Gencor Releases Second Quarter Fiscal 2024 Results

Rhea-AI Summary

Gencor Industries, Inc. reported a strong second quarter fiscal 2024 with a 33.4% increase in net revenues to $40.7 million compared to the same quarter last year. Gross profit margins increased to 30.3% from 29.8%. Operating income rose 37.0% to $7.1 million, and net income increased by 27.7% to $6.2 million. The company had no outstanding debt, $117.1 million in cash and marketable securities, and a backlog of $50.4 million. Gencor's President highlighted strong results and optimism from highway contractors, positioning the company well for future growth.

Positive

• Net revenues increased by 33.4% to $40.7 million for the quarter, showing strong growth.

• Gross profit margins improved to 30.3% from 29.8%, indicating better profitability.

• Operating income surged by 37.0% to $7.1 million, showcasing improved operational performance.

• Net income rose by 27.7% to $6.2 million, reflecting solid financial growth.

• The company had no short-term or long-term debt outstanding, providing a strong financial position.

• Gencor had $117.1 million in cash and marketable securities, ensuring financial stability.

• The backlog of $50.4 million indicates strong demand and future revenue prospects.

• Gencor's President emphasized optimistic outlook with highway contractors, positioning the company for continued growth.

Negative

• None.

Insights

Financial Analyst

Gencor's Q2 fiscal 2024 report demonstrates a robust performance with a 33.4% increase in net revenues and a 27.7% rise in net income year-over-year. The growth in gross profit margins, although modest, reflects improved efficiency and pricing strategies. Notably, the 34.8% increase in backlog suggests a healthy order book and potential revenue streams in future quarters. The increased SG&A expenses, a result of enhanced trade show activities among other factors, should be monitored for future impact on net income. Overall, these results could be seen as a strong indicator of the company's current financial health and operational execution. The company's strategic focus on infrastructure, as evidenced by the success at the World of Asphalt show, aligns with ongoing governmental investments, presenting further opportunities for growth.

Market Research Analyst

Gencor's strategic positioning in the heavy machinery industry for highway construction is timely, as the Infrastructure Investment and Jobs Act continues to generate demand. The significant increase in backlog represents industry confidence, suggesting that Gencor may continue to benefit from public investment in infrastructure. The high-interest rate environment has not dampened the demand for Gencor's equipment, indicating the essential nature of its products. Investors should note the potential for sustained growth, given the commitment to infrastructure spending, but also consider broader economic factors that could affect the industry, such as shifts in fiscal policy or changes in the construction sector’s dynamics.

Investment Analyst

The decline in non-operating income, mainly from a decrease in gains on marketable securities, aligns with Gencor's strategy of selling most equities in January 2023. This decision, possibly made to take advantage of market conditions or to rebalance the portfolio, indicates a proactive approach to asset management. However, investors should be aware that such moves can create variability in non-operating income. Additionally, the improved liquidity position, with a notable increase in cash and marketable securities from September 2023, provides financial flexibility and a solid foundation for continued operations and strategic initiatives. Absence of debt enhances the company's financial stability and is a positive sign for investors, potentially leading to a lower risk profile.

ORLANDO, Fla., May 10, 2024 (GLOBE NEWSWIRE) -- Gencor Industries, Inc. (the “Company” or “Gencor”) (NYSE American LLC: GENC) announced today net revenues increased 33.4% to $40,676,000 for the quarter ended March 31, 2024 compared with $30,501,000 for the quarter ended March 31, 2023. Gross profit margins for the quarter ended March 31, 2024 were 30.3% compared with 29.8% for the quarter ended March 31, 2023 on improved absorption on increased production and favorable price realization.

Product engineering and development expenses increased $19,000 to $893,000 for the quarter ended March 31, 2024, as compared to $874,000 for the quarter ended March 31, 2023. Selling, general and administrative (“SG&A”) expenses increased $1,295,000 to $4,357,000 for the quarter ended March 31, 2024, compared to $3,062,000 for the quarter ended March 31, 2023. The increase in SG&A expenses was primarily due to increased trade show expenses, professional fees and commissions on higher sales.

