Gencor $GENC Part 2

A waiting game

Disclaimer: This is not investing advice. Everything written here is my own opinion and is for informational purposes only. Everything written here is subject to my own errors, biases, and other types of mistakes. You should do your own research and consult a financial advisor before making any investment decisions. I own shares of GENC.

I first wrote up my thoughts about Gencor on April 10, 2025. It was a special situation where I saw really solid downside protection, since the market price of $11 - $12 per share was solidly below Gencor’s tangible net asset value, most of which was cash.

For a refresher, that post is linked here:

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GENC shares have appreciated meaningfully since the time of my first post. Today, they trade in the $14 range.

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And here’s the bigger picture:

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Even though this setup has been successful so far, we’re still eagerly awaiting any SEC filings from Gencor. On May 9, the company filed another notification that another quarterly filing would be delayed. This wasn’t too surprising - it’s understandable that each new quarter would need to be delayed until the previous delayed filings got filed and the company got “caught up.”

I can also understand why investors who own Gencor would be getting more and more concerned as more time passes without any updates. I still have the opinion that the language surrounding the “material weaknesses” suggests that they are of reporting and accounting nature only, not actually something wrong with the business or the basic pieces of accounting. But as time goes on and on, I wonder, as I’m sure many others do, whether longer delays imply issues that are more difficult to reconcile and untangle, and whether that implies that those issues are more serious.

Overall, while it’s been nice to see the stock (justifiably, in my opinion) drift up over the past couple months, it has been and will continue to be a waiting game.

We got one filing from GENC on May 29, which was its Conflict Minerals Report. So it wasn’t anything material that provided an update on the company or its accounting issues, but I was glad to see any filing to break the silence. This report was filed around the same time this year that it had been in previous years, so I was also glad to see some (admittedly small) signal of “business as usual” at Gencor.

So the question becomes: what to do now? I mean, if you bought GENC two months ago for $12 per share and sold it today at $14 per share, that result wouldn’t be shabby, especially for a two month holding period. I don’t think there’s any shame in selling some or all of a well-bought position here. But I also want to make the case for holding on to these shares, which is what I am doing. That case is based on a couple main points:

• I think there’s good reason to believe that meaningful updates from GENC will occur in June and/or early July.

• I think Gencor is as strong a business as ever, and industry conditions will continue to be strong because of the constant underlying need to repair roads.

Please keep in mind that these are both opinions. Let’s go through each of them in more detail.

Updates in June and July

I believe Gencor will work very hard to have its late 10-K filed by the end of June. This belief comes from the threat of NYSE delisting that comes as a natural result of being late with filing one’s 10-K.

This notice specifies a date (the end of June) and this date is more or less a deadline. I say “more or less” because Gencor could, in theory, be granted an extension. Here’s the direct quote:

“The NYSE informed the Company that, under the rules of the NYSE American, the Company has six months from the Form 10-K filing due date of December 31, 2024, to regain compliance with the NYSE American listing standards by filing the Form 10-K with the SEC. The NYSE further noted that, if the Company fails to file the Form 10-K within the six-month period, the NYSE may grant, at its sole discretion, an extension of up to six additional months for the Company to regain compliance, depending on the Company’s specific circumstances. The Delinquency Notification also provides that the NYSE may nevertheless commence delisting proceedings at any time if it deems that the circumstances warrant.

The Company currently expects to file the Form 10-K within the six-month period granted by the Delinquency Notification; however, there can be no assurance that the Form 10-K will be filed within such period.”

This line of thinking is far, far from a guarantee that Gencor will file its 10-K in June. Nevertheless, I can put myself in the shoes of people working on this. This theoretical deadline date has probably been in the back of their heads this whole time. Furthermore, if they have been fully aware of this date and know that they won’t meet the deadline, it would be practical and prudent to issue a press release stating that they know they won’t meet the deadline and have asked the NYSE for X number of months of extension. A company would want to do that 1) so that they don’t get delisted and 2) to keep the market informed so that the date doesn’t come and everybody panics due to the fear of delisting.

So my bet is that in June, we will either get a 10-K filed or we’ll get clarity on when to expect the 10-K to be filed. But if that doesn’t happen, I have a backup plan.

