Titan Machinery Inc. Announces Results for Fiscal First Quarter Ended April 30, 2024

WEST FARGO, N.D., May 23, 2024 (GLOBE NEWSWIRE) -- Titan Machinery Inc. (NASDAQ:TITN) ("Titan" or the "Company"), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal first quarter ended April 30, 2024.

"Our first quarter results reflected an industry-wide transition to a more challenging market environment, characterized by softening demand and excess supply of inventory in many product categories as OEM delivery timelines returned to normal and as new sales converted to used trade-ins," stated Bryan Knutson, Titan Machinery's President and Chief Executive Officer. "Lower net farm income and the extended duration of higher interest rates are impacting farmer sentiment and influencing farmers' equipment purchasing decisions across our geographic footprint. As the cycle progresses, our entire team remains focused on advancing our customer care strategy to ensure we have the service capacity available to meet our customers' needs, controlling the aspects of the business that we can such as our fixed overhead and managing our inventory to align with demand. We believe that the combination of these levers will allow us to generate significantly improved financial results versus the prior cycle, and demonstrate the numerous strategic improvements we've made to our business over the past several years."

Fiscal 2025 First Quarter Results

Consolidated Results

For the first quarter of fiscal 2025, revenue increased to $628.7 million compared to $569.6 million in the first quarter of last year. Equipment revenue was $468.1 million for the first quarter of fiscal 2025, compared to $429.4 million in the first quarter last year. Parts revenue was $108.2 million for the first quarter of fiscal 2025, compared to $96.6 million in the first quarter last year. Revenue generated from service was $45.1 million for the first quarter of fiscal 2025, compared to $34.9 million in the first quarter last year. Revenue from rental and other was $7.3 million for the first quarter of fiscal 2025, compared to $8.7 million in the first quarter last year.

Gross profit for the first quarter of fiscal 2025 was $121.8 million, compared to $118.6 million in the first quarter last year. The Company's gross profit margin was 19.4% in the first quarter of fiscal 2025, compared to 20.8% in the first quarter last year. The year-over-year decrease in gross profit margin in the first quarter was primarily due to lower equipment margins which is being driven by higher levels of inventory and softening demand.

Operating expenses were $99.2 million for the first quarter of fiscal 2025, compared to $81.3 million in the first quarter last year. The year-over-year increase was led by additional operating expenses due to acquisitions that have taken place in the past year. Operating expense as a percentage of revenue was 15.8% for the first quarter of fiscal 2025, compared to 14.3% of revenue in the first quarter last year.

Floorplan interest expense and other interest expense aggregated to $9.5 million in the first quarter of fiscal 2025, compared to $2.5 million for the same period last year, with the increase primarily due to a higher level of interest-bearing inventory, including the usage of existing floorplan capacity to finance the O'Connors acquisition.

In the first quarter of fiscal 2025, net income was $9.4 million, or earnings per diluted share of $0.41, compared to net income of $27.0 million, or earnings per diluted share of $1.19, for the first quarter of last year. The main drivers of the decrease in profitability were lower equipment gross margins and incremental floorplan interest expense.

The Company generated $23.9 million in EBITDA in the first quarter of fiscal 2025, compared to $43.6 million generated in the first quarter of last year.

Segment Results

Agriculture Segment - Revenue for the first quarter of fiscal 2025 was $447.7 million, compared to $423.2 million in the first quarter last year. Revenue growth of 5.8% was led by same-store growth of 4.3%, and was also supported by contributions from the acquisition of Scott Supply, Co. in January 2024. Revenue growth was limited by softening of demand for equipment purchases due to the expected decline of net farm income this growing season. Pre-tax income for the first quarter of fiscal 2025 was $13.0 million, compared to $24.2 million in the first quarter of the prior year.

Construction Segment - Revenue for the first quarter of fiscal 2025 was $71.5 million, compared to $72.0 million in the first quarter last year. The slight decline in segment revenue was primarily a product of modest growth in equipment sales that were offset by lower parts sales. Pre-tax income for the first quarter of fiscal 2025 was $0.3 million, compared to $4.5 million in the first quarter last year.

