Titan Machinery Inc. Announces Results for Fiscal Third Quarter Ended October 31, 2022

Rhea-AI Summary

Titan Machinery (TITN) reported a remarkable revenue increase of 47.3% in Q3 Fiscal 2023, reaching $668.8 million. Earnings per share soared by 88% to a record $1.82. The company also raised its EPS guidance for the fiscal year to a range of $4.55 - $4.85. Strong performance was noted across equipment sales, which rose to $509 million, alongside gains in parts and service revenues. Operating efficiency improved, evidenced by a pre-tax margin of 8.2%. Adjusted EBITDA surged 80% to $63.5 million.

Positive

• Revenue increased by 47.3% to $668.8 million.
• Earnings per share (EPS) rose by 88% to $1.82.
• Increased EPS guidance for fiscal 2023 to $4.55 - $4.85.
• Consolidated pre-tax margin reached a record 8.2%.
• Adjusted EBITDA grew by 80% to $63.5 million.

Negative

• Net cash used for operating activities was $7.1 million, a decline from net cash provided of $72.3 million the previous year.

- Revenue for Third Quarter of Fiscal 2023 Increased 47.3% to $668.8 million -

- Third Quarter of Fiscal 2023 EPS Increased 88% to a Record $1.82 -

- Increases Fiscal 2023 EPS Modeling Assumption in Range of $4.55-$4.85 -

WEST FARGO, N.D., Nov. 30, 2022 (GLOBE NEWSWIRE) -- Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal third quarter ended October 31, 2022.

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "We delivered another consecutive quarter of record financial results, with third quarter earnings per share of $1.82. The ongoing strength of the agriculture sector combined with our customer-centric focus drove consolidated revenue growth of 47%, which was supported by strong contribution across each of our revenue streams — equipment, parts and service. Our business continues to operate with great efficiency, allowing us to drive significant operating leverage on the higher levels of revenue that we have achieved. This is demonstrated in our record consolidated pre-tax margin of 8.2% that we delivered in the fiscal third quarter, with each of our operating segments experiencing pre-tax margin expansion.   Given these strong third quarter results, coupled with our expectations for the solid market fundamentals continuing through the fourth quarter, we are increasing our earnings per share modeling assumption for fiscal year 2023 to a midpoint of $4.70 per share."

Fiscal 2023 Third Quarter Results

Consolidated Results

For the third quarter of fiscal 2023, revenue increased to $668.8 million compared to $454.0 million in the third quarter last year. Equipment sales were $509.0 million for the third quarter of fiscal 2023, compared to $329.8 million in the third quarter last year. Parts sales were $108.7 million for the third quarter of fiscal 2023, compared to $80.5 million in the third quarter last year. Revenue generated from service was $39.0 million for the third quarter of fiscal 2023, compared to $32.0 million in the third quarter last year. Revenue from rental and other was $12.1 million for the third quarter of fiscal 2023, compared to $11.6 million in the third quarter last year.

Gross profit for the third quarter of fiscal 2023 was $139.6 million, compared to $92.5 million in the third quarter last year. The Company's gross profit margin increased to 20.9% in the third quarter of fiscal 2023, compared to 20.4% in the third quarter last year. Gross profit margin increased primarily due to stronger equipment margins, which were partially offset by revenue mix, with a greater proportion of equipment revenue in the third quarter of fiscal 2023, as compared to the third quarter of the prior year.

Operating expenses increased by $21.9 million, but at a lower rate than revenue growth, to $84.9 million for the third quarter of fiscal 2023, compared to $62.9 million in the third quarter last year, primarily due to the inclusion of operating expenses related to acquisitions that have occurred in the past year, as well as higher variable expenses on increased revenues. Operating expenses as a percentage of revenue decreased 120 basis points to 12.7% for the third quarter of fiscal 2023, compared to 13.9% of revenue in the prior year period.

Floorplan and other interest expense was $1.8 million in the third quarter of fiscal 2023, compared to $1.3 million for the same period last year.

