is negative.

As of the date of this report, the most recently completed measurement period was our first quarter ended January 31, 2026, during which our consolidated EBITDA was negative.

As of the date of this report, the most recently completed measurement period was our second quarter ended April 30, 2026, during which our consolidated EBITDA was negative.

In order to borrow in compliance with the maximum consolidated leverage ratio covenant set forth above, we are effectively prohibited from borrowing under the 2026 Credit Agreement until we have positive consolidated EBITDA for our most recently completed four fiscal quarters.

As of January 31, 2026, our credit facilities consisted of a €1.5 million revolving credit facility in Germany and the $20.0 million secured revolving credit and letter of credit facility.

We had no debt or borrowings outstanding under any of our credit facilities as of January 31, 2026.

As of April 30, 2026, our credit facilities consisted of a €1.5 million revolving credit facility in Germany and the $20.0 million secured revolving credit and letter of credit facility.

We had no debt or borrowings outstanding under any of our credit facilities as of April 30, 2026.

We also have an international cash pooling strategy that generally provides access to available cash deposits and credit facilities when needed in the U.S., Europe, or Asia Pacific.

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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.

Those judgments and estimates have a significant effect on the condensed consolidated 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, 2025, 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 three months of fiscal year 2026, 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, 2025.

During the first six months of fiscal year 2026, 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, 2025.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

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We follow FASB guidance for accounting for guarantees (codified in ASC 460).

As of January 31, 2026, we had four outstanding third party payment guarantees totaling approximately $0.4 million.

As of April 30, 2026, we had four outstanding third party payment guarantees totaling approximately $0.3 million.

The terms of these guarantees are consistent with the underlying customer financing terms.

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• The risks of our international operations;

Governmental actions, initiatives and regulations, including import and export restrictions, duties and tariffs and changes to tax laws;

Governmental actions, initiatives and regulations, including import and export restrictions, duties and tariffs, including an inability to receive any refunds of tariffs paid in previous periods, and changes to tax laws;

• The effects of changes in currency exchange rates;

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• Changes in the SOFR rate;

The impact of the COVID-19 pandemic and other public health epidemics and pandemics on the global economy, our business and operations, our employees and the business, operations and economies of our customers and suppliers.

The impact of public health epidemics and pandemics on the global economy, our business and operations, our employees and the business, operations and economies of our customers and suppliers.

We discuss these and other important risks and uncertainties that may affect our future operations in Part I, Item 1A – Risk Factors in our most recent Annual Report on Form 10K and may update that discussion in Part II, Item 1A – Risk Factors in this report or in a Quarterly Report on Form 10-Q we file hereafter.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis