GENCOR INDUSTRIES, INC.

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Introductory Note: Caution Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Quarterly Report”) and the Company’s 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. The Company’s actual results may differ materially from those set forth in the Company’s forward-looking statements 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 (i) the United States (“U.S.”) government’s tariff announcements, (ii) the ongoing conflicts and/or tensions involving Russia, Ukraine, Israel, Iran, and (iii) any actions taken by the U.S. or other countries in response to such tariff announcements, conflicts and/or tensions, 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 most recently issued Form 10-K for the year ended September 30, 2025: (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 of operations, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statement made by the Company herein speaks as of the date of this Quarterly Report. 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 Quarterly Report to the “Company,” “Gencor,” “we,” “us,” or “our,” or similar words are to Gencor Industries, Inc. and its subsidiaries.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

This Quarterly Report contains certain “forward-looking statements” within the meaning of the Exchange Act, which represent the Company’s expectations and beliefs, including, but not limited to, statements concerning gross margins, sales of the Company’s products and litigation. These statements by their nature involve substantial risks and uncertainties, certain 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, the performance of the investment portfolio and the demand for the Company’s products.

For information concerning these factors and related matters, see the following sections of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025: (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 Quarterly Report. The Company does not undertake to update any forward-looking statement, except as required by law.

Overview

Gencor Industries is a leading manufacturer of heavy machinery used in the production of highway construction equipment and materials and environmental control equipment. The Company’s core products include hot mix asphalt plants, combustion systems, fluid heat transfer systems, and asphalt pavers. The Company’s products are manufactured at three facilities in the United States.

Because the Company’s products are sold primarily to the highway construction industry, the business is seasonal in nature. Traditionally, the Company’s customers reduce their purchases of new equipment for shipment during the summer and fall months to avoid disrupting their peak season for highway construction and related repair work. The majority of orders for the Company’s products are thus received between October and February, with a significant volume of shipments occurring in the late winter and spring. The principal factors driving demand for the Company’s products are the overall economic conditions, the level of government funding for domestic highway construction and repair, Canadian infrastructure spending, the need for spare parts, fluctuations in the price of liquid asphalt, and a trend towards larger more efficient asphalt plants.

On November 15, 2021, President Biden signed into law a five-year, $1.2 trillion infrastructure bill, the Infrastructure Investment and Jobs Act (the “IIJ Act”), including $550 billion in new spending and reauthorization of $650 billion in previously allocated funds. The IIJ Act provides $110 billion for the nation’s highways, bridges and roads. The IIJ Act is scheduled to expire on September 30, 2026.

Fluctuations in the price of carbon steel, which is a significant cost and material used in the manufacturing of the Company’s equipment, may affect the Company’s financial performance. The Company is subject to fluctuations in market prices for raw materials, such as copper and steel. If the Company is unable to purchase materials it requires or is unable to pass on price increases to its customers or otherwise reduce its cost of goods sold, its results of operations and financial condition may be adversely affected.

The Company monitors the prices it charges for its products and services on an ongoing basis and has historically been able to adjust its prices to take into account changes in the rate of inflation.

Also, a significant increase in the price of liquid asphalt could decrease demand for hot mix asphalt paving materials and certain of the Company’s products. Increases in oil prices also drive up the cost of gasoline and diesel, which results in increased freight costs. Where possible, the Company will pass increased freight costs on to its customers. However, the Company may not be able to recapture all of the higher costs, which could have a negative impact on the Company’s financial performance.

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The Company manufactures equipment domestically with a fraction of sales exported to neighboring countries. The current U.S. Presidential administration has implemented tariffs on certain countries where the Company has sales. Also, some of the parts the Company procures are sourced from countries subject to the recent tariffs. It is not known whether any additional costs will be passed onto customers. If the Company cannot pass additional costs onto customers, then this could negatively affect revenues, cash flows, and financial position.

The Company believes its strategy of continuing to invest in product engineering and development and its focus on delivering the highest quality products and superior service will strengthen the Company’s market position. The Company continues to review its internal processes to identify inefficiencies and cost-reduction opportunities. The Company will continue to scrutinize its relationships with suppliers to ensure it is achieving the highest quality materials and services at the most competitive cost.

