Hurco Companies, Inc. (HURC): Business Model Canvas [Dec-2025 Updated]

You're digging into the strategy of Hurco Companies, Inc. (HURC), and frankly, the numbers from the first nine months of fiscal year 2025-showing a $12.1 million net loss-make that dive essential. As someone who's mapped these models for years, I can tell you that understanding how they make money, from their proprietary WinMax control software to their diverse machine brands like Hurco and Takumi, is key to seeing past the near-term dip. This Business Model Canvas cuts through the noise, laying out exactly where their value comes from and how they structure costs across their global dealer network, so you can see the real levers for their next move; check out the details below to see their core engine.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Key Partnerships

You're looking at the structure that supports Hurco Companies, Inc.'s value delivery, especially as the company navigates a market where Q1 Fiscal Year 2025 sales reached $46.41 million, despite a challenging order intake of $40,085,000 for that quarter.

Global network of independent distributors and dealers for sales and service

Hurco Companies, Inc. relies on a worldwide sales, service, and distribution network spanning North America, Europe, and Asia. Sales channels include authorized distributor partners, independent contractors, or direct sales/service technicians, depending on the geographic location. In instances where a machine is sold through a distributor, Hurco Companies, Inc. typically has no installation involvement. The company had 6,483,990 shares of common stock outstanding as of February 28, 2025.

Strategic technology partners like Hexagon (WORKNC CAM software) for integration

The collaboration with Hexagon, specifically integrating the WORKNC CAM software, was designed to enhance CNC machine capabilities. This strategic alignment yielded quantifiable operational improvements. The results from this integration included a 30% reduction in production errors and a 20% increase in customer satisfaction scores.

Automation solution providers, such as BMO Automation, for turnkey systems

The preferred partnership with BMO Automation focuses on delivering tested automation solutions requiring minimal integration to address the skills gap. BMO Automation, based in the Netherlands, has been active in machining industry automation since 2008. This partnership aims to increase the productivity and profitability of Hurco Companies, Inc.'s customers' CNC machines, supporting Industry 4.0 technology adoption.

Educational institutions (e.g., Vincennes University) to address the skills gap

The partnership with Vincennes University (VU) began in 2013 to improve youth education and fill the manufacturing skills gap. Hurco Companies, Inc. has provided VU with a total of 32 state-of-the-art Hurco CNC machine tools for the Precision Machining Technology program. Annually, about 50 graduates with experience on Hurco machines enter the workforce. Hurco Companies, Inc. has also hired several graduates of the VU program as applications engineers.

Hurco PRO program members for product reliability and feature optimization feedback

The Hurco PRO program involves key users providing direct feedback. While specific membership numbers for late 2025 aren't public, this feedback loop is critical for optimizing features like the WinMax® control, which supports both Conversational Programming and Industry-Standard NC Programming (G-code).

Here's a quick look at the quantifiable impact from some of these key relationships:

Partner Type	Specific Partner/Program	Quantifiable Metric	Value/Amount
Technology Integration	Hexagon (WORKNC CAM)	Reduction in production errors	30%
Technology Integration	Hexagon (WORKNC CAM)	Increase in customer satisfaction scores	20%
Education/Skills Gap	Vincennes University (Since 2013)	Total CNC machines provided to VU	32 units
Education/Skills Gap	Vincennes University	Annual graduates with Hurco experience	About 50
Financial Context (H1 FY2025)	Overall Company Performance	Total Orders (First Six Months FY2025)	$83,790,000
Financial Context (H1 FY2025)	Overall Company Performance	Total Sales and Service Fees (First Six Months FY2025)	$87,280,000

The company's cash position as of January 31, 2025, stood at $41,820,000 in cash and cash equivalents, which supports the ongoing investment in these strategic alliances.

The Hurco brand is supported by its premium technologies, including 5-axis CNC machining centers and lathes, while the Milltronics brand targets cost-conscious manufacturers with a simplified control. The Takumi brand focuses on high-speed, high-precision machining, often utilizing third-party controls like Fanuc.

The gross profit margin for Q1 Fiscal Year 2025 was 18% of sales, compared to 22% in the prior year period, reflecting lower volume sales of higher-performance machines, which are often key components in advanced automation setups.

For the second quarter of fiscal year 2025, Hurco Companies, Inc. reported sales and service fees of $40.87 million, with orders at $43.7 million.

You should review the latest 10-Q filing for the most current metrics on distributor performance across the Americas, Europe, and Asia Pacific regions.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Key Activities

Research and development (R&D) of proprietary CNC control technology (WinMax®).

Innovation at Hurco Companies, Inc. is driven by developing control technology that increases the profitability of each customer's business. The integrated Hurco CNC control, powered by WinMax®, is highlighted as the most versatile and intuitive control in the industry, supporting both Conversational Programming and Industry-Standard NC Programming (G-code).

For the first fiscal quarter ended January 31, 2025, R&D Expenses were reported at $3.4 million, up from $3.2 million in the corresponding period of fiscal year 2024. The company's flagship Hurco brand machines are powered by the WinMax® control.

The following table summarizes key financial metrics from the first quarter of fiscal year 2025, which reflects the output of R&D investment:

Metric	Amount (Q1 FY2025)	Comparison Point
Sales and Service Fees	$46,414,000	3% increase year-over-year
Total Orders Received	$40,085,000	20% decrease year-over-year
Gross Profit Margin	18%	Down from 22% in Q1 FY2024
Cash and Cash Equivalents (Jan 31, 2025)	$41,820,000	Up from $33,330,000 at Oct 31, 2024

Global manufacturing and assembly of machine tools in Taiwan, China, U.S., and Italy.

Hurco Companies, Inc. maintains a global manufacturing presence to produce its three brands of CNC machine tools: Hurco, Milltronics, and Takumi. The executive offices and principal design and engineering operations are located in Indianapolis, Indiana, USA. Manufacturing and assembly operations are conducted in Taiwan, Italy, and the U.S.

Select CNC machining centers, including the VMX42i and VMX6030i models, are fully assembled by skilled employees at the Indianapolis, Indiana facility. This assembly process involves meticulous steps such as hand scraping of machined surfaces and alignment of critical components.

Worldwide sales, service, and application engineering support.

Hurco Companies, Inc. sells products through direct and indirect sales forces across the Americas, Europe, and Asia. The company supports this with numerous subsidiaries providing localized assistance.

The locations for sales, application engineering support, and service subsidiaries include:

• Americas: Canada, U.S.
• Europe: England, France, Germany, Italy, the Netherlands, Poland
• Asia: China, India, Singapore, Taiwan

For the third fiscal quarter ended July 31, 2025, sales and service fees reached $45.8 million. Sales in the Americas increased by 10% for that quarter, while Asia Pacific sales surged by 48%.

Supply chain management for raw materials (e.g., steel and iron products).

The management of the supply chain is a key activity, with the company noting risks associated with the limited number of manufacturing and supply chain sources. A noted risk factor in filings is the potential for increases in the prices of raw materials, specifically mentioning steel and iron products.

For the three months ended January 31, 2025, the Cost of Sales and Service was $38,124,000 (in thousands), against Sales and Service Fees of $46,414,000 (in thousands).

The company's commitment to financial discipline included efficient management of inventory levels, as evidenced by the cash and cash equivalents increasing to $41,820,000 as of January 31, 2025.

Finance: review inventory turnover ratio based on Q1 and Q3 2025 Cost of Sales data by next Tuesday.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Key Resources

You're looking at the core assets Hurco Companies, Inc. relies on to run the business as of late 2025. These are the things they own or control that are essential for delivering value.

Proprietary Software and Control Technology

The integrated CNC control system, powered by the proprietary WinMax® software, remains a central asset. This technology is designed to maximize efficiency and simplify operations for the user. The control supports both Conversational Programming and Industry-Standard NC Programming (G-code). Specific technological capabilities built into the motion control system include:

• Up to 10,000 block look-ahead.
• AdaptiPath, a conversational pocketing feature for controlled engagement cutting.
• Advanced Verification Graphics and Simulation feature with 3D solid rendering.

Diverse Product Portfolio and Brand Equity

Hurco Companies, Inc. manages a portfolio of distinct brands, each targeting a specific market segment. This diversity helps manage demand fluctuations across different customer needs. For instance, in the first quarter of fiscal year 2025, strong demand was noted across the board, with Americas sales growing by 9% and Asia Pacific sales growing by 18%, driven by specific brand machines in those regions.

