Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal fourth quarter and full year ended January 31, 2021.

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "We completed fiscal 2021 with a strong finish in fourth quarter, driven by our equipment business which grew 35% for the quarter. From a segment perspective, our Agriculture segment was the standout performer for the quarter and fiscal year, generating very strong top and bottom line performance. We are also pleased with the operating improvement in our Construction segment this fiscal year, which generated positive pre-tax income in fourth quarter and full year. While the pandemic and adverse weather conditions have created additional obstacles across our international store footprint, we experienced growth in our International segment parts and service business during the fourth quarter and full year, which has been a focus for us. Looking ahead to fiscal 2022, Titan Machinery is in a great position — we are benefiting from renewed strength in the commodities cycle, we've stayed close to our customers with exceptional service, and we've carefully managed our cost structure and balance sheet to ensure that we drive profitability and remain nimble to react to future opportunities."

Fiscal 2021 Fourth Quarter Results

Consolidated ResultsFor the fourth quarter of fiscal 2021, revenue was $436.7 million, compared to revenue of $351.0 million in the fourth quarter last year. Equipment revenue was $354.0 million for the fourth quarter of fiscal 2021, compared to $262.8 million in the fourth quarter last year. Parts revenue was $49.8 million for the fourth quarter of fiscal 2021, compared to $52.3 million in the fourth quarter last year. Revenue generated from service was $22.9 million for the fourth quarter of fiscal 2021, compared to $22.0 million in the fourth quarter last year. Revenue from rental and other was $9.9 million for the fourth quarter of fiscal 2021, compared to $13.9 million in the fourth quarter last year.

Gross profit for the fourth quarter of fiscal 2021 increased to $67.7 million compared to $61.1 million in the fourth quarter last year. The Company's gross profit margin decreased to 15.5% in the fourth quarter of fiscal 2021, compared to 17.4% in the fourth quarter last year. Gross profit margin decreased primarily due to mix, with a greater proportion of equipment revenue in the fourth quarter of fiscal 2021 compared to a greater proportion of higher margin parts and service revenue in the fourth quarter last year.

Operating expenses were essentially flat at $60.5 million for the fourth quarter of fiscal 2021, compared to $60.1 million in the fourth quarter last year. Operating expenses as a percentage of sales improved 320 basis points to 13.9% for the fourth quarter of fiscal 2021, compared to 17.1% of revenue in the prior year period. The Company recognized impairments related to intangible and long-lived assets of $0.4 million in the quarter compared to $3.6 million in the prior year quarter.

Floorplan and other interest expense was $1.5 million for the fourth quarter of fiscal 2021, compared to $2.5 million for the same period last year. The decrease was due to a lower interest rate environment, a lower interest rate spread under our new five-year Amended and Restated Credit Agreement that was finalized in April 2020, and lower borrowings on our lines of credit.

In the fourth quarter of fiscal 2021, net income was $0.8 million, or earnings per diluted share of $0.03, compared to $0.7 million, or earnings per diluted share of $0.03 for the fourth quarter of fiscal 2020.

On an adjusted basis, net income for the fourth quarter of fiscal 2021 was $5.3 million, or $0.23 per diluted share, compared to net income of $0.6 million, or $0.02 per diluted share for the fourth quarter of fiscal 2020. The adjusted fourth quarter fiscal 2021 net income of $5.3 million excludes a $3.3 million charge for Ukraine income tax valuation allowance adjustments, while the adjusted fourth quarter fiscal 2020 net income excludes a $4.6 million benefit for domestic income tax valuation adjustments.

The Company generated $13.7 million in adjusted EBITDA in the fourth quarter of fiscal 2021, compared to $8.1 million for the fourth quarter of fiscal 2020.

