Titan Machinery Inc. (Nasdaq: TITN) (the “Company”), a leading
network of full-service agricultural and construction equipment
stores, today announced preliminary results for the fiscal second
quarter ended July 31, 2024.
“Lower commodity prices and sustained high
interest rates, along with mixed growing conditions across our
footprint, have negatively affected farmer sentiment resulting in
lower agriculture equipment sales in our fiscal second quarter,”
commented Bryan Knutson, Titan Machinery's President and Chief
Executive Officer. “Commodity prices for most key cash crops in our
footprint have steadily declined since the beginning of the year
and retreated by an additional 10 to 20% in the second quarter. As
we navigate the current contractionary cycle, we are focused on
reducing inventory levels, particularly used equipment,
implementing cost controls and supporting our customer care
strategy to grow our parts and service businesses. We are confident
in our long-term customer-centric strategy and believe that our
business model, which has integrated numerous efficiencies and
process improvements since the last industry downturn, positions us
well to manage through the current challenging environment.”
Preliminary Expected
Fiscal 2025 Second Quarter
Results
For the second quarter of fiscal 2025, revenue
is expected to be approximately $634 million, primarily reflecting
lower than expected equipment revenues due to incrementally softer
retail demand.
This is preliminarily expected to result in
adjusted pre-tax income for the second quarter of fiscal 2025 of
approximately $6.9 million ($4.3 million pre-tax loss on a GAAP
reported basis) and adjusted earnings per diluted share of
approximately $0.17 ($0.19 loss per diluted share on a GAAP
reported basis), on approximately 22.6 million weighted average
diluted common shares outstanding. The adjusted pre-tax income and
adjusted earnings per diluted share exclude a non-cash
sale-leaseback financing expense of an estimated $11.2 million or
$0.36 per diluted share, as discussed below.
The Company has not yet completed preparation of
its interim financial statements for the second quarter of fiscal
2025 and the information presented herein is preliminary and
subject to finalization. The Company will provide full financial
results when it reports its results for the second quarter of
fiscal 2025 on Thursday, August 29, 2024.
Second Quarter Sale-Leaseback
Expense
The estimated adjusted earnings discussed above
excludes the accounting impact of the Company's umbrella purchase
for 13 of its leased facilities. The purchase closing date for each
leased facility will occur on or before the expiration of the
respective lease, all of which expire over the next several years
through calendar year 2030. This is estimated to result in
recording approximately $11.2 million of one-time, non-cash
sale-leaseback financing expense in the second quarter, which was
not originally contemplated in the Company’s fiscal 2025 modeling
assumptions. While the initial impact of this purchase agreement
temporarily reduces GAAP reported earnings, the transaction is
strategic and supports the Company’s long-term customer care
strategy by investing in facilities and shop space required for
continued growth in its high margin parts and service
businesses.
Fiscal 2025 Modeling
Assumptions
Bo Larsen, Titan Machinery's Chief Financial
Officer, stated, “We are proactively updating our full year fiscal
2025 modeling assumptions to reflect the preliminary second quarter
results, our latest view on the industry environment and adjust for
the non-cash sale-leaseback financing expense. Retail demand has
softened further over the last several months, and our updated
guidance reflects demand that remains at these subdued levels. We
continue to prioritize managing inventory down to targeted levels,
and we expect this lower demand environment will require further
reduction in equipment margin versus our previous assumptions. We
now anticipate these margins may approach the historical lows the
Company realized in fiscal years 2016 and 2017. However, our
proactive approach to managing inventory, despite the short-term
impact on margins, is strategically aimed at shortening the
duration of this downturn compared to previous cycles. We believe
these deliberate actions will help compress the impact of this
contractionary cycle on our performance, potentially accelerating
our return to a more normalized margin profile. Additionally,
because of the sales softness and the commensurate impact on
inventory levels versus our initial assumptions, we are incurring
higher floorplan interest expense which is exacerbating the decline
in earnings per share. We will discuss second quarter results and
expectations for the rest of the year in more detail during our
earnings call on August 29th.”
The following are the Company's current
expectations for fiscal 2025 modeling assumptions.
|
Previous Assumptions |
|
Current Assumptions |
Segment Revenue |
|
|
|
Agriculture |
Down 2.5% - Up 2.5% |
|
Down 5% - Down 10% |
Construction |
Flat - Up 5% |
|
Down 2.5% - Up 2.5% |
Europe |
Down 5% - Flat |
|
Down 12% - Down 17% |
Australia |
$240M - $260M USD |
|
$230M - $250M USD |
|
|
|
|
Diluted Earnings (Loss) Per Share |
$2.25 - $2.75 |
|
($0.36) - $0.14 |
Adjusted Diluted Earnings Per Share |
$2.25 - $2.75 |
|
$0.00 - $0.50* |
*Adjusted for an estimated ($0.36) impact for
non-cash sale-leaseback financing expense in the fiscal second
quarter as described in more detail above.
Conference Call and Presentation
Information
The Company will release its finalized financial
results for the second quarter ended July 31, 2024, on August 29,
2024, followed by an investor conference call 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 three hours after the call concludes and
will be available through September 12, 2024, by dialing (844)
512-2921 from the U.S., or (412) 317-6671 from international
locations, and entering confirmation code 13747715.
There also will be a simultaneous, live webcast
available on the Investor Relations section of the Company's web
site at www.titanmachinery.com. The webcast will be archived
for 30 days.
About Titan Machinery Inc.
Titan Machinery Inc., founded in 1980 and
headquartered in West Fargo, North Dakota, owns and operates a
network of full service agricultural and construction equipment
dealer locations in North America, Europe and Australia, servicing
farmers, ranchers, and commercial applicators. The network consists
of US locations in Colorado, Idaho, Iowa, Kansas, Minnesota,
Missouri, Montana, Nebraska, North Dakota, South Dakota,
Washington, Wisconsin, and Wyoming. The international network
includes European stores located in Bulgaria, Germany, Romania, and
Ukraine and Australian stores located in New South Wales, South
Australia, and Victoria in Southeastern Australia. The Titan
Machinery locations represent one or more of the CNH Industrial
Brands, including Case IH, New Holland Agriculture, Case
Construction, New Holland Construction, and CNH Industrial Capital.
Additional information about Titan Machinery Inc. can be found at
www.titanmachinery.com.
Forward Looking Statements
Except for historical information contained
herein, the statements in this release are forward-looking and made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The words "potential," "believe,"
"estimate," "expect," "intend," "may," "could," "will," "plan,"
"anticipate," and similar words and expressions are intended to
identify forward-looking statements. These statements are based
upon the current beliefs and expectations of our management.
Forward-looking statements made in this release, which include
statements regarding modeling assumptions, expected results of
operations for the quarter ended July 31, 2024, expected results of
operations for the fiscal year ending January 31, 2025, statements
regarding the Company's ability to generate improved financial
results, and may include statements regarding Agriculture,
Construction, Europe and Australia segment initiatives and
improvements, segment revenue realization, growth and profitability
expectations, inventory availability and consumer demand
expectations, and agricultural and construction equipment industry
conditions and trends, involve known and unknown risks and
uncertainties that may cause Titan's actual results in future
periods to differ materially from the forecasted assumptions and
expected results. The Company's risks and uncertainties include,
among other things, our ability to successfully integrate, and
realize growth opportunities and synergies in connection with the
O'Connors acquisition and the risk that we have assumed unforeseen
or other liabilities in connection with the O'Connors acquisition.
In addition, risks and uncertainties also include the impact of the
Russia-Ukraine conflict on our Ukrainian subsidiary, our
substantial dependence on CNH Industrial including CNH Industrial's
ability to design, manufacture and allocate inventory to our stores
necessary to satisfy our customers' demands, supply chain
disruptions impacting our suppliers, including CNH Industrial, the
continued availability of organic growth and acquisition
opportunities, potential difficulties integrating acquired stores,
industry supply levels, fluctuating agriculture and construction
industry economic conditions, the success of recently implemented
initiatives within the Company's operating segments, the
uncertainty and fluctuating conditions in the capital and credit
markets, difficulties in conducting international operations,
foreign currency risks, governmental agriculture policies, seasonal
fluctuations, the ability of the Company to reduce current
inventory levels successfully and the impact of that reduction on
equipment margins, weather conditions, disruption in receiving
ample inventory financing, and increased competition in the
geographic areas served. These and other risks are more fully
described in Titan's filings with the Securities and Exchange
Commission, including the Company's most recently filed Annual
Report on Form 10-K, as updated in subsequently filed Quarterly
Reports on Form 10-Q, as applicable. Titan conducts its business in
a highly competitive and rapidly changing environment. Accordingly,
new risks and uncertainties may arise. It is not possible for
management to predict all such risks and uncertainties, nor to
assess the impact of all such risks and uncertainties on Titan's
business or the extent to which any individual risk or uncertainty,
or combination of risks and uncertainties, may cause results to
differ materially from those contained in any forward-looking
statement. Other than as required by law, Titan disclaims any
obligation to update such risks and uncertainties or to publicly
announce results of revisions to any of the forward-looking
statements contained in this release to reflect future events or
developments.
Investor Relations Contact:
ICR, Inc.
Jeff Sonnek, jsonnek@icrinc.com
Managing Director
646-277-1263
TITAN MACHINERY INC. |
Non-GAAP Reconciliations |
(in thousands, except per share data) |
(Unaudited) |
|
|
|
|
|
Preliminary ResultsThree Months
Ended |
|
|
July 31, 2024 |
Adjusted Income Before Income Taxes |
|
|
Income Before Income Taxes |
|
$ |
(4,250 |
) |
Adjustments |
|
|
Estimated impact of sale-leaseback financing expense |
|
|
11,159 |
|
Total Adjustments |
|
|
11,159 |
|
Adjusted Income Before Income Taxes |
|
$ |
6,909 |
|
|
|
|
Adjusted Diluted EPS |
|
|
Diluted EPS |
|
$ |
(0.19 |
) |
Adjustments |
|
|
Estimated impact of sale-leaseback financing expense |
|
|
0.48 |
|
Total Pre-Tax Adjustments |
|
|
0.48 |
|
Less: Tax Effect of Adjustments |
|
|
(0.12 |
) |
Total Adjustments |
|
|
0.36 |
|
Adjusted Diluted EPS |
|
$ |
0.17 |
|
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