In the third quarter of fiscal 2023, net income was $41.3 million, or earnings per diluted share of $1.82, compared to net income of $21.8 million, or earnings per diluted share of $0.97, for the third quarter of last year.

On an adjusted basis, net income for the third quarter of fiscal 2023 was $41.5 million, or adjusted earnings per diluted share of $1.83, compared to adjusted net income of $21.7 million, or adjusted earnings per diluted share of $0.96, for the third quarter of last year.

The Company generated $63.5 million in adjusted EBITDA in the third quarter of fiscal 2023, reflecting an increase of 80% versus the $35.3 million generated in the third quarter of last year.

Segment Results

Agriculture Segment - Revenue for the third quarter of fiscal 2023 was $493.3 million, compared to $281.5 million in the third quarter last year.   The sales increase was positively impacted by organic growth as well as the acquisitions of Jaycox Implement in December 2021, Mark's Machinery in April 2022, and Heartland Ag Systems in August 2022. Pre-tax income for the third quarter of fiscal 2023 was $42.0 million, and included a $2.0 million benefit recognized on the expected achievement of annual manufacturer incentives.   This compared to $19.6 million of pre-tax income in the third quarter last year.

Construction Segment - Revenue for the third quarter of fiscal 2023 was $86.4 million, compared to $79.7 million in the third quarter last year. Growth was driven by a same-store sales increase of 34.2%, primarily due to increased equipment demand, and partially offset by lost sales contributions from the Company’s fiscal 2022 fourth quarter divestiture of construction stores in Montana and Wyoming and the fiscal 2023 first quarter divestiture of its consumer products store in North Dakota. Pre-tax income for the third quarter of fiscal 2023 was $6.1 million, and compared to $3.6 million in the third quarter last year.

International Segment - Revenue for the third quarter of fiscal 2023 was $89.0 million, compared to $92.7 million in the third quarter last year, while on a constant currency basis revenue was up $9.2 million or 9.9%. Pre-tax income for the third quarter of fiscal 2023 was $8.5 million. This compares to pre-tax income of $6.3 million in the third quarter last year. Adjusted pre-tax income, which excludes negligible adjustments, was $8.7 million for the third quarter of fiscal 2023 and $6.1 million in the third quarter last year.

Balance Sheet and Cash Flow

Cash at the end of the third quarter of fiscal 2023 was $45.9 million. Inventories increased to $630.4 million as of October 31, 2022, compared to $421.8 million as of January 31, 2022. This inventory increase includes increases in new equipment inventory of $149.9 million, parts inventory of $54.4 million, and used equipment inventory of $0.5 million. Outstanding floorplan payables were $273.1 million on $777.0 million total available floorplan lines of credit as of October 31, 2022, compared to $135.4 million outstanding floorplan payables as of January 31, 2022.

In the first nine months of fiscal 2023, net cash used for operating activities was $7.1 million, compared to net cash provided by operating activities of $72.3 million in the first nine months of fiscal 2022. The decrease in cash provided by operating activities was primarily due to increasing inventory in fiscal 2023 compared to fiscal 2022.

Additional Management Commentary

Mr. Meyer added, "Our orderly transition of the Chief Financial Officer position continues to progress well. Bo Larsen joined our team at the beginning of November and has been working with departing Chief Financial Officer Mark Kalvoda to integrate into the business ahead of his appointment on December 1, 2022. We look forward to his future contributions."

“The momentum in our business continues to be visible across all aspects of Titan Machinery, as favorable industry conditions combine with several years of operational improvements and solid growth through accretive and strategic acquisitions. With respect to our acquisition of Heartland Ag, which closed in August 2022, we are pleased with the integration process and their financial performance in their first quarter with Titan Machinery. Looking ahead, we are very well positioned to serve the strong industries that we operate in with our robust balance sheet and powerful operational performance.”

Fiscal 2023 Modeling Assumptions

The following are the Company's current expectations for fiscal 2023 modeling assumptions.

	Current Assumptions		Previous Assumptions
Segment Revenue
Agriculture(1)	Up 55-60%		Up 50-55%
Construction(2)	Down 0-5%		Down 5-10%
International(3)	Down 0-5%		Down 0-5%
Diluted EPS(4)	$4.55 - $4.85		$3.70 - $4.00
(1) Includes the full year impact of the Jaycox acquisition, which closed in December 2021, the partial year impact of the Mark's Machinery acquisition, which closed in April 2022, and the partial year impact of the Heartland acquisition, which closed in August 2022.
(2) Includes the full year impact of the Montana and Wyoming divestiture in January 2022 and the partial year impact of the North Dakota divestiture in March 2022. Adjusting full year fiscal 2022 revenue by approximately $73 million, representing the fiscal 2022 revenue of these divested stores, results in a same-store sales assumption of up approximately 25%.
(3) Includes a reduction in revenue of approximately 40% from our Ukrainian subsidiary compared to fiscal 2022.
(4) Includes an estimated loss of approximately $0.05 to $0.10 per share from our Ukrainian subsidiary.

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 Wednesday, December 14, 2022, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13734399.

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

Within this release, the Company refers to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. The Company believes that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP financial measures. The non-GAAP financial measures in this release include adjustments for Ukraine remeasurement gains/losses and impairment charges. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, the GAAP financial measures presented in this release and the Company's financial statements and other publicly filed reports. Non-GAAP financial measures presented in this release may not be comparable to similarly titled measures used by other companies. Investors are encouraged to review the reconciliations of adjusted financial measures used in this release to their most directly comparable GAAP financial measures. These reconciliations are attached to this release. The tables included in the Non-GAAP Reconciliations section reconcile adjusted net income, adjusted EBITDA, adjusted diluted earnings per share, and adjusted income before income taxes (all non-GAAP financial measures) for the periods presented, to their respective most directly comparable GAAP financial measures.

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 and Europe, 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 and its European stores are located in Bulgaria, Germany, Romania, and Ukraine. 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, 2023 and may include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, the performance of our Ukrainian subsidiary within our International segment, inventory availability expectations, leverage expectations, agricultural and construction equipment industry conditions and trends, involve known and unknown risks and uncertainties that may cause Titan Machinery’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 Heartland Ag System's acquisition, the risk that we assume unforeseen or other liabilities in connection with the Heartland Ag System's acquisition and the impact of any conditions or obligations imposed on us under the new Case IH dealer agreements for the commercial application equipment business. In addition, risks and uncertainties also include the impact of the Russia-Ukraine conflict on our Ukrainian subsidiary, the duration, scope and impact of the COVID-19 pandemic on the Company's operations, 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 Machinery’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 Machinery 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 Machinery’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 Machinery 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)
	October 31, 2022				January 31, 2022
Assets
Current Assets
Cash	$	45,852			$	146,149
Receivables, net of allowance for expected credit losses		111,849				94,287
Inventories, net		630,377				421,758
Prepaid expenses and other		15,625				28,135
Total current assets		803,703				690,329
Noncurrent Assets
Property and equipment, net of accumulated depreciation		215,954				178,243
Operating lease assets		52,091				56,150
Deferred income taxes		2,937				1,328
Goodwill		32,022				8,952
Intangible assets, net of accumulated amortization		16,852				10,624
Other		1,211				1,041
Total noncurrent assets		321,067				256,338
Total Assets	$	1,124,770			$	946,667
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	43,338			$	25,644
Floorplan payable		273,083				135,415
Current maturities of long-term debt		6,895				5,876
Current operating lease liabilities		9,671				9,601
Deferred revenue		56,812				134,146
Accrued expenses and other		56,980				59,339
Income taxes payable		15,918				4,700
Total current liabilities		462,697				374,721
Long-Term Liabilities
Long-term debt, less current maturities		91,055				74,772
Operating lease liabilities		50,737				55,595
Deferred income taxes		1,974				2,006
Other long-term liabilities		7,020				4,374
Total long-term liabilities		150,786				136,747
Stockholders' Equity
Common stock		—				—
Additional paid-in-capital		256,073				254,455
Retained earnings		266,672				182,916
Accumulated other comprehensive loss		(11,458	)			(2,172	)
Total stockholders' equity		511,287				435,199
Total Liabilities and Stockholders' Equity	$	1,124,770			$	946,667

