• Titan Machinery Inc. Announces Results for Fiscal Second Quarter Ended July 31, 2022

    Source: Nasdaq GlobeNewswire / 25 Aug 2022 05:45:01   America/Chicago

    - Revenue for Second Quarter of Fiscal 2023 Increased 31.5% to $496.5 million -

    - Record Quarterly EPS of $1.10 for Second Quarter of Fiscal 2023 -

    - Increases Fiscal 2023 Modeling Assumptions, Expects Fiscal 2023 EPS in Range of $3.70-$4.00 -

    WEST FARGO, N.D., Aug. 25, 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 second quarter ended July 31, 2022.

    David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "We are pleased to deliver second quarter earnings per share of $1.10 — which marks the highest quarterly earnings performance in our Company's history. This is the result of our team's unrelenting focus on customer service and operating efficiencies, which have translated to a consolidated pre-tax margin of 6.7%. Each of our operating segments contributed to these results, demonstrating our commitment to drive higher rates of pre-tax margin across our entire organization. Our Agriculture segment continues to perform well, and we expect this momentum to continue through the balance of fiscal 2023 with timely deliveries of inventory. Our Construction segment is also experiencing strong equipment demand and notable strength in parts, service and rental resulting in improved pre-tax margin. And, within our International segment, our business is proving to be resilient, particularly within our Ukraine market, where the farming industry has forged ahead with great resolve amid a very turbulent environment due to the ongoing conflict."

    Fiscal 2023 Second Quarter Results

    Consolidated Results
    For the second quarter of fiscal 2023, revenue increased to $496.5 million compared to $377.6 million in the second quarter last year. Equipment sales were $375.2 million for the second quarter of fiscal 2023, compared to $272.7 million in the second quarter last year. Parts sales were $77.7 million for the second quarter of fiscal 2023, compared to $65.3 million in the second quarter last year. Revenue generated from service was $33.4 million for the second quarter of fiscal 2023, compared to $29.7 million in the second quarter last year. Revenue from rental and other was $10.3 million for the second quarter of fiscal 2023, compared to $9.9 million in the second quarter last year.

    Gross profit for the second quarter of fiscal 2023 was $102.7 million, compared to $75.0 million in the second quarter last year. The Company's gross profit margin increased to 20.7% in the second quarter of fiscal 2023, compared to 19.9% in the second quarter last year. Gross profit margin primarily increased due to stronger equipment margins, which were partially offset by revenue mix, with a greater proportion of equipment revenue in the second quarter of fiscal 2023, versus higher margin parts and service revenue, as compared to the second quarter of the prior year.

    Operating expenses increased by $11.8 million to $68.8 million for the second quarter of fiscal 2023, compared to $57.1 million in the second quarter last year, primarily due to higher variable expenses on increased revenues, as well as acquisition related expenses on the Heartland Ag Systems transaction that closed earlier this month. Operating expenses as a percentage of revenue decreased 120 basis points to 13.9% for the second quarter of fiscal 2023, compared to 15.1% of revenue in the prior year period.

    Floorplan and other interest expense was $1.6 million in the second quarter of fiscal 2023, compared to $1.5 million for the same period last year.

    In the second quarter of fiscal 2023, net income was $25.0 million, or earnings per diluted share of $1.10, compared to net income of $11.2 million, or earnings per diluted share of $0.50, for the second quarter of last year.

    On an adjusted basis, net income for the second quarter of fiscal 2023 was $25.0 million, or adjusted earnings per diluted share of $1.10, compared to adjusted net income of $12.7 million, or adjusted earnings per diluted share of $0.56, for the second quarter of last year.

    The Company generated $40.2 million in adjusted EBITDA in the second quarter of fiscal 2023, compared to $23.5 million in the second quarter of last year.

    Segment Results
    Agriculture Segment - Revenue for the second quarter of fiscal 2023 was $349.0 million, compared to $219.4 million in the second quarter last year. The sales increase was positively impacted by the acquisitions of Jaycox Implement and Mark's Machinery, which closed in December 2021 and April 2022, respectively. Pre-tax income for the second quarter of fiscal 2023 was $24.9 million, and included a $2.6 million benefit recognized on the expected achievement of annual manufacturer incentives. This compared to $12.1 million of pre-tax income in the second quarter last year.

    Construction Segment - Revenue for the second quarter of fiscal 2023 was $70.0 million, compared to $80.9 million in the second quarter last year. While revenue was lower versus the prior year period due to the lost sales contributions from the Company’s fiscal 2022 fourth quarter divestiture of construction stores in Montana and Wyoming and our fiscal 2023 first quarter divestiture of our consumer products store in North Dakota, same-store sales increased 14.9%. Pre-tax income for the second quarter of fiscal 2023 was $3.9 million, and compared to $2.8 million in the second quarter last year.

    International Segment - Revenue for the second quarter of fiscal 2023 was $77.6 million, compared to $77.3 million in the second quarter last year, while on a constant currency basis revenue was up $8.8 million or 11.3%. Pre-tax income for the second quarter of fiscal 2023 was $5.9 million. This compares to pre-tax income of $0.4 million in the second quarter last year. Adjusted pre-tax income for the second quarter of fiscal 2023 was $5.9 million, which excludes a negligible adjustment, compared to $1.9 million in the second quarter last year.

    Balance Sheet and Cash Flow
    Cash at the end of the second quarter of fiscal 2023 was $142.1 million. Inventories increased to $556.4 million as of July 31, 2022, compared to $421.8 million as of January 31, 2022. This inventory increase includes increases in new equipment inventory of $129.9 million and parts inventory of $13.2 million, which is partially offset by a $9.3 million decrease in used equipment inventory. Outstanding floorplan payables were $274.2 million on $743.0 million total available floorplan lines of credit as of July 31, 2022, compared to $135.4 million outstanding floorplan payables as of January 31, 2022.

    In the first six months of fiscal 2023, net cash used for operating activities was $21.0 million, compared to net cash provided by operating activities of $28.6 million in the first six months of fiscal 2022.

    Additional Management Commentary
    Mr. Meyer added, "The integration of our Heartland Ag Systems acquisition is already well underway since closing in early August. Our teams are working hard to efficiently establish a complete distribution model that covers both the farmer and commercial applicator markets. This acquisition provides us the ability to generate significant revenue synergies through equipment packaging opportunities with the commercial applicator customer, and also provides additional avenues of growth as we leverage our expansive parts and service network for the commercial applicator market. We share remarkably similar cultures focused on exceptional customer service and look forward to the Heartland team's future contributions."

    “We are in a great position to sustain our sales growth and as a result, we are increasing our modeling assumptions for both revenue and earnings per share for the second half of fiscal 2023. The sustained strength of our financial performance over the past two years reflects a combination of strong macro forces and our efficient operating structure. As we look ahead to fiscal 2024, we believe that these dynamics will continue to support a strong agriculture economy. We expect that equipment availability will remain constrained due to ongoing supply chain challenges of our suppliers, together with new cash crop equipment allocations and shorter pricing windows for fiscal 2024. However, we believe that the industry supply limitations and ongoing strong demand will extend the current favorable agriculture industry cycle and create an opportunity for Titan Machinery to continue demonstrating the strong earnings power of our business.”

    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 50-55% Up 37-42%
    Construction(2)Down 5-10% Down 10-15%
    International(3)Down 0-5% Down 0-5%
        
    Diluted EPS(4)$3.70 - $4.00 $2.90 - $3.20
        
    (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 expected 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 15-20%.
    (3) Includes a reduction in revenue of approximately 45% from our Ukrainian subsidiary compared to fiscal 2022.
    (4) Includes an estimated loss of approximately $0.05 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 Thursday, September 8, 2022, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13732266.

    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 (loss), adjusted EBITDA, adjusted diluted earnings (loss) per share, and adjusted income (loss) 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 the Heartland acquisition and 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 acquisition, the risk that we assume unforeseen or other liabilities in connection with the Heartland 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 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)
        
     July 31, 2022 January 31, 2022
    Assets   
    Current Assets   
    Cash$142,057  $146,149 
    Receivables, net of allowance for expected credit losses 96,369   94,287 
    Inventories, net 556,383   421,758 
    Prepaid expenses and other 17,736   28,135 
    Total current assets 812,545   690,329 
    Noncurrent Assets   
    Property and equipment, net of accumulated depreciation 188,964   178,243 
    Operating lease assets 51,888   56,150 
    Deferred income taxes 2,239   1,328 
    Goodwill 9,535   8,952 
    Intangible assets, net of accumulated amortization 11,480   10,624 
    Other 1,220   1,041 
    Total noncurrent assets 265,326   256,338 
    Total Assets$1,077,871  $946,667 
        
    Liabilities and Stockholders' Equity   
    Current Liabilities   
    Accounts payable$28,344  $25,644 
    Floorplan payable 274,244   135,415 
    Current maturities of long-term debt 6,650   5,876 
    Current operating lease liabilities 9,465   9,601 
    Deferred revenue 91,819   134,146 
    Accrued expenses and other 42,856   59,339 
    Income taxes payable 6,289   4,700 
    Total current liabilities 459,667   374,721 
    Long-Term Liabilities   
    Long-term debt, less current maturities 86,500   74,772 
    Operating lease liabilities 50,998   55,595 
    Deferred income taxes 1,991   2,006 
    Other long-term liabilities 4,438   4,374 
    Total long-term liabilities 143,927   136,747 
    Stockholders' Equity   
    Common stock —   — 
    Additional paid-in-capital 255,188   254,455 
    Retained earnings 225,414   182,916 
    Accumulated other comprehensive loss (6,325)  (2,172)
    Total stockholders' equity 474,277   435,199 
    Total Liabilities and Stockholders' Equity$1,077,871  $946,667 



    TITAN MACHINERY INC.
    Consolidated Condensed Statements of Operations
    (in thousands, except per share data)
    (Unaudited)
            
     Three Months Ended July 31, Six Months Ended July 31,
      2022   2021   2022   2021 
    Revenue       
    Equipment$375,216  $272,733  $731,582  $548,713 
    Parts 77,693   65,317   146,255   127,942 
    Service 33,365   29,676   62,887   57,379 
    Rental and other 10,269   9,904   16,825   16,300 
    Total Revenue 496,543   377,630   957,549   750,334 
    Cost of Revenue       
    Equipment 323,988   240,332   634,222   484,008 
    Parts 52,706   46,089   100,015   90,529 
    Service 11,072   9,771   21,832   19,065 
    Rental and other 6,078   6,420   10,087   10,737 
    Total Cost of Revenue 393,844   302,612   766,156   604,339 
    Gross Profit 102,699   75,018   191,393   145,995 
    Operating Expenses 68,828   57,074   132,980   113,516 
    Impairment of Intangible and Long-Lived Assets —   1,498   —   1,498 
    Income from Operations 33,871   16,446   58,413   30,981 
    Other Income (Expense)       
    Interest and other income 873   654   1,365   1,320 
    Floorplan interest expense (245)  (350)  (499)  (768)
    Other interest expense (1,349)  (1,118)  (2,545)  (2,222)
    Income Before Income Taxes 33,150   15,632   56,734   29,311 
    Provision for Income Taxes 8,191   4,383   14,235   7,515 
    Net Income$24,959  $11,249   42,499   21,796 
            
    Diluted Earnings per Share$1.10  $0.50  $1.88  $0.97 
    Diluted Weighted Average Common Shares 22,392   22,276   22,357   22,220 



    TITAN MACHINERY INC.
    Consolidated Condensed Statements of Cash Flows
    (in thousands)
    (Unaudited)
        
     Six Months Ended July 31,
      2022   2021 
    Operating Activities   
    Net income$42,499  $21,796 
    Adjustments to reconcile net income to net cash provided by operating activities   
    Depreciation and amortization 10,987   10,602 
    Impairment —   1,498 
    Other, net 5,122   4,893 
    Changes in assets and liabilities   
    Inventories (137,708)  (17,166)
    Manufacturer floorplan payable 105,415   56,436 
    Other working capital (47,268)  (49,498)
    Net Cash Provided by (Used for) Operating Activities (20,953)  28,561 
    Investing Activities   
    Property and equipment purchases (14,507)  (19,834)
    Proceeds from sale of property and equipment 1,628   420 
    Acquisition consideration, net of cash acquired (7,675)  — 
    Other, net (182)  12 
    Net Cash Used for Investing Activities (20,736)  (19,402)
    Financing Activities   
    Net change in non-manufacturer floorplan payable 35,716   (22,731)
    Net proceeds from long-term debt and finance leases 4,536   1,334 
    Other, net (689)  (976)
    Net Cash Provided by (Used for) Financing Activities 39,563   (22,373)
    Effect of Exchange Rate Changes on Cash (1,966)  (192)
    Net Change in Cash (4,092)  (13,406)
    Cash at Beginning of Period 146,149   78,990 
    Cash at End of Period$142,057  $65,584 



