Butler National Corporation
12/11/2025 | Press release | Distributed by Public on 12/11/2025 08:27
Quarterly Report for Quarter Ending October 31, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THROUGHOUT THIS ITEM 2 ALL NON TABULAR FINANCIAL RESULTS ARE PRESENTED IN THOUSANDS OF U.S. DOLLARS EXCEPT WHERE MILLIONS OF DOLLARS IS INDICATED.
Forward-Looking Statements
Statements made in this report, other reports and proxy statements filed with the Securities and Exchange Commission, communications to stockholders, press releases, and oral statements made by representatives of the Company that are not historical in nature, or that state the Company or management intentions, plans, beliefs, expectations or predictions of the future, may constitute "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements can often be identified by the use of forward-looking terminology, such as "could," "should," "will," "intended," "continue," "believe," "may," "expect," "anticipate," "goal," "forecast," "plan," "guidance" or "estimate" or the negative of these words, variations thereof or similar expressions. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties, and assumptions. It is important to note that any such performance and actual results, financial condition or business, could differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A (Risk Factors) of the Annual Report on Form 10-K for the fiscal year ended April 30, 2025, and elsewhere herein or in other reports filed with the SEC. Other unforeseen factors not identified herein could also have such an effect. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial condition or business over time, except as expressly required by federal securities laws.
Actual events or results may differ materially from the information included in forward-looking statements. In evaluating such statements, a number of risks, uncertainties and other factors could cause actual results, performance, financial condition, cash flows, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. These risks, uncertainties and other factors include those set forth in Item 1A (Risk Factors) of the Annual Report on Form 10-K for the fiscal year ended April 30, 2025, including the following factors:
•customer concentration risk;
•dependence on government spending;
•government shutdown;
•industry specific business cycles;
•regulatory hurdles in the launch of new products;
•loss of key personnel;
•the geographic location of our casino;
•fixed-price contracts;
•international sales;
•changing U.S. trade policy and impacts of tariffs;
•future acquisitions;
•supply chain and labor issues;
•customer demand;
•insurance costs and insufficient insurance for aircraft modifications;
•cyber security threats;
•fraud, theft and cheating at our casino;
•dependence on third-party platforms to offer sports wagering;
•outside factors influence the profitability of sports wagering and legacy gaming;
•change of control restrictions;
•significant and expensive governmental regulation across our industries;
•failure by the corporation or its stockholders to maintain applicable gaming licenses;
•evolving political and legislative initiatives in gaming;
•extensive and increasing taxation of gaming revenues;
•changes in regulations of financial reporting;
•the stability of economic markets;
•potential impairment losses;
•marketability restrictions of our common stock;
•the possibility of a reverse-stock split;
•market competition by larger competitors;
•acts of terrorism and war;
•climate change, inclement weather and natural disasters; and
•rising inflation
Except as expressly required by the federal securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. Results of operations in any past period should not be considered indicative of the results to be expected for future periods. Fluctuations in operating results may also result in fluctuations in the price of the Company's common stock.
Investors should also be aware that while the Company, from time to time, communicates with securities analysts; Company policy is to not disclose any material non-public information or other confidential commercial information. Accordingly, shareholders should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Company has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of Butler National Corporation.
General
Butler National Corporation ("Butler National" the "Company", "we", "us", or "our") was incorporated in 1960. Our companies design, engineer, manufacture, sell, integrate, install, repair, modify, overhaul, service and distribute a broad portfolio of aerostructures, aircraft components, avionics, accessories, subassemblies and systems ("Aerospace Products"). We serve a broad, worldwide spectrum of the aviation industry, including owners of aircraft and contractors involved with private, commercial, business, and government aircraft operations. We also serve commercial weapon manufacturers and suppliers to governments and their agencies.
In addition, our companies provide management services in the gaming industry, which includes owning the land and building for the Boot Hill Casino and Resort in Dodge City, Kansas ("Professional Services").
Products and Services
The Company has two operating segments for financial reporting purposes: (a) Aerospace Products, whose companies' revenues are derived from system design, engineering, manufacturing, sale, distribution, integration, installation, repairing, modifying, overhauling and servicing of aerostructures, avionics, aircraft components, accessories, subassemblies and systems; and (b) Professional Services, whose companies provide professional management services in the traditional gaming industry and in sports wagering.
Aerospace Products.The Aerospace Products segment includes the design, manufacture, sale and service of structural modifications, design, integration and installation of electronic equipment, systems and technologies that enhance aircraft operations, and the design, manufacture and sale of commercial controls, cabling and defense related articles. Additionally, we operate Federal Aviation Administration (the "FAA") Repair Stations. Companies in Aerospace Products concentrate on products and services for Learjet, Textron Beechcraft King Air, and Textron Cessna turboprop aircraft.
Products. The aviation-related products that the companies within this group design, engineer, manufacture, integrate, install, repair and/or service include:
|
•Aerial surveillance products
•Aerodynamic enhancement products
•Airplane range extension products
•Avcon stability enhancing fins
•Airplane nose extension products
•Cargo/sensor carrying pods and radomes
•Fuel system protection devices
|
•Navigation / flight display installations
•Crew work stations
•Electrical power systems and switching equipment
•Enlarged aircraft doors
•Powered airplane sensor lifts
•Provisions to allow carrying of external stores
•Specialized cabling and harnesses
|
|||||||
Modifications.The companies in Aerospace Products have authority, pursuant to Federal Aviation Administration Supplemental Type Certificates ("STCs") and Parts Manufacturer Approval ("PMA"), to build required parts and subassemblies and to make applicable installations. Companies in Aerospace Products perform modifications in the aviation industry including:
|
•Aerial photograph capabilities
•Aerodynamic improvements
•Avionics systems
•Cargo or expanded-sized doors
•Search and rescue
•Airborne research capability
|
•Extended range fuel tanks
•Radar systems
•ISR - Intelligence Surveillance Reconnaissance
•Special mission modifications
•Target towing capabilities
•Electrical systems integration
|
|||||||
Special Mission Electronics. We supply defense-related, commercial off-the-shelf products to various commercial entities and government agencies and subcontractors in order to update or extend the useful life of systems. These products include:
|
•Cabling
•Electronic control systems
•Gun Control Units for Apache and Blackhawk helicopters
|
•HangFire Override Modules
•Test equipment
•Gun Control Units for land and sea based military vehicles
|
|||||||
Professional Services.The Professional Services segment includes the management of a gaming and related dining and entertainment facility in Dodge City, Kansas. Boot Hill Casino and Resort features approximately 500 slot machines, 15 table games, a restaurant and a sportsbook.
Boot Hill. Butler National Service Corporation ("BNSC"), and BHCMC, LLC ("BHCMC"), companies in Professional Services, manage The Boot Hill Casino and Resort in Dodge City, Kansas ("Boot Hill") pursuant to the Lottery Gaming Facility Management Contract, by and among BNSC, BHCMC and the Kansas Lottery, as subsequently amended ("Boot Hill Agreement"). As required by Kansas law, all games, gaming equipment and gaming operations, including sports wagering, at Boot Hill are owned and operated by the Kansas Lottery. On September 1, 2022, sports wagering became legal in the State of Kansas. Sports wagering is managed through the
four lottery gaming facility managers. The Company entered into a provider contract with DraftKings for interactive/mobile sports wagering. In addition to an online platform, the Company opened a DraftKings branded sports book at Boot Hill on February 28, 2023
Results Overview
The six months ended October 31, 2025 revenue increased 5% to $43.4 million compared to $41.2 million in the six months ended October 31, 2024. In the six months ended October 31, 2025 the Professional Services revenue was $18.0 million compared to $18.9 million in the six months ended October 31, 2024, a decrease of 5%. In the six months ended October 31, 2025 the Aerospace Products revenue was $25.4 million compared to $22.3 million in the six months ended October 31, 2024, an increase of 14%.
In the six months ended October 31, 2025 net income increased to $9.7 million compared to a net income of $5.8 million in the six months ended October 31, 2024, an increase of 66%. In the six months ended October 31, 2025, operating income increased to $11.7 million from an operating income of $8.4 million in the six months ended October 31, 2024, an increase of 40%.
RESULTS OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 2025 COMPARED TO THE SIX MONTHS ENDED OCTOBER 31, 2024
|
Six Months Ended October 31, 2025 |
Six Months Ended October 31, 2024 |
||||||||||||||||||||||||||||
| (dollars in thousands) | Percent of Total Revenue | Percent of Total Revenue | Percent Change 2024-2025 | ||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| Professional Services | $ | 18,023 | 42 | % | $ | 18,887 | 46 | % | -5 | % | |||||||||||||||||||
| Aerospace Products | 25,353 | 58 | % | 22,302 | 54 | % | 14 | % | |||||||||||||||||||||
| Total revenue | 43,376 | 100 | % | 41,189 | 100 | % | 5 | % | |||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||
| Cost of Professional Services | 7,775 | 18 | % | 7,802 | 19 | % | - | % | |||||||||||||||||||||
| Cost of Aerospace Products | 14,064 | 32 | % | 14,998 | 36 | % | -6 | % | |||||||||||||||||||||
| Marketing and advertising | 1,817 | 5 | % | 1,865 | 5 | % | -3 | % | |||||||||||||||||||||
| General, administrative and other | 7,976 | 18 | % | 8,134 | 20 | % | -2 | % | |||||||||||||||||||||
| Total costs and expenses | 31,632 | 73 | % | 32,799 | 80 | % | -4 | % | |||||||||||||||||||||
| Operating income | $ | 11,744 | 27 | % | $ | 8,390 | 20 | % | 40 | % | |||||||||||||||||||
Revenue:
Revenueincreased 5% to $43.4 million in the six months ended October 31, 2025, compared to $41.2 million in the six months ended October 31, 2024. See"Operations by Segment" below for a discussion of the primary reasons for the increase in revenue.
•Professional Services derives its revenue from professional management services in the gaming industry through Butler National Service Corporation ("BNSC") and BHCMC, LLC ("BHCMC"). Revenue from Professional Services decreased 5% to $18.0 million for the six months ended October 31, 2025 compared to $18.9 million for the six months ended October 31, 2024. Sports wagering through the DraftKings sports wagering platform brought in $2.8 million for the six months ended October 31, 2025 compared to $2.4 million in the six months ended October 31, 2024. Traditional casino gaming revenue decreased $0.8 million. Effective December 15, 2024, the revenue share to the state of Kansas increased by 2% with the start of our fifteen-year contract renewal term for the management of Boot Hill Casino.
•Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for aircraft and military vehicles. Aerospace Products revenue increased by 14% to $25.4 million for the six months ended October 31, 2025 compared to $22.3 million for the six months ended October 31, 2024. The increase in revenue is primarily due to an increase in special mission electronics business of $2.3 million along with an increase in aircraft avionics business of $1.0 million.
Costs and expenses:
Costs and expenses related to Professional Services and Aerospace Products include the cost of engineering, labor, materials, equipment utilization, control systems, security and occupancy. Costs and expenses decreased 4% to $31.6 million in the six months ended October 31, 2025 compared to$32.8 million in the six months ended October 31, 2024. Costs and expenses were 73% of total revenue in the six months ended October 31, 2025, as compared to 80% of total revenue in the six months ended October 31, 2024. This represents an operating margin of 27.1% in the six months ended October 31, 2025, compared to 20.4% in fiscal 2024 (operating income as a percentage of revenue), an increase of 6.7 percentage points.
Cost of Professional Servicesremained constant in the six months ended October 31, 2025 at$7.8 million compared to$7.8 million in the six months ended October 31, 2024. Costs were 18% of total revenue in the six months ended October 31, 2025, as compared to 19% of total revenue in the six months ended October 31, 2024.
Cost of Aerospace Products decreased 6%in the six months ended October 31, 2025 to $14.1 million compared to $15.0 million for the six months ended October 31, 2024. Costs were 32%of total revenue in the six months ended October 31, 2025, as compared to 36% of total revenue in the six months ended October 31, 2024, reflecting increased efficiencies of our engineering and fabrication leading to improved operating profit margins.
While we continue to work to control costs, with the sales growth and expansion of aircraft modification installations at the New Century facility, the need for parts fabrication exceeded our existing shop capacity in Newton, Kansas. In response, in April, 2025, we purchased a building adjacent to our Newton airport campus for the primary purpose to expand our internal fabrication capabilities. We also committed capital to upgrading operations and acquiring additional talent.
Marketing and advertising expensesdecreasedin the six months ended October 31, 2025 to $1.8 million compared to $1.9 million in the six months ended October 31, 2024. Expenses were5% of total revenue in the six months ended October 31, 2025, as compared to 5% of total revenue in the six months ended October 31, 2024. Marketing and advertising expenses include advertising, sales and marketing labor, gaming development costs, and casino and product promotions.
General, administrative and other expenses as a percent of total revenue were 18% in the six months ended October 31, 2025, compared to 20% in the six months ended October 31, 2024. These expenses decreased 2% to $8.0 million in the six months ended October 31, 2025, from $8.1 million in the six months ended October 31, 2024. The decrease is primarily attributable to lower insurance, travel, and utilities costs for the six months ended October 31, 2025 compared to the six months ended October 31, 2024.
Other income (expense):
Other income (expense)was $1.4 million in the six months ended October 31, 2025 compared to ($388) thousand in the six months ended October 31, 2024. Interest expense was $1.0 million in the six months ended October 31, 2025, compared with interest expense of $1.1 million in the six months ended October 31, 2024. The decrease in interest expense is due to the paydown of long-term debt. Interest income was $507 thousand in the six months ended October 31, 2025 compared to $206 thousand in the six months ended October 31, 2024. Gain on sale of assets was $1.9 million in the six months ended October 31, 2025, compared to a $509 thousand gain on sale of assets in the six months ended October 31, 2024. The gain on sale of assets for the six months ended October 31, 2025 was a result of selling two older model Learjets and the Professional Services administration building, which will be replaced by a newly constructed facility adjacent to the Boot Hill Casino.
Operations by Segment
We have two operating segments, Professional Services and Aerospace Products. The Professional Services segment includes revenue contributions and expenditures associated with casino management services and management support
services. Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, modifying, servicing and repairing products for aircraft.
The following table presents a summary of our operating segment information for the six months ended October 31, 2025 and October 31, 2024:
|
Six Months Ended October 31, 2025 |
Six Months Ended October 31, 2024 |
||||||||||||||||||||||||||||
| (dollars in thousands) | Percent of Total Revenue | Percent of Total Revenue | Percent Change 2024-2025 | ||||||||||||||||||||||||||
| Professional Services | |||||||||||||||||||||||||||||
| Revenue - Boot Hill Casino | $ | 18,023 | 100 | % | $ | 18,887 | 100 | % | -5 | % | |||||||||||||||||||
| Cost of Professional Services | 7,775 | 43 | % | 7,802 | 41 | % | 0 | % | |||||||||||||||||||||
| Expenses | 6,790 | 38 | % | 6,577 | 35 | % | 3 | % | |||||||||||||||||||||
| Total costs and expenses | 14,565 | 81 | % | 14,379 | 76 | % | 1 | % | |||||||||||||||||||||
| Professional Services operating income | $ | 3,458 | 19 | % | $ | 4,508 | 24 | % | -23 | % | |||||||||||||||||||
|
Six Months Ended October 31, 2025 |
Six Months Ended October 31, 2024 |
||||||||||||||||||||||||||||
| (dollars in thousands) | Percent of Total Revenue | Percent of Total Revenue | Percent Change 2024-2025 | ||||||||||||||||||||||||||
| Aerospace Products | |||||||||||||||||||||||||||||
| Revenue | $ | 25,353 | 100 | % | $ | 22,302 | 100 | % | 14 | % | |||||||||||||||||||
| Cost of Aerospace Products | 14,064 | 55 | % | 14,998 | 67 | % | -6 | % | |||||||||||||||||||||
| Expenses | 3,003 | 12 | % | 3,422 | 15 | % | -12 | % | |||||||||||||||||||||
| Total costs and expenses | 17,067 | 67 | % | 18,420 | 83 | % | -7 | % | |||||||||||||||||||||
| Aerospace Products operating income | $ | 8,286 | 33 | % | $ | 3,882 | 17 | % | 113 | % | |||||||||||||||||||
Professional Services
•Revenue from Professional Services decreased 5% for the six months ended October 31, 2025 to$18.0 million compared to $18.9 million for the six months ended October 31, 2024. Sports wagering through the DraftKings sports wagering platform brought in $2.8 million of revenue for the six months ended October 31, 2025 compared to $2.4 million in the six months ended October 31, 2024. Furthermore, traditional casino gaming revenue decreased $0.8 million due to a decrease in patron visits. We believe the decline of traditional casino gaming revenue was due primarily to economic factors impacting the region surrounding our casino in southwest Kansas. Factors influencing the local economy in the region surrounding our casino operations include reduced shifts and/or wages for Dodge City-based cattle processors and meat packing employees, increased inflation and drought conditions. Additionally, beginning in December 2024, the revenue share paid to the State of Kansas under our Management Agreement increased by two percent. Our revenue is determined after the revenue share is distributed to the state and mandated regulatory expenses are paid. Non-gaming revenue at Boot Hill Casino decreased to $1.9 million for the six months ended October 31, 2025, compared to $2.3 million for the six months ended October 31, 2024, primarily due to the casino's temporary closure of its restaurant due to ongoing renovations. The restaurant renovations were completed on October 31, 2025.
•Costs of Professional Services decreased less than $0.1 million to $7.8 million in the six months ended October 31, 2025 compared to$7.8 million compared to the six months ended October 31, 2024. Costs were 43% of
segment total revenue in the six months ended October 31, 2025, as compared to 41% of segment total revenue in the six months ended October 31, 2024. The increase is directly related to an increase in labor costs and a decline in segment revenue.
•Expenses increased 3% in the six months ended October 31, 2025 to$6.8 million compared to $6.6 million in the six months ended October 31, 2024. Expenses were 38%of segment total revenue in the six months ended October 31, 2025, as compared to 35% of segment total revenue for the six months ended October 31, 2024.
Aerospace Products
•Revenue increased 14% to $25.4 million in the six months ended October 31, 2025, compared to $22.3 million in the six months ended October 31, 2024. The increase in revenue is primarily due to a $2.3 million increase in special missions electronics and a $1.0 million increase in aircraft avionics, partially offset by a $0.2 million decrease in aircraft modification business. The increase in revenue with respect to special mission electronics is related to efficiencies in production, including pre-building components for shipment upon receipt of orders, increased inventory to minimize risk of production delay, and receipt of additional orders, which is also reflected in the increased backlog. While a new control housing design for the minigun control is in process, special mission electronics shipped a number of the legacy control units that were first manufactured in late fiscal year 2025. We are focused on identifying and acquiring the staffing to efficiently decrease backlog. Our backlog as of October 31, 2025, totaled $46.3 million for Aerospace Products. The backlog includes orders with signed contracts which may not be completed within the next fiscal year. There can be no assurance that all orders will be completed or that some may ever commence. During the six months ended October 31, 2025, the Aircraft Modifications business entered into two contracts for large airplanes. The move into larger airplanes opens new market opportunities for Avcon. We continue to look at process opportunities to enhance the cable fabrication process in our expansion of that business. For Aircraft Modifications, timing in percentage of completion is reflected in the quarter revenue compared to the previous year. Avionics revenue was up due to revenues associated with a multi-airplane avionics upgrade contract.
•Costs of Aerospace Products decreased 6% in the six months ended October 31, 2025 to $14.1 million compared to $15.0 million for the six months ended October 31, 2024. Costs were 55% of segment total revenue in the six months ended October 31, 2025, as compared to 67% of segment total revenue in the six months ended October 31, 2024, reflecting increased efficiencies of our engineering and fabrication labor leading to improved operating profit margins. Both Special Mission Electronics and Aircraft Modifications gained further efficiencies by strategically planning sub-component fabrication and decreasing outsourcing. With respect to Avionics, the divestment of the autopilot product line has reduced the costs. It is noteworthy that on June 16, 2025, a third-party's airplane crashed into the Company's New Century, Kansas hangar facility resulting in some, but not a material, temporary loss in use of hangar operations for Aircraft Modifications. The hanger has now been fully repaired and restored.
•Expenses decreased 12% in the six months ended October 31, 2025 to $3.0 million compared to $3.4 million for the six months ended October 31, 2024. Expenses were 12% ofsegment total revenue in the six months ended October 31, 2025, as compared to 15% of segment total revenue in the six months ended October 31, 2024. The decrease is primarily due to lower overhead labor and travel costs in fiscal 2026.
THREE MONTHS ENDED OCTOBER 31, 2025 COMPARED TO THE THREE MONTHS ENDED OCTOBER 31, 2024
|
Three Months Ended October 31, 2025 |
Three Months Ended October 31, 2024 |
||||||||||||||||||||||||||||
| (dollars in thousands) | Percent of Total Revenue | Percent of Total Revenue | Percent Change 2024-2025 | ||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| Professional Services | $ | 9,212 | 40 | % | $ | 9,650 | 45 | % | -5 | % | |||||||||||||||||||
| Aerospace Products | 14,039 | 60 | % | 11,710 | 55 | % | 20 | % | |||||||||||||||||||||
| Total revenue | 23,251 | 100 | % | 21,360 | 100 | % | 9 | % | |||||||||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||||||||
| Cost of Professional Services | 3,863 | 17 | % | 3,909 | 18 | % | -1 | % | |||||||||||||||||||||
| Cost of Aerospace Products | 7,473 | 32 | % | 7,524 | 35 | % | -1 | % | |||||||||||||||||||||
| Marketing and advertising | 896 | 5 | % | 951 | 7 | % | -6 | % | |||||||||||||||||||||
| General, administrative and other | 3,942 | 17 | % | 4,122 | 19 | % | -4 | % | |||||||||||||||||||||
| Total costs and expenses | 16,174 | 70 | % | 16,506 | 77 | % | -2 | % | |||||||||||||||||||||
| Operating income | $ | 7,077 | 30 | % | $ | 4,854 | 23 | % | 46 | % | |||||||||||||||||||
Revenue
Revenueincreased 9% to $23.3 million in the three months ended October 31, 2025, compared to $21.4 million in the three months ended October 31, 2024. See "Operations by Segment" below for a discussion of the primary reasons for the increase in revenue.
•Professional Services derives its revenue from professional management services in the gaming industry through BNSC and BHCMC. Revenue from Professional Services decreased 5% to $9.2 million for the three months ended October 31, 2025 compared to $9.7 million for the three months ended October 31, 2024. Sports wagering through the DraftKings sports wagering platform brought in $1.6 million for the three months ended October 31, 2025 compared to $1.4 million in the three months ended October 31, 2024. Traditional casino gaming revenue decreased $0.2 million. Effective December 15, 2024, the revenue share to the state of Kansas increased by 2% with the start of our fifteen-year contract renewal term for the management of Boot Hill.
•Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, servicing and repairing products for aircraft and military vehicles. Aerospace Products revenue increased by 20% to $14.0 million for the three months ended October 31, 2025 compared to $11.7 million for the three months ended October 31, 2024. The increase in revenue is primarily due to an increase in special mission electronics business of $1.0 million along with an increase in aircraft modification business of $1.2 million.
Costs and expenses:
Costs and expensesrelated to Professional Services and Aerospace Products include the cost of engineering, labor, materials, equipment utilization, control systems, security and occupancy. Costs and expenses decreased 2% to $16.2 million in the three months ended October 31, 2025 compared to$16.5 million in the three months ended October 31, 2024. Costs and expenses were 70% of total revenue in the three months ended October 31, 2025, as compared to 77% of total revenue in the three months ended October 31, 2024. This represents an operating margin of 30.4% in the three months ended October 31, 2025, compared to 22.7% in fiscal 2024 (operating income as a percentage of revenue), an increase of 7.7 percentage points.
Cost of Professional Servicesremained flat in the three months ended October 31, 2025 at$3.9 million compared to$3.9 million in the three months ended October 31, 2024. Costs were 17% of total revenue in the three months ended October 31, 2025, as compared to 18% of total revenue in the three months ended October 31, 2024.
Cost of Aerospace Productsremained flat in the three months ended October 31, 2025 at $7.5 million compared to $7.5 million for the three months ended October 31, 2024. Costs were 32%of total revenue in the three months ended October 31, 2025, as compared to 35% of total revenue in the three months ended October 31, 2024, reflecting increased efficiencies of our engineering and fabrication leading to improved operating profit margins.
While we continue to work to control costs, with the sales growth and expansion of aircraft modification installations at the New Century facility, the need for parts fabrication exceeded our existing shop capacity in Newton, Kansas. In response, in April, 2025, we purchased a building adjacent to our Newton airport campus for the primary purpose to expand our internal fabrication capabilities.
Marketing and advertising expensesdecreased6% in the three months ended October 31, 2025, to $896 thousand compared to $951 thousand in the three months ended October 31, 2024. Expenses were5% of total revenue in the three months ended October 31, 2025, as compared to 7% of total revenue in the three months ended October 31, 2024. Marketing and advertising expenses include advertising, sales and marketing labor, gaming development costs, and casino and product promotions.
General, administrative and other expensesas a percent of total revenue were17% in the three months ended October 31, 2025, compared to 19% in the three months ended October 31, 2024. These expenses decreased 4% to $3.9 million in the three months ended October 31, 2025, from $4.1 million in the three months ended October 31, 2024.
Other income (expense):
Other income (expense)was $1.7 million in the three months ended October 31, 2025 compared to $71 thousand in the three months ended October 31, 2024. Interest expense was ($501) thousand in the three months ended October 31, 2025, compared with interest expense of ($538) thousand in the three months ended October 31, 2024. The decrease in interest expense is due to the paydown of long-term debt. Interest income was $335 thousand in the three months ended October 31, 2025 compared to $100 thousand in the three months ended October 31, 2024. Gain on sale of assets was $1.9 million in the three months ended October 31, 2025 and $509 thousand in the three months ended October 31, 2024.
Operations by Segment
We have two operating segments, Professional Services and Aerospace Products. The Professional Services segment includes revenue contributions and expenditures associated with casino management services and management support services. Aerospace Products derives its revenue by designing, engineering, manufacturing, installing, modifying, servicing and repairing products for aircraft.
The following table presents a summary of our operating segment information for the three months ended October 31, 2025 and October 31, 2024:
|
Three Months Ended October 31, 2025 |
Three Months Ended October 31, 2024 |
||||||||||||||||||||||||||||
| (dollars in thousands) | Percent of Total Revenue | Percent of Total Revenue | Percent Change 2024-2025 | ||||||||||||||||||||||||||
| Professional Services | |||||||||||||||||||||||||||||
| Revenue - Boot Hill Casino | $ | 9,212 | 100 | % | $ | 9,650 | 100 | % | -5 | % | |||||||||||||||||||
| Cost of Professional Services | 3,863 | 42 | % | 3,909 | 41 | % | -1 | % | |||||||||||||||||||||
| Expenses | 3,673 | 40 | % | 3,363 | 35 | % | 9 | % | |||||||||||||||||||||
| Total costs and expenses | 7,536 | 82 | % | 7,272 | 75 | % | 4 | % | |||||||||||||||||||||
| Professional Services operating income | $ | 1,676 | 18 | % | $ | 2,378 | 25 | % | -30 | % | |||||||||||||||||||
| Three Months Ended October 31, 2025 | Three Months Ended October 31, 2024 | ||||||||||||||||||||||||||||
| (dollars in thousands) | Percent of Total Revenue | Percent of Total Revenue | Percent Change 2024-2025 | ||||||||||||||||||||||||||
| Aerospace Products | |||||||||||||||||||||||||||||
| Revenue | $ | 14,039 | 100 | % | $ | 11,710 | 100 | % | 20 | % | |||||||||||||||||||
| Cost of Aerospace Products | 7,473 | 53 | % | 7,524 | 64 | % | -1 | % | |||||||||||||||||||||
| Expenses | 1,165 | 8 | % | 1,710 | 15 | % | -32 | % | |||||||||||||||||||||
| Total costs and expenses | 8,638 | 62 | % | 9,234 | 79 | % | -6 | % | |||||||||||||||||||||
| Aerospace Products operating income | $ | 5,401 | 38 | % | $ | 2,476 | 21 | % | 118 | % | |||||||||||||||||||
Professional Services
•Revenue from Professional Services decreased 5% for the three months ended October 31, 2025 to$9.2 million compared to $9.7 million for the three months ended October 31, 2024. Sports wagering through the DraftKings sports wagering platform brought in $1.6 million of revenue for the three months ended October 31, 2025 compared to $1.4 million in the three months ended October 31, 2024. Furthermore, traditional casino gaming revenue decreased $0.2 million due to a decrease in patron visits. We believe the decline of traditional casino gaming revenue was due primarily to economic factors impacting the region surrounding our casino in southwest Kansas. Factors influencing the local economy in the region surrounding our casino operations include reduced shifts and/or wages for Dodge City-based cattle processors and meat packing employees, increased inflation and drought conditions. Additionally, beginning in December 2024, the revenue share paid to the State of Kansas under our Management Agreement increased by two percent. Our revenue is determined after the revenue share is distributed to the state and mandated regulatory expenses are paid. Non-gaming revenue at Boot Hill Casino decreased to $0.8 million for the three months ended October 31, 2025, compared to $1.2 million for the three months ended October 31, 2024, primarily due to the casino's temporary closure of its restaurant due to ongoing renovations.
•Costs of Professional Services decreased less than $0.1 million to $3.9 million in the three months ended October 31, 2025 compared to$3.9 million compared to the three months ended October 31, 2024. Costs were 42% ofsegment total revenue in the three months ended October 31, 2025, as compared to 41% of segment total revenue in the three months ended October 31, 2024.
•Expenses increased 9% in the three months ended October 31, 2025 to$3.7 million compared to $3.4 million in the three months ended October 31, 2024, primarily due to higher allocation of corporate overhead costs. Expenses were 40% ofsegment total revenue in the three months ended October 31, 2025, as compared to 35% of segment total revenue in the three months ended October 31, 2024.
Aerospace Products
•Revenue increased 20% to $14.0 million in the three months ended October 31, 2025, compared to $11.7 million in the three months ended October 31, 2024. The increase in revenue is primarily due to a $1.0 million increase in special missions electronics and a $1.2 million increase in aircraft modification business. The increase in revenue with respect to special mission electronics is related to efficiencies in production, including pre-building components for shipment upon receipt of orders, increased inventory to minimize risk of production delay, and receipt of additional orders, which is also reflected in the increased backlog. While a new control housing design for the minigun control is in process, special mission electronics shipped a number of the legacy control units that were first manufactured in late fiscal year 2025. We are focused on identifying and acquiring the staffing to efficiently decrease backlog. During the three months ended October 31, 2025, the Aircraft Modifications business entered into two contracts for large airplanes. The move into larger airplanes opens new market opportunities for Avcon. We continue to look at process opportunities to enhance the cable fabrication process in our expansion of that business. For Aircraft Modifications, timing in percentage of
completion is reflected in the quarter revenue compared to the previous year. Avionics revenue was up slightly due to revenues associated with a multi-airplane avionics upgrade contract.
•Cost of Aerospace Products decreased less than 1% in the three months ended October 31, 2025 to $7.5 million compared to $7.5 million for the three months ended October 31, 2024. Costs were 53% of segment total revenue in the three months ended October 31, 2025, as compared to 64% of segment total revenue in the three months ended October 31, 2024, reflecting increased efficiencies of our engineering and fabrication labor leading to improved operating profit margins. Both Special Mission Electronics and Aircraft Modifications gained further efficiencies by strategically planning sub-component fabrication and decreasing outsourcing. With respect to Avionics, the divestment of the autopilot product line has reduced the costs.
•Expenses decreased 7% in the three months ended October 31, 2025 to $1.2 million compared to $1.7 million for the three months ended October 31, 2024. Expenses were 8% ofsegment total revenue in the three months ended October 31, 2025, as compared to 15% of segment total revenue in the three months ended October 31, 2024. The decrease is primarily due to lower overhead labor and travel costs in fiscal 2026.
Employees
Other than persons employed by our gaming subsidiaries, there were 153 full time and 6 part time employees on October 31, 2025, compared to 140 full time and 2 part time employees on October 31, 2024. Our staffing at Boot Hill Casino & Resort on October 31, 2025 was 187 full time and 44 part time employees compared to 200 full time and 41 part time employees on October 31, 2024. None of the employees are subject to any collective bargaining agreements.
Liquidity and Capital Resources
Overview
Butler National is a holding company. Our ability to fund our obligations depends on existing cash on hand, cash flow from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources have been cash on hand, cash flow from operations, borrowings under our lines of credit and notes payable and proceeds from the issuance of debt and equity securities. We assess liquidity in terms of the ability to generate cash or obtain financing in order to fund operating, investing and debt service requirements. Our primary ongoing cash requirements include the funding of operations, capital expenditures, acquisitions and other investments in line with our business strategy and debt repayment obligations and interest payments. Our strategy has been to maintain moderate leverage and substantial capital resources in order to take advantage of opportunities, to invest in our businesses and develop new streams of income that may be profitable. As such, we have continued to invest in developing and marketing new aircraft modifications and marketing new STCs. We believe that our current banks will provide the necessary capital for our business operations. However, we continue to maintain contact with other banks that have expressed an interest in funding our working capital needs to continue our operational growth in 2026 and beyond.
Operating Activities
During the six months ended October 31, 2025 our cash position increased by$4.4 million. Net income was $9.7 million for the six months ended October 31, 2025. Cash flow provided by operating activities was $13.9 million for the six months ended October 31, 2025. Non-cash activities consisting of depreciation and amortization provided $3.4 million, deferred compensation added $0.1 million, stock awarded to directors added $0.1 million, and gain on sale of assets used $1.9 million. Contract assets increased our cash position by$1.1 million and contract liability increased our cash position by $0.4 million. Inventories decreased our cash position by $0.5 million and accounts receivable decreased our cash position by$0.5 million.Gaming facility mandated payments increased our cash position by $61 thousand. Prepaid expenses and other assets decreased our cash by $0.8 million. Accounts payable increased our cash position by$1.2 million and lease liabilities increased our cash position by $0.1 million. Accrued liabilities decreased our cash position by $0.6 million and other current liabilities decreased our cash by $69 thousand. Income tax payable increased our cash position by $2.1 million.
Investing Activities
Cash used in investing activities was $1.7 million for the six months ended October 31, 2025. We invested $1.2 million towards STCs, $0.9 million on buildings and improvements, and $1.2 million on machinery and equipment. For the six
months ended October 31, 2025, proceeds from the sale of assets provided $1.6 million, including $1.2 million for the sale of Boot Hill Casino's administrative building and $0.4 million on the sale of two airplanes. Of the $1.2 million related to the building sale, approximately $1.2 million was received in cash and the remaining $1.2 million is recorded in accounts receivable at October 31, 2025. The Company plans to construct a more efficient facility for storage and training adjacent to the casino.
Financing Activities
Cash used by financing activities was $7.7 million for the six months ended October 31, 2025. We made repayments of $2.8 million on our long-term debt and we made repayments on lease right-to-use of $135 thousand. We purchased Company stock of $4.8 million. The stock acquired was placed in treasury.
Capital Expenditures
The Company anticipates remaining capital expenditures in fiscal 2026 to be approximately $9.2 million, consisting of $3.8 million on STC's, $2.4 million on equipment, and $3.0 million on buildings and improvements. We anticipate our cash balance will be sufficient to cover our cash requirements through the current fiscal year.
