HURCO COMPANIES INC 10-Q

Item 1 . FINANCIAL STATEMENTS HURCO COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ July 31, ​ July 31, ​ ​ 2025 2024 2025 2024 ​ ​ ​ (unaudited) ​ ​ (unaudited) Sales and service fees ​ $ 45,806 ​ $ 42,651 ​ $ 133,087 ​ $ 132,882 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales and service ​ 36,694 ​ 34,808 ​ 107,856 ​ 107,325 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 9,112 ​ 7,843 ​ 25,231 ​ 25,557 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling, general and administrative expenses ​ 10,762 ​ 10,376 ​ 32,041 ​ 33,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating (loss) income ​ ( 1,650 ) ​ ( 2,533 ) ​ ( 6,810 ) ​ ( 7,795 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ 4 ​ 159 ​ 66 ​ 426 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income ​ 58 ​ 172 ​ 239 ​ 492 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Investment income, net ​ 13 ​ 59 ​ 186 ​ 126 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other (expense) income, net ​ ( 1,543 ) ​ ( 136 ) ​ ( 2,499 ) ​ ( 1,125 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Loss) income before income taxes ​ ( 3,126 ) ​ ​ ( 2,597 ) ​ ( 8,950 ) ​ ​ ( 8,728 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision (benefit) for income taxes ​ 567 ​ 6,999 ​ 3,126 ​ 6,438 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ ( 3,693 ) ​ $ ( 9,596 ) ​ $ ( 12,076 ) ​ $ ( 15,166 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Loss) income per common share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.58 ) ​ $ ( 1.47 ) ​ $ ( 1.87 ) ​ $ ( 2.33 ) Diluted ​ $ ( 0.58 ) ​ $ ( 1.47 ) ​ $ ( 1.87 ) ​ $ ( 2.33 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 6,463 ​ ​ 6,513 ​ ​ 6,474 ​ ​ 6,505 Diluted ​ ​ 6,463 ​ ​ 6,513 ​ ​ 6,474 ​ ​ 6,505 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends paid per share ​ $ — ​ $ — ​ $ — ​ $ 0.32 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The accompanying notes are an integral part of the condensed consolidated financial statements. ​ 3 Table of Contents HURCO COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ July 31, ​ July 31, ​ ​ 2025 2024 2025 2024 ​ ​ ​ (unaudited) ​ ​ (unaudited) ​ Net (loss) income ​ $ ( 3,693 ) ​ $ ( 9,596 ) ​ $ ( 12,076 ) ​ $ ( 15,166 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive (loss) income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation (loss) gain of foreign currency financial statements ​ 5,462 ​ 1,085 ​ 8,129 ​ 1,601 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Gain) / loss on derivative instruments reclassified into operations, net of tax (expense)/ benefit of $ 91 , $ 112 , $ 333 and $ 297 , respectively ​ 304 ​ 373 ​ 1,111 ​ 992 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain / (loss) on derivative instruments, net of tax expense (benefit) of $ 163 , ($ 74 ), $ 11 and ($ 261 ), respectively ​ 544 ​ ( 248 ) ​ 37 ​ ( 870 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other comprehensive (loss) income ​ 6,310 ​ 1,210 ​ 9,277 ​ 1,723 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive (loss) income ​ $ 2,617 ​ $ ( 8,386 ) ​ $ ( 2,799 ) ​ $ ( 13,443 ) ​ ​ The accompanying notes are an integral part of the condensed consolidated financial statements. ​ 4 Table of Contents HURCO COMPANIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ July 31, ​ October 31, ​ 2025 2024 ASSETS ​ (unaudited) ​ ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 44,494 ​ $ 33,330 Accounts receivable, net ​ 27,645 ​ 36,678 Inventories ​ 147,538 ​ 153,037 Derivative assets ​ 2,782 ​ 323 Prepaid and other assets ​ 5,835 ​ 5,209 Total current assets ​ 228,294 ​ 228,577 Property and equipment: ​ ​ ​ ​ Land ​ 1,046 ​ 1,046 Building ​ 7,381 ​ 7,381 Machinery and equipment ​ 26,919 ​ 28,106 Leasehold improvements ​ 4,644 ​ 4,667 ​ ​ 39,990 ​ 41,200 Less accumulated depreciation and amortization ​ ( 31,671 ) ​ ( 32,404 ) Total property and equipment, net ​ 8,319 ​ 8,796 Non–current assets: ​ ​ ​ ​ Software development costs, less accumulated amortization ​ 7,684 ​ 7,044 Intangible assets, net ​ 663 ​ 763 Operating lease - right of use assets, net ​ ​ 11,929 ​ ​ 11,313 Deferred income taxes ​ 641 ​ 1,349 Investments ​ 8,821 ​ 8,216 Other assets ​ 2,737 ​ 2,585 Total non–current assets ​ 32,475 ​ 31,270 Total assets ​ $ 269,088 ​ $ 268,643 LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ Accounts payable ​ $ 27,343 ​ $ 24,951 Customer deposits ​ ​ 4,453 ​ ​ 4,308 Derivative liabilities ​ ​ 2,038 ​ ​ 705 Operating lease liabilities ​ ​ 4,190 ​ ​ 3,829 Accrued payroll and employee benefits ​ 6,819 ​ 7,786 Accrued income taxes ​ 1,622 ​ 866 Accrued expenses ​ 4,113 ​ 4,258 Accrued warranty expenses ​ 961 ​ 1,086 Total current liabilities ​ 51,539 ​ 47,789 Non–current liabilities: ​ ​ ​ ​ Deferred income taxes ​ 47 ​ 53 Accrued tax liability ​ ​ 29 ​ ​ 537 Operating lease liabilities ​ ​ 8,116 ​ ​ 7,852 Deferred credits and other ​ ​ 5,685 ​ ​ 5,240 Total non–current liabilities ​ ​ 13,877 ​ ​ 13,682 Commitment and contingencies ​ ​ — ​ ​ — Shareholders’ equity: ​ ​ ​ ​ ​ ​ Preferred stock: no par value per share, 1,000,000 shares authorized; no shares issued ​ ​ — ​ ​ — Common stock: no par value, $ .10 stated value per share, 12,500,000 shares authorized; 6,569,682 and 6,548,838 shares issued and 6,402,396 and 6,435,624 shares outstanding, as of July 31, 2025 and October 31, 2024, respectively ​ ​ 640 ​ 644 Additional paid-in capital ​ 60,781 ​ 61,500 Retained earnings ​ 149,346 ​ 161,422 Accumulated other comprehensive loss ​ ( 7,095 ) ​ ( 16,394 ) Total shareholders’ equity ​ 203,672 ​ 207,172 Total liabilities and shareholders’ equity ​ $ 269,088 ​ $ 268,643 The accompanying notes are an integral part of the condensed consolidated financial statements. 