TITAN MACHINERY INC.
Consolidated Condensed Statements of Operations
(in thousands, except per share data)
(Unaudited)
	Three Months Ended October 31,								Nine Months Ended October 31,
		2022				2021				2022				2021
Revenue
Equipment	$	508,996			$	329,814			$	1,240,579			$	878,528
Parts		108,719				80,521				254,974				208,464
Service		38,960				32,026				101,847				89,405
Rental and other		12,098				11,614				28,923				27,914
Total Revenue		668,773				453,975				1,626,323				1,204,311
Cost of Revenue
Equipment		436,156				288,576				1,070,378				772,584
Parts		72,146				55,654				172,162				146,184
Service		13,456				10,249				35,288				29,314
Rental and other		7,435				7,016				17,522				17,754
Total Cost of Revenue		529,193				361,495				1,295,350				965,836
Gross Profit		139,580				92,480				330,973				238,475
Operating Expenses		84,861				62,943				217,841				176,460
Impairment of Intangible and Long-Lived Assets		—				—				—				1,498
Income from Operations		54,719				29,537				113,132				60,517
Other Income (Expense)
Interest and other income		1,804				616				3,169				1,935
Floorplan interest expense		(588	)			(259	)			(1,087	)			(1,027	)
Other interest expense		(1,257	)			(1,071	)			(3,802	)			(3,292	)
Income Before Income Taxes		54,678				28,823				111,412				58,133
Provision for Income Taxes		13,421				7,007				27,656				14,521
Net Income	$	41,257			$	21,816				83,756				43,612
Diluted Earnings per Share	$	1.82			$	0.97			$	3.70			$	1.93
Diluted Weighted Average Common Shares		22,399				22,222				22,372				22,238

TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
	Nine Months Ended October 31,
		2022				2021
Operating Activities
Net income	$	83,756			$	43,612
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		18,356				16,336
Impairment		—				1,498
Other, net		7,727				7,145
Changes in assets and liabilities, net of effects of acquisitions
Inventories		(115,734	)			3,181
Manufacturer floorplan payable		78,972				45,801
Other working capital		(80,211	)			(45,298	)
Net Cash Provided by (Used for) Operating Activities		(7,134	)			72,275
Investing Activities
Property and equipment purchases		(25,430	)			(29,693	)
Proceeds from sale of property and equipment		2,110				667
Acquisition consideration, net of cash acquired		(100,471	)			—
Other, net		(176	)			20
Net Cash Used for Investing Activities		(123,967	)			(29,006	)
Financing Activities
Net change in non-manufacturer floorplan payable		32,212				(30,104	)
Net proceeds from long-term debt and finance leases		2,819				(213	)
Other, net		(698	)			(998	)
Net Cash Provided by (Used for) Financing Activities		34,333				(31,315	)
Effect of Exchange Rate Changes on Cash		(3,529	)			(404	)
Net Change in Cash		(100,297	)			11,550
Cash at Beginning of Period		146,149				78,990
Cash at End of Period	$	45,852			$	90,540

TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
	Three Months Ended October 31,											Nine Months Ended October 31,
		2022				2021			% Change				2022				2021			% Change
Revenue
Agriculture	$	493,324			$	281,506			75.2	%		$	1,160,829			$	730,422			58.9	%
Construction		86,403				79,735			8.4	%			223,389				229,286			(2.6	)%
International		89,046				92,734			(4.0	)%			242,105				244,603			(1.0	)%
Total	$	668,773			$	453,975			47.3	%		$	1,626,323			$	1,204,311			35.0	%
Income Before Income Taxes
Agriculture	$	42,044			$	19,618			114.3	%		$	83,387			$	42,910			94.3	%
Construction		6,065				3,564			70.2	%			13,197				6,518			102.5	%
International		8,488				6,260			35.6	%			18,683				9,498			96.7	%
Segment Income Before Income Taxes		56,597				29,442			92.2	%			115,267				58,926			95.6	%
Shared Resources		(1,919	)			(619	)		n/m				(3,855	)			(793	)		n/m
Total	$	54,678			$	28,823			89.7	%		$	111,412			$	58,133			91.7	%

TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands, except per share data)
(Unaudited)
		Three Months Ended October 31,								Nine Months Ended October 31,
			2022				2021				2022				2021
Adjusted Net Income
Net Income		$	41,257			$	21,816			$	83,756			$	43,612
Adjustments
Impairment charges			—				—				—				1,498
Ukraine remeasurement (gain) / loss (1)			234				(113	)			549				(296	)
Total Adjustments			234				(113	)			549				1,202
Adjusted Net Income		$	41,491			$	21,703			$	84,305			$	44,814
Adjusted Diluted EPS
Diluted EPS		$	1.82			$	0.97			$	3.70			$	1.93
Adjustments (2)
Impairment charges			—				—				—				0.07
Ukraine remeasurement (gain) / loss (1)			0.01				(0.01	)			0.02				(0.02	)
Total Adjustments			0.01				(0.01	)			0.02				0.05
Adjusted Diluted EPS		$	1.83			$	0.96			$	3.72			$	1.98
Adjusted Income Before Income Taxes
Income Before Income Taxes		$	54,678			$	28,823			$	111,412			$	58,133
Adjustments
Impairment charges			—				—				—				1,498
Ukraine remeasurement (gain) / loss			233				(113	)			549				(296	)
Total Adjustments			233				(113	)			549				1,202
Adjusted Income Before Income Taxes		$	54,911			$	28,710			$	111,961			$	59,335
Adjusted Income Before Income Taxes - International
Income Before Income Taxes		$	8,488			$	6,260			$	18,683			$	9,498
Adjustments
Impairment charges			—				—				—				1,498
Ukraine remeasurement (gain) / loss			233				(113	)			549				(296	)
Total Adjustments			233				(113	)			549				1,202
Adjusted Income Before Income Taxes		$	8,721			$	6,147			$	19,232			$	10,700
Adjusted EBITDA
Net Income		$	41,257			$	21,816			$	83,756			$	43,612
Adjustments
Interest expense, net of interest income			1,170				840				3,562				2,941
Provision for income taxes			13,421				7,007				27,656				14,521
Depreciation and amortization			7,368				5,734				18,355				16,336
EBITDA			63,216				35,397				133,329				77,410
Adjustments
Impairment charges			—				—				—				1,498
Ukraine remeasurement (gain) / loss			234				(113	)			549				(296	)
Total Adjustments			234				(113	)			549				1,202
Adjusted EBITDA		$	63,450			$	35,284			$	133,878			$	78,612
(1) Due to the income tax valuation allowance on the Ukrainian and German subsidiaries, there are no tax adjustments for the Ukraine remeasurement (gain)/loss for the periods ending October 31, 2022 and 2021 or the impairment charge for the periods ending October 31, 2021.
(2) Adjustments are net of amounts allocated to participating securities where applicable.

FAQ

What were Titan Machinery's earnings for Q3 Fiscal 2023?

Titan Machinery reported earnings per share of $1.82 for Q3 Fiscal 2023.

How much did Titan Machinery's revenue increase in Q3 Fiscal 2023?

Revenue increased by 47.3% to $668.8 million in Q3 Fiscal 2023.

What is Titan Machinery’s EPS guidance for Fiscal 2023?

Titan Machinery has increased its EPS guidance for Fiscal 2023 to a range of $4.55 to $4.85.

How did Titan Machinery's adjusted EBITDA perform in Q3 Fiscal 2023?

Adjusted EBITDA grew by 80% to $63.5 million for Q3 Fiscal 2023.

What is the pre-tax margin reported by Titan Machinery for Q3 Fiscal 2023?

The pre-tax margin reported was a record 8.2% for Q3 Fiscal 2023.