Critical Accounting Policies and Estimates
We believe there are several accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amount of revenue and other significant areas involving management judgments and estimates. These significant accounting policies relate to revenue from contracts with customers, inventory valuation and long-lived assets. These policies and our procedures related to these policies are described in detail below and under specific areas within this "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Revenue from Contracts with Customers - Aerospace Contracts
Methodology
We recognize revenue and profit based upon either (1) the percent completion method, in which sales and profit are recorded based upon the ratio of labor costs incurred to date to estimated total labor costs to complete the performance obligation, or (2) the point-in-time method, in which sales are recognized at the time control is transferred to the customer. For aerospace contracts that involve airplane modifications based on customer specific requirements, we generally recognize revenue and income using the percent completion method because of continuous transfer of control to the customer. Revenue is generally recognized using the percent completion method based on the extent of progress towards completion of the performance obligation, which allows for recognition of revenue as work on a contract progresses. Our general contract term is between one to twelve months.
Management performs detailed quarterly reviews of all of our significant long-term contracts. Based upon these reviews, we record the effects of adjustments in profit estimates each period. If at any time management determines that in the case of a particular contract total costs will exceed total contract revenue, we record a provision for the entire anticipated contract loss at that time.
Judgment and Uncertainties
The percent completion revenue recognition model requires that we estimate future revenues and costs over the life of a contract. Revenues are estimated based upon the original contract price, with consideration being given to exercised contract options, change orders and, in some cases, projected customer requirements. Contract costs may be incurred over a period of several months, and the estimation of these costs requires significant judgment based upon the acquired knowledge and experience of program managers, engineers and financial professionals. Estimated costs are based primarily on anticipated purchase contract terms, historical performance trends, business base and other economic projections.
Effect if Actual Results Differ from Assumptions
While we do not believe there is a reasonable likelihood there will be a material change in estimates or assumptions used to calculate our revenue contracts and costs, estimating the percentage of work complete on certain programs is a complex task. As a result, changes to these estimates could have a significant impact on our results of operations. These products
and services are an important element in our continuing strategy to increase operating efficiencies and profitability as well as broaden our business base. Management continues to monitor and update program cost estimates quarterly for these contracts. A significant change in an estimate on one or more of these contracts could have a material effect on our financial position and results of operations.
Inventory Valuation
Methodology
We have four types of inventory (a) raw materials, (b) contracts in process, (c) other work in process and (d) finished goods. Raw material includes certain general stock materials but primarily relates to purchases that were made in anticipation of specific programs that have not been started as of the balance sheet date. Raw materials are stated at the lower of the cost of the inventory or its fair market value. Contracts in process, other work in process and finished goods are valued at production cost comprised of material, labor and overhead. Contracts in process, other work in process and finished goods are reported at the lower of cost or net realizable value.
Judgment and Uncertainties
The process for evaluating inventory obsolescence or market value often requires the Company to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be sold in the normal course of business. We adjust our inventory by the difference between the estimated market value and the actual cost of our inventory to arrive at net realizable value. Changes in estimates of future sales volume may necessitate future write-downs of inventory value.
Effect if Actual Results Differ from Assumptions
Management reviews the inventory balance on an annual basis to determine whether any additional write-downs are necessary. Following the write-down of the inventory as discussed above, we believe this inventory is stated at net realizable value at October 31, 2025, although an unanticipated lack of demand for aircraft or spare parts in the future could result in additional write-downs of the inventory value. Overall, management believes that our inventory is appropriately valued at October 31, 2025.
Long-lived Assets
Methodology
The Company accounts for its long-lived assets in accordance with ASC Topic 360-10, Impairment or Disposal of Long-Lived Assets. ASC Topic 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. The Company assesses the recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition.
Judgment and Uncertainties
In years that management performs a qualitative assessment we consider the following qualitative factors: general economic conditions in the markets served by the segment, relevant industry-specific performance statistics, and forecasted results of operations.
For the quantitative impairment tests, management estimated the fair value of the long-lived asset group using an income methodology based on management's estimates of forecasted undiscounted cash flows over the estimated life of the assets. Changes in these estimates and assumptions could materially affect the results of our impairment testing.
An impairment loss is recognized for any excess of the carrying amount of the estimated undiscounted cash flows over the remaining life of the assets. No impairment charges were recorded during the six months ended October 31, 2025.
Effect if Actual Results Differ from Assumptions
As with all assumptions, there is an inherent level of uncertainty and actual results, to the extent they differ from those assumptions, could have a material impact on fair value. For example, a reduction in customer demand would impact our assumed growth rate resulting in a reduced fair value. Potential events or circumstances could have a negative effect on the estimated fair value. The loss of a major customer or program could have a significant impact on the future cash flows associated with a long-lived asset group. We do not currently believe there to be a reasonable likelihood that actual results will vary materially from estimates and assumptions used to test our long-lived assets for impairment losses. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to additional impairment charges that could be material.
Changing Prices and Inflation
We have experienced upward pressure from inflation in fiscal year 2026. From fiscal year 2025 to fiscal year 2026 most of the increases we experienced were in material and labor costs. This additional cost may not be transferable to our customers resulting in lower income in the future. We anticipate fuel, material and labor costs to rise in fiscal 2026 and 2027.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Butler National Corporation published this content on December 11, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on December 11, 2025 at 14:27 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]