Concerns over inflation, geopolitical issues and global financial markets have led to increased economic instability and expectations of slower economic growth. The Company may be adversely affected by any such economic instability or unpredictability. Sanctions and disruptions to the global economy may lead to additional inflation and may disrupt the global supply chain and could have a material adverse effect on our ability to secure supplies. Prolonged periods of inflation would likely increase our costs in the form of higher wages, and increased cost of supplies and equipment necessary to operate our business. Additionally, conflicts and/or tensions involving Russia, Ukraine, Israel, Iran, the U.S., Greenland, and various other countries in South America, Europe and the Middle East, may cause increased inflation in energy and logistics costs and could further cause general economic conditions in the U.S. or abroad to deteriorate. There is a risk that one or more of our suppliers could be negatively affected by global economic instability, which could adversely affect our ability to operate efficiently and timely complete our operational goals. As of the date of this Quarterly Report, the Company’s operations have not been significantly impacted.

Results of Operations

Quarter Ended June 30, 2026 versus June 30, 2025

Net revenue for the quarter ended June 30, 2026 was $33,805,000 compared with $26,986,000 net revenue for the quarter ended June 30, 2025. The increase in net revenue was primarily due to an increase in contract equipment revenues recognized over time and associated freight revenue.

As a percent of net revenue, gross profit margins increased 140 basis points to 27.9% in the quarter ended June 30, 2026, compared to 26.5% in the quarter ended June 30, 2025.

Product engineering and development expenses decreased $61,000 to $680,000 for the quarter ended June 30, 2026, as compared to $741,000 for the quarter ended June 30, 2025 due to lower headcount. Selling, general and administrative (“SG&A”) expenses decreased $313,000 to $2,952,000 for the quarter ended June 30, 2026, compared to $3,265,000 for the quarter ended June 30, 2025 primarily due to reduced professional services expenses.

Operating income increased 85.0%, or $2,665,000, from $3,137,000 for the quarter ended June 30, 2025 to $5,802,000 for the quarter ended June 30, 2026, primarily due to higher gross profits and lower SG&A expenses. Operating margin was 17.2% for the quarter ended June 30, 2026 compared with 11.6% for the quarter ended June 30, 2025.

For the quarter ended June 30, 2026, the Company had net other income of $1,416,000, compared to $2,036,000 for the quarter ended June 30, 2025. Interest and dividend income, net of fees, was $1,176,000 in the quarter ended June 30, 2026 as compared to $1,142,000 in the quarter ended June 30, 2025. The net realized and unrealized gains on marketable securities were $241,000 for the quarter ended June 30, 2026, compared to net realized and unrealized gains of $894,000 for the quarter ended June 30, 2025. The decline in net realized and unrealized gains was due to slightly higher interest rates.

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The Company’s effective income tax rate was reduced to 21% for the quarter ended June 30, 2026, based on an expected annual effective income tax rate of 24%, compared to prior income tax rate of 26% for the quarter ended June 30, 2025,

Net income for the quarter ended June 30, 2026 increased $1,855,000, or 48.5%, to $5,683,000, or $0.39 basic and diluted net income per common share, from $3,828,000, or $0.26 basic and diluted net income per common share, for the quarter ended June 30, 2025. The higher net income resulted primarily from the impact of higher net revenues, improved margins and lower SG&A expenses, offset by lower net non-operating income.

Nine Months Ended June 30, 2026 versus June 30, 2025

Net revenue for the nine months ended June 30, 2026 and 2025 were $91,180,000 and $96,606,000, respectively. The decrease of $5,426,000, or 5.6%, was primarily due to delayed timing of orders in the quarters ended December 31, 2025 and March 31, 2026.

As a percentage of net revenue, gross profit margins increased to 29.5% for the nine months ended June 30, 2026 from 28.1% for the nine months ended June 30, 2025.

Product engineering and development expenses decreased $32,000 to $2,067,000 for the nine months ended June 30, 2026, compared to $2,099,000 for the nine months ended June 30, 2025. SG&A expenses increased $868,000 to $11,692,000 for the nine months ended June 30, 2026, compared to $10,824,000 the nine months ended June 30, 2025, primarily due to higher trade show expenses incurred during the quarter ended March 31, 2026, as previously disclosed, partially offset by a decrease in professional fees.

