Titan Machinery Inc. Announces Results for Fiscal First Quarter Ended April 30, 2022

·17 min read

- Revenue for First Quarter of Fiscal 2023 Increased 23.7% to $461.0 million -

- EPS for First Quarter of Fiscal 2023 was $0.78 and Adjusted EPS was $0.79 -

- Increases Fiscal 2023 Modeling Assumptions, Expects Fiscal 2023 EPS in Range of $2.85-$3.15 -

WEST FARGO, N.D., May 26, 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 first quarter ended April 30, 2022.

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "Our momentum continued into fiscal first quarter 2023 with strong operating leverage across each of our segments, which combined for a 24% increase in revenue and a 66% increase in earnings per share. Our Agriculture segment benefited from robust demand, which was supported by an increase in equipment deliveries from our suppliers following a delay in fiscal fourth quarter 2022. Our Construction segment continued to demonstrate improved levels of pre-tax profitability as we achieve operating improvements across our optimized footprint. While revenue growth in our International segment was negatively affected by the conflict in Ukraine, it is impacting our operations less than originally anticipated as our Ukrainian customers continue to farm, requiring Titan's support for equipment, parts and service. Our business across our European footprint proved to be resilient to the conflict's indirect effects and was able to generate an improvement in pre-tax income margins despite a slight decrease in revenue. We remain positive on the broader environment, despite some of the recent market turbulence, and continue to expect another exceptional year at Titan Machinery."

Fiscal 2023 First Quarter Results

Consolidated Results

For the first quarter of fiscal 2023, revenue increased to $461.0 million compared to $372.7 million in the first quarter last year. Equipment sales were $356.4 million for the first quarter of fiscal 2023, compared to $276.0 million in the first quarter last year. Parts sales were $68.6 million for the first quarter of fiscal 2023, compared to $62.6 million in the first quarter last year. Revenue generated from service was $29.5 million for the first quarter of fiscal 2023, compared to $27.7 million in the first quarter last year. Revenue from rental and other was $6.6 million for the first quarter of fiscal 2023, compared to $6.4 million in the first quarter last year.

Gross profit for the first quarter of fiscal 2023 was $88.7 million, compared to $71.0 million in the first quarter last year. The Company's gross profit margin increased to 19.2% in the first quarter of fiscal 2023, compared to 19.0% in the first 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 first quarter of fiscal 2023, versus higher margin parts and service revenue, as compared to the first quarter of the prior year.

Operating expenses increased by $7.7 million to $64.2 million for the first quarter of fiscal 2023, compared to $56.4 million in the first quarter last year, primarily due to higher variable expenses on increased revenues. Operating expenses as a percentage of revenue decreased 120 basis points to 13.9% for the first quarter of fiscal 2023, compared to 15.1% of revenue in the prior year period.

Floorplan and other interest expense of $1.5 million in the first quarter of fiscal 2023 was flat as compared to the same period last year.

In the first quarter of fiscal 2023, net income was $17.5 million, or earnings per diluted share of $0.78, compared to net income of $10.5 million, or earnings per diluted share of $0.47, for the first quarter of last year.

On an adjusted basis, net income for the first quarter of fiscal 2023 was $17.8 million, or adjusted earnings per diluted share of $0.79, compared to adjusted net income of $10.4 million, or adjusted earnings per diluted share of $0.46, for the first quarter of last year.

The Company generated $30.2 million in adjusted EBITDA in the first quarter of fiscal 2023, compared to $19.8 million in the first quarter of last year.

Segment Results
Agriculture Segment - Revenue for the first quarter of fiscal 2023 was $318.5 million, compared to $229.6 million in the first quarter last year. Pre-tax income for the first quarter of fiscal 2023 was $16.4 million, compared to $11.2 million of pre-tax income in the first quarter last year.

Construction Segment - Revenue for the first quarter of fiscal 2023 was $67.0 million, compared to $68.6 million in the first quarter last year. While revenue was slightly 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 24.9% primarily due to increased equipment demand. Pre-tax income for the first quarter of fiscal 2023 was $3.2 million, which included a pre-tax gain of $1.4 million associated with the consumer products store sale, and compared to $0.1 million in the first quarter last year.