Segment ResultsAgriculture Segment - Revenue for the fourth quarter of fiscal 2021 was $303.2 million, compared to $215.5 million in the fourth quarter last year. Pre-tax income for the fourth quarter of fiscal 2021 was $7.9 million, compared to a pre-tax loss of $0.3 million in the fourth quarter last year. Adjusted pre-tax income for the fourth quarter of fiscal 2021 was $8.0 million, compared to $2.5 million in the fourth quarter last year.

Construction Segment - Revenue for the fourth quarter of fiscal 2021 was $88.9 million, compared to $87.2 million in the fourth quarter last year. Pre-tax income for the fourth quarter of fiscal 2021 was $0.2 million, compared to a pre-tax loss of $1.8 million in the fourth quarter last year. Adjusted pre-tax income for the fourth quarter of fiscal 2021 was $0.6 million, compared to a pre-tax loss of $1.0 million in the fourth quarter last year. At the end of fiscal 2021, the Company divested its Phoenix and Tucson, Arizona construction equipment store locations.

International Segment - Revenue for the fourth quarter of fiscal 2021 was $44.6 million, compared to $48.2 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2021 was $2.9 million, compared to $2.3 million in the fourth quarter last year. Adjusted pre-tax loss for the fourth quarter of fiscal 2021 was $2.7 million, compared to $2.3 million in the fourth quarter last year.

Fiscal 2021 Full Year Results

Revenue increased 8.1% to $1.4 billion for fiscal 2021. Net income for fiscal 2021 was $19.4 million, or $0.86 per diluted share, compared to $14.0 million, or $0.63 per diluted share, for the prior year. Adjusted net income for fiscal 2021 was $28.2 million, or $1.26 per diluted share, compared to an adjusted net income of $18.6 million, or $0.84 per diluted share, for the prior year. The Company generated adjusted EBITDA of $65.4 million in fiscal 2021, representing an increase of 24.6% compared to adjusted EBITDA of $52.5 million in fiscal 2020.

Balance Sheet and Cash Flow

Cash at the end of the fourth quarter of fiscal 2021 was $79.0 million. Inventories decreased to $418.5 million as of January 31, 2021, compared to $597.4 million as of January 31, 2020. This inventory decrease includes a $177.8 million decrease in equipment inventory, which reflects a decrease in new equipment inventory of $151.7 million and a $26.1 million decrease in used equipment inventory. The lower year-end inventory also reflects the divestiture of the Company's two Arizona construction stores. Outstanding floorplan payables were $161.8 million on $773.0 million total available floorplan lines of credit as of January 31, 2021, compared to $371.8 million outstanding floorplan payables as of January 31, 2020.

For the fiscal year ended January 31, 2021, the Company’s net cash provided by operating activities was $173.0 million, compared to $1.0 million for the fiscal year ended January 31, 2020. The Company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in its equipment inventory. Taking these adjustments into account, adjusted net cash provided by operating activities was $148.5 million for the fiscal year ended January 31, 2021, compared to $17.8 million for the fiscal year ended January 31, 2020.

Mr. Meyer concluded, "We expect another strong year of growth in fiscal 2022. While fiscal 2021 was a great success, especially in light of the unforeseen challenges brought about by the global pandemic, we believe there are additional areas of opportunity in this new fiscal year. Our entire organization has done an amazing job and we are ideally positioned to take advantage of the improving industry conditions with our healthy inventory position, which helped drive a record $148 million in adjusted operating cash flow during fiscal 2021 and is supporting our business in a variety of ways such as improved equipment margins and lowering our floorplan interest expense. These dynamics have improved our cash flow, reduced our debt, and put the business on a strong foundation to generate profitable growth across our segments in fiscal 2022."

Fiscal 2022 Modeling Assumptions

The following are the Company's current expectations for fiscal 2022 modeling assumptions. We believe modeling assumptions will continue to be impacted by the challenging global economy due to the COVID-19 pandemic, creating a higher degree of uncertainty in these assumptions compared to a normal environment.

  Current Assumptions
Segment Revenue  
Agriculture(1) Up 10-15%
Construction(2) Down 0-5%
International Up 12-17%
   
Diluted EPS(3) $1.25 - $1.45
   
(1) Includes the full year impact of the HorizonWest acquisition completed in May 2020.
(2) Includes the full year impact of the Phoenix and Tucson, AZ store divestitures in January 2021. Adjusting full year fiscal 2021 net sales by $27 million, representing the 2021 net sales of these divested stores, results in a same-store sales assumption of up 3-8%.
(3) Includes expenses related to ERP implementation.

Conference Call 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) 705-6003 from the U.S. International callers can dial (201) 493-6725. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, April 1, 2021, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13716797.

A copy of the presentation that will accompany the prepared remarks from 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 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 measures. Generally, the non-GAAP measures include adjustments for items such as valuation allowances for income tax, impairment charges, Ukraine remeasurement gains/losses and costs associated with our Enterprise Resource Planning (ERP) system transition. The 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 measures as presented herein 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 net income, diluted earnings per share, income (loss) before income taxes, and net cash provided by operating activities (all GAAP financial measures) for the periods presented to adjusted net income, adjusted EBITDA, adjusted diluted earnings per share, adjusted income (loss) before income taxes, and adjusted net cash provided by operating activities (all non-GAAP financial measures) for the periods presented.

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, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming and its European stores are located in Bulgaria, Germany, Romania, Serbia 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. Such statements are based upon the current beliefs and expectations of our management. Forward-looking statements made herein, which include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, 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, 2022, 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 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 as 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 herein to reflect future events or developments.

Investor Relations Contact:ICR, Inc.John Mills, jmills@icrinc.comManaging Partner646-277-1254

 
TITAN MACHINERY INC.
Consolidated Balance Sheets
(in thousands)
(Unaudited)
       
  January 31, 2021   January 31, 2020
Assets      
Current Assets      
Cash $ 78,990     $ 43,721  
Receivables, net of allowance for expected credit losses 69,109     72,776  
Inventories 418,458     597,394  
Prepaid expenses and other 13,677     13,655  
Total current assets 580,234     727,546  
Noncurrent Assets      
Property and equipment, net of accumulated depreciation 147,165     145,562  
Operating lease assets 74,445     88,281  
Deferred income taxes 3,637     2,147  
Goodwill 1,433     2,327  
Intangible assets, net of accumulated amortization 7,785     8,367  
Other 1,090     1,113  
Total noncurrent assets 235,555     247,797  
Total Assets $ 815,789     $ 975,343  
       
Liabilities and Stockholders' Equity      
Current Liabilities      
Accounts payable $ 20,045     $ 16,976  
Floorplan payable 161,835     371,772  
Current maturities of long-term debt 4,591     13,779  
Current maturities of operating leases 11,772     12,259  
Deferred revenue 59,418     40,968  
Accrued expenses and other 48,791     38,360  
Income taxes payable 11,048     49  
Total current liabilities 317,500     494,163  
Long-Term Liabilities      
Long-term debt, less current maturities 44,906     37,789  
Operating lease liabilities 73,567     88,387  
Deferred income taxes     2,055  
Other long-term liabilities 8,535     7,845  
Total long-term liabilities 127,008     136,076  
Stockholders' Equity      
Common stock      
Additional paid-in-capital 252,913     250,607  
Retained earnings 116,869     97,717  
Accumulated other comprehensive income (loss) 1,499     (3,220 )
Total stockholders' equity 371,281     345,104  
Total Liabilities and Stockholders' Equity $ 815,789     $ 975,343  
 
