Taylor Devices' Net Income Jumps 17% Amid Backlog Decline

TL;DR

**TAYD's profit soared, but the shrinking backlog is a red flag for future growth; sell the rally.**

AI Summary

Taylor Devices, Inc. reported a 6% increase in net revenue to $32,695,000 for the nine months ended February 28, 2026, up from $30,732,000 in the prior year. Net income surged by 17% to $6,696,848, compared to $5,725,060 in the same period last year. Basic and diluted earnings per common share rose to $2.12 from $1.83. The company saw a significant shift in sales concentration, with domestic sales increasing by 12% and international sales decreasing by 21%. Sales to aerospace/defense customers grew by 22%, while sales to construction of buildings and bridges customers decreased by 16% and industrial customers by 12%. Gross profit as a percentage of net revenue slightly declined to 44% from 45%. The backlog of open sales orders decreased substantially from $33.3 million across 146 orders at February 28, 2025, to $20.8 million across 116 orders at February 28, 2026, indicating a potential slowdown in future revenue conversion. Cash and cash equivalents increased to $2,530,424 from $1,190,656 at May 31, 2025.

Why It Matters

Taylor Devices' strong net income growth of 17% and increased EPS of $2.12 signals operational efficiency and profitability for investors. However, the significant 37.5% reduction in backlog from $33.3 million to $20.8 million could indicate future revenue headwinds, impacting long-term investor confidence and potentially signaling a competitive shift or reduced demand in key sectors. The company's increased reliance on aerospace/defense sales (66% of total sales) and decreased structural and industrial sales highlights a strategic pivot or market trend, which could affect employees in those declining segments and alter the company's competitive positioning against more diversified peers. This shift also suggests a broader market trend towards defense spending over infrastructure projects.

Risk Assessment

Risk Level: medium — The company's backlog decreased significantly from $33.3 million across 146 open sales orders at February 28, 2025, to $20.8 million across 116 open sales orders at February 28, 2026. This 37.5% reduction in backlog could lead to lower revenues in fiscal years 2026 and 2027, posing a medium-term revenue risk despite current strong performance.

Analyst Insight

Investors should closely monitor TAYD's upcoming quarterly reports for signs of backlog stabilization or recovery. Consider taking profits on the recent net income surge, given the substantial decline in future revenue visibility indicated by the shrinking backlog.

Financial Highlights

revenue

$32,695,023

total Assets

$75,452,711

net Income

$6,696,848

eps

$2.12

gross Margin

44%

cash Position

$2,530,424

revenue Growth

+6%

Revenue Breakdown

Key Numbers

• $32,695,023 — Net Revenue (6% increase for nine months ended Feb 28, 2026)
• $6,696,848 — Net Income (17% increase for nine months ended Feb 28, 2026)
• $2.12 — Basic and Diluted EPS (Increased from $1.83 for nine months ended Feb 28, 2026)
• $20.8 million — Backlog (Decreased from $33.3 million at Feb 28, 2025, to Feb 28, 2026)
• 66% — Sales to Aerospace / Defense (Increased from 58% for nine months ended Feb 28, 2026)
• 44% — Gross Profit as % of Net Revenue (Decreased from 45% for nine months ended Feb 28, 2026)
• $2,530,424 — Cash and Cash Equivalents (Increased from $1,190,656 at May 31, 2025)
• 12% — Domestic Sales Increase (For nine months ended Feb 28, 2026)
• 21% — International Sales Decrease (For nine months ended Feb 28, 2026)

Key Players & Entities

• Taylor Devices, Inc. (company) — registrant
• U.S. Securities and Exchange Commission (regulator) — filing recipient
• Nasdaq Stock Market LLC (company) — stock exchange
• Financial Accounting Standards Board (regulator) — accounting standard setter
• ASU 2023-09 (other) — accounting standard update
• ASU 2025-03 (other) — accounting standard update
• Private Securities Litigation Reform Act of 1995 (other) — legal act
• Bloomberg (company) — publisher