International Segment - Revenue for the first quarter of fiscal 2023 was $75.5 million, compared to $74.5 million in the first quarter last year. Pre-tax income for the first quarter of fiscal 2023 was $4.3 million, which included a $0.7 million estimated bad debt provision in our Ukraine business primarily as a result of the on-going conflict with Russia in that region. This compares to pre-tax income of $2.8 million in the first quarter last year. Adjusted pre-tax income for the first quarter of fiscal 2023 was $4.6 million, compared to $2.7 million in the first quarter last year.

Balance Sheet and Cash Flow

Cash at the end of the first quarter of fiscal 2023 was $147.1 million. Inventories increased to $494.2 million as of April 30, 2022, compared to $421.8 million as of January 31, 2022. This inventory increase includes increases in new equipment inventory of $65.6 million and parts inventory of $8.0 million, which is partially offset by a $2.1 million decrease in used equipment inventory. Outstanding floorplan payables were $188.9 million on $751.0 million total available floorplan lines of credit as of April 30, 2022, compared to $135.4 million outstanding floorplan payables as of January 31, 2022.

In the first three months of fiscal 2023, net cash provided by operating activities was $5.3 million, compared to net cash provided by operating activities of $27.0 million in the first three months of fiscal 2022.

Additional Management Commentary

Mr. Meyer concluded, "We closed our acquisition of Mark's Machinery in April, which followed our acquisition of Jaycox Implement in December 2021, and are very happy with their full integration, immediate accretion and valuable contributions to the Titan culture. We remain active with our pipeline of potential acquisition candidates as we seek to grow the business through quality acquisitions in addition to our continuous focus on organic growth."

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 27-32%

 

Up 22-27%

Construction(2)

Down 10-15%

 

Down 12-17%

International(3)

Down 0-5%

 

Down 8-13%

 

 

 

 

Diluted EPS(4)

$2.85 - $3.15

 

$2.55 - $2.85

 

 

 

 

(1) Includes the full year impact of the Jaycox acquisition, which closed in December 2021, and the partial year impact of the Mark's Machinery acquisition, which closed in April 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 10-15%.

(3) Includes a reduction in revenue of approximately 50% (versus 75% previously) from our Ukraine subsidiary compared to fiscal 2022.

(4) Includes an estimated loss of approximately $0.15 per share (versus $0.25 loss previously) for our Ukraine 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, June 9, 2022, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13728811.

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 include adjustments for Ukraine remeasurement gains/losses. 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 measure.

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. The network consists of US locations in Colorado, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, 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 may include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, in particular the performance of our Ukrainian subsidiary within our International segment, inventory expectations, leverage expectations, agricultural and construction equipment industry conditions and trends, and modeling assumptions and expected results of operations for the fiscal year ending January 31, 2023, involve known and unknown risks and uncertainties that may cause Titan Machinery’s actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company’s risks and uncertainties include, among other things, 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, a substantial dependence on a single distributor, 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 reduce 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 risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on Titan Machinery’s business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Other than required by law, Titan Machinery disclaims any obligation to update such factors 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, 2022

 

January 31, 2022

Assets

 

 

 

Current Assets

 

 

 

Cash

$

147,095

 

 

$

146,149

 

Receivables, net of allowance for expected credit losses

 

84,870

 

 

 

94,287

 

Inventories, net

 

494,167

 

 

 

421,758

 

Prepaid expenses and other

 

22,223

 

 

 

28,135

 

Total current assets

 

748,355

 

 

 

690,329

 

Noncurrent Assets

 

 

 

Property and equipment, net of accumulated depreciation

 

183,489

 

 

 

178,243

 

Operating lease assets

 

53,980

 

 

 

56,150

 

Deferred income taxes

 

2,297

 

 

 

1,328

 

Goodwill

 

9,535

 

 

 

8,952

 

Intangible assets, net of accumulated amortization

 

11,509

 

 

 

10,624

 

Other

 

1,032

 

 

 

1,041

 

Total noncurrent assets

 

261,842

 

 

 

256,338

 

Total Assets

$

1,010,197

 

 

$

946,667

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

Current Liabilities

 

 

 

Accounts payable

$

26,817

 

 

$

25,644

 

Floorplan payable

 

188,881

 

 

 

135,415

 

Current maturities of long-term debt

 