Europe Segment - Revenue for the first quarter of fiscal 2025 was $65.1 million, compared to $74.4 million in the first quarter last year; foreign currency fluctuations accounted for a $0.6 million increase in revenue. Net of the effect of these foreign currency fluctuations, revenue decreased $10.0 million, or 13.4%. The year-over-year decrease in revenue was driven by a softening of new equipment demand, which was only partially offset by growth in parts and service revenue. Pre-tax income for the first quarter of fiscal 2025 was $1.4 million, compared to pre-tax income of $6.4 million in the first quarter of the prior year.

Australia Segment - Revenue for the first quarter of fiscal 2025 was $44.4 million and pre-tax loss for the first quarter of fiscal 2025 was $0.5 million.

Balance Sheet and Cash Flow

Cash at the end of the first quarter of fiscal 2025 was $35.7 million. Inventories increased to $1.4 billion as of April 30, 2024, compared to $1.3 billion as of January 31, 2024. This change in inventory reflects increases of $105.5 million and $27.1 million in new equipment and used equipment inventories respectively, partially offset by a decrease of $7.6 million in parts inventory. Outstanding floorplan payables were $1.0 billion on $1.4 billion total available floorplan and working capital lines of credit as of April 30, 2024, compared to $893.8 million outstanding floorplan payables as of January 31, 2024.

For the first three months ended April 30, 2024, the Company's net cash used for operating activities was $32.4 million, compared to net cash used for operating activities of $77.7 million for the first three months ended April 30, 2023. This decrease in usage of operating cash flow was primarily driven by favorable timing of collection of receivables as compared to the prior year first quarter. Net cash provided by financing activities decreased year over year by $55.1 million in the first three months of fiscal year 2025 to $43.1 million. This decrease was entirely driven by a $50.8 million decrease in non-manufacturer floorplan payables, which represents the Company's other credit lines including its Bank Syndicate Agreement.

Additional Management Commentary

Mr. Knutson continued, "We remain focused on serving our customers who feed and build the world while navigating the declining market environment. In consideration of the incrementally softer demand than we initially anticipated, we are updating our full year modeling assumptions for revenue, and also modifying our underlying assumptions for equipment margins and floorplan interest expense. We are laser focused on utilizing the tools at our disposal to improve our inventory levels as efficiently as possible to ensure we are well positioned moving forward."

Fiscal 2025 Modeling Assumptions

The following are the Company's current expectations for fiscal 2025 modeling assumptions.

	Previous Assumptions		Current Assumptions
Segment Revenue
Agriculture	Flat - Up 5%		Down 2.5% - Up 2.5%
Construction	Up 3 - 8%		Flat - Up 5%
Europe	Flat - Up 5%		Down 5% - Flat
Australia	$250M - $270M USD		$240M - $260M USD
Diluted EPS	$3.00 - $3.50		$2.25 - $2.75

Conference Call and Presentation Information

The Company will host a conference call and audio webcast today at 7:30 a.m. Central time (8:30 a.m. Eastern time). Investors interested in participating in the live call can dial (877) 704-4453 from the U.S. International callers can dial (201) 389-0920. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, June 6, 2024, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13746660.

A copy of the presentation that will accompany the prepared remarks on the conference call is available on the Company's website under Investor Relations at www.titanmachinery.com. An archive of the audio webcast will be available on the Company's website under Investor Relations at www.titanmachinery.com for 30 days following the audio webcast.

Non-GAAP Financial Measures

This press release and the attached financial tables contain disclosure of the Company's EBITDA, which is a non-GAAP financial measure as defined under SEC rules. As required by SEC rules, the Company has provided a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure in the schedule included in this press release. The Company believes that presentation of this non-GAAP financial measure improves the transparency of the Company's disclosures and provides a meaningful presentation of the Company's results.