Brand	Market Positioning	Noted Performance/Feature
Hurco	Premium, high-performance 3-axis and 5-axis CNC machining centers and lathes.	Strong demand in China (Asia Pacific region) in Q3 FY2025.
Milltronics	Value segment, balance of affordability and capability, focus on ease of use.	Strong demand for toolroom lathes and vertical milling machines in Q1 FY2025.
Takumi	Precision machining, high-speed applications, particularly for mold & die and aerospace.	Sales surged in the Asia Pacific region in Q3 FY2025.

Global Operational Footprint

The company's ability to serve a global customer base is supported by its physical infrastructure. Hurco Companies, Inc. manufactures in Taiwan and China and supports its operations with a worldwide sales, service, and distribution network spanning three continents: North America, Europe, and Asia.

Financial Strength and Liquidity

A key resource supporting operations and strategic flexibility is the company's balance sheet strength. As of the close of the third fiscal quarter, Hurco Companies, Inc. maintained a strong cash position. Cash and cash equivalents totaled $44,494,000 at July 31, 2025. This compares to cash and cash equivalents of $33,330,000 at October 31, 2024.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Value Propositions

You're looking at the core reasons why job shops and manufacturers choose Hurco Companies, Inc. over competitors. It's about making complex machining easier and more productive, which is critical when capital decisions are cautious, as seen in the Q1 fiscal year 2025 order decline of 20% to $40,085,000. Still, the value propositions are what keep the sales engine running, evidenced by total sales and service fees reaching $46,414,000 in Q1 fiscal year 2025. Here's how the five key areas deliver that value.

The machine portfolio is designed to cover a spectrum of customer needs, balancing performance with price. This is reflected in the Q1 fiscal year 2025 sales, where there was strong demand for more competitively priced Hurco (VM) machines and Milltronics products, while sales of higher-performance VMX series machines and lathes softened, contributing to a gross profit margin decline from 22% to 18% year-over-year for that quarter. This shows the importance of having options across the performance curve.

Machine Category / Brand	Key Feature Alignment	Relevant FY2025 Performance Indicator
Hurco (3-axis, 5-axis, Lathes)	Proprietary Conversational Programming (WinMax®)	Americas sales grew 9% in Q1 FY2025; Americas sales grew 10% in Q3 FY2025.
Milltronics (Mills & Lathes)	Balance of affordability and capability; ease of use	Strong demand noted alongside Hurco machines in Q1 FY2025 sales.
Takumi (CNC Machine Tools)	High-speed, high-precision machining for mold & die	Asia Pacific sales surged 48% in Q3 FY2025, mainly due to increased Takumi machine sales.
Automation Solutions (ProCobots)	Integrated efficiency boost, seamless integration	Automation projects can potentially pay for themselves within a year.

The proprietary conversational programming, WinMax®, is central to the Hurco and Milltronics value. It supports both Conversational Programming and Industry-Standard NC Programming (G-code), which is vital for job shops needing flexibility. While specific adoption numbers aren't public, the success in regions like the Asia Pacific, where sales grew 18% in Q1 fiscal year 2025, shows the appeal of their core offerings. Furthermore, sales of computer control systems and software specifically increased by 13% in Q1 fiscal year 2025, largely driven by software sales in the United Kingdom.

For automation, the ProCobots integration directly addresses labor shortages and efficiency needs. The value here is quantified by the potential revenue boost; one calculation suggests an automation system could generate up to €120,000 in additional annual revenue. This system is designed for rapid deployment, allowing for part changeover times of less than 5 minutes when integrated with the control system.

Global service and application support is the safety net for high-value capital equipment. The company emphasizes that when you buy equipment you rely on, after-sales service is vital. This support network underpins the confidence in all brands, including Takumi, which benefits from the same trusted service team that has supported Hurco since 1968. The company maintained a strong liquidity position, ending Q3 fiscal year 2025 with over $44 million in cash and cash equivalents as of July 31, 2025, which supports ongoing service commitments.