FAQ

Risk Factors

• Customer Budget Reductions [medium — market]: Reductions in capital budgets by customers and potential customers can negatively impact demand for the Company's products. This is a significant factor as it directly affects sales volume and revenue generation.
• Changing Product Demand [medium — market]: Shifts in product demand and industry capacity can lead to fluctuations in sales. The company's ability to adapt to evolving customer needs and market trends is crucial for sustained performance.
• Increased Competition and Pricing Pressures [medium — market]: The company faces competition that can lead to pricing pressures. This could impact gross margins and overall profitability if not managed effectively through product differentiation or cost efficiencies.
• Technological Advancements [medium — market]: Advances in technology could reduce the demand for the Company's current products. Continuous innovation and adaptation to new technologies are necessary to remain competitive.
• Natural Disasters [low — market]: The frequency and intensity of natural disasters can affect demand for the Company's products. While external, these events can create unpredictable swings in customer needs.
• Backlog Reduction [medium — operational]: The backlog of open sales orders decreased substantially from $33.3 million to $20.8 million. This indicates a potential slowdown in future revenue conversion and requires careful monitoring of new order intake.

Industry Context

Taylor Devices, Inc. operates in a niche market providing shock absorption and energy transfer solutions. The company's performance is closely tied to the capital expenditure cycles of its key customer segments, particularly aerospace/defense, construction, and industrial manufacturing. Trends such as increased defense spending and infrastructure development can be tailwinds, while economic slowdowns or shifts in technology can present headwinds.

Regulatory Implications

The company operates under standard SEC reporting requirements for public companies, necessitating accurate and timely financial disclosures. There are no specific industry-specific regulatory risks highlighted in this filing that would materially impact operations beyond general compliance.

What Investors Should Do

1. Monitor backlog trends closely.
2. Analyze the shift in sales concentration.
3. Evaluate the impact of declining gross margin.
4. Assess the increase in cash and short-term investments.

Key Dates

• 2026-02-28: End of Nine-Month Period — Reporting period for the 10-Q, showing year-over-year financial performance and position.
• 2025-02-28: Prior Year Nine-Month Period End — Benchmark for comparing financial performance and operational metrics.
• 2025-05-31: Prior Fiscal Year End — Balance sheet comparison point for cash and cash equivalents and other assets/liabilities.

Glossary

Backlog

The total value of confirmed customer orders that have not yet been fulfilled or shipped. (Indicates future revenue potential; a decrease suggests a potential slowdown in sales.)

Gross Profit as a percentage of Net Revenue

Measures the profitability of a company's core operations after deducting the cost of goods sold. (A slight decline from 45% to 44% indicates a minor decrease in efficiency or increased cost of sales relative to revenue.)

Costs and estimated earnings in excess of billings

Represents revenue recognized on long-term contracts where the cumulative costs incurred and estimated earnings exceed the cumulative amounts billed to customers. (An increase from $5,360,499 to $5,681,210 suggests more work-in-progress on long-term contracts where billing has not yet caught up.)

Billings in excess of costs and estimated earnings

Represents amounts billed to customers on long-term contracts that exceed the cumulative costs incurred and estimated earnings. (A significant decrease from $4,382,067 to $1,404,085 indicates a reduction in unbilled revenue on contracts, potentially due to project completion or billing adjustments.)

Year-Over-Year Comparison

Compared to the prior year's nine-month period, Taylor Devices, Inc. has demonstrated revenue growth of 6% and a more substantial 17% increase in net income, leading to higher EPS of $2.12 from $1.83. However, the gross profit margin has slightly compressed from 45% to 44%. A significant shift in sales composition is evident, with domestic sales up 12% while international sales fell 21%, and a notable pivot towards aerospace/defense customers (+22%) at the expense of construction (-16%) and industrial (-12%) sectors. The most concerning change is the substantial reduction in the order backlog, signaling potential headwinds for future revenue.

Key Financial Figures

• $33.3 million — its backlog with a total sales value of $33.3 million. At February 28, 2026, the Company had
• $20.8 million — its backlog with a total sales value of $20.8 million. The Company expects to recognize reven
• $39,000 — esearch and development costs increased $39,000 from the same period in the prior year.
• $800,000 — on ("FASB ASC"). The Company recognized $800,000 (47,850 options granted) and $731,000 (
• $731,000 — d $800,000 (47,850 options granted) and $731,000 (46,800 options granted) of compensatio
• $6,790,000 — Operating Income Operating income was $6,790,000 for the nine-month period ended Februar
• $5,869,000 — od ended February 28, 2026, higher than $5,869,000 in the same period of the prior year. T
• $1,231,000 — enses. Other Income Other income was $1,231,000 for the nine-month period ended Februar