The Company had operating income of $13,137,000 for the nine months ended June 30, 2026, compared to $14,241,000 for the nine months ended June 30, 2025. The decrease in operating income was due to lower net revenue in the quarters ended December 31, 2025 and March 31, 2026, respectively and higher SG&A expenses in the quarter ended March 31, 2026, primarily due to higher trade show expenses.

For the nine months ended June 30, 2026, the Company had net other income of $3,903,000 compared to $4,326,000 for the nine months ended June 30, 2025. Interest and dividend income, net of fees, was $3,464,000 for the nine months ended June 30, 2026, as compared to $3,289,000 for the nine months ended June 30, 2025. The increase in interest and dividend income, net of fees, for the nine months ended June 30, 2026, was primarily due to higher rates earned on fixed income investments and higher cash balances. Net realized and unrealized gains on marketable securities were $439,000 for the nine months ended June 30, 2026, compared to $1,037,000 for the nine months ended June 30, 2025.

The Company’s effective income tax rate was reduced to 24% for the quarter ended June 30, 2026, based on an expected annual effective income tax rate of 24%, compared to the prior income tax rate of 26% for the nine months ended June 30, 2025.

Net income for the nine months ended June 30, 2026 was $12,965,000, or $0.89 basic and diluted net income per common share, compared to $13,740,000, or $0.94 basic and diluted net income per common share for the nine months ended June 30, 2025. The lower net income and earnings per share resulted primarily from the impact of reduced net revenue in the quarters ended December 31, 2025 and March 31, 2026, respectively.

Liquidity and Capital Resources

The Company generates capital resources through operations and returns on its investments, and we believe these sources of capital will satisfy our liquidity needs in both the short and long term.

The Company had no long-term or short-term debt outstanding at June 30, 2026 or September 30, 2025. In April 2020, a financial institution issued an irrevocable standby letter of credit (“letter of credit”) on behalf of the Company for the benefit of one of the Company’s insurance carriers. The maximum amount that can be drawn by the beneficiary under the letter of credit is $150,000. The letter of credit expires in March 2027, unless terminated earlier, and can be extended, as provided by the agreement. The Company intends to renew the letter of credit for as long as the Company does business with the beneficiary insurance carrier. The letter is collateralized by restricted cash of the same amount on any outstanding drawings. To date, no amounts have been drawn under the letter of credit.

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As of June 30, 2026, the Company had $26,258,000 in cash and cash equivalents, and $137,911,000 in marketable securities, including $6,335,000 in equities, $28,723,000 in corporate bonds, $12,623,000 in exchange-traded funds, $2,737,000 in mutual funds, $86,480,000 in government securities, and $1,013,000 in cash and money funds. The marketable securities are invested through a professional investment management firm. These securities may be liquidated at any time into cash and cash equivalents.

The Company’s backlog was $79.2 million at June 30, 2026 compared to $26.2 million at June 30, 2025. The Company’s net working capital (defined as current assets less current liabilities) was $211.3 million at June 30, 2026 and $197.7 million at September 30, 2025. Cash flows provided by operating activities during the nine months ended June 30, 2026 were $1,369,000. Contract assets decreased $5,811,000 and contract liabilities increased $2,825,000 with the timing of inventory build, customer payments and percentage of completion recognition on plant sales where revenue is recognized over time. Marketable securities increased $28,197,000 due to a $25,000,000 transfer from operating cash to investments. Inventories decreased $6,518,000 during the nine months ended June 30, 2026, due to paver sales and the completion and shipment on several large contract orders where revenue is recognized at a point in time. Prepaid expenses increased $1,162,000 reflecting prepayments of insurance premiums to be amortized over fiscal 2026 and prepaid income taxes. Accounts payable increased $1,765,000 due to the timing of purchase order receipts. Customer deposits decreased $861,000 reflecting down payments and final payments on contract jobs that shipped complete during the nine months ended June 30, 2026.