6,270

 

 

 

5,876

 

Current operating lease liabilities

 

9,481

 

 

 

9,601

 

Deferred revenue

 

129,503

 

 

 

134,146

 

Accrued expenses and other

 

47,091

 

 

 

59,339

 

Income taxes payable

 

9,456

 

 

 

 

Total current liabilities

 

417,499

 

 

 

374,721

 

Long-Term Liabilities

 

 

 

Long-term debt, less current maturities

 

81,974

 

 

 

74,772

 

Operating lease liabilities

 

53,284

 

 

 

55,595

 

Other long-term liabilities

 

3,956

 

 

 

4,374

 

Total long-term liabilities

 

141,215

 

 

 

136,747

 

Stockholders' Equity

 

 

 

Common stock

 

 

 

 

 

Additional paid-in-capital

 

254,390

 

 

 

254,455

 

Retained earnings

 

200,456

 

 

 

182,916

 

Accumulated other comprehensive loss

 

(3,363

)

 

 

(2,172

)

Total stockholders' equity

 

451,483

 

 

 

435,199

 

Total Liabilities and Stockholders' Equity

$

1,010,197

 

 

$

946,667

 


TITAN MACHINERY INC.

Consolidated Condensed Statements of Operations

(in thousands, except per share data)

(Unaudited)

 

 

 

 

 

Three Months Ended April 30,

 

 

2022

 

 

 

2021

 

Revenue

 

 

 

Equipment

$

356,366

 

 

$

275,980

 

Parts

 

68,562

 

 

 

62,626

 

Service

 

29,522

 

 

 

27,702

 

Rental and other

 

6,557

 

 

 

6,398

 

Total Revenue

 

461,007

 

 

 

372,706

 

Cost of Revenue

 

 

 

Equipment

 

310,234

 

 

 

243,676

 

Parts

 

47,310

 

 

 

44,440

 

Service

 

10,760

 

 

 

9,294

 

Rental and other

 

4,009

 

 

 

4,318

 

Total Cost of Revenue

 

372,313

 

 

 

301,728

 

Gross Profit

 

88,694

 

 

 

70,978

 

Operating Expenses

 

64,152

 

 

 

56,442

 

Income from Operations

 

24,542

 

 

 

14,536

 

Other Income (Expense)

 

 

 

Interest and other income

 

492

 

 

 

665

 

Floorplan interest expense

 

(254

)

 

 

(418

)

Other interest expense

 

(1,196

)

 

 

(1,104

)

Income Before Income Taxes

 

23,584

 

 

 

13,679

 

Provision for Income Taxes

 

6,044

 

 

 

3,132

 

Net Income

$

17,540

 

 

$

10,547

 

 

 

 

 

Diluted Earnings per Share

$

0.78

 

 

$

0.47

 

Diluted Weighted Average Common Shares

 

22,321

 

 

 

22,179

 


TITAN MACHINERY INC.

Consolidated Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

 

 

Three Months Ended April 30,

 

 

2022

 

 

 

2021

 

Operating Activities

 

 

 

Net income

$

17,540

 

 

$

10,547

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

Depreciation and amortization

 

5,224

 

 

 

5,207

 

Other, net

 

1,739

 

 

 

2,359

 

Changes in assets and liabilities

 

 

 

Inventories

 

(69,321

)

 

 

(1,615

)

Manufacturer floorplan payable

 

51,069

 

 

 

19,657

 

Other working capital

 

(930

)

 

 

(9,199

)

Net Cash Provided by Operating Activities

 

5,321

 

 

 

26,956

 

Investing Activities

 

 

 

Property and equipment purchases

 

(5,111

)

 

 

(9,126

)

Proceeds from sale of property and equipment

 

836

 

 

 

135

 

Acquisition consideration, net of cash acquired

 

(7,675

)

 

 

 

Other, net

 

6

 

 

 

7

 

Net Cash Used for Investing Activities

 

(11,944

)

 

 

(8,984

)

Financing Activities

 

 

 

Net change in non-manufacturer floorplan payable

 

2,000

 

 

 

(9,141

)

Net proceeds from (payments on) long-term debt and finance leases

 

6,672

 

 

 

3,281

 

Other, net

 

(683

)

 

 

(974

)

Net Cash Provided by (Used) for Financing Activities

 

7,989

 

 

 

(6,834

)

Effect of Exchange Rate Changes on Cash

 

(420

)

 

 

(399

)

Net Change in Cash

 

946

 

 

 

10,739

 

Cash at Beginning of Period

 

146,149

 

 

 

78,990

 

Cash at End of Period

$

147,095

 

 

$

89,729

 


TITAN MACHINERY INC.