Filing Documents

• tayd-20260228_10q.htm (10-Q) — 398KB
• td_ex31z1.htm (EX-31.1) — 7KB
• td_ex31z2.htm (EX-31.2) — 7KB
• td_ex32z1.htm (EX-32.1) — 4KB
• td_ex32z2.htm (EX-32.2) — 4KB
• 0001376474-26-000254.txt ( ) — 1523KB
• tayd-20260228_cal.xml (EX-101.CAL) — 30KB
• tayd-20260228_def.xml (EX-101.DEF) — 25KB
• tayd-20260228_lab.xml (EX-101.LAB) — 90KB
• tayd-20260228_pre.xml (EX-101.PRE) — 65KB
• tayd-20260228.xsd (EX-101.SCH) — 8KB
• tayd-20260228_10q_htm.xml (XML) — 105KB

Financial Statements

Financial Statements Condensed Consolidated Balance Sheets as of February 28, 2026 and May 31, 2025 4 Condensed Consolidated Statements of Income for the three and nine months ended February 28, 2026 and February 28, 202 5 5 Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended February 28, 2026 and February 28, 202 5 6 Condensed Consolidated Statements of Cash Flows for the nine months ended February 28, 2026 and February 28, 202 5 7 Notes to Condensed Consolidated Financial Statements 8 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 17 Item 4.

Controls and Procedures

Controls and Procedures 17 PART II OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 18 Item 1A.

Risk Factors

Risk Factors 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Mine Safety Disclosures 18 Item 5. Other Information 18 Item 6. Exhibits 19

– Financial Information

Part I – Financial Information

Financial Statements

Item 1. Financial Statements TAYLOR DEVICES, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets (Unaudited) February 28, May 31, 2026 2025 Assets Current assets: Cash and cash equivalents $ 2,530,424 $ 1,190,656 Short-term investments 39,181,924 34,799,367 Accounts receivable, net 4,863,234 5,599,785 Inventory 7,481,184 8,113,321 Costs and estimated earnings in excess of billings 5,681,210 5,360,499 Other current assets 1,371,101 1,219,211 Total current assets 61,109,077 56,282,839 Maintenance and other inventory, net 783,353 1,107,875 Property and equipment, net 12,702,256 12,074,172 Patents, net 253,702 270,370 Other assets 288,323 284,864 Deferred income taxes 316,000 1,598,000 $ 75,452,711 $ 71,618,120 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 1,129,072 $ 1,119,240 Accrued expenses 2,772,627 4,072,436 Billings in excess of costs and estimated earnings 1,404,085 4,382,067 Total current liabilities 5,305,784 9,573,743 Stockholders' equity: Common stock and additional paid-in capital 16,733,835 14,649,415 Retained earnings 67,237,002 60,540,154 83,970,837 75,189,569 Treasury stock - at cost ( 13,823,910 ) ( 13,145,192 ) Total stockholders' equity 70,146,927 62,044,377 $ 75,452,711 $ 71,618,120 See notes to condensed consolidated financial statements. 4 TAYLOR DEVICES, INC. AND SUBSIDIARY Condensed Consolidated Statements of Income (Unaudited) (Unaudited) For the three months ended For the nine months ended February 28, 2026 February 28, 2025 February 28 , 202 6 February 28, 2025 Sales, net $ 11,173,201 $ 10,564,834 $ 32,695,023 $ 30,731,571 Cost of goods sold 6,681,721 6,035,961 18,305,448 16,812,968 Gross profit 4,491,480 4,528,873 14,389,575 13,918,603 Research and development costs 63,015 146,749 358,202 318,863 Selling, general

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Cautionary Statement The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Information in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-Q that does not consist of historical facts are "forward-looking statements." Statements accompanied or qualified by, or containing, words such as "may," "will," "should," "believes," "expects," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume" constitute forward-looking statements and, as such, are not a guarantee of future performance. These statements involve factors, risks and uncertainties, the impact or occurrence of which can cause actual results to differ materially from the expected results described in such statements. Risks and uncertainties can include, among others: reductions in capital budgets by our customers and potential customers; changing product demand and industry capacity; increased competition and pricing pressures; advances in technology that can reduce the demand for the Company's products; the kind, frequency and intensity of natural disasters that affect demand for the Company's products; and other factors, many or all of which are beyond the Company's control. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results. Except as may be required by law, the Company disclaims any obligation to release publicly any updates or revisions to the forward-looking statements herein to reflect any change in the Company's expectations with regard thereto, or any changes in events, conditions or circumstances on which any such statement is based. Results of Operations A summary of the period-to-period changes in the principal items incl

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