Cash flows used in investing activities for the nine months ended June 30, 2026 of $1,698,000 were related to capital expenditures, primarily for building additions and improvements, and capital equipment.

Seasonality

The Company’s primary business is the manufacture of asphalt plants and related components and asphalt pavers. These products typically experience a seasonal slowdown during the third and fourth quarters of the calendar year. This slowdown often results in lower reported sales and operating results during the first and fourth quarters of the fiscal year ended September 30.

Critical Accounting Policies, Estimates and Assumptions

The Company believes the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of the financial condition and results of operations and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Accounting policies, in addition to the critical accounting policies referenced below, are presented in Note 1 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2025, “Nature of Operations and Summary of Significant Accounting Policies.” There were no material changes to the accounting policies during the nine months ended June 30, 2026.

Estimates and Assumptions

In preparing the condensed consolidated financial statements, the Company uses certain estimates and assumptions that may affect reported amounts and disclosures. Estimates and assumptions are used, among other places, when accounting for certain revenue (e.g., contract accounting), expense, and asset and liability valuations. The Company believes that the estimates and assumptions made in preparing the condensed consolidated financial statements are reasonable, but are inherently uncertain. Assumptions may be incomplete or inaccurate and unanticipated events may occur. The Company is subject to risks and uncertainties that may cause actual results to differ from estimated results.

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Revenues & Expenses

The Company recognizes revenue under ASU 2014-09, Revenue from Contracts with Customers (Topic 606).

Revenues from contracts with customers for the design, manufacture and sale of custom equipment are recognized over time when the performance obligation is satisfied by transferring control of the equipment. Control of the equipment transfers over time, as the equipment is unique to the specific contract and thus does not create an asset with an alternative use to the Company. Revenues and costs are recognized in proportion to actual labor costs incurred, as compared with total estimated labor costs expected to be incurred, during the entire contract. All incremental costs related to obtaining a contract are expensed as incurred, as the amortization period is less than one year. Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined.

Contract assets (excluding accounts receivable) under contracts with customers represent revenue recognized in excess of amounts billed on equipment sales recognized over time. These contract assets were $6,397,000 and $12,208,000 at June 30, 2026 and September 30, 2025, respectively, and are included in current assets on the Company’s condensed consolidated balance sheets. Contract liabilities (excluding customer deposits) under contracts with customers represent amounts billed in excess of revenue recognized on equipment sales recognized over time. These contract liabilities were $2,825,000 at June 30, 2026, and there were no contract liabilities at September 30, 2025. Contract liabilities are included in current liabilities on the Company’s condensed consolidated balance sheets. Customer deposits related to contracts with customers were $3,028,000 and $3,889,000 at June 30, 2026 and September 30, 2025, respectively, and are included in current liabilities on the Company’s condensed consolidated balance sheets.

Revenues from all other contracts for the design and manufacture of equipment, for service and for parts sales, net of any discounts and return allowances, are recorded at a point in time when control of the goods or services has been transferred. Control of the goods or service typically transfers at time of shipment or upon completion of the service.

Payment for equipment under contract with customers is typically due prior to shipment. Payment for services under contract with customers is due as services are completed. Accounts receivable related to contracts with customers for equipment sales were $92,000 and $80,000 at June 30, 2026 and September 30, 2025, respectively.

Product warranty costs are estimated using historical experience and known issues and are charged to production costs as revenue is recognized.

The Company records revenues earned for shipping and handling as freight revenue at the time of shipment. The cost of shipping and handling is recorded as cost of goods sold concurrently with the revenue recognition.

All product engineering and development costs, and selling, general and administrative expenses are charged to operations as incurred. Provision is made for any anticipated contract losses in the period that the loss becomes evident.

The allowance for credit losses is determined by performing a specific review of all account balances greater than 90 days past due and other higher risk amounts to determine collectability, and also adjusting for any known customer payment issues with account balances in the less-than-90-day past due aging category. Account balances are charged off against the allowance for credit losses when they are determined to be uncollectible. Any recoveries of account balances previously considered in the allowance for credit losses reduce future additions to the allowance for credit losses. The allowance for credit losses also includes an estimate for returns and allowances. Provisions for estimated returns and allowances and other adjustments, are provided for in the same period the related sales are recorded. Returns and allowances, which reduce product revenue, are estimated using known issues and historical experience.