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, owns and operates a network of full service agricultural and construction equipment dealer locations in North America, Europe and Australia, servicing farmers, ranchers and commercial applicators. The network consists of US locations in Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin and Wyoming. The international network includes European stores located in Bulgaria, Germany, Romania, and Ukraine and Australian stores located in New South Wales, South Australia, and Victoria in Southeastern Australia. The Titan Machinery locations represent one or more of the CNH Industrial Brands, including Case IH, New Holland Agriculture, Case Construction, New Holland Construction, and CNH Industrial Capital. Additional information about Titan Machinery Inc. can be found at www.titanmachinery.com.

Forward Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "potential," "believe," "estimate," "expect," "intend," "may," "could," "will," "plan," "anticipate," and similar words and expressions are intended to identify forward-looking statements. These statements are based upon the current beliefs and expectations of our management. Forward-looking statements made in this release, which include statements regarding modeling assumptions and expected results of operations for the fiscal year ending January 31, 2025 statements regarding the Company's ability to generate improved mid-cycle financial results, as compared to prior cycles, and may include statements regarding Agriculture, Construction, Europe and Australia segment initiatives and improvements, segment revenue realization, growth and profitability expectations, inventory availability and consumer demand expectations, and agricultural and construction equipment industry conditions and trends, involve known and unknown risks and uncertainties that may cause Titan's actual results in future periods to differ materially from the forecasted assumptions and expected results. The Company's risks and uncertainties include, among other things, our ability to successfully integrate, and realize growth opportunities and synergies in connection with the O'Connors acquisition and the risk that we have assumed unforeseen or other liabilities in connection with the O'Connors acquisition. In addition, risks and uncertainties also include the impact of the Russia-Ukraine conflict on our Ukrainian subsidiary, our substantial dependence on CNH Industrial including CNH Industrial's ability to design, manufacture and allocate inventory to our stores necessary to satisfy our customers' demands, supply chain disruptions impacting our suppliers, including CNH Industrial, the continued availability of organic growth and acquisition opportunities, potential difficulties integrating acquired stores, industry supply levels, fluctuating agriculture and construction industry economic conditions, the success of recently implemented initiatives within the Company's operating segments, the uncertainty and fluctuating conditions in the capital and credit markets, difficulties in conducting international operations, foreign currency risks, governmental agriculture policies, seasonal fluctuations, the ability of the Company to manage inventory levels, weather conditions, disruption in receiving ample inventory financing, and increased competition in the geographic areas served. These and other risks are more fully described in Titan's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Titan conducts its business in a highly competitive and rapidly changing environment. Accordingly, new risks and uncertainties may arise. It is not possible for management to predict all such risks and uncertainties, nor to assess the impact of all such risks and uncertainties on Titan's business or the extent to which any individual risk or uncertainty, or combination of risks and uncertainties, may cause results to differ materially from those contained in any forward-looking statement. Other than as required by law, Titan disclaims any obligation to update such risks and uncertainties or to publicly announce results of revisions to any of the forward-looking statements contained in this release to reflect future events or developments.

Investor Relations Contact:

ICR, Inc.

Jeff Sonnek, [email protected]

646-277-1263

TITAN MACHINERY INC.
Consolidated Condensed Balance Sheets
(in thousands)
(Unaudited)
	April 30, 2024				January 31, 2024
Assets
Current Assets
Cash	$	35,684			$	38,066
Receivables, net of allowance for expected credit losses		134,142				153,657
Inventories, net		1,429,762				1,303,030
Prepaid expenses and other		15,301				24,262
Total current assets		1,614,889				1,519,015
Noncurrent Assets
Property and equipment, net of accumulated depreciation		304,472				298,774
Operating lease assets		51,858				54,699
Deferred income taxes		517				529
Goodwill		62,979				64,105
Intangible assets, net of accumulated amortization		51,301				53,356
Other		1,651				1,783
Total noncurrent assets		472,778				473,246
Total Assets	$	2,087,667			$	1,992,261
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	47,629			$	43,846
Floorplan payable		1,024,999				893,846
Current maturities of long-term debt		13,890				13,706
Current operating lease liabilities		10,918				10,751
Deferred revenue		84,900				115,852
Accrued expenses and other		65,402				74,400
Total current liabilities		1,247,738				1,152,401
Long-Term Liabilities
Long-term debt, less current maturities		105,440				106,407
Operating lease liabilities		47,693				50,964
Deferred income taxes		21,740				22,607
Other long-term liabilities		2,455				2,240
Total long-term liabilities		177,328				182,218
Stockholders' Equity
Common stock		—				—
Additional paid-in-capital		258,700				258,657
Retained earnings		406,666				397,225
Accumulated other comprehensive loss		(2,765	)			1,760
Total stockholders' equity		662,601				657,642
Total Liabilities and Stockholders' Equity	$	2,087,667			$	1,992,261