5 Table of Contents HURCO COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ July 31, ​ July 31, ​ 2025 2024 2025 2024 ​ ​ ​ (unaudited) ​ (unaudited) Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ ( 3,693 ) ​ $ ( 9,596 ) ​ $ ( 12,076 ) ​ $ ( 15,166 ) Adjustments to reconcile net income to net cash provided by (used for) operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for doubtful accounts ​ ( 125 ) ​ ​ 20 ​ ( 134 ) ​ ​ ( 40 ) Deferred income taxes ​ ( 1,623 ) ​ ​ ( 3,395 ) ​ ( 4,000 ) ​ ​ ( 3,536 ) Deferred income tax valuation allowances ​ ​ 1,639 ​ ​ 8,158 ​ ​ 5,294 ​ ​ 8,158 Equity in loss (income) of affiliates ​ 179 ​ ​ ( 181 ) ​ 48 ​ ​ ( 268 ) Foreign currency (gain) loss ​ ​ 3,099 ​ ​ ( 571 ) ​ ​ 2,552 ​ ​ ( 1,177 ) Unrealized (gain) loss on derivatives ​ ( 813 ) ​ ​ ( 418 ) ​ ( 914 ) ​ ​ 821 Depreciation and amortization ​ 642 ​ ​ 888 ​ 2,000 ​ ​ 2,678 Stock–based compensation ​ 578 ​ ​ 269 ​ 1,629 ​ ​ 1,080 Change in assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Increase) decrease in accounts receivable ​ ( 1,638 ) ​ ​ 2,141 ​ 9,754 ​ ​ 15,377 (Increase) decrease in inventories ​ 1,467 ​ ​ 1,386 ​ 11,099 ​ ​ ( 2,357 ) (Increase) decrease in prepaid expenses ​ 185 ​ ​ 1,344 ​ ( 1,182 ) ​ ​ ( 1,068 ) Increase (decrease) in accounts payable ​ 2,489 ​ ​ ( 524 ) ​ 1,104 ​ ​ ( 2,860 ) Increase (decrease) in customer deposits ​ 820 ​ ​ 1,049 ​ 80 ​ ​ 1,442 Increase (decrease) in accrued expenses ​ ( 288 ) ​ ​ ( 484 ) ​ ( 461 ) ​ ​ ( 3 ) Increase (decrease) in accrued payroll and employee benefits ​ ​ ( 145 ) ​ ​ 393 ​ ​ ( 967 ) ​ ​ ( 1,865 ) Increase (decrease) in accrued income tax ​ ​ ( 244 ) ​ ​ ( 365 ) ​ ​ 726 ​ ​ ( 909 ) Increase (decrease) in accrued tax liability ​ ​ — ​ ​ 4 ​ ​ ( 508 ) ​ ​ ( 591 ) Net change in deferred tax assets and liabilities ​ 47 ​ ​ ( 46 ) ​ 172 ​ ​ ( 57 ) Net change in derivative assets and liabilities ​ ​ 171 ​ ​ ( 527 ) ​ ​ ( 63 ) ​ ​ ( 633 ) Other ​ ( 209 ) ​ ​ ( 167 ) ​ ( 281 ) ​ ​ ( 338 ) Net cash provided by (used for) operating activities ​ 2,538 ​ ​ ( 622 ) ​ 13,872 ​ ​ ( 1,312 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from sale of property and equipment ​ 69 ​ ​ 1 ​ 245 ​ ​ 26 Purchase of property and equipment ​ ( 470 ) ​ ​ ( 219 ) ​ ( 871 ) ​ ​ ( 793 ) Software development costs ​ ​ ( 462 ) ​ ​ ( 516 ) ​ ( 1,417 ) ​ ​ ( 1,253 ) Other investments ​ 118 ​ ​ — ​ 118 ​ ​ 117 Net cash provided by (used for) investing activities ​ ( 745 ) ​ ​ ( 734 ) ​ ( 1,925 ) ​ ​ ( 1,903 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends paid ​ — ​ ​ — ​ — ​ ​ ( 2,093 ) Stock repurchases ​ ​ ( 2,000 ) ​ ​ ( 508 ) ​ ​ ( 2,000 ) ​ ​ ( 508 ) Taxes paid related to net settlement of restricted shares ​ — ​ ​ — ​ ( 352 ) ​ ​ ( 315 ) Net cash provided by (used for) financing activities ​ ( 2,000 ) ​ ​ ( 508 ) ​ ( 2,352 ) ​ ​ ( 2,916 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of exchange rate changes on cash and cash equivalents ​ 894 ​ ​ 376 ​ 1,569 ​ ​ 401 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash and cash equivalents ​ 687 ​ ​ ( 1,488 ) ​ 11,164 ​ ​ ( 5,730 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents at beginning of period ​ 43,807 ​ ​ 37,542 ​ 33,330 ​ ​ 41,784 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents at end of period ​ $ 44,494 ​ $ 36,054 ​ $ 44,494 ​ $ 36,054 ​ The accompanying notes are an integral part of the condensed consolidated financial statements. ​ 6 Table of Contents HURCO COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (In thousands, except shares outstanding) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended July 31, 2025 and 2024 ​ ​ (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Shares ​ ​ ​ ​ Paid–in ​ Retained ​ Comprehensive ​ ​ ​ (unaudited) Outstanding Amount Capital Earnings Income (Loss) Total Balances, April 30, 2024 ​ 6,523,259 ​ $ 652 ​ $ 62,155 ​ $ 172,461 ​ $ ( 19,691 ) ​ $ 215,577 Net income (loss) ​ — ​ ​ — ​ ​ — ​ ​ ( 9,596 ) ​ — ​ ​ ( 9,596 ) Other comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ — ​ 1,210 ​ ​ 1,210 Deferred income tax valuation allowances ​ — ​ ​ — ​ ​ — ​ ​ — ​ ( 327 ) ​ ​ ( 327 ) Stock–based compensation expense, net of taxes withheld for vested restricted shares ​ — ​ ​ — ​ ​ 269 ​ ​ — ​ — ​ ​ 269 Stock repurchases ​ ( 29,413 ) ​ ​ ( 3 ) ​ ​ ( 505 ) ​ ​ — ​ — ​ ​ ( 508 ) Balances, July 31, 2024 ​ 6,493,846 ​ $ 649 ​ $ 61,919 ​ $ 162,865 ​ $ ( 18,808 ) ​ $ 206,625 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances, April 30, 2025 ​ 6,506,868 ​ $ 651 ​ $ 62,192 ​ $ 153,039 ​ $ ( 13,602 ) ​ $ 202,280 Net income (loss) ​ — ​ 0 — ​ 0 — ​ 0 ( 3,693 ) ​ ​ — ​ ​ ( 3,693 ) Other comprehensive income (loss) ​ — ​ 0 — ​ 0 — ​ 0 — ​ ​ 6,310 ​ ​ 6,310 Deferred income tax valuation allowances ​ — ​ 0 — ​ 0 — ​ 0 — ​ ​ 197 ​ ​ 197 Stock–based compensation expense, net of taxes withheld for vested restricted shares ​ — ​ 0 — ​ 0 578 ​ 0 — ​ ​ — ​ ​ 578 Stock repurchases ​ ( 104,472 ) ​ 0 ( 11 ) ​ 0 ( 1,989 ) ​ 0 — ​ ​ — ​ ​ ( 2,000 ) Balances, July 31, 2025 ​ 6,402,396 ​ $ 640 ​ $ 60,781 ​ $ 149,346 ​ $ ( 7,095 ) ​ $ 203,672 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended July 31, 2025 and 2024 ​ ​ (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Common Stock ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Shares ​ ​ ​ ​ Paid–in ​ Retained ​ Comprehensive ​ ​ ​ ​ Outstanding Amount Capital Earnings Income (Loss) Total Balances, October 31, 2023 ​ 6,462,138 ​ $ 646 ​ $ 61,665 ​ $ 180,124 ​ $ ( 20,204 ) ​ $ 222,231 Net income (loss) ​ — ​ ​ — ​ ​ — ​ ​ ( 15,166 ) ​ — ​ ​ ( 15,166 ) Other comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ — ​ 1,723 ​ ​ 1,723 Deferred income tax valuation allowances ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 327 ) ​ ​ ( 327 ) Stock–based compensation expense, net of taxes withheld for vested restricted shares ​ 61,121 ​ ​ 6 ​ ​ 759 ​ ​ — ​ — ​ ​ 765 Stock repurchases ​ ( 29,413 ) ​ ​ ( 3 ) ​ ​ ( 505 ) ​ ​ — ​ — ​ ​ ( 508 ) Dividends paid ​ — ​ ​ — ​ ​ — ​ ​ ( 2,093 ) ​ — ​ ​ ( 2,093 ) Balances, July 31, 2024 ​ 6,493,846 ​ $ 649 ​ $ 61,919 ​ $ 162,865 ​ $ ( 18,808 ) ​ $ 206,625 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances, October 31, 2024 ​ 6,435,624 ​ $ 644 ​ $ 61,500 ​ $ 161,422 ​ $ ( 16,394 ) ​ $ 207,172 Net income (loss) ​ — ​ ​ — ​ ​ — ​ ​ ( 12,076 ) ​ — ​ ​ ( 12,076 ) Other comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ — ​ 9,277 ​ ​ 9,277 Deferred income tax valuation allowances ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 22 ​ ​ 22 Stock–based compensation expense, net of taxes withheld for vested restricted shares ​ 71,244 ​ ​ 7 ​ ​ 1,270 ​ ​ — ​ — ​ ​ 1,277 Stock repurchases ​ ( 104,472 ) ​ ​ ( 11 ) ​ ​ ( 1,989 ) ​ ​ — ​ — ​ ​ ( 2,000 ) Balances, July 31, 2025 ​ 6,402,396 ​ $ 640 ​ $ 60,781 ​ $ 149,346 ​ $ ( 7,095 ) ​ $ 203,672 ​ The accompanying notes are an integral part of the condensed consolidated financial statements. ​ 7 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. GENERAL ​ The unaudited Condensed Consolidated Financial Statements include the accounts of Hurco Companies, Inc. and its consolidated subsidiaries. As used in this report, the words “we”, “us”, “our”, “Hurco” and the “Company” refer to Hurco Companies, Inc. and its consolidated subsidiaries. ​ We design, manufacture, and sell computerized (i.e., Computer Numeric Control (“CNC”)) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry through a worldwide sales, service, and distribution network. Although most of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training, and applications support. ​ The condensed consolidated financial information as of July 31, 2025 and for the three and nine months ended July 31, 2025, and July 31, 2024 is unaudited. However, in our opinion, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, results of operations, changes in shareholders’ equity and cash flows for and at the end of the interim periods. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2024. ​ 2. REVENUE RECOGNITION ​ We design, manufacture, and sell computerized machine tools. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories, and replacement parts for our products, as well as customer service, training, and applications support. ​ We recognize revenues from the sale of machine tools, components and accessories and services, and reflect the consideration to which we expect to be entitled. We record revenues based on a five-step model in accordance with Financial Accounting Standards Board (“FASB”) guidance codified in Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers” (“ASC 606”). In accordance with ASC 606, we have defined contracts as agreements with our customers and distributors in the form of purchase orders, packing or shipping documents, invoices, and, periodically, verbal requests for components and accessories. For each contract, we identify our performance obligations, which are delivering goods or services, determine the transaction price, allocate the contract transaction price to each of the performance obligations (when applicable), and recognize the revenue when (or as) the performance obligation to the customer is fulfilled. A good or service is transferred when the customer obtains control of that good or service. Our computerized machine tools are general purpose computer-controlled machine tools that are typically used in stand–alone operations. Prior to shipment, we test each machine to ensure the machine’s compliance with standard operating specifications. We deem that the customer obtains control upon delivery of the product and that obtaining control is not contingent upon contractual customer acceptance. Therefore, we recognize revenue from sales of our machine tool systems upon delivery of the product to the customer or distributor, which is normally at the time of shipment. ​ Depending upon geographic location, after shipment, a machine may be installed at the customer’s facility by a distributor, independent contractor, or by one of our service technicians. In most instances where a machine is sold through a distributor, we have no installation involvement. If sales are direct or through sales agents, we will typically complete the machine installation, which consists of the reassembly of certain parts that were removed for shipping and the re-testing of the machine to ensure that it is performing within the standard specifications. We consider the machine installation process for our 3-axis machines to be inconsequential and immaterial within the context of the contract. For our 5-axis machines that we install, we estimate the fair value of the installation performance obligation and recognize that installation revenue on a prorata basis over the period of the installation process. ​ 8 Table of Contents From time to time, and depending upon geographic location, we may provide training or freight services. We consider these services to be immaterial within the context of the contract, as the value of these services typically does not rise to a material level as a component of the total contract value. Service fees from maintenance contracts are deferred and recognized in earnings on a prorata basis over the term of the contract and are generally sold on a stand-alone basis. Customer discounts and estimated product returns are recorded as a reduction of revenue in the same period that the related sales are recorded. We have reviewed the overall sales transactions for variable consideration and have determined that these amounts are not material. ​ 3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We are exposed to certain market risks relating to our ongoing business operations, including foreign currency risk, interest rate risk and credit risk. We manage our exposure to these and other market risks through regular operating and financing activities. Currently, the only risk that we manage through the use of derivative instruments is foreign currency risk, for which we enter into derivative instruments in the form of foreign currency forward exchange contracts with a major financial institution. We enter into these forward exchange contracts to reduce the potential effects of foreign exchange rate movements on our net equity investment in one of our foreign subsidiaries, to reduce the impact on gross profit and net earnings from sales and purchases denominated in foreign currencies, and to reduce the impact on our net earnings of foreign currency fluctuations on receivables and payables denominated in foreign currencies that are different than the subsidiaries’ functional currency. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, Pounds Sterling, Indian Rupee, Singapore Dollars, Chinese Yuan, Polish Zloty, and New Taiwan Dollars. We record all derivative instruments as assets or liabilities at fair value. Derivatives Designated as Hedging Instruments ​ We enter into foreign currency forward exchange contracts periodically to hedge certain forecasted inter-company sales and purchases denominated in the following foreign currencies: the Pound Sterling, Euro and New Taiwan Dollar. The purpose of these instruments is to mitigate the risk that the U.S. dollar net cash inflows and outflows resulting from sales and purchases denominated in foreign currencies will be adversely affected by changes in exchange rates. These forward contracts have been designated as cash flow hedge instruments and are recorded in the Condensed Consolidated Balance Sheets at fair value in Derivative assets and Derivative liabilities. The effective portion of the gains and losses resulting from the changes in the fair value of these hedge contracts is deferred in Accumulated other comprehensive loss and recognized as an adjustment to Cost of sales and service in the period that the corresponding inventory sold that is the subject of the related hedge contract is