    TITAN MACHINERY INC.
    Segment Results
    (in thousands)
    (Unaudited)
        
     Three Months Ended July 31, Six Months Ended July 31,
      2022   2021  % Change  2022   2021  % Change
    Revenue           
    Agriculture$348,956  $219,364  59.1% $667,503  $448,915  48.7%
    Construction 70,022   80,943  (13.5)%  136,986   149,550  (8.4)%
    International 77,565   77,323  0.3%  153,060   151,869  0.8%
    Total$496,543  $377,630  31.5% $957,549  $750,334  27.6%
                
    Income Before Income Taxes           
    Agriculture$24,895  $12,067  106.3% $41,344  $23,292  77.5%
    Construction 3,923   2,815  39.4%  7,132   2,953  141.5%
    International 5,870   430  n/m  10,195   3,238  n/m
    Segment Income Before Income Taxes 34,688   15,312  126.5%  58,671   29,483  99.0%
    Shared Resources (1,538)  320  n/m  (1,937)  (172) n/m
    Total$33,150  $15,632  112.1% $56,734  $29,311  93.6%



    TITAN MACHINERY INC.
    Non-GAAP Reconciliations
    (in thousands, except per share data)
    (Unaudited)
             
      Three Months Ended July 31, Six Months Ended July 31,
       2022   2021   2022  2021 
    Adjusted Net Income        
    Net Income $24,959  $11,249  $42,499 $21,796 
    Adjustments        
    Impairment charges  —   1,498   —  1,498 
    Ukraine remeasurement (gain) / loss (1)  21   (53)  315  (183)
    Total Adjustments  21   1,445   315  1,315 
    Adjusted Net Income $24,980  $12,694  $42,814 $23,111 
             
    Adjusted Diluted EPS        
    Diluted EPS $1.10  $0.50  $1.88 $0.97 
    Adjustments (2)        
    Impairment charges  —   0.07   —  0.07 
    Ukraine remeasurement (gain) / loss (1)  —   (0.01)  0.01  (0.01)
    Total Adjustments  —   0.06   0.01  0.06 
    Adjusted Diluted EPS $1.10  $0.56  $1.89 $1.03 
             
    Adjusted Income Before Income Taxes        
    Income Before Income Taxes $33,150  $15,632  $56,734 $29,311 
    Adjustments        
    Impairment charges  —   1,498   —  1,498 
    Ukraine remeasurement (gain) / loss  21   (53)  315  (183)
    Total Adjustments  21   1,445   315  1,315 
    Adjusted Income Before Income Taxes $33,171  $17,077  $57,049 $30,626 
             
    Adjusted Income Before Income Taxes - International        
    Income (Loss) Before Income Taxes $5,870  $430  $10,195 $3,238 
    Adjustments        
    Impairment charges  —   1,498   —  1,498 
    Ukraine remeasurement (gain) / loss  21   (53)  315  (183)
    Total Adjustments  21   1,445   315  1,315 
    Adjusted Income Before Income Taxes $5,891  $1,875  $10,510 $4,553 
             
    Adjusted EBITDA        
    Net Income $24,959  $11,249  $42,499 $21,796 
    Adjustments        
    Interest expense, net of interest income  1,283   1,049   2,392  2,100 
    Provision for income taxes  8,191   4,383   14,235  7,515 
    Depreciation and amortization  5,781   5,395   10,987  10,602 
    EBITDA  40,214   22,076   70,113  42,013 
    Adjustments        
    Impairment charges  —   1,498   —  1,498 
    Ukraine remeasurement (gain) / loss  21   (53)  315  (183)
    Total Adjustments  21   1,445   315  1,315 
    Adjusted EBITDA $40,235  $23,521  $70,428 $43,328 
             
    (1) Due to the income tax valuation allowance on the Ukrainian and German subsidiaries, there are no tax adjustments of the Ukraine remeasurement (gain)/loss for the periods ending July 31, 2022 and 2021 or the impairment charge for the periods ending July 31, 2021.  
    (2) Adjustments are net of amounts allocated to participating securities where applicable.    


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