TITAN MACHINERY INC.
Consolidated Condensed Statements of Operations
(in thousands, except per share data)
(Unaudited)
	Three Months Ended April 30,
		2024				2023
Revenue
Equipment	$	468,089			$	429,376
Parts		108,226				96,606
Service		45,079				34,933
Rental and other		7,309				8,716
Total Revenue		628,703				569,631
Cost of Revenue
Equipment		412,239				368,262
Parts		73,151				65,103
Service		16,776				12,409
Rental and other		4,782				5,277
Total Cost of Revenue		506,948				451,051
Gross Profit		121,755				118,580
Operating Expenses		99,158				81,315
Income from Operations		22,597				37,265
Other (Expense) Income
Interest and other (expense) income		(288	)			720
Floorplan interest expense		(7,064	)			(1,272	)
Other interest expense		(2,459	)			(1,274	)
Income Before Income Taxes		12,786				35,439
Provision for Income Taxes		3,345				8,474
Net Income	$	9,441			$	26,965
Diluted Earnings per Share	$	0.41			$	1.19
Diluted Weighted Average Common Shares		22,546				22,448

TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
	Three Months Ended April 30,
		2024				2023
Operating Activities
Net income	$	9,441			$	26,965
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		8,715				6,948
Other, net		4,313				1,482
Changes in assets and liabilities, net of effects of acquisitions
Inventories		(137,760	)			(140,107	)
Manufacturer floorplan payable		92,084				86,259
Receivables		20,115				(32,307	)
Other working capital		(29,262	)			(26,944	)
Net Cash Used for Operating Activities		(32,354	)			(77,704	)
Investing Activities
Property and equipment purchases		(13,725	)			(10,928	)
Proceeds from sale of property and equipment		950				2,850
Acquisition consideration, net of cash acquired		(260	)			(17,463	)
Other, net		131				(759	)
Net Cash Used for Investing Activities		(12,904	)			(26,300	)
Financing Activities
Net change in non-manufacturer floorplan payable		46,442				97,266
Net proceeds from long-term debt and finance leases		(2,567	)			1,924
Other, net		(794	)			(994	)
Net Cash Provided by Financing Activities		43,081				98,196
Effect of Exchange Rate Changes on Cash		(205	)			252
Net Change in Cash		(2,382	)			(5,556	)
Cash at Beginning of Period		38,066				43,913
Cash at End of Period	$	35,684			$	38,357

TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
	Three Months Ended April 30,
		2024				2023			% Change
Revenue
Agriculture	$	447,687			$	423,195			5.8	%
Construction		71,492				71,996			(0.7	)%
Europe		65,105				74,440			(12.5	)%
Australia	$	44,419			$	—			*N/M
Total	$	628,703			$	569,631			10.4	%
Income (Loss) Before Income Taxes
Agriculture	$	13,045			$	24,152			(46.0	)%
Construction		268				4,533			(94.1	)%
Europe		1,350				6,384			(78.9	)%
Australia		(486	)			—			*N/M
Segment Income Before Income Taxes		14,177				35,069			(59.6	)%
Shared Resources		(1,391	)			370			475.9	%
Total	$	12,786			$	35,439			(63.9	)%
*N/M = Not Meaningful

TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands)
(Unaudited)
		Three Months Ended April 30,
			2024				2023
EBITDA
Net Income		$	9,441			$	26,965
Adjustments
Interest expense, net of interest income			2,351				1,165
Provision for income taxes			3,345				8,474
Depreciation and amortization			8,715				6,948
EBITDA		$	23,852			$	43,552