recognized, thereby providing an offsetting economic impact against the corresponding change in the U.S. dollar value of the inter-company sale or purchase being hedged. The ineffective portion of gains and losses resulting from the changes in the fair value of these hedge contracts is immediately reported in Other income (expense), net. We perform quarterly assessments of hedge effectiveness by verifying and documenting the critical terms of the hedge instrument and determining that forecasted transactions have not changed significantly. We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default. ​ We had forward contracts outstanding as of July 31, 2025, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2025 through July 2026 . The contract amounts, expressed at forward rates in U.S. dollars at July 31, 2025, were $ 5.8 million for Euros, $ 3.9 million for Pounds Sterling, and $ 16.6 million for New Taiwan Dollars. At July 31, 2025, we had an immaterial amount of realized gain, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss. Included in this amount was $ 0.1 million of unrealized gain, net of tax, related to cash flow hedge instruments that remain subject to currency fluctuation risk. The majority of these deferred gains will be recorded as an adjustment to Cost of sales and service in periods through August 2026, when the corresponding inventory that is the subject of the related hedge contracts is sold, as described above. ​ We are also exposed to foreign currency exchange risk related to our investment in net assets in foreign countries. To manage this risk, we entered into a forward contract with a notional amount of € 3.0 million in November 2024. We designated this forward contract as a hedge of our net investment in Euro denominated assets. We selected the forward method under FASB guidance related to the accounting for derivative instruments and hedging activities. The forward method requires all changes in the fair value of the contract to be reported as a cumulative translation adjustment in Accumulated other comprehensive loss, net of tax, in the same manner as the underlying hedged net assets. This forward contract matures in November 2025 . As of July 31, 2025, we had a realized gain of $ 1.2 million and an unrealized loss of $ 0.1 million, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss related to this forward contract. ​ 9 Table of Contents Derivatives Not Designated as Hedging Instruments ​ We also enter into foreign currency forward exchange contracts to protect against the effects of foreign currency fluctuations on inter-company receivables, payables and loans denominated in foreign currencies. These derivative instruments are not designated as hedges under FASB guidance and, as a result, changes in their fair value are reported currently in Other (expense) income, net in the Condensed Consolidated Statements of Operations consistent with the transaction gain or loss on the related receivables and payables denominated in foreign currencies. ​ We had forward contracts outstanding as of July 31, 2025, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2025 through March 2026 . The contract amounts, expressed at forward rates in U.S. dollars at July 31, 2025, totaled $ 63.0 million. ​ Fair Value of Derivative Instruments ​ We recognize the fair value of derivative instruments as assets and liabilities on a gross basis on our Condensed Consolidated Balance Sheets. As of July 31, 2025 and October 31, 2024, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ July 31, 2025 ​ October 31, 2024 ​ ​ ​ Balance Sheet ​ Fair ​ Balance Sheet ​ Fair ​ Derivatives Location Value Location Value Designated as Hedging Instruments: ​ ​ ​ ​ ​ ​ ​ Foreign exchange forward contracts ​ Derivative assets ​ $ 612 ​ Derivative assets ​ $ 165 ​ Foreign exchange forward contracts ​ Derivative liabilities ​ $ 669 ​ Derivative liabilities ​ $ 430 ​ ​ ​ ​ ​ ​ ​ ​ ​ Not Designated as Hedging Instruments: ​ ​ ​ ​ ​ ​ ​ ​ Foreign exchange forward contracts ​ Derivative assets ​ $ 2,170 ​ Derivative assets ​ $ 158 ​ Foreign exchange forward contracts ​ Derivative liabilities ​ $ 1,369 ​ Derivative liabilities ​ $ 275 ​ ​ Effect of Derivative Instruments on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Operations ​ Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the three months ended July 31, 2025 and 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location of Gain ​ Amount of Gain ​ ​ Amount of Gain (Loss) ​ (Loss) Reclassified ​ (Loss) Reclassified ​ ​ Recognized in Other ​ from Other ​ from Other ​ ​ Comprehensive ​ Comprehensive ​ Comprehensive Derivatives ​ Income (Loss) ​ Income (Loss) ​ Income (Loss) ​ ​ Three Months Ended ​ ​ ​ Three Months Ended ​ ​ July 31, ​ ​ ​ July 31, ​ 2025 2024 ​ 2025 2024 Designated as Hedging Instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Effective portion) ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign exchange forward contracts – Intercompany sales/purchases ​ $ 544 ​ $ ( 248 ) ​ Cost of sales and service ​ $ ( 304 ) $ ( 373 ) Foreign exchange forward contract – Net investment ​ $ ( 5 ) ​ $ ( 20 ) ​ ​ ​ ​ ​ 10 Table of Contents We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended July 31, 2025 or 2024. We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended July 31, 2025 and 2024 on derivative instruments not designated as hedging instruments (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location of Gain ​ ​ ​ ​ ​ ​ ​ ​ (Loss) Recognized ​ Amount of Gain (Loss) Derivatives in Operations ​ Recognized in Operations ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ July 31, ​ ​ ​ 2025 2024 Not Designated as Hedging Instruments: ​ ​ ​ Foreign exchange forward contracts Other (expense) income, net ​ $ 2,395 $ ( 632 ) ​ The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended July 31, 2025 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign Currency ​ Cash Flow ​ ​ ​ ​ Translation ​ Hedges Total Balance, April 30, 2025 ​ $ ( 11,844 ) ​ $ ( 1,758 ) ​ $ ( 13,602 ) Other comprehensive income (loss) before reclassifications ​ 5,462 ​ ​ 544 ​ 6,006 Reclassifications ​ — ​ ​ 304 ​ 304 Deferred income tax valuation allowances ​ — ​ ​ 197 ​ 197 Balance, July 31, 2025 ​ $ ( 6,382 ) ​ $ ( 713 ) ​ $ ( 7,095 ) ​ Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the nine months ended July 31, 2025 and 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location of Gain ​ Amount of Gain ​ ​ ​ Amount of Gain (Loss) ​ (Loss) Reclassified ​ (Loss) Reclassified ​ ​ ​ Recognized