• WinMax® simplifies the user experience and enhances operational efficiency, as noted in fiscal year 2023 advancements.
• The ProCobots system is designed to eliminate tedious programming, enabling flexible automation across the range of 3-axis mills, 5-axis machining centers, and CNC lathes.
• Global reach supports customers across North America, Europe, and Asia, where Q3 fiscal year 2025 sales surged 48% in the Asia Pacific region.

Finance: draft Q4 2025 cash flow projection by next Tuesday.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Customer Relationships

You're looking at how Hurco Companies, Inc. keeps its machine tool customers engaged and coming back, which is critical when new orders soften, as seen in the first quarter of fiscal year 2025 where total orders fell by 20% year-over-year to $40,085,000.

Dedicated application engineering support and training are foundational, backed by a significant global footprint. Hurco Companies, Inc. maintains sales, application engineering support, and service subsidiaries across 11 countries, including the U.S., China, England, France, Germany, India, Italy, the Netherlands, Poland, Singapore, and Taiwan. This infrastructure supports the complex machinery they sell, which generated total sales and service fees of $46,414,000 in the first quarter of fiscal year 2025.

The go-to-market strategy relies on a dual approach combining direct interaction and third-party reach. This structure is essential for a company whose total sales and service fees for the nine months ended July 31, 2025, totaled $133,087,000.

• The company serves its broad customer base through a worldwide sales, service, and distribution network.
• This network provides personal assistance for the premium Hurco brand, the value-focused Milltronics brand, and the precision-oriented Takumi brand.
• Selling, general, and administrative expenses (SG&A) were managed down to 22% of sales in Q1 FY2025, down from 26% the prior year, reflecting cost discipline across these customer-facing operations.

The Hurco PRO program is designed for deep collaboration, though specific participation rates or financial contributions from this program for fiscal year 2025 are not publicly itemized. This initiative aims to integrate key customers into the product development cycle, ensuring the proprietary WINMAX control and machine designs meet evolving shop floor needs. The company's commitment to financial discipline, which resulted in cash and cash equivalents reaching $41,820,000 as of January 31, 2025, helps fund these long-term relationship investments.

Long-term relationships are cemented through ongoing service and support, which is captured within the overall sales and service fees line item. While the specific revenue percentage from service contracts is not broken out, the focus on service is implied by the structure. The gross profit margin for Q1 FY2025 was 18% of sales, which was pressured by a product mix skewed toward lower-margin items, suggesting that higher-margin service or premium machine sales were softer that quarter.

Here's a look at the operational scale supporting these customer relationships as of the first half of fiscal year 2025:

Relationship Component	Metric Type	Value (Latest Available)
Global Support Footprint	Number of Subsidiaries for Sales/Service/Engineering	11 Countries
Q1 FY2025 Sales & Service Fees	Financial Amount	$46,414,000
Q1 FY2025 Gross Profit Margin	Percentage of Sales	18%
Q1 FY2025 SG&A as % of Sales	Efficiency Metric	22%
Cash Position (Jan 31, 2025)	Financial Amount	$41,820,000

The CEO noted the commitment to remaining a trusted partner, ready to provide customers with the machines they need-when they need them-even while navigating market uncertainty. Finance: draft 13-week cash view by Friday.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Channels

Hurco Companies, Inc. markets its computerized machine tools and control systems through a worldwide sales, service, and distribution network across North America, Europe, and Asia.

The company maintains a direct sales presence through regional sales offices and technical centers in key areas. Sales, application engineering, and service offices are located in Indianapolis, Indiana; High Wycombe, England; Munich, Germany; Paris, France; Milan, Italy; Shanghai, China, and Singapore. Distribution facilities support this network from Los Angeles, California, and Venlo, the Netherlands.

The sales performance across these regions for the third fiscal quarter ended July 31, 2025, showed variation. Sales and service fees for the nine months of fiscal year 2025 totaled $133,087,000. For the third quarter of fiscal year 2025, sales and service fees were $45,806,000, a 7% increase year-over-year.

Geographic Region	Q3 FY2025 Sales (in thousands)	Year-over-Year Q3 Change	Nine Months FY2025 Sales (in thousands)	Year-over-Year Nine Months Change
Americas	Data Not Separated	Increased 10%	Data Not Separated	Increased 3%
Europe	Data Not Separated	Remained flat	Data Not Separated	Decreased 3%
Asia Pacific	Data Not Separated	Surged 48%	Data Not Separated	Grew 7%

The company relies on an extensive worldwide network of independent distributors and dealers to provide access to its CNC machines and solutions. This network is crucial for delivering industry-leading solutions backed by expertise.

