Art's Way Manufacturing — First Nine Months of Fiscal 2026 Earnings Summary

Financial Performance

• Consolidated sales increased 12.3% year-over-year to $20,110,000 for the nine months ended August 31, 2026, compared to $17,910,000 in the prior period; sales decreased 12.7% to $5,615,000 for the third quarter compared to $6,432,000 in the prior year.
• Consolidated net income was $230,000 for the nine months ended August 31, 2026, a decline from $1,680,000 in the same period of fiscal 2025; net loss was $140,000 for the third quarter compared to net income of $254,000 in the prior year.
• Earnings per share (EPS) for the nine months ended August 31, 2026, was $0.04, down from $0.33 in the prior period; EPS for the third quarter was $(0.03) compared to $0.05 in the prior year.
• Consolidated operating income declined to $547,000 for the nine months ended August 31, 2026, from $858,000 in the prior period; operating loss was $(70,000) for the third quarter compared to operating income of $345,000 in the prior year.
• Gross profit as a percentage of sales declined by 2.1 percentage points to 27.9% for the nine months ended August 31, 2026, compared to the prior period.
• Operating expenses as a percentage of sales increased by 0.2 percentage points to 25.1% for the nine months ended August 31, 2026.
• The nine-month net income comparison is affected by a $1,154,000 Employee Retention Credit received in Q2 of fiscal 2025 that was not repeated in fiscal 2026.

Guidance and Future Outlook

• Management expects strong performance going forward driven by a backlog of significant projects in the Modular Buildings segment, which represents the largest backlog in the company's history.
• Current backlog in the Modular Buildings segment is expected to carry the company through the end of fiscal 2027.
• Management anticipates continued progress with a focus on quality, innovation, and customer service.
• The company plans to build up grinder mixer inventory if it can work through its backlog, though demand for these products currently exceeds supply.
• The company is actively working to regain margins in both business segments while continuing to grow in their respective markets.

Business Segments and Product Lines

• Agricultural Products: Sales increased 12.4% to $19,147,000 (calculated from total sales minus Modular Buildings) for the nine months ended August 31, 2026, compared to the prior period; sales increased 2.7% for the third quarter.
  • Gross profit as a percentage of sales increased by 4.0 percentage points to 28.4% for the nine months ended August 31, 2026.
  • Operating expenses as a percentage of sales increased by 1.1 percentage points to 34.6% for the nine months ended August 31, 2026.
  • Operating loss improved by $215,000 for the nine months ended August 31, 2026, compared to the prior period.
  • Net loss for the segment was $725,000 for the nine months ended August 31, 2026, compared to net income of $139,000 in the prior period; this is impacted by a $976,000 Employee Retention Credit received in the prior period.
  • Grinder mixer sales increased approximately $1,523,000 year-over-year.
  • Demand for grinder mixers, manure spreaders, and bale processors increased due to strong livestock prices.
  • Demand for sugar beet equipment declined due to lower sugar beet prices, partially mitigated by the introduction of the new ClearView beet head in 12 and 8-row configurations.
  • The company strategically deployed an experienced product specialist to primary beet territory in April 2026.
  • Elevated inventory levels of whole goods in beet and manure spreading equipment are being maintained to react to demand spikes.
• Modular Buildings: Sales increased 12.1% to $962,000 (calculated from total sales minus Agricultural Products) for the nine months ended August 31, 2026; sales decreased 26.0% for the third quarter.
  • Gross profit as a percentage of sales declined by 9.2 percentage points to 27.2% for the nine months ended August 31, 2026.
  • Operating expenses as a percentage of sales decreased by 0.09 percentage points to 13.2% for the nine months ended August 31, 2026.
  • Net income for the segment was $955,000 for the nine months ended August 31, 2026, compared to $1,541,000 in the prior period; this is impacted by a $179,000 Employee Retention Credit received in the prior period.
  • The third quarter revenue decline was attributed to the timing of revenue recognition on projects under contract.
  • Margin decrease in the segment was due to selling a warrantied agriculture modular building at cost, project overages on site work, and contingencies that became profits in the first quarter of fiscal 2025 which were not repeated.

Market and Competitive Landscape

• The overall outlook for the agricultural sector is described as bleak due to modest row crop prices and rising input costs.
• Sales growth in the agricultural segment is attributed to dealer inventories returning to normal stocking levels from previous years.
• The price of steel used in manufacturing increased over 40% since the fiscal year end.
• Rising oil prices are expected to challenge margins for the remainder of fiscal 2026.

Risks and Challenges

• Rising material and operating costs are putting pressure on margins in both business segments.
• The company faces challenges from rising steel prices (over 40% increase) and rising oil prices.
• The agricultural sector faces risks from modest row crop prices and rising input costs.
• The company is carrying elevated inventory levels of whole goods in beet and manure spreading equipment.
• Forward-looking statements note risks including customer demand, credit-worthiness of customers, ability to operate at lower expense levels, ability to complete projects timely, ability to renew financing, ability to repay debt and meet covenants, inflation, tariffs, economic conditions, labor market competition, raw material costs, and unexpected changes in segment performance.

Management Commentary and Tone

• Marc McConnell, President, CEO, and Chairman, stated that while third-quarter results were not entirely representative of the year's evolution, the company is pleased with strong demand for livestock equipment and agricultural equipment sales remaining ahead of 2025 levels.
• Management expressed confidence in the Modular Buildings segment, citing strong demand and a record backlog.
• Management acknowledged the battle with rising costs but emphasized active efforts to regain margins while growing in their markets.
• The tone regarding the agricultural sector is cautious regarding the overall outlook but positive regarding specific product demand driven by livestock prices.

Other Key Points

• The company has approximately 100 employees across two locations: Armstrong, Iowa, and Monona, Iowa.
• The company operates two reporting segments: Agricultural Products and Modular Buildings.
• The Employee Retention Credit received in fiscal 2025 significantly impacted comparability for the nine-month period, with $1,154,000 total impact ($976,000 in Agricultural Products and $179,000 in Modular Buildings).
• The company is a small, publicly traded company (Nasdaq: ARTW) specializing in equipment manufacturing for over 70 years.