in Other ​ from Other ​ from Other ​ ​ ​ Comprehensive ​ Comprehensive ​ Comprehensive ​ ​ ​ Income (Loss) ​ Income (Loss) ​ Income (Loss) ​ ​ ​ Nine Months Ended ​ ​ ​ Nine Months Ended ​ ​ ​ July 31, ​ ​ ​ July 31, ​ Derivatives 2025 2024 ​ 2025 2024 Designated as Hedging Instruments: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Effective Portion) ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign exchange forward contracts – Intercompany sales/purchases ​ $ 37 ​ $ ( 870 ) ​ Cost of sales and service ​ $ ( 1,111 ) $ ( 992 ) ​ Foreign exchange forward contract – Net investment ​ $ ( 101 ) ​ $ ( 29 ) ​ ​ ​ ​ 11 Table of Contents We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the nine months ended July 31, 2025 or 2024. We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the nine months ended July 31, 2025 and 2024 on derivative instruments not designated as hedging instruments (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location of Gain ​ ​ ​ ​ ​ ​ ​ ​ ​ (Loss) Recognized ​ Amount of Gain (Loss) ​ Derivatives ​ in Operations ​ Recognized in Operations ​ ​ ​ ​ ​ Nine Months Ended ​ ​ ​ ​ ​ July 31, ​ Derivatives ​ 2025 2024 Not Designated as Hedging Instruments: ​ ​ ​ Foreign exchange forward contracts Other (expense) income, net ​ $ 618 $ ( 2,042 ) ​ The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the nine months ended July 31, 2025 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ Cash ​ ​ ​ ​ ​ Currency ​ Flow ​ ​ ​ ​ Translation Hedges Total Balance, October 31, 2024 ​ $ ( 14,511 ) $ ( 1,883 ) ​ $ ( 16,394 ) Other comprehensive income (loss) before reclassifications ​ 8,129 ​ 37 ​ 8,166 Reclassifications ​ — ​ 1,111 ​ 1,111 Deferred income tax valuation allowances ​ — ​ 22 ​ 22 Balance, July 31, 2025 ​ $ ( 6,382 ) $ ( 713 ) ​ $ ( 7,095 ) ​ ​ ​ ​ ​ 4. EQUITY INCENTIVE PLAN ​ In March 2016, we adopted the Hurco Companies, Inc. 2016 Equity Incentive Plan (as amended, the “2016 Equity Plan”), which allows us to grant awards of stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards. The 2016 Equity Plan replaced the Hurco Companies, Inc. 2008 Equity Incentive Plan (the “2008 Equity Plan”) and is the only active plan under which equity awards may be made by us to our employees and non-employee directors. No further awards will be made under our 2008 Equity Plan. The total number of shares of our common stock that may be issued pursuant to awards under the 2016 Equity Plan was initially 856,048 , which included 386,048 shares that remained available for future grants under the 2008 Equity Plan as of March 10, 2016, the date our shareholders approved the 2016 Equity Plan. On March 10, 2022, our shareholders approved the Amended and Restated Hurco Companies, Inc. 2016 Equity Incentive Plan, which, among other items, increased the aggregate number of shares that may be issued under the 2016 Equity Plan by 850,000 shares. On March 13, 2025, our shareholders approved an amendment to the 2016 Equity Plan, which, once again, increased by 850,000 the aggregate number of shares that may be issued thereunder. ​ The Compensation Committee of our Board of Directors has the authority to determine the officers, directors, and key employees who will be granted awards under the 2016 Equity Plan; designate the number of shares subject to each award; determine the terms and conditions upon which awards will be granted; and prescribe the form and terms of award agreements. We have granted restricted shares and performance stock units under the 2016 Equity Plan that are currently outstanding. The market value of a share of our common stock, for purposes of the 2016 Equity Plan, is the closing sale price as reported by the Nasdaq Global Select Market on the date in question or, if not a trading day, on the last preceding trading date. ​ On March 13, 2025, the Compensation Committee granted a total of 29,868 shares of time-based restricted stock to our non-employee directors. The restricted shares vest in full one year from the date of grant provided the recipient remains on the board of directors through that date. The grant date fair value of the restricted shares was based on the closing sales price of our common stock on the grant date, which was $ 16.07 per share. ​ 12 Table of Contents On January 7, 2025, the Compensation Committee approved a long-term incentive compensation arrangement for our executive officers in the form of time-based restricted shares and performance stock units (“PSUs”), which will be payable in shares of our common stock if earned and vested. The awards were approximately 45 % time-based vesting and approximately 55 % performance-based vesting. The three-year performance period for the PSUs is fiscal year 2025 through fiscal year 2027. ​ On that date, the Compensation Committee granted a total of 75,119 shares of time-based restricted stock to our executive officers. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $ 19.81 per share. ​ On January 7, 2025, the Compensation Committee also granted a total target number of 50,078 PSUs to our executive officers designated as “PSU – NI”. These PSUs were weighted as approximately 30 % of the overall 2025 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average net income over the three-year period of fiscal years 2025-2027. Participants will have the ability to earn between 50 % of the target number of the PSUs – NI for achieving threshold performance and 200 % of the target number of the PSUs – NI for achieving maximum performance. The grant date fair value of the PSUs – NI was based on the closing sales price of our common stock on the grant date, which was $ 19.81 per PSU. ​ On January 7, 2025, the Compensation Committee also granted a total target number of 41,735 PSUs to our executive officers designated as “PSU –FCF”. These PSUs were weighted as approximately 25 % of the overall 2025 executive long-term incentive compensation arrangement and will vest and be paid based upon the achievement of pre-established goals related to our average free cash flow over the three-year period of fiscal years 2025-2027. Participants will have the ability to earn between 50 % of the target number of the PSUs – FCF for achieving threshold performance and 200 % of the target number of the PSUs – FCF for achieving maximum performance. The grant date fair value of the PSUs – FCF was based on the closing sales price of our common stock on the grant date, which was $ 19.81 per PSU. ​ On November 13, 2024, the Compensation Committee granted a total of 13,525 shares of time-based restricted stock to our non-executive employees. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $ 21.80 per share. ​ A reconciliation of our restricted stock and PSU activity and related information for the nine-month period ended July 31, 2025 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average Grant ​ Number of Shares Date Fair Value Unvested at October 31, 2024 378,092 ​ $ 24.97 Shares or units granted 210,325 ​ ​ 19.41 Shares or units vested ( 71,244 ) ​ ​ 25.80 Shares or units cancelled ( 42,472 ) ​ ​ 31.06 Shares withheld ( 17,748 ) ​ ​ 28.51 Unvested at July 31, 2025 456,953 ​ $ 21.58 ​ During the nine months of fiscal 2025 and 2024, we recorded approximately $ 1.6 million and $ 1.1 million, respectively, of stock-based compensation expense related to grants under the 2016 Equity Plan. As of July 31, 2025, there was an estimated $ 3.5 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal year 2028. ​ 5. EARNINGS (LOSS) PER SHARE ​ Per share results have been computed based on the average number of common shares outstanding over the period in question. The computation of basic and diluted net income (loss) per share is determined using net income (loss) applicable to common shareholders as the numerator and the number of shares outstanding as the denominator as follows (in thousands, except per share amounts): ​ 13 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ July 31, ​ July 31, ​ ​ 2025 ​ 2024 ​ 2025 ​ 2024 ​ Basic Diluted Basic Diluted Basic Diluted Basic Diluted Net (loss) income ​ $ ( 3,693 ) ​ $ ( 3,693 ) ​ $ ( 9,596 ) ​ $ ( 9,596 ) ​ $ ( 12,076 ) ​ $ ( 12,076 ) ​ $ ( 15,166 ) ​ $ ( 15,166 ) Undistributed earnings allocated to participating shares ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — Net (loss) income applicable to common shareholders ​ $ ( 3,693 ) ​ $ ( 3,693 ) ​ $ ( 9,596 ) ​ $ ( 9,596 ) ​ $ ( 12,076 ) ​ $ ( 12,076 ) ​ $ ( 15,166 ) ​ $ ( 15,166 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ 6,463 ​ 6,463 ​ 6,513 ​ 6,513 ​ 6,474 ​ 6,474 ​ 6,505 ​ 6,505 Stock options and contingently issuable securities ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ — ​ ​ 6,463 ​ 6,463 ​ 6,513 ​ 6,513 ​ 6,474 ​ 6,474 ​ 6,505 ​ 6,505 (Loss) income per share ​ $ ( 0.58 ) ​ $ ( 0.58 ) ​ $ ( 1.47 ) ​ $ ( 1.47 ) ​ $ ( 1.87 ) ​ $ ( 1.87 ) ​ $ ( 2.33 ) ​ $ ( 2.33 ) ​ For the three and nine months ended July 31, 2025 and July 31, 2024, there were an immaterial number of stock options and contingently issuable securities that were excluded from the diluted loss per share calculation because they were anti-dilutive due to the net loss in the periods. ​ ​ ​ ​ 6. ACCOUNTS RECEIVABLE Accounts receivable is net of provision for credit losses of $ 1.3 million and $ 1.5 million as of July 31, 2025 and October 31, 2024, respectively. ​ 7. INVENTORIES ​ Inventories, priced at the lower of cost (first-in, first-out method) or net realizable value, are summarized below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ July 31, October 31, ​ ​ 2025 ​ 2024 ​ Purchased parts and sub–assemblies ​ $ 37,122 $ 35,385 ​ Work–in–process ​ 11,476 ​ 13,428 ​ Finished goods ​ 98,940 ​ 104,224 ​ Inventories ​ $ 147,538 $ 153,037 ​ ​ ​ 8. LEASES Our lease portfolio includes leased production and assembly facilities, warehouses and distribution centers, office space, vehicles, material handling equipment utilized in our production and assembly facilities, laptops and other information technology equipment, as well as other miscellaneous leased equipment. Most of the leased production and assembly facilities have lease terms ranging from two to five years , although the terms and conditions of our leases can vary significantly from lease to lease. We have assessed the specific terms and conditions of each lease to determine the amount of the lease payments and the length of the lease term, which includes the minimum period over which lease payments are required plus any renewal options that are both within our control to exercise and reasonably certain of being exercised upon lease commencement. In determining whether or not a renewal option is reasonably certain of being exercised, we assessed all relevant factors to determine if sufficient incentives exist as of lease commencement to conclude renewal is reasonably certain. There are no material residual value guarantees provided by us, nor any restrictions or covenants imposed by the leases to which we are a party. In determining the lease liability, we utilize our incremental borrowing rate to discount the future lease payments over the lease term to present value. ​ We record a right-of-use asset and lease liability on our Condensed Consolidated Balance Sheets for all leases that, at the commencement date, have a lease term of more than 12 months and are classified as leases under ASC 842. 14 Table of Contents ​ We recorded total operating lease expense of $ 1.3 million for each of the three months ended July 31, 2025 and 2024, respectively, and $ 4.0 million and $ 4.1 million for the nine months ended July 31, 2025 and 2024, respectively, which is classified within Cost of sales and service and Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations. Operating lease expense includes short-term leases and variable lease payments which are immaterial. There were no lease costs capitalized on the Condensed Consolidated Balance Sheets as of July 31, 2025. ​ The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the three and nine months ended July 31, 2025 and 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended July 31, ​ ​ Nine Months Ended July 31, ​ ​ 2025 ​ 2024 ​ ​ 2025 ​ 2024 Operating cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for amounts included in the measurement of lease liabilities ​ $ 1,298 ​ $ 1,202 ​ $ 3,831 ​ $ 3,500 Non-cash information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Right-of-use assets obtained in exchange for new operating lease liabilities ​ $ 1,621 ​ $ 1,676 ​ $ 3,903 ​ $ 4,278 ​ The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of July 31, 2025 (in thousands): ​ ​ ​ ​ ​ Remainder of 2025 ​ $ 1,228 2026 ​ ​ 4,360 2027 ​ ​ 3,517 2028 ​ ​ 2,303 2029 ​ ​ 772 2030 and thereafter ​ ​ 926 Total ​ ​ 13,106 Less: Imputed interest ​ ​ ( 800 ) Present value of operating lease liabilities ​ $ 12,306 ​ As of July 31, 2025, the weighted-average remaining term of our lease portfolio was approximately 3.5 years and the weighted-average discount rate was approximately 3.4 %. ​ 9. SEGMENT INFORMATION We operate in a single operating and reportable segment: industrial automation equipment. We design, manufacture, and sell computerized (i.e., Computer Numeric Control) machine tools, consisting primarily of vertical machining centers (mills) and turning centers (lathes), to companies in the metal cutting industry through a worldwide sales, service, and distribution network. Although most of our computer control systems and software products are proprietary, they predominantly use industry standard personal computer components. Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products. We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training, and applications support. ​ 15 Table of Contents The following table sets forth sales and service fees by product group and services for the three and nine months ended July 31, 2025 and 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended July 31, ​ Nine Months Ended July 31, ​ 2025 2024 ​ 2025 2024 Computerized Machine Tools ​ $ 36,889 $ 33,191 ​ $ 106,347 $ 104,176 Computer Control Systems and Software † ​ 530 ​ 697 ​ 1,843 ​ 1,866 Service Parts ​ 6,309 ​ 6,535 ​ 18,404 ​ 20,389 Service Fees ​ 2,078 ​ 2,228 ​ 6,493 ​ 6,451 Total ​ $ 45,806 $ 42,651 ​ $ 133,087 $ 132,882 † Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine tools. ​ ​ 10. GUARANTEES AND PRODUCT WARRANTIES ​ 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 Guarantees). 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 it 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. ​ We provide warranties on our products with respect to defects in material and workmanship. The terms of these warranties are generally one year for machines and shorter periods for service parts. We recognize an estimated liability with respect to this obligation at the time of product sale, with subsequent warranty claims recorded against the estimated liability. The amount of the warranty estimated liability is determined based on historical trend experience and any known warranty issues that could cause future warranty costs to differ from historical experience. ​ A reconciliation of the changes in our warranty estimated liability is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ July 31, ​ ​ 2025 ​ 2024 Balance, beginning of period ​ $ 1,086 $ 1,294 Provision for warranties during the period ​ 1,747 ​ 1,629 Charges to the estimated liability ​ ( 1,890 ) ​ ( 1,861 ) Impact of foreign currency translation ​ 18 ​ 14 Balance, end of period ​ $ 961 $ 1,076 ​ The year-over-year decrease in our warranty estimated liability was primarily due to a lower sales volume of more complex, higher-performance machines. ​ 11. DEBT AGREEMENTS ​ On December 31, 2018, we and our subsidiary Hurco B.V. entered into a credit agreement with Bank of America, N.A., as the lender, which was subsequently amended on each of March 13, 2020, December 23, 2020, December 17, 2021, January 4, 2023, and December 19, 2023 (as amended, the “2018 Credit Agreement”). The 2018 Credit Agreement provides for an unsecured revolving credit and letter of credit facility in a maximum aggregate amount of $ 40.0 million. The 2018 Credit Agreement provides that the maximum amount of outstanding letters of credit at any one time may not exceed $ 10.0 million, the maximum amount of outstanding loans made to our subsidiary Hurco B.V. at any one time may not exceed $ 20.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time may not exceed $ 20.0 million. Under the 2018 Credit Agreement, we and Hurco B.V. are borrowers, and certain of our other subsidiaries are guarantors. The scheduled maturity date of the 2018 Credit Agreement is December 31, 2025 . ​ 16 Table of Contents Borrowings under the 2018 Credit Agreement bear interest at floating rates based on, at our option, either (i) a rate based upon the secured overnight financing rate (“SOFR”), the Sterling Overnight Index Average Reference Rate, the Euro Interbank Offering Rate, or another alternative currency-based rate approved by the lender, depending on the term of the loan and the currency in which such loan is denominated, plus 1.00 % per annum, or (ii) a base rate (which is the highest of (a) the federal funds rate plus 0.50 %, (b) the prime rate or (c) the one month SOFR-based rate plus 1.00 %), plus 0.00 % per annum. Outstanding letters of credit will carry an annual rate of 1.00 %. ​ The 2018 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $ 10.0 million); (2) restricting us from making certain payments, including (a) cash dividends, except that we may pay cash dividends as long as immediately before and after giving effect to such payment, the sum of the unused amount of the commitments under the 2018 Credit Agreement plus our cash on hand is not less than $ 10.0 million, and as long as we are not in default before and after giving effect to such dividend payments and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $ 25.0 million; (3) requiring that we maintain a minimum working capital of $ 125.0 million; and (4) requiring that we maintain a minimum tangible net worth of $ 176.5 million. We may use the proceeds from advances under the 2018 Credit Agreement for general corporate purposes. ​ In March 2019, our wholly-owned subsidiaries in Taiwan (Hurco Manufacturing Limited (“HML”)) and China (Ningbo Hurco Machine Tool, Ltd. (“NHML”)) closed on uncommitted revolving credit facilities with maximum aggregate amounts of 150 million New Taiwan Dollars and 32.5 million Chinese Yuan, respectively. As uncommitted facilities, both the Taiwan and China credit facilities are subject to review and termination by the respective underlying lending institution from time to time. In February and December 2023, NHML and HML, respectively, renewed the above-referenced credit facilities on substantially similar terms and identical maximum aggregate limits. ​ As of July 31, 2025, our existing credit facilities consisted of a € 1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility, and the $ 40.0 million revolving credit facility under the 2018 Credit Agreement. ​ As of July 31, 2025, there were no borrowings under any of our credit facilities and there was approximately $ 51.2 million of available borrowing capacity thereunder. There were also no borrowings under any of our credit facilities as of October 31, 2024. ​ 12. INCOME TAXES ​ Our provision for income taxes and effective tax rate is affected by the geographic composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates, and other events that are not consistent from period to period, such as changes in income tax laws. ​ We recorded income tax expense during the nine months of fiscal 2025 of $ 3.1 million compared to $ 6.4 million for the same period in fiscal 2024. Our effective tax rate for the nine months of fiscal 2025 was ( 35 %), compared to ( 74 %) in the corresponding prior year period. The year-over-year change 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 $ 4.0 million valuation allowance recorded against our U.S., Chinese and Italian deferred tax assets, we did not record a tax benefit of $ 4.0 million 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 based on our conclusion that the deferred tax assets were not more likely than not going to be realized. ​ Our unrecognized tax benefits were $ 29,000 as of July 31, 2025, and $ 28,000 as of October 31, 2024, and in each case included accrued interest. ​ 17 Table of Contents We recognize accrued interest and penalties related to unrecognized tax benefits as components of income tax expense. As of July 31, 2025, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 8,000 , which did not include the federal tax benefit of interest deductions. ​ On July 4, 2025, the United States Congress passed budget reconciliation bill H.R. 1 referred to as the One Big Beautiful Bill ("OBBB"). The OBBB contains several changes to corporate taxation including modifications to capitalization of research and development expenses, limitations on deductions for interest expense, and accelerated fixed asset depreciation. We are still evaluating the impact of the OBBB, but we expect that the legislation will likely not have a material impact on our consolidated financial statements and related disclosures. ​ We file U.S. federal and state income tax returns, as well as tax returns in several foreign jurisdictions. The statutes of limitations with respect to unrecognized tax benefits will expire this fiscal year. ​ Currently our manufacturing subsidiary in Italy is under tax inspection for fiscal year October 31, 2021. ​ 13. FINANCIAL INSTRUMENTS FASB fair value guidance establishes a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exist, therefore requiring an entity to develop its own assumptions. The carrying amounts for cash and cash equivalents approximate their fair values due to the short maturity of these instruments, and such instruments meet the Level 1 criteria of the three–tier fair value hierarchy discussed above. The carrying amount of short-term debt approximates fair value due to the variable rate of the interest and the short-term nature of the instrument. In accordance with this guidance, the following table represents the fair value hierarchy for our financial assets and liabilities measured at fair value as of July 31, 2025 and October 31, 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Assets ​ Liabilities ​ ​ July 31, 2025 October 31, 2024 July 31, 2025 October 31, 2024 Level 1 ​ ​ ​ ​ ​ ​ ​ Mutual Funds ​ $ 3,282 $ 2,942 $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Level 2 ​ ​ ​ ​ ​ ​ ​ Derivatives ​ $ 2,782 $ 323 $ 2,038 ​ $ 705 ​ ​ Included in Level 1 assets are mutual fund investments under a nonqualified deferred compensation plan. We estimate the fair value of these investments on a recurring basis using market prices that are readily available. Included in Level 2 fair value measurements are derivative assets and liabilities related to gains and losses on foreign currency forward exchange contracts entered into with a third party. We estimate the fair value of these derivatives on a recurring basis using foreign currency exchange rates obtained from active markets. Derivative instruments are reported in the accompanying Condensed Consolidated Financial Statements at fair value. We have derivative financial instruments in the form of foreign currency forward exchange contracts as described in Note 3 of Notes to Condensed Consolidated Financial Statements. The U.S. dollar equivalent notional amounts of these contracts were $ 89.1 million and $ 85.1 million at July 31, 2025 and October 31, 2024, respectively. The fair value of our foreign currency forward exchange contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility. The counterparties to the forward exchange contracts are substantial and creditworthy financial institutions. We do not consider either the risk of counterparties’ non-performance or the economic consequences of counterparties’ non-performance to be material risks. ​ 18 Table of Contents 14. CONTINGENCIES AND LITIGATION From time to time, we are involved in various claims and lawsuits arising in the normal course of business. Pursuant to applicable accounting rules, we accrue the minimum liability for each known claim when the estimated outcome is a range of possible loss and no one amount within that range is more likely than another. We maintain insurance policies for such matters, and we record insurance recoveries when we determine such recovery to be probable. We do not expect any of these claims, individually or in the aggregate, to have a material adverse effect on our consolidated financial position or results of operations. We believe that the ultimate resolution of claims for any losses will not exceed our insurance policy coverages. ​ 15. NEW ACCOUNTING PRONOUNCEMENTS ​ New Accounting Pronouncements: In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update will be effective for our fiscal year 2025 annual reporting and subsequent interim periods. We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures. ​ In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to income tax disclosures, which aims to improve disclosures and presentation requirements to the transparency of the income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments will be effective for our fiscal year 2026, with the option to early adopt at any time prior to the effective date. We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures. ​ In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires companies to disclose disaggregated information about any relevant expense caption presented on the face of the income statement within continuing operations into the following required natural expense categories, as applicable: (1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible asset amortization, and (5) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities or other depletion expenses. This update will be effective for our fiscal year 2028 annual reporting. Early adoption is permitted. We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures. ​ 19 Table of Contents