Remember back to March and April, when GENC was issuing some press releases that provided a few critical numbers about the performance in the prior quarters. On April 3, Gencor issued a press release that had 3 things in it:

1. Revenue from the quarter ended December 31, 2024

2. Cash and Marketable Securities as of March 31, 2025

3. Backlog as of March 31, 2025

This was April 3, just a few days after the quarter-end of March 31.

I see no reason why we wouldn’t expect the pattern to continue and, within the first few days of July, see a press release which would contain:

1. Revenue from the quarter ended March 31, 2025

2. Cash and Marketable Securities as of June 30, 2025

3. Backlog as of June 30, 2025

Having that update in early July would provide clarity on the business, even if no 10-K or 10-Q had been filed by that point. Overall, these are the types of updates that I think we’ll see in June and early July, and the reasoning behind why I have an opinion about timing. The updates we get could be slightly different than what I’ve outlined, but I think they will be along these lines.

Business Strength

I’ll start out by noting that everything we’ve seen from recent updates from Gencor have shown that the business is strong - maybe better than ever.

FY 2024 revenue is suggested to be $113 million, which is higher than any other year as far as I can see.

Q1 2025 revenue is suggested to be $31 million, continuing the record sales trend

Cash and marketable securities as of March 31, 2025 was $144 million, which is the largest I can see in the company’s history. Not to mention the fact that it grew to that level from $130 million as of December 31, 2024.

Few numbers have been released by Gencor throughout 2025, but they paint a positive picture.

Another resource we have to help us understand what Gencor’s industry conditions are like is its competitor, Astec Industries. Astec makes a wide variety of machines that mostly have to do with the road construction and repair industry. On April 29, Astec reported a very strong quarter ended March 31. Like Gencor, ASTE revenue has continued to build to a record level in the first part of 2025.

On the call, management said “we continue to see strong demand for asphalt and concrete plants” and highlighted the 2025 Report Card for America’s Infrastructure, which is a document prepared by the American Society of Civil Engineers.

In this year’s report card, America’s roads got a D+ (in 2021 they got a D). My takeaway from that is that there’s effectively a built-up amount of demand for road repairs, new asphalt, and the machines that make it. This thought is reinforced by my own experience. I’ve never lived somewhere and thought “all the roads here are perfect and never need to change.” Rather, I see new cracks and potholes every year, places where I think the road needs to add more lanes, and each year new sections of I-70 are redone. Roads are truly a never-ending project of maintenance that we forget about and take for granted because they’ve always been there.

The report card suggests that, despite all the road work and maintenance that we are currently doing, there’s plenty of room to be doing more. Gencor will be the first to tell you that its business is heavily affected by the amount of government funding for projects that have to do with road construction and repair. But I think that funding will continue to be there in the years to come. Investing in infrastructure seems like an easy thing for politicians to agree on, even though they don’t agree on much these days. Having drivable roads seems unoffensive enough, to me. As we enter a time period with more worldwide recognition that the United States is in a sovereign debt crisis, I believe America’s leaders will turn to stimulating and appeasing the citizens. Heavy infrastructure spending is an easy one that checks both of those boxes.

My Base Case

As I mentioned before, I am continuing to hold GENC. I believe there’s still plenty of value at the $14 price range. My base case is that, upon successfully clearing up the accounting issues and getting caught up on filings, the market would react positively and bid GENC up to the high teens. Prior to this accounting snafu, GENC traded in the low $20s, and it’s the same company if not a little better.

I think it’s likely that some updates will come in the rest of June and/or early July. My base case expectation is that the market would respond positively to the filing of a 10-K. After the filing of the 10-K, I think it wouldn’t be long before the delayed 10-Qs were filed. I imagine those are much easier and probably being worked on concurrently with the annual report, but the things need to be filed in the right order.

Another type of press release to be aware of would be an update that the company needs more time and has asked the NYSE for an extension past the end of June for the filing of its 10-K. Hopefully such a request would be granted by the NYSE, but I still think the market would respond negatively to such an announcement by Gencor.

I’ll be watching regularly and write something if there are any updates and if the situation changes!

Thanks for reading!

P.S. I love the opportunity in Gencor, but usually I like to do due diligence where I get to eat something. I recently had the chance to eat some delicious ribs at a restaurant called Flanigan’s: