Titan Machinery (TITN) 23 May 242025 Q1 Earnings call transcript

Greetings. Welcome to the Titan Machinery's First Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please note, today's conference is being recorded.I'll now turn the call over to Jeff Sonnek with ICR. Jeff, you may now begin.

Thank you. first XXXX Machinery's conference Titan to quarter earnings fiscal call. Welcome

Officer.By company call and Knutson, Financial fiscal have first today XXXX. for the April earnings are to Bo everyone the access from Chief quarter Officer; On the Executive the Bryan release should Chief President Larsen, XX, ended now, and

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adjusted In in future guarantee addition, including may prepared and be statements We presentation measures in do the presentation including of may Risk of particularly information when current note call, section believe results a contain these to call.Please performance, performance, results period a remarks today's financial should Factors XX-K. additional at underlying those the that may as your upon Titan any forward-looking expectations to Titan's providing materially remarks, webcast recently and Except into on are which update from them. differ by to and statements made complete can middle ongoing a report questions. or may and more the not forward-looking in The prepared that Statements most and results actual forward-looking more facilitate no uncertainties reliance forward-looking be we're in website detailed page.I'd we required inherent risks from These forward-looking release statements. statements, accompany Titan's like financial assumes can annual contain analysis is ir.titanmachinery.com. make These on placed undue Form on discuss risk not factors to the greater applicable factors those Titan's non-GAAP today's the today's directly comparing to during period. on filed adjusted identified response cause discussion financial below be based statements to involve measures, management basis. remind of found in transparency that obligation again of could therefore, everyone the be any an management that law, projected

of We comparable their in of and these CEO, our to like your questions. most I'd release.At reconciliations remarks, Knutson. open Bryan, to now company's the financial please directly the to included today's GAAP go the take Bryan non-GAAP measures prepared ahead. measures we that, will With have introduce call conclusion Mr. President

an providing reflect brief Thank results and call current the you, incremental a more market assumptions.Our transition for our Jeff. by a Good XXXX outlook the will some thoughts quarter financial his modeling summary Bo to offer market updated call environment. of Then challenging results first morning, passing today's I our before to on everyone.I'll begin and fiscal environment. on review thoughts industry

We is product in factors. have demand demand and This restricted of categories. into rapidly shift moved inventory product one lower many of high out of supply reflects excess supply mainly a period and influencing characterized X a that by

multiple years following supply significantly their volumes. times First, limited of production normal manufacturing constraints rapidly have delivery chain to returned that

we purchases are headwinds, contrasts broader equipment incomes, for seeing rates decisions.As the strong XXXX, to equipment purchasing cases, in farm with some we extended a persisted experienced throughout fiscal of net duration start as higher Second, a delaying which combination slower-than-expected The our farmer result fiscal and geographic suppressed these demand that interest Ag incremental fundamentals impacting XXXX. of sentiment, demand and footprint uncertainty weaken. a of softening is across macroeconomic

enabled in us a from more to have So our than our production while year. the among and which, sales backlog, by been normalization of schedules supply cases, has some chains delayed convert suppliers

stemming equipment available to for of aggressive aligned longer to as Big term, increase laser-focused from trade-ins. more adopting tactics levels in the demand. our to are sensitive inventory interest X.Xx down whole our equipment range new manage healthier plan picture as managing we the inventories on industry are Therefore, with We used sale more softening inventory we X.Xx with and levels, to are to good minimizing turns and which expense. floor well healthy correspond inventory

more described FY a our on targeted our and so on As it fiscal will do, likely we and we currently have one XXXX. to believe remain into is 'XX some desired our levels earnings what through direct to we highest of will levels.Turning I we priority we to QX call, sight path our into these time, year will results. inventory need to But comments until achieve QX the line reiterate carry execute

first were the Although this the was were revenue able when our to to inventory pleased we growth we into despite deliver below to acquisition.We experienced over record demand in excluding heading margin period. incrementally performance softer a manage we to O'Connors million, quarter transition the sales from the efforts quarter, same-store growth the some compression first of segment. due XX% than expectations, through Agriculture being our contribution year, anticipated And quarter positive levels first our number also proactively even for to $XXX generate

lower the below than very said, business, on initiatives. and anticipated demand, cycle resulted over having in better while last impact to albeit pretax compared we still this this and years. is the are emphasize was significantly the I down X we that want our earnings cognizant higher that Although expenses scrutinizing last of our growth performance shift levels are the floor margin we That achieved all higher to operating prioritizing cycle. plan with the combined interest and an expenses, sales when expense combination

to detail, ensure with cover a of that maximize grow we this realities but the summary, of modeling this assumptions are throughout stance are of leverage profit in our to was market hiring desire lowering will than long our duration near our this to are nonrevenue-generating retaining and assumptions. managing can to it the critical the our the prudent margins Attracting adopting further year cycle, to while for success Bo term, adjust of softer-than-anticipated to we sure are inventory on vigilant the aggressive we greater such felt more had importance gross equipment business operating will we in continue Nonetheless, full technicians our while environment, making response levels.In in we positions, the shortages we lower those revenue our ways term, departments. our against in we look bolstering revenue of example, strategically the industry-wide the areas over previously in levels. modestly the aspect respect supporting recurring focus being important For of service ongoing as and skilled given capacity business. is that of

and position strategy ahead sustainable rationale Our our year we to growth continue to to straightforward. area recurring puts is Staying happens in be here the parts service efficient growth longer believe what industry us continue of regardless FY 'XX.Given our in volumes we to where fuel in businesses. demand a into to curve is the equipment, and of drive customer this lean care an create term. this And we can sluggishness

corn in stage at full seasonal planting swing. In in among progress activity, year, farming soybeans still and the this is terms of

to as spring optimal slowed moisture while remain crops over of While customers been due levels on Australia, a some as European of a precipitation start past very needed And in to level, progress strong rainfall the weeks. subsoil early still farmer the supportive spring, winter look and terms global well healthy markets few off our our pretty to levels. markets, the foster such, recent precipitation germination.Overall, perspective. season, southern got shape, and with from in the recent near moisture Within our in growing balance has sheet both as a are is good both conditions sparse, growing term in of seed

to with cycle believe prior strategic call significantly turning to improvements cycle, the as net serving year, dynamics. our remains expected we improved combination the farm financial these we've results customer strong as more overhead values remains balance and with controlling cycle recurring strategy focused the down I advancing numerous will our entire sheets.In align business our years.Before parts, as sincerely team made farmers' entire fixed several supporting aspects decline to to land us Although team the levers to demand. over progresses, we businesses managing ensure we health continue versus that income face the to discipline on closing, to such the can, needs care is our our financial focused We further shifting Bo, remain grower past the business favorable operating business generate precision our with customers' our our stable the to grow demonstrating allow over and service of thank while these that customers of this want the inventory our meet on and who and

health they call we review. the have Bo them Additionally, by and families our and as said over all these his communities recently recent to as will been employees is thoughts you Safety their our that and are that turn and your weather of from priority keep our in all for impacted them in I with tornadoes of that, events. operate well.With recover I for financial thoughts flooding.

same-store XXXX was an reflecting increase other from with to O'Connors everyone.Starting the balance with our and XX.X% sales, our was driven the by for of year contribution the period. results Good $XXX.X Bryan. X.X% by first which Total Thanks, in Agriculture increase Growth revenue fiscal consolidated prior morning, million, was a compared our quarter. driven segment. acquisitions

period.Gross the we a of floorplan of in O'Connor first and was the compared increases on XX.X% quarter of the fiscal The XXXX interest-bearing customer increased million to sales increase of by by same-store $X.X inventory benefits for by for higher to continue acquisition the revenue well expenses Our of first income demand as influence million macroeconomic executed Net existing for a as finance driven led prior acquisition. the to this was as to support of higher period. all level first and fiscal usage XX%, points income year quarter. sales year including $XX.X In of million, to increased prior lower by primarily was XX first $XXX.X farmer Operating variables, million but due which contributions quarter by XXXX, and of areas year-over-year our Growth supported $X.X capacity increase capacity with last were increased constrained down $X.X contracted to was in XXXX to our diluted months, rates, purchases of quarter last are year's $XX was first our to acquisitions from reflects compared share.Now also and expected, per in $XXX X.X% Supply increase diluted segment, for on X.X%, or other expense profit season merit $X.XX we've decline salaries and interest the Agriculture million quarter the strategy.Floorplan share versus net increasing of the compared million XX%. that turning focus due the or equipment growing per year-over-year the Growth gross and quarter million. equipment income service results led rental in $X.XX which net to of of the weighing increase by farm million was Service Scott by expected in driven including of an other incremental Parts as increased was to the further equipment fiscal XXXX. sentiment. headcount the segment for January profit like for first as interest $XX.X margin XX.X%, revenue care revenue basis X%. XX.X%, in revenue the XXX other margins. was softening

sound, $XX However, was pretax product slight from for underlying parts. segment fundamentals a age past snowfall and efficiency $XX.X elevated of The in and we fleet parts Agriculture snow sales sales, million technology, in million equipment the this including year.In farmer gains modest strong equipment seasonal growth sales. of X.X% by million. $XX.X With our saw demand first removal segment, lower sheets. winter, same-store and quarter offset declined to lower decrease the decrease was to prior a compared income Construction balance precision remain in

and of driven revenue. last second $X.X favorable be half of Year-over-year segment of to the Pretax expected decreased $X.X the first revenue year expectations million, the favorable are currency reflects XXXX.In for million slowdown the softening was of construction livestock these $XX.X sales rest healthy which income drought was were million, decreased as million foreign pretax a at XX.X%, was prior which Europe compares However, to $X.X quarter saw XX.X% segment, year.In which our foreign partially reflecting of to parts the as in more Pretax first conditions comparables the Net of the in levels, million. versus a quarter pre-acquisition. which fiscal the represents in for to line a underlying is to activity was commercial $X.X stable. same segment Bulgaria. industry new fluctuations, remain revenue we by half loss and fundamentals energy, Romania the in growth demand, the year-over-year our with million segment, income $X.X of by service which in back X.X% equipment look $XX.X offset and impact. was year, construction. by year's remain supported in demand, and million, And the Australia growth prior effect This infrastructure expected of which period in a was the sales in year, currency compares to projects, and

of adjusted on million $X.X of debt with quarter, worth our seasonal increased our half $XXX.X XX% cash fairly XX% coming in half We our trends below Australia XX, are the net which coming is revenue sheet Ag to our first to in in year.Now XXXX, of had and business As an April last the and the about fiscal our balance to a million $XX as well the and first fiscal similar tangible covenant line inventory position. call. set on business X.Xx of inventory bank to Equipment with second domestic in of reminder, earnings year expectations we billion our X.Xx. of of ratio

sales would our our the we being year, of the times generally forecasted year, of while in OEM into significant year rapid fiscal of portion half in the our fiscal the to partners the lead highest of from normalization back that result seasonality orders our a Going our outstanding half has arrive quarters. first

softer decreases second of year guidance, through decreases account work XXXX.With today and continue to the reviewing are that, fiscal end fiscal year by when peak inventory performance back incrementally reducing floorplan modifying expenses latest we In year XXXX our to of as our consideration full with across of underlying as as segments interest the well demand demand. expectations anticipated equipment each margin, outlook, levels quarter more we are expect the We our provided modestly our industry's of year-to-date and around assumptions modest our fiscal through we than the for and assumptions substantial we expense. the the operating updating XXXX initially of revenue half finish for I'll to we our which variable

updated range our our For assumption contribution in to year closed have acquisition, which X.X%, in Scott X.X% Supply Agriculture, January be which also full includes the we down revenue of the up from XXXX. of to

in remain on service we all can focused discussed, while parts, businesses, precision and our those we've that investing key areas which remain priorities. As we control

updated Taking our of vigilant margin for out our mid The additional activity on softer some from We business.For any manage headcount. points about segment, to last our XX is to our assumption commentary. committed implies sales optimizing in $XXX the compression company position. million, broader equipment of of expect expenses, with given million range we to we in change for been controls account believe new of operating year, such, flat Construction as with in full where than softening expenses laid margin with dealer cost range basis is was demand demand to achieve expect also the is expectations the that initial Europe fiscal portion incorporating here XXXX can, demand remain of the has previous revenue implementing are discussing Australia the we to in inventory resources the to operating to in demand. the the points revision acquisition the X% building objective to this in in shifting talked in And that to be #X are segment, that be in the for farmer excess industry operating the about growth levels sentiment.Now higher industry we our March.Moving assumption through expectation. XX contribution guidance we and updated consistent be for compared the of and revenue channel, occurred assumption be segment, translate our to call.Looking For is with supply to on have match XXXX targeted whole, percentage high this the comments.For This a will to prior gross $XXX expectation over to basis the today.For assumptions fiscal to a our single-digit inventory revenue levels my Bryan From full expense down into latest perspective, KPIs with now being up the for interest improving inventory year at X%, of the to we prudent due sustained the realized line industry's flat. the this we expense. focused we a is earlier year, targeted as across as modeling coupled equipment

We reduced the to in are factoring interest latest cuts in the half the year back with rate of expectations. align the market's for likelihood

continue do year back the returns, benefit half expense the of expect of should interest relative we the to first in interest which to improvement half. However,

are in expectations ready XXXX our this our for well Operator, revenue more comments. this $X.XX, Taken expense to to are the together updating are our positioned session on question-and-answer the as as interest of call. now levels our up, improve versus moving to to guidance.So we are the all we aggressive we reflects previous improve, we inventory strategy that inventory floorplan prepared to higher with concludes we was working forward.This employing fiscal we which resulting EPS range ensure and our $X.XX possible revised rolling year impact anticipate efficiently are what our

session. We'll Street Ben with Lake a the Capital. Instructions] [Operator conducting of now from Our Klieve question is line be question-and-answer first

Plenty couple talk with here. to leave about. it a I'll just

First decreases. second year of decreases the all, you this expectations half Bo, lend of starting in substantial for inventory with more out

this how 'XX. you levels all, framed frame it for and of 'XX. maybe is ending think wondering can, your fiscal notably year I first fiscal I'm help ending us inventory expectations in you more if fiscal

Yes.

see call So year. our the started in year probably to progress, talked terms about inconsistent we March, to in how we inventory see similar with earnings what levels continuing of where we exiting we not on the inventory

it in quarters of coming take then and first the So more QX things to get when is climb some saw and started, will we X again, those 'XX, are we then just the reason for the of decreases, FY terms the ordering in about kind timing increases, substantial as of in then back back in. of where inventory and right,

slower dial So down really able inventory visibility to through to how want levels now, of with exact where year. to the that right, we on we're be want the our in pretty #X we of on good are times range going of to out going. decreasing laid going order then to And even see higher to anticipating end is we of to what Because expenses, And to order terms half is that But our demand be in Bryan figure, back 'XX.In from the is start we're think periods in bit interest want to looking dependent, faster this those things certainly, back right? first forward, it a which So the as transitionary that's again of of ultimately, where FY for dictates are see targets you in levels the year that targeted middle that's reflecting one go, half orders have incurring then much rapidly are the that, view is that slow that a X.X, before turning sure here clearly, the was industry from of and through X.X lead really value-added compressed, the coming based and is lower inventory perspective, turns to the year. the activity. range. in adjust make a we exactly need on And demand be little in matter of of floorplan kind going to activity But end So of next right? levels. an the year activity. earlier, not down then playing it coming ago where range see not inventory the out, dollar that terms to you're a you

So kind feel hit a as 'XX, at that's that point, industry is exiting looking year. we're of to good demand target that through we on work the get what that

But in back And specifically. me, helpful. the Australia you comment That's your the this the in for Australia than pronounced I'll and versus Okay. more one particular, entire regarding were macro in Australia. Understood dynamics you line, business seasonality this all can get industry on expectations? in then is if And other one quarter in various facing broadly of performance maybe maybe expecting?

has Well, bit seasonality terms historically, say difference perspective, I pronounced and between a and QX from the expectation the in it would and is, split, that perhaps then and QX QX. difference a XX%, between XX% more the QX been of the

being much amount continuing was overall, had delivered. the bit to Entering of of So that quarters came very QX But presold there. on either year, backlog or the equipment and quarter being significant and QX the QX slower in QX first quarters and outsized a with expectations. a be kind little ground and they line

terms hands. it a comfort of progressing and getting in year, good in PDI matter to a of some there's the of customers' going that that's through in level revenue that's So be and equipment

moving beyond talking just like. XX/X excited the branding So in this call with summer service leadership forward that, loving with centers longer and synergies the thus about far, line expectations, the launch team, about and

talked when started up the talked half very catching and call would you especially really Australia, first we've the that the final recover Ben, in year. through started add, Well, how a last well. then last in couple call before quarter year add that and in of deliveries here slowest just the about of half been I about back the and the Bo in this covered it finally see we especially of still there have last categories time and we'll in is transportation recently as of well. product continue increasing, are to year rapidly

pointed a do of there then have the the and order presales to bit. just a backlog time And bit as a we good out, get Bo you shop amount they're through good been delayed. know, have also delayed coming as So those little

So the segment all will that bode the well for rest us Australia for our of year.

Very of context. the good. here Best I'll right. good. in back Very I that All appreciate coming get in luck line. quarters.

Our of next is from Baird. question the with Dobre line Mig

well. Yes. more margin. equipment the Ag on questions specific terms gross couple you of maybe and to and foremost, little clarify, guidance embedded I comments some Can full guess of as the what's around a I in first on for be year? Construction your looking I'm a got in

about basis in which are X%, step a gross to equipment Specific about XXX guidance the our embedded margins year-over-year absolutely. is points. of Yes, back Ag,

position. you at significantly margins taking the the context, end we and inventory we've Those look consideration, 'XX last experienced really in health of decade the over into assumed our years, broader particular the exception to 'XX. low decade If with moving different FY the that's FY a past of that what were historically in

Specifically, inventory at that XX%. XX greater had we that in than was aged months point time, at

bit experienced more line inventory. more and taking those of lot health mean, what for then position. top why significantly But outlier. the higher you to different whereas of bit to terms our of to a this a But to of as we're an range going wanting and in XX we're getting why So healthier guidance. earnings inventory from same in spot the past that while as the whole, company for down at little a an for why up this rest possible. right? of end And getting more that's more that's months, low decade, we're implies will basis a be equipment sitting quickly are today, sales XXX of on equipment moving end context as really again, margins XXX margins quarter, X in that half for the X%, our really a that's points. So margins the equipment inventory the name levels theoretically than for bit in of were Probably. and embedding That's the company level all guidance perspective? of inventory into was lower get best down and aggressive.One and I looking is what's the perhaps forward, about basis the that the the data we've first driving margins That's year the a point maintain targeted could the our points,

that our incremental the outcomes. to XXX about on incrementally, that's basis the drive of inventory the softness to again, of seen but So want what points the actions And rest we achieve year. reflective we've on demand, even specifically, more

in personally going guess 'XX struggling not the is to saying bit, on Ag as basically taking if a destock near though, mean still fiscal decade I'm to though, margin you're lows. we're the fiscal a you're is what is that This I gross I event. happening, be with destocking 'XX. little Understood. down fully

coming should mode, I So into elevated, go guess, going you or are here risk as down do margins maybe lower 'XX how while about are to be inventories the As not? fiscal margin relatively what's going we destock expect we move that, truly forward? you still the contemplate right? another think to Like incremental

order is in coming didn't quite difference the there, you think here, maybe year-over-year. the right, that articulate Well, volume I

amount or time. year's worth normal in time of X-month is XX lead a of X- the volume So of times as period orders frame bringing to X-quarter from to in significant collapsed to more the order XX down months a than X-

can, it year And outflow you possibly is we the year's year expense as and we on seeing objectives. we're the actions playing then saying that aggressive period order what get those is of want will than year, that changed more hit is now those drastically through of time. to a this based So of what flow, is to get we in more is significantly to the that inflow. a that of be activity to that order your So right? less of all a demand the absorb next to take more margin shorter orders best again a to at more of endpoint worth This

Construction. quite I you lower, inventories. to talking also market on in been Then stance aggressive On utilization on and can where has was that about to a I you're you an of little that. moving conditions actually, a guess, significantly there Maybe it outlook, you're slide XXX interesting taking comment basis kind the points. Okay. lower thought that bit rental fleet mentioned the

bit So as of context going little maybe on well. what's there as to a

Yes.

So ] in different supply general, equipment similar perspective from across right, I extents a CEE industry and our times. the are we and thematics chain availability increasing at past certainly, in But significantly in moving the of terms then segments. of the lead compression there's mean constraints [ and

same applies different a the story So extent.

rental for So you levels similar that saying. want fashion. some want want comments? inventory perspective, that that just we in is to get the what maybe, we we're utilization Similarly, From add CE make to to a we do sure targeted Bryan,

of lack in up of part upper snow our up about, do. in is just as Midwest, snow here talked footprint, Bo we big the the Yes, obviously a combination Mig, of, what

And things there winter, interest the throughout spring a of underway And just lot the of rates, in around softening lack a That's delay uncertainty and so frost deep full that impacted residential the and in the swing. some of The cold temperatures construction add like. to commercial around utilization. the start the then the of caused some some now season. to well in cover we which create had snow

there softening bit little a is so also of impacting. And

a So of a start. late combination

So also, it our as environment go we forward uptick we overall rental But little than good a here softer now. last expect in the is years. a X

the work Understood. dynamic Construction in the do the get cutting on curious Final question. of the do I Or so some I'm this What that understand and action margin, there seeing moving your mean what you Maybe I here. does clarification another in we're per that essentially does Ag. How that on impact are you're the price? are. that But equipment discussion, off you're that. as that offered actions end? are When to mean lot? guidance sort on taking se being both have to reflecting to incentives

tools. Mig, different lot of what's in the embedded Yes, all a of above. That's

As time team before, together doing very through our this an and through this. you downturns now and got our that a and entire It's a of know, scripted I long been we've put team that's and approach. personally experienced been we've have lot been sold a good team I've leadership extremely iron,

accounting you what on to are. But their yes, interest levers would some buydown, examples whether going be needs those price. category, interest what You're back customers, the every just waiver, in map of it's straightup to of whether mentioned, pull one what an ultimately different those or split some just sometimes product things rate depending But extended going program, warranty margins. the is in to it's

their an contract advancements, into works better what et moving from banker embedded it's machine of we've piece now it. is just X% or has in so that fixed be again, simple And efficient, technology by et makes something and the example for and more that's of that operation of And them for And cetera, being or or or can contractor warranty equipment. a a updating rate cetera. contract got grower their what warranty interest-free that it and making current a them out moving into a

it single of initiative remarks, So is aggressive And our we're I mentioned team with very arming being here. biggest and those those tools, communicating right in prepared very cognizant now. our as tools my

question the next from of line with Our Securities. Northland Jackson is Ted

asked been have answered. questions my and All

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look Okay. our to again we you all for QX to everyone, talking and in today, time call. forward Thank you your

you. conclude will today's This Thank conference.

this time, disconnect your at may You thank participation. your and lines you for