Segment Results

(in thousands)

(Unaudited)

 

 

 

Three Months Ended April 30,

 

 

2022

 

 

 

2021

 

 

% Change

Revenue

 

 

 

 

 

Agriculture

$

318,548

 

 

$

229,554

 

 

38.8 %

Construction

 

66,964

 

 

 

68,608

 

 

(2.4)%

International

 

75,495

 

 

 

74,544

 

 

1.3 %

Total

$

461,007

 

 

$

372,706

 

 

23.7%

 

 

 

 

 

 

Income Before Income Taxes

 

 

 

 

 

Agriculture

$

16,449

 

 

$

11,224

 

 

46.6 %

Construction

 

3,210

 

 

 

138

 

 

n/m

International

 

4,325

 

 

 

2,808

 

 

54.0 %

Segment Income Before Income Taxes

 

23,984

 

 

 

14,170

 

 

69.3 %

Shared Resources

 

(400

)

 

 

(491

)

 

18.5 %

Total

$

23,584

 

 

$

13,679

 

 

72.4 %


TITAN MACHINERY INC.

Non-GAAP Reconciliations

(in thousands, except per share data)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended April 30,

 

 

 

2022

 

 

2021

 

Adjusted Net Income

 

 

 

 

Net Income

 

$

17,540

 

$

10,547

 

Adjustments

 

 

 

 

Ukraine remeasurement (gain) / loss (1)

 

 

294

 

 

(129

)

Total Pre-Tax Adjustments

 

 

294

 

 

(129

)

Adjusted Net Income

 

$

17,834

 

$

10,418

 

 

 

 

 

 

Adjusted Diluted EPS

 

 

 

 

Diluted EPS

 

$

0.78

 

$

0.47

 

Adjustments (2)

 

 

 

 

Ukraine remeasurement (gain) / loss (1)

 

 

0.01

 

 

(0.01

)

Total Pre-Tax Adjustments

 

 

0.01

 

 

(0.01

)

Adjusted Diluted EPS

 

$

0.79

 

$

0.46

 

 

 

 

 

 

Adjusted Income Before Income Taxes

 

 

 

 

Income Before Income Taxes

 

$

23,584

 

$

13,678

 

Adjustments

 

 

 

 

Ukraine remeasurement (gain) / loss

 

 

294

 

 

(129

)

Total Adjustments

 

 

294

 

 

(129

)

Adjusted Income Before Income Taxes

 

$

23,878

 

$

13,549

 

 

 

 

 

 

Adjusted Income Before Income Taxes - International

 

 

 

 

Income (Loss) Before Income Taxes

 

$

4,325

 

$

2,808

 

Adjustments

 

 

 

 

Ukraine remeasurement (gain) / loss

 

 

294

 

 

(129

)

Total Adjustments

 

 

294

 

 

(129

)

Adjusted Income Before Income Taxes

 

$

4,619

 

$

2,679

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

Net Income

 

$

17,540

 

$

10,547

 

Adjustments

 

 

 

 

Interest expense, net of interest income

 

 

1,110

 

 

1,052

 

Provision for income taxes

 

 

6,044

 

 

3,132

 

Depreciation and amortization

 

 

5,206

 

 

5,207

 

EBITDA

 

 

29,900

 

 

19,938

 

Adjustments

 

 

 

 

Ukraine remeasurement (gain) / loss

 

 

294

 

 

(129

)

Total Adjustments

 

 

294

 

 

(129

)

Adjusted EBITDA

 

$

30,194

 

$

19,809

 

 

 

 

 

 

(1) Due to the income tax valuation allowance on the Ukrainian subsidiary, there is no tax adjustments of the Ukraine remeasurement (gain)/loss for the quarters ending April 30, 2022 and 2021.

(2) Adjustments are net of amounts allocated to participating securities where applicable.



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