STOCK TITAN

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

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Titan Machinery (Nasdaq: TITN) reported its fiscal Q1 2025 results, showing a revenue increase to $628.7M from $569.6M YoY. Equipment revenue rose to $468.1M, parts to $108.2M, and services to $45.1M. However, the gross profit margin decreased to 19.4% from 20.8%, and net income dropped to $9.4M from $27.0M. Operating expenses increased to $99.2M due to past acquisitions.

Segment-wise, agriculture revenue grew by 5.8%, construction remained flat, Europe saw a 13.4% decline, and Australia reported $44.4M in revenue. The company updated its fiscal 2025 assumptions, lowering expected revenue and diluted EPS ranges. Cash at quarter-end was $35.7M, with inventory rising to $1.4B. Net cash used for operating activities decreased to $32.4M.

Positive
  • Revenue increased to $628.7 million, up from $569.6 million.
  • Equipment revenue rose to $468.1 million.
  • Parts revenue increased to $108.2 million.
  • Service revenue grew to $45.1 million.
  • Agriculture segment revenue grew by 5.8%.
Negative
  • Gross profit margin decreased to 19.4% from 20.8%.
  • Net income dropped to $9.4 million from $27.0 million.
  • Operating expenses increased to $99.2 million.
  • Construction segment revenue remained flat.
  • European segment revenue decreased by 13.4%.
  • Australia segment reported a pre-tax loss of $0.5 million.
  • Floorplan interest expenses increased significantly to $9.5 million from $2.5 million.
  • Updated fiscal 2025 modeling assumptions lowered revenue and EPS expectations.
  • Inventories increased to $1.4 billion.
  • Net cash used for operating activities was $32.4 million.

Insights

The financial results for Titan Machinery Inc. show a mixed performance in the fiscal first quarter ended April 30, 2024. Revenue growth of $628.7 million versus $569.6 million year-over-year is notable, with increases across equipment, parts and service segments. However, the significant decline in net income from $27.0 million to $9.4 million is concerning, primarily attributed to lower equipment margins and increased floorplan interest expenses.

The drop in gross profit margin to 19.4% from 20.8% indicates a challenging pricing environment with excess inventory and subdued demand. The rise in operating expenses from $81.3 million to $99.2 million, mainly due to recent acquisitions, also signals potential strain on profitability in the short-term. Investors should keep an eye on how management handles these operational challenges and inventory management strategies in the coming quarters.

From a balance sheet perspective, the increase in inventories to $1.4 billion and higher floorplan payables to $1.0 billion indicate potential risks if demand does not pick up. Cash flow improvements, with net cash used for operating activities decreasing to $32.4 million, suggest effective receivables management but also highlight the need for continual monitoring of liquidity and credit lines.

Titan Machinery’s results reflect broader industry trends, such as softening demand and inventory challenges. The agriculture segment showed a modest revenue increase, but the expected decline in net farm income could further dampen demand. Notably, the company's same-store growth of 4.3% underscores its ability to hold market share despite headwinds.

The construction segment remained nearly flat, indicating stability but lacking significant growth drivers in the short-term. The Europe segment saw a notable revenue decrease, driven by weakening new equipment demand and currency fluctuations, pointing to macroeconomic pressures that may persist.

In terms of future outlook, the company's adjustment of its fiscal 2025 modeling assumptions, including lower revenue projections in agriculture and Europe and a revision in diluted EPS range to $2.25-$2.75 from $3.00-$3.50, suggests a cautious stance. Investors should weigh these revisions against the backdrop of potential market recovery and the effectiveness of Titan’s strategic adjustments.

The update provided by Titan Machinery indicates significant operational challenges. The key issues stem from higher inventory levels and increased operating expenses. Inventory management remains critical, with the company reporting $1.4 billion in inventories and a floorplan interest expense spike to $9.5 million, emphasizing the cost of carrying this inventory.

Higher operating expenses due to recent acquisitions reflect strategic growth but also necessitate efficient integration to control overheads. The company's focus on controlling fixed overhead and improving service capacity is prudent, though it hinges on execution efficiency. As the market adjusts, achieving better alignment between inventory and demand will be vital for financial health.

Investors should monitor how well Titan Machinery can streamline operations, optimize inventory turnover and mitigate interest expenses in the coming quarters.

- Updates Fiscal 2025 Modeling Assumptions -

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   
AgricultureFlat - Up 5% Down 2.5% - Up 2.5%
ConstructionUp 3 - 8% Flat - Up 5%
EuropeFlat - 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, jeff.sonnek@icrinc.com
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 
     

 


FAQ

What were Titan Machinery's fiscal Q1 2025 earnings?

Titan Machinery reported a net income of $9.4 million, or $0.41 per diluted share, for fiscal Q1 2025.

How did Titan Machinery's revenue perform in fiscal Q1 2025?

Titan Machinery's revenue increased to $628.7 million in fiscal Q1 2025, up from $569.6 million in the same period last year.

What was the gross profit margin for Titan Machinery in fiscal Q1 2025?

The gross profit margin for Titan Machinery in fiscal Q1 2025 was 19.4%, down from 20.8% in the same period last year.

What is Titan Machinery's updated fiscal 2025 EPS guidance?

Titan Machinery updated its fiscal 2025 EPS guidance to a range of $2.25 to $2.75, down from the previous range of $3.00 to $3.50.

What is Titan Machinery's fiscal Q1 2025 equipment revenue?

Titan Machinery's fiscal Q1 2025 equipment revenue was $468.1 million, compared to $429.4 million in the same period last year.

How did Titan Machinery's agriculture segment perform in fiscal Q1 2025?

The agriculture segment's revenue grew to $447.7 million, a 5.8% increase compared to the same period last year.

What were the operating expenses for Titan Machinery in fiscal Q1 2025?

Operating expenses for Titan Machinery in fiscal Q1 2025 were $99.2 million, up from $81.3 million in the same period last year.

What were Titan Machinery's fiscal Q1 2025 cash and inventory levels?

Titan Machinery had $35.7 million in cash and $1.4 billion in inventory at the end of fiscal Q1 2025.

How did Titan Machinery's Europe segment perform in fiscal Q1 2025?

The Europe segment saw a revenue decline of 13.4% to $65.1 million in fiscal Q1 2025.

What were Titan Machinery's fiscal Q1 2025 floorplan interest expenses?

Floorplan interest expenses increased to $9.5 million in fiscal Q1 2025, compared to $2.5 million in the same period last year.

Titan Machinery Inc.

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WEST FARGO