Operating income increased 37.0% or $1,911,000 from $5,161,000 for the quarter ended March 31, 2023 to $7,072,000 for the quarter ended March 31, 2024, on significantly higher net revenue.

For the quarter ended March 31, 2024, the Company had net non-operating income of $1,008,000 compared to $1,257,000 for the quarter ended March 31, 2023. The decrease was primarily due to a decrease in gains on marketable securities as the Company sold most of its equities in January 2023. Interest and dividend income, net of fees, was $803,000 in the quarter ended March 31, 2024 as compared to $565,000 in the quarter ended March 31, 2023. The increase was primarily due to higher rates earned on cash and fixed income investments. The net realized and unrealized gains on marketable securities were $205,000 for the quarter ended March 31, 2024 compared to $692,000 for the quarter ended March 31, 2023.

The effective income tax rates for the quarters ended March 31, 2024 and March 31, 2023, were 23.0% and 24.1%, respectively, based on the expected annual effective income tax rate.

Net income for the quarter ended March 31, 2024 increased 27.7% to $6,222,000, or $0.42 basic and diluted earnings per share, from $4,873,000, or $0.33 basic and diluted earnings per share, for the quarter ended March 31, 2023. The improved net income and earnings per share resulted primarily from the increased net revenue.

For the six months ended March 31, 2024 the Company had net revenue of $66,694,000 and net income of $10,548,000 ($0.72 per diluted share) versus net revenue of $56,327,000 and net income of $8,349,000 ($0.57 per diluted share) for the six months ended March 31, 2023.

At March 31, 2024, the Company had $117,107,000 of cash and marketable securities compared to $101,283,000 at September 30, 2023. Net working capital was $176,523,000 at March 31, 2024. The Company had no short-term or long-term debt outstanding at March 31, 2024.

The Company’s backlog was $50.4 million at March 31, 2024 compared to $37.4 million at March 31, 2023.

Marc Elliott, Gencor’s President, commented, “Second quarter results were strong across the board, further demonstrating our successful strategy centered on top-line growth and solid margin performance. During the quarter, we continued to see healthy demand for our equipment despite the high-interest rate environment. Our backlog of $50.4 million is 34.8% higher than the prior year. It represents continued optimism from highway contractors that the Federal government and many states continue to focus on investing in America’s infrastructure.

I am also pleased to report that Gencor had a strong showing at the World of Asphalt show in March, with higher-than-normal attendance, which portends continued industry confidence via the Infrastructure Investment and Jobs Act. We remain well-positioned to capitalize on our success and new opportunities going forward.”

Gencor Industries, Inc. is a diversified heavy machinery manufacturer for the production of highway construction materials and equipment and environmental control machinery and equipment used in a variety of applications.

GENCOR INDUSTRIES, INC. Condensed Consolidated Income Statements (Unaudited)
	For the Quarters Ended March 31,						For the Six Months Ended March 31,
		2024			2023			2024			2023
Net revenue	$	40,676,000		$	30,501,000		$	66,694,000		$	56,327,000
Cost of goods sold		28,354,000			21,404,000			46,838,000			41,415,000
Gross profit		12,322,000			9,097,000			19,856,000			14,912,000
Operating expenses:
Product engineering and development		893,000			874,000			1,694,000			1,771,000
Selling, general and administrative		4,357,000			3,062,000			7,707,000			5,861,000
Total operating expenses		5,250,000			3,936,000			9,401,000			7,632,000
Operating income		7,072,000			5,161,000			10,455,000			7,280,000
Other income (expense), net:
Interest and dividend income, net of fees		803,000			565,000			1,519,000			1,058,000
Net realized and unrealized gains (losses) on marketable securities		205,000			692,000			1,724,000			2,654,000
Total other income (expense), net		1,008,000			1,257,000			3,243,000			3,712,000
Income before income tax expense		8,080,000			6,418,000			13,698,000			10,992,000
Income tax expense		1,858,000			1,545,000			3,150,000			2,643,000
Net income	$	6,222,000		$	4,873,000		$	10,548,000		$	8,349,000
Net income per common share – basic and diluted	$	0.42		$	0.33		$	0.72		$	0.57

GENCOR INDUSTRIES, INC. Condensed Consolidated Balance Sheets (Unaudited)
ASSETS	March 31, 2024			September 30, 2023
Current assets:
Cash and cash equivalents	$	30,213,000		$	17,031,000
Marketable securities at fair value (cost of $87,006,000 at March 31, 2024 and $85,514,000 at September 30, 2023)		86,894,000			84,252,000
Accounts receivable, less allowance for credit losses of $398,000 at March 31, 2024 and $545,000 at September 30, 2023		5,758,000			2,467,000
Costs and estimated earnings in excess of billings		2,469,000			1,508,000
Inventories, net		63,732,000			71,527,000
Prepaid expenses and other current assets		1,216,000			2,169,000
Total current assets		190,282,000			178,954,000
Property and equipment, net		12,296,000			13,246,000
Deferred and other income taxes		2,902,000			3,167,000
Other long-term assets		562,000			381,000
Total Assets	$	206,042,000		$	195,748,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,944,000		$	3,269,000
Customer deposits		7,945,000			6,815,000
Accrued expenses		2,513,000			3,753,000
Current operating lease liabilities		357,000			328,000
Total current liabilities		13,759,000			14,165,000
Non-current operating lease liabilities		152,000			-
Total liabilities		13,911,000			14,165,000
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $.10 per share; 300,000 shares authorized; none issued		-			-
Common stock, par value $.10 per share; 15,000,000 shares authorized;
12,338,845 shares issued and outstanding at March 31, 2024 and September 30, 2023		1,234,000			1,234,000
Class B Stock, par value $.10 per share; 6,000,000 shares authorized;
2,318,857 shares issued and outstanding at March 31, 2024 and September 30, 2023		232,000			232,000
Capital in excess of par value		12,590,000			12,590,000
Retained earnings		178,075,000			167,527,000
Total shareholders’ equity		192,131,000			181,583,000
Total Liabilities and Shareholders’ Equity	$	206,042,000		$	195,748,000

Caution Concerning Forward Looking Statements - This press release and our other communications and statements may contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements about the Company’s beliefs, plans, objectives, goals, expectations, estimates, projections and intentions. These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond the Company’s control. Actual results may differ materially depending on a variety of important factors, including the financial condition of the Company’s customers, changes in the economic and competitive environments and demand for the Company’s products. In addition, the impact of the invasion by Russia into Ukraine and the conflict between Israel and Hamas, as well as actions taken by other countries, including the U.S., in response to such conflicts, could result in a disruption in our supply chain and higher costs of our products. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements.

For information concerning these factors and related matters, see the following sections of the Company’s Annual Report on Form 10-K for the year ended September 30, 2023: (a) Part I, Item 1A, “Risk Factors” and (b) Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. However, other factors besides those referenced could adversely affect the Company’s results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by the Company herein speak as of the date of this press release. The Company does not undertake to update any forward-looking statements, except as required by law.

Unless the context otherwise indicates, all references in this press release to the “Company,” “Gencor,” “we,” “us,” or “our,” or similar words are to Gencor Industries, Inc. and its subsidiaries.

Contact:        
Eric Mellen, Chief Financial Officer
407-290-6000

FAQ

How much did Gencor's net revenues increase by in the second quarter of fiscal 2024?

Gencor's net revenues increased by 33.4% to $40.7 million in the second quarter of fiscal 2024.

What was the gross profit margin for Gencor in the second quarter of fiscal 2024?

Gencor's gross profit margin was 30.3% in the second quarter of fiscal 2024.

How much was Gencor's net income in the second quarter of fiscal 2024?

Gencor's net income in the second quarter of fiscal 2024 was $6.2 million.

Did Gencor have any outstanding debt at the end of the second quarter of fiscal 2024?

No, Gencor had no short-term or long-term debt outstanding at the end of the second quarter of fiscal 2024.

What was Gencor's backlog at the end of the second quarter of fiscal 2024?

Gencor's backlog was $50.4 million at the end of the second quarter of fiscal 2024.