Product demonstrations and market engagement occur through participation in trade shows and industry events. The company showcased its latest advancements, such as the Hurco TM8MYi lathe and the Takumi UA400 machining center, at the 2024 International Manufacturing Technology Show (IMTS).

• Sales, application engineering, and service offices are in Indianapolis, High Wycombe, Munich, Paris, Milan, Shanghai, and Singapore.
• Distribution facilities are in Los Angeles and Venlo.
• Q3 FY2025 sales in the Asia Pacific region grew 48% over the prior year quarter.
• Americas sales increased 10% for the third quarter of fiscal year 2025.
• The total revenue for the trailing twelve months ending July 31, 2025, was $0.18 Billion USD.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Customer Segments

The customer base for Hurco Companies, Inc. is served through its three primary brands: Hurco, Milltronics, and Takumi, targeting distinct needs within the metal cutting and forming industry.

Small-to-midsize job shops and contract manufacturers (core market).

This segment represents a significant portion of the customer base, historically skewed toward smaller manufacturing businesses. Sales in the Americas, driven by shipments of Hurco and Milltronics machines, increased by 3% for the nine months ended July 31, 2025, compared to the prior year period. The company serves this market with machines designed for high-mix manufacturing environments.

Precision manufacturers in aerospace, defense, and medical equipment.

Hurco Companies, Inc. machines serve manufacturers in industries including aerospace, defense, medical equipment, energy, and transportation. The Asia Pacific region saw sales increase by 7% for the nine months ended July 31, 2025, mainly due to increased sales of Takumi machines, which are focused on high-precision applications.

• Aerospace
• Defense
• Medical equipment
• Energy
• Transportation

Cost-conscious manufacturers seeking entry-level CNC (Milltronics brand).

The Milltronics brand is positioned for cost-conscious manufacturers, offering a balance of affordability and capability with a focus on ease of use. These machines cater to job shops, toolrooms, and general manufacturing, providing an accessible entry point into CNC machining.

High-end production and mold & die shops (Takumi brand users).

Takumi machines are focused on high-speed, high-precision machining, making them the choice for precision-driven industries. This includes mold & die and high-end production applications. Decreased customer demand in the first quarter of fiscal year 2025 was noted for higher-performance VMX machines, which are part of the Hurco portfolio.

The following table summarizes the geographic sales performance, which reflects the reach across these customer segments for the nine months ended July 31, 2025:

Geographic Region	Sales and Service Fees (Nine Months Ended July 31, 2025)	Year-over-Year Change (Nine Months Ended July 31, 2025)
Americas	Data not explicitly isolated in total dollars	3% increase
Europe	Data not explicitly isolated in total dollars	3% decrease
Asia Pacific	Data not explicitly isolated in total dollars	7% increase
Total Company Sales and Service Fees	$133,087,000	Less than 1% increase (from $132.9 million in prior year period)

The North America Computer Numerical Control Machines Market is projected to grow at a CAGR of 10% from 2025-2031 F.

Key customer focus areas by brand:

• Hurco: Job shops, high-mix manufacturing, production environments.
• Milltronics: Job shops, toolrooms, general manufacturing, cost-conscious needs.
• Takumi: Mold & die, aerospace, high-end production, high-speed/high-precision.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Cost Structure

You're looking at the core expenses Hurco Companies, Inc. incurs to run its business, which is key to understanding their profitability, especially in a cyclical industry like machine tools. Honestly, the cost structure is dominated by making the machines and then selling them globally.

Manufacturing costs, including raw materials (steel/iron) and labor, are captured in the Cost of Sales and Service. For the nine months ended July 31, 2025, this total cost was $107,856,000 thousand. This figure bundles everything from the steel and iron that form the machine bases to the direct labor assembling the CNC machines in Taiwan and China. A specific breakdown between raw materials and direct labor isn't itemized in the public nine-month statements, so we use the aggregate number. This cost against total sales of $133,087,000 thousand resulted in a Gross Profit of $25,231,000 thousand, or 19% of sales for the period.