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Inventories

Inventories are valued at the lower of cost or net realizable value, with cost being determined under the first in, first out method and net realizable value defined as the estimated selling price of goods less reasonable costs of completion and delivery. Appropriate consideration is given to obsolescence, excessive levels, deterioration, possible alternative uses and other factors in determining net realizable value. The cost of work in process and finished goods includes materials, direct labor, variable costs and overhead. The Company evaluates the need to record inventory adjustments on all inventories, including raw materials, work in process, finished goods, spare parts and used equipment. Used equipment acquired by the Company on trade-in from customers is carried at estimated net realizable value. Unless specific circumstances warrant different treatment regarding inventory obsolescence, an allowance is established to reduce the cost basis of inventories three to four years old by 50%, the cost basis of inventories four to five years old by 75%, and the cost basis of inventories greater than five years old to zero. Inventory is typically reviewed for obsolescence on an annual basis computed as of September 30, the Company’s fiscal year end. If significant known changes in trends, technology or other specific circumstances that warrant consideration occur during the year, then the impact on obsolescence is considered at that time.

Marketable Securities and Fair Value Measurements

Marketable debt and equity securities are categorized as trading securities and are thus marked to market and stated at fair value. Fair value is determined using the quoted closing or latest bid prices for Level 1 investments and market standard valuation methodologies for Level 2 investments. Realized gains and (losses) on investment transactions are determined by specific identification and are recognized as incurred in the condensed consolidated income statements. Net unrealized gains and (losses) are reported in the condensed consolidated income statements in the current period and represent the change in the fair value of investment holdings during the period.

Long-Lived Asset Impairment

Property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess over its fair value of the asset’s carrying value. Fair value is generally determined using a discounted cash flow analysis. There were no impairment losses in the nine months ended June 30, 2026 and June 30, 2025.

Off-Balance Sheet Arrangements

None.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s President and Chairman of the Board (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer) evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act) pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this Quarterly Report (June 30, 2026). Based upon that evaluation, the President and the Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, the Company’s disclosure controls and procedures were not effective at the reasonable assurance level solely as a result of the material weaknesses management identified in our internal control over financial reporting, as described in our Annual Report on Form 10-K for the year ended September 30, 2025.

Because of inherent limitations, the Company’s disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of such disclosure controls and procedures are met, and no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

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Material Weaknesses in Internal Control over Financial Reporting

As previously reported in the Annual Report on Form 10-K for the year ended September 30, 2025, management identified the following material weaknesses in internal control over financial reporting as of September 30, 2025, which were not remediated as of June 30, 2026:

Management’s Plan of Remediation of Material Weaknesses

Management, with oversight by the Audit Committee, will continue to monitor potential control weaknesses and implement remediation efforts to address ongoing material weaknesses described above and improve our internal control over financial reporting.

To address the material weaknesses described above, the Company has implemented new and enhanced controls designed to ensure that access to information technology applications and data are adequately restricted to appropriate personnel, ensure segregation of duties, and appropriately monitor the activities of the individuals with access to modify data. We believe the actions described above will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting. However, the new and enhanced controls have not operated for a sufficient period of time to conclude that the material weaknesses have been remediated.

Management and the Audit Committee will monitor these specific remedial measures and the effectiveness of our overall control environment. The identified material weaknesses in internal control over financial reporting will only be considered remediated when the relevant controls have operated effectively for a sufficient period of time for management to conclude that they have been remediated. The Company can provide no assurance as to when the remediation of these material weaknesses will be completed.

Changes in Internal Control over Financial Reporting

The Company’s management, including the President and Chief Financial Officer, has reviewed the Company’s internal control over financial reporting. Except for the changes in the internal controls to remediate material weaknesses and other changes as part of our plans to improve our internal controls over financial reporting as discussed above, there were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. However, as noted above where needed, the Company will be continuing to implement changes to our internal control over financial reporting to address the material weaknesses described above.

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Item 6. Exhibits

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

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