 
TITAN MACHINERY INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
               
  Three Months Ended January 31,   Twelve Months Ended January 31,
  2021   2020   2021   2020
Revenue              
Equipment $ 354,011     $ 262,826     $ 1,016,071     $ 917,202  
Parts 49,830     52,289     244,676     234,217  
Service 22,947     21,950     107,229     99,165  
Rental and other 9,890     13,899     43,246     54,587  
Total Revenue 436,678     350,964     1,411,222     1,305,171  
Cost of Revenue              
Equipment 318,122     235,362     911,170     818,707  
Parts 35,668     36,810     171,873     165,190  
Service 8,429     8,276     36,692     33,446  
Rental and other 6,745     9,398     30,125     37,010  
Total Cost of Revenue 368,964     289,846     1,149,860     1,054,353  
Gross Profit 67,714     61,118     261,362     250,818  
Operating Expenses 60,523     60,128     220,774     225,722  
Impairment of Goodwill         1,453      
Impairment of Intangible and Long-Lived Assets 409     3,578     1,727     3,764  
Income (Loss) from Operations 6,782     (2,588 )   37,408     21,332  
Other Income (Expense)              
Interest and other income (expense) 194     439     527     3,126  
Floorplan interest expense (528 )   (1,630 )   (3,339 )   (5,354 )
Other interest expense (959 )   (890 )   (3,843 )   (4,452 )
Income (Loss) Before Income Taxes 5,489     (4,669 )   30,753     14,652  
Provision for (Benefit from) Income Taxes 4,707     (5,342 )   11,397     699  
Net Income 782     673     19,356     13,953  
               
Diluted Earnings per Share $ 0.03     $ 0.03     $ 0.86     $ 0.63  
Diluted Weighted Average Common Shares 22,143     21,977     22,104     21,953  
 
 
TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
       
  Year Ended January 31,
  2021   2020
Operating Activities      
Net income $ 19,356     $ 13,953  
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization 23,701     28,067  
Impairment 3,180     3,764  
Other, net 9,313     13,284  
Changes in assets and liabilities      
Inventories 199,245     (99,469 )
Manufacturer floorplan payable (110,084 )   49,601  
Other working capital 28,285     (8,245 )
Net Cash Provided by Operating Activities 172,996     955  
Investing Activities      
Property and equipment purchases (20,089 )   (25,016 )
Proceeds from sale of property and equipment 6,592     2,415  
Acquisition consideration, net of cash acquired (6,790 )   (13,887 )
Other, net (10 )   19  
Net Cash Used for Investing Activities (20,297 )   (36,469 )
Financing Activities      
Net change in non-manufacturer floorplan payable (106,414 )   50,158  
Repurchase of senior convertible notes     (45,644 )
Net proceeds from (payments on) long-term debt (10,616 )   18,864  
Other, net (909 )   (509 )
Net Cash Provided by (Used for) Financing Activities (117,939 )   22,869  
Effect of Exchange Rate Changes on Cash 509     (379 )
Net Change in Cash 35,269     (13,024 )
Cash at Beginning of Period 43,721     56,745  
Cash at End of Period $ 78,990     $ 43,721  
 
 
TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
                       
  Three Months Ended January 31,   Twelve Months Ended January 31,
  2021   2020   Change   2021   2020   Change
Revenue                      
Agriculture $ 303,161     $ 215,508     40.7 %   $ 886,485     $ 749,042     18.3 %
Construction 88,883     87,220     1.9 %   305,745     320,034     (4.5) %
International 44,634     48,236     (7.5) %   218,992     236,095     (7.2) %
Total $ 436,678     $ 350,964     24.4 %   $ 1,411,222     $ 1,305,171     8.1 %
                       
Income (Loss) Before Income Taxes                      
Agriculture $ 7,933     $ (275 )   n/m   $ 34,422     $ 18,036     90.9 %
Construction 236     (1,750 )   n/m   186     (2,290 )   n/m
International (2,890 )   (2,279 )   (26.8) %   (6,025 )   504     n/m
Segment income before income taxes 5,279     (4,304 )   n/m   28,583     16,250     75.9 %
Shared Resources 210     (365 )   n/m   2,170     (1,598 )   n/m
Total $ 5,489     $ (4,669 )   n/m   $ 30,753     $ 14,652     109.9 %
                       
 
 
TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands, except per share data)
(Unaudited)
               