The Selling, General, and Administrative (SG&A) expenses are a significant fixed-cost component Hurco manages closely. For the nine months of FY2025, SG&A expenses totaled $32,041,000 thousand. This is down from $33,352,000 thousand in the prior year period, reflecting management's focus on cost discipline, such as lower discretionary spending and reduced employee health insurance costs. This $32,041,000 thousand represents 24% of the nine-month sales.

Here's a quick look at the key operating expenses for the nine months ended July 31, 2025, compared to the prior year:

Cost Component (Nine Months Ended July 31)	2025 (in thousands)	2024 (in thousands)
Sales and Service Fees (Revenue)	$133,087	$132,882
Cost of Sales and Service	$107,856	$107,325
Gross Profit	$25,231	$25,557
Selling, General and Administrative Expenses	$32,041	$33,352
Operating (Loss) Income	($6,810)	($7,795)

Research and development (R&D) investment for new product initiatives is an ongoing cost, though a specific standalone dollar amount for the nine-month period isn't broken out separately from operating expenses in the primary statements; it's part of the overall operating cost base. Management has reiterated a commitment to ongoing investments in technology and product development, suggesting this is a priority cost area even while navigating macroeconomic uncertainty. The CEO noted they are 'still committed to investing in our product development initiatives.'

Costs associated with the global distribution and service network are embedded within both Cost of Sales (for service parts/labor) and SG&A (for sales commissions, overhead, and support). Hurco Companies, Inc. operates this network across North America, Europe, and Asia, which inherently involves significant logistical and personnel costs. For instance, the SG&A reduction in FY2025 reflected lower sales commissions, which directly ties to the sales network cost structure.

Finally, there are Non-cash tax valuation allowances, which are accounting entries reflecting uncertainty about realizing future tax benefits. For the nine months of fiscal year 2025, Hurco Companies, Inc. recorded a valuation allowance totaling $5,294,000 thousand. This compares to $8,158,000 thousand in the corresponding prior year period. These allowances directly impact the reported income tax expense and net loss.

You should track the gross margin closely; it's the first indicator of how well they are managing their direct manufacturing costs relative to the prices they can command in different regions. Finance: draft 13-week cash view by Friday.

Hurco Companies, Inc. (HURC) - Canvas Business Model: Revenue Streams

You're looking at how Hurco Companies, Inc. (HURC) brings in the money, which is pretty straightforward for a manufacturer of high-precision equipment. The core of the revenue streams revolves around selling the machines themselves, plus the ongoing support and add-ons that keep those machines running profitably for the customer and for HURC. Honestly, it's a mix of big capital expenditure sales and recurring service revenue.

The primary income sources are:

• Sales of Computer Numerical Control (CNC) machine tools, which includes their mills and lathes.
• Sales derived from service fees and replacement parts-the aftermarket business is key here.
• Revenue from software options, control upgrades, and various hardware accessories that enhance the core machine offering.

To give you a concrete picture of the scale as of their latest reporting period ending July 31, 2025, here are the top-line numbers. The total Trailing Twelve Months (TTM) revenue was reported at $186.79 million. This shows the overall run rate for the business leading up to that date.

Breaking that down by quarter, the sales and service fees for the third quarter of fiscal year 2025 were $45.806 million. For the longer nine-month period ending July 31, 2025, the cumulative sales and service fees reached $133.09 million. This revenue generation is geographically diverse, which is an important factor to track.

Here's a quick look at the revenue performance by region for that Q3 2025 period, which directly reflects machine tool sales:

Geographic Region	Q3 2025 Sales Change (YoY)	Nine Months 2025 Sales Change (YoY)
Americas	Increased by 10%	Increased by 3%
Asia Pacific	Surged by 48%	Increased by 7%
Europe	Remained flat (increased by less than 1%)	Decreased by 3%

The strength in the Americas and Asia Pacific, driven by higher shipments of Hurco and Milltronics machines, clearly supported the overall revenue picture for the quarter, even as Europe softened. Remember, the sales of the actual CNC machine tools-the mills and lathes-are the largest component of these figures, with service and parts revenue providing a necessary, though smaller, stream of income to smooth out the cyclical nature of capital equipment purchases.