Titan Machinery Inc. (Nasdaq: TITN), a leading network of
full-service agricultural and construction equipment stores, today
reported financial results for the fiscal first quarter ended
April 30, 2023.
David Meyer, Titan Machinery’s Chairman and
Chief Executive Officer, stated, "We are off to a solid start to
fiscal 2024 with strong first quarter results consistent with our
expectations going into the year. Notably, each of our operating
segments achieved expansion in pre-tax margins versus the prior
year period. Our Agriculture segment continued to drive growth,
reflecting healthy underlying industry fundamentals and strong
customer demand. Our equipment business remains strong, albeit
hampered by the constrained supply in key product categories. Our
parts and service business also performed well, despite a later
start to the planting season in some of our northern markets. We
are poised for this momentum in our parts and service business to
carry into our fiscal second quarter as our customers complete
their spring field work. We are well positioned to capitalize on
the opportunities that lie ahead and are committed to providing
world-class service to our customers and delivering strong results
for our shareholders."
Fiscal 2024
First Quarter Results
Consolidated Results
For the first quarter of fiscal 2024, revenue
increased to $569.6 million compared to $461.0 million in the first
quarter last year. Equipment revenue was $429.4 million for the
first quarter of fiscal 2024, compared to $356.4 million in the
first quarter last year. Parts revenue was $96.6 million for the
first quarter of fiscal 2024, compared to $68.6 million in the
first quarter last year. Revenue generated from service was $34.9
million for the first quarter of fiscal 2024, compared to $29.5
million in the first quarter last year. Revenue from rental and
other was $8.7 million for the first quarter of fiscal 2024,
compared to $6.6 million in the first quarter last year.
Gross profit for the first quarter of fiscal
2024 was $118.6 million, compared to $88.7 million in the first
quarter last year. The Company's gross profit margin increased to
20.8% in the first quarter of fiscal 2024, compared to 19.2% in the
first quarter last year. The year-over-year increase in gross
profit margin in the first quarter was primarily driven by improved
new equipment margins.
Operating expenses were $81.3 million for the
first quarter of fiscal 2024, compared to $64.2 million in the
first quarter last year. The year-over-year increase was driven by
higher operating expenses related to the acquisitions that have
occurred in the past year, as well as higher variable expenses on
increased sales volume. Operating expenses as a percentage of
revenue increased 40 basis points to 14.3% for the first quarter of
fiscal 2024, compared to 13.9% of revenue in the prior year period.
The prior year period benefited from a $1.4 million gain associated
with the sale of our North Dakota consumer products store, which
offset operating expenses during such period.
Floorplan and other interest expense was $2.5
million in the first quarter of fiscal 2024, compared to $1.5
million for the same period last year.
In the first quarter of fiscal 2024, net income
was $27.0 million, or earnings per diluted share of $1.19, compared
to net income of $17.5 million, or earnings per diluted share of
$0.78, for the first quarter of last year.
The Company generated $43.6 million in EBITDA in
the first quarter of fiscal 2024, reflecting an increase of 45.7%
versus the $29.9 million generated in the first quarter of last
year.
Segment ResultsAgriculture Segment - Revenue for
the first quarter of fiscal 2024 was $423.2 million, compared to
$318.5 million in the first quarter last year. The revenue increase
was primarily driven by the acquisitions of Mark's Machinery in
April 2022, Heartland Ag Systems in August 2022, and Pioneer Farm
Equipment in February 2023, and also benefited from same-store
growth of 3.8% which was achieved on top of a strong performance in
the prior year. Pre-tax income for the first quarter of fiscal 2024
was $24.2 million, compared to $16.4 million in the first quarter
of the prior year.
Construction Segment - Revenue for the first
quarter of fiscal 2024 was $72.0 million, compared to $67.0 million
in the first quarter last year. Revenue growth was primarily driven
by a same-store sales increase of 9.9%, which was partially offset
by lost sales contributions from the Company’s fiscal 2023 first
quarter divestiture of its consumer products store in North Dakota.
Pre-tax income for the first quarter of fiscal 2024 was $4.5
million, compared to $3.2 million in the first quarter last year.
The prior year first quarter included a $1.4 million gain
associated with the aforementioned divestiture.
International Segment - Revenue for the first
quarter of fiscal 2024 was $74.4 million, compared to $75.5 million
in the first quarter last year; foreign currency fluctuations
accounted for a $3.2 million decrease in revenue. Net of the effect
of these foreign currency fluctuations, revenue increased $2.1
million or 2.8%. Pre-tax income for the first quarter of fiscal
2024 was $6.4 million. This compares to pre-tax income of $4.3
million in the first quarter last year.
Balance Sheet and Cash Flow
Cash at the end of the first quarter of fiscal
2024 was $38.4 million. Inventories increased to $854.2 million as
of April 30, 2023, compared to $703.9 million as of
January 31, 2023. This change in inventory reflects increases
of $127.8 million, $16.8 million, and $4.1 million, in new
equipment, used equipment, and parts inventory, respectively. The
increase in inventory includes $22.0 million that was attributable
to the Pioneer acquisition made during the first quarter of fiscal
2024. Outstanding floorplan payables were $443.0 million on $781.0
million total available floorplan lines of credit as of
April 30, 2023, compared to $258.4 million outstanding
floorplan payables as of January 31, 2023.
For the first three months ended April 30,
2023, the Company's net cash used for operating activities was
$77.7 million, compared to net cash provided by operating
activities of $5.3 million for the first three months ended April
30, 2022. This decrease in operating cash flow was driven by an
increase in inventory, which reflects an increase in new wholegoods
inventory levels for some equipment categories.
Additional Management
Commentary
Mr. Meyer added, "Our first quarter performance
supports the guidance that we provided in March, and we are
reiterating our full year fiscal 2024 modeling assumptions today.
While we continue to see strong demand in all three of our
operating segments, we anticipate ebbs and flows between quarters
for the balance of our fiscal year due to timeliness of equipment
shipments and supply chain constraints. We remain focused on
procuring these high demand equipment categories to support our
customers needs and positioning our business for the long-term
while continuing to pursue accretive acquisitions."
Fiscal 2024
Modeling Assumptions
The Company is reiterating its previous
expectations for Fiscal 2024.
|
Assumptions |
Segment Revenue |
|
Agriculture(1) |
Up 20-25% |
Construction |
Flat - Up 5% |
International |
Up 8-13% |
|
|
Diluted
EPS(2) |
$4.50 - $5.10 |
|
|
(1) Includes the full year impact of the Mark's Machinery
acquisition, which closed in April 2022, the Heartland Ag
acquisition, which closed in August 2022, and the Pioneer Farm
Equipment acquisition, which closed in February 2023. |
(2) Includes an estimated loss of approximately $0.07 per share for
our Ukraine subsidiary, which would be similar to actual results
for such subsidiary in Fiscal 2023. |
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 8, 2023, by dialing (844) 512-2921 from the U.S., or
(412) 317-6671 from international locations, and entering
confirmation code 13738299.
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 certain non-GAAP financial measures as defined under
SEC rules, such as EBITDA. 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 and Europe, servicing farmers,
contractors, 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, 2024 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, 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.com646-277-1263
TITAN MACHINERY INC. |
Consolidated Condensed Balance Sheets |
(in thousands) |
(Unaudited) |
|
|
|
|
|
April 30, 2023 |
|
January 31, 2023 |
Assets |
|
|
|
Current Assets |
|
|
|
Cash |
$ |
38,357 |
|
|
$ |
43,913 |
|
Receivables, net of allowance for expected credit losses |
|
131,284 |
|
|
|
95,844 |
|
Inventories, net |
|
854,154 |
|
|
|
703,939 |
|
Prepaid expenses and other |
|
19,792 |
|
|
|
25,554 |
|
Total current assets |
|
1,043,587 |
|
|
|
869,250 |
|
Noncurrent Assets |
|
|
|
Property and equipment, net of accumulated depreciation |
|
233,830 |
|
|
|
217,782 |
|
Operating lease assets |
|
47,684 |
|
|
|
50,206 |
|
Deferred income taxes |
|
2,169 |
|
|
|
1,246 |
|
Goodwill |
|
30,691 |
|
|
|
30,622 |
|
Intangible assets, net of accumulated amortization |
|
18,330 |
|
|
|
18,411 |
|
Other |
|
1,814 |
|
|
|
1,178 |
|
Total noncurrent assets |
|
334,518 |
|
|
|
319,445 |
|
Total Assets |
$ |
1,378,105 |
|
|
$ |
1,188,695 |
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
Current Liabilities |
|
|
|
Accounts payable |
$ |
43,195 |
|
|
$ |
40,834 |
|
Floorplan payable |
|
442,950 |
|
|
|
258,372 |
|
Current maturities of long-term debt |
|
7,481 |
|
|
|
7,241 |
|
Current operating lease liabilities |
|
9,888 |
|
|
|
9,855 |
|
Deferred revenue |
|
97,532 |
|
|
|
119,845 |
|
Accrued expenses and other |
|
48,042 |
|
|
|
58,159 |
|
Income taxes payable |
|
11,151 |
|
|
|
3,845 |
|
Total current liabilities |
|
660,239 |
|
|
|
498,151 |
|
Long-Term Liabilities |
|
|
|
Long-term debt, less current maturities |
|
93,445 |
|
|
|
89,950 |
|
Operating lease liabilities |
|
45,770 |
|
|
|
48,513 |
|
Deferred income taxes |
|
9,567 |
|
|
|
9,563 |
|
Other long-term liabilities |
|
5,051 |
|
|
|
6,212 |
|
Total long-term liabilities |
|
153,833 |
|
|
|
154,238 |
|
Stockholders' Equity |
|
|
|
Common stock |
|
— |
|
|
|
— |
|
Additional paid-in-capital |
|
256,207 |
|
|
|
256,541 |
|
Retained earnings |
|
311,749 |
|
|
|
284,784 |
|
Accumulated other comprehensive loss |
|
(3,923 |
) |
|
|
(5,019 |
) |
Total stockholders' equity |
|
564,033 |
|
|
|
536,306 |
|
Total Liabilities and Stockholders' Equity |
$ |
1,378,105 |
|
|
$ |
1,188,695 |
|
|
TITAN MACHINERY INC. |
Consolidated Condensed Statements of
Operations |
(in thousands, except per share data) |
(Unaudited) |
|
|
|
|
|
Three Months Ended April 30, |
|
|
2023 |
|
|
|
2022 |
|
Revenue |
|
|
|
Equipment |
$ |
429,376 |
|
|
$ |
356,366 |
|
Parts |
|
96,606 |
|
|
|
68,562 |
|
Service |
|
34,933 |
|
|
|
29,523 |
|
Rental and other |
|
8,716 |
|
|
|
6,556 |
|
Total Revenue |
|
569,631 |
|
|
|
461,007 |
|
Cost of Revenue |
|
|
|
Equipment |
|
368,262 |
|
|
|
310,234 |
|
Parts |
|
65,103 |
|
|
|
47,310 |
|
Service |
|
12,409 |
|
|
|
10,760 |
|
Rental and other |
|
5,277 |
|
|
|
4,009 |
|
Total Cost of Revenue |
|
451,051 |
|
|
|
372,313 |
|
Gross Profit |
|
118,580 |
|
|
|
88,694 |
|
Operating Expenses |
|
81,315 |
|
|
|
64,152 |
|
Income from Operations |
|
37,265 |
|
|
|
24,542 |
|
Other Income (Expense) |
|
|
|
Interest and other income |
|
720 |
|
|
|
492 |
|
Floorplan interest expense |
|
(1,272 |
) |
|
|
(254 |
) |
Other interest expense |
|
(1,274 |
) |
|
|
(1,196 |
) |
Income Before Income Taxes |
|
35,439 |
|
|
|
23,584 |
|
Provision for Income Taxes |
|
8,474 |
|
|
|
6,044 |
|
Net Income |
$ |
26,965 |
|
|
$ |
17,540 |
|
|
|
|
|
Diluted Earnings per Share |
$ |
1.19 |
|
|
$ |
0.78 |
|
Diluted Weighted Average Common Shares |
|
22,448 |
|
|
|
22,321 |
|
|
TITAN MACHINERY INC. |
Consolidated Condensed Statements of Cash
Flows |
(in thousands) |
(Unaudited) |
|
|
|
|
|
Three Months Ended April 30, |
|
|
2023 |
|
|
|
2022 |
|
Operating Activities |
|
|
|
Net income |
$ |
26,965 |
|
|
$ |
17,540 |
|
Adjustments to reconcile net income to net cash provided by
operating activities |
|
|
|
Depreciation and amortization |
|
6,948 |
|
|
|
5,224 |
|
Other, net |
|
1,482 |
|
|
|
1,739 |
|
Changes in assets and liabilities, net of effects of
acquisitions |
|
|
|
Inventories |
|
(140,107 |
) |
|
|
(69,321 |
) |
Manufacturer floorplan payable |
|
86,259 |
|
|
|
51,069 |
|
Receivables |
|
(32,307 |
) |
|
|
9,846 |
|
Other working capital |
|
(26,944 |
) |
|
|
(10,776 |
) |
Net Cash Provided by (Used for) Operating Activities |
|
(77,704 |
) |
|
|
5,321 |
|
Investing Activities |
|
|
|
Property and equipment purchases |
|
(10,928 |
) |
|
|
(5,111 |
) |
Proceeds from sale of property and equipment |
|
2,850 |
|
|
|
836 |
|
Acquisition consideration, net of cash acquired |
|
(17,463 |
) |
|
|
(7,675 |
) |
Other, net |
|
(759 |
) |
|
|
6 |
|
Net Cash Used for Investing Activities |
|
(26,300 |
) |
|
|
(11,944 |
) |
Financing Activities |
|
|
|
Net change in non-manufacturer floorplan payable |
|
97,266 |
|
|
|
2,000 |
|
Net proceeds from long-term debt and finance leases |
|
1,924 |
|
|
|
6,672 |
|
Other, net |
|
(994 |
) |
|
|
(683 |
) |
Net Cash Provided by Financing Activities |
|
98,196 |
|
|
|
7,989 |
|
Effect of Exchange Rate Changes on Cash |
|
252 |
|
|
|
(420 |
) |
Net Change in Cash |
|
(5,556 |
) |
|
|
946 |
|
Cash at Beginning of Period |
|
43,913 |
|
|
|
146,149 |
|
Cash at End of Period |
$ |
38,357 |
|
|
$ |
147,095 |
|
|
TITAN MACHINERY INC. |
Segment Results |
(in thousands) |
(Unaudited) |
|
|
|
Three Months Ended April 30, |
|
|
2023 |
|
|
2022 |
|
|
% Change |
Revenue |
|
|
|
|
|
Agriculture |
$ |
423,195 |
|
$ |
318,548 |
|
|
32.9% |
Construction |
|
71,996 |
|
|
66,964 |
|
|
7.5% |
International |
|
74,440 |
|
|
75,495 |
|
|
(1.4)% |
Total |
$ |
569,631 |
|
$ |
461,007 |
|
|
23.6% |
|
|
|
|
|
|
Income Before Income Taxes |
|
|
|
|
|
Agriculture |
$ |
24,152 |
|
$ |
16,449 |
|
|
46.8% |
Construction |
|
4,533 |
|
|
3,210 |
|
|
41.2% |
International |
|
6,384 |
|
|
4,325 |
|
|
47.6% |
Segment Income Before Income Taxes |
|
35,069 |
|
|
23,984 |
|
|
46.2% |
Shared Resources |
|
370 |
|
|
(400 |
) |
|
n/m |
Total |
$ |
35,439 |
|
$ |
23,584 |
|
|
50.3% |
|
TITAN MACHINERY INC. |
Non-GAAP Reconciliations |
(in thousands) |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended April 30, |
|
|
|
2023 |
|
|
2022 |
EBITDA |
|
|
|
|
Net Income |
|
$ |
26,965 |
|
$ |
17,540 |
Adjustments |
|
|
|
|
Interest expense, net of interest income |
|
|
1,165 |
|
|
1,110 |
Provision for income taxes |
|
|
8,474 |
|
|
6,044 |
Depreciation and amortization |
|
|
6,948 |
|
|
5,206 |
EBITDA |
|
|
43,552 |
|
|
29,900 |
|
|
|
|
|
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