  Three Months Ended January 31,   Twelve Months Ended January 31,
  2021   2020   2021   2020
Adjusted Net Income              
Net Income $ 782     $ 673     $ 19,356     $ 13,953  
Adjustments              
ERP transition costs 740     2,397     2,990     7,175  
Impairment charges 409     3,578     3,180     3,764  
Ukraine remeasurement (gain) / loss 201     (28 )   1,174     (616 )
Total Pre-Tax Adjustments 1,350     5,947     7,344     10,323  
Tax Effect of Adjustments (1) 386     (1,452 )   (2,227 )   (1,036 )
Adjustment for Tax Valuation Allowance 2,741     (4,611 )   3,759     (4,611 )
Total Adjustments 4,477     (116 )   8,876     4,676  
Adjusted Net Income $ 5,259     $ 557     $ 28,232     $ 18,629  
               
Adjusted Diluted EPS              
Diluted EPS $ 0.03     $ 0.03     $ 0.86     $ 0.63  
Adjustments (2)              
ERP transition costs 0.03     0.11     0.13     0.32  
Impairment charges 0.02     0.16     0.14     0.17  
Ukraine remeasurement (gain) / loss 0.01     (0.01 )   0.05     (0.02 )
Total Pre-Tax Adjustments 0.06     0.26     0.32     0.47  
Tax Effect of Adjustments (1) 0.02     (0.06 )   (0.10 )   (0.05 )
Adjustment for Tax Valuation Allowance 0.12     (0.21 )   0.18     (0.21 )
Total Adjustments 0.20     (0.01 )   0.40     0.21  
Adjusted Diluted EPS $ 0.23     $ 0.02     $ 1.26     $ 0.84  
               
Adjusted Income Before Income Taxes              
Income (Loss) Before Income Taxes $ 5,489     $ (4,669 )   $ 30,753     $ 14,652  
Adjustments              
ERP transition costs 740     2,397     2,990     7,175  
Impairment charges 409     3,578     3,180     3,764  
Ukraine remeasurement (gain) / loss 201     (28 )   1,174     (616 )
Total Adjustments 1,350     5,947     7,344     10,323  
Adjusted Income Before Income Taxes $ 6,839     $ 1,278     $ 38,097     $ 24,975  
               
Adjusted Income Before Income Taxes - Agriculture              
Income (Loss) Before Income Taxes $ 7,933     $ (275 )   $ 34,422     $ 18,036  
Impairment charges 28     2,807     272     2,807  
Adjusted Income Before Income Taxes $ 7,961     $ 2,532     $ 34,694     $ 20,843  
               
Adjusted Income (Loss) Before Income Taxes - Construction              
Income (Loss) Before Income Taxes $ 236     $ (1,750 )   $ 186     $ (2,290 )
Impairment charges 381     771     597     957  
Adjusted Income (Loss) Before Income Taxes $ 617     $ (979 )   $ 783     $ (1,333 )
               
Adjusted Loss Before Income Taxes - International              
Income (Loss) Before Income Taxes $ (2,890 )   $ (2,279 )   $ (6,025 )   $ 504  
Adjustments              
Impairment charges         2,311      
Ukraine remeasurement (gain) / loss 201     (28 )   1,174     (616 )
Total Adjustments 201     (28 )   3,485     (616 )
Adjusted Loss Before Income Taxes $ (2,689 )   $ (2,307 )   $ (2,540 )   $ (112 )
               
Adjusted EBITDA              
Net Income $ 782     $ 673     $ 19,356     $ 13,953  
Adjustments              
Interest expense, net of interest income 884     815     3,574     4,121  
Provision for income taxes 4,707     (5,342 )   11,397     699  
Depreciation and amortization 5,970     7,006     23,701     28,067  
EBITDA 12,343     3,152     58,028     46,840  
Adjustments              
ERP transition costs 740     1,384     2,990     2,497  
Impairment charges 409     3,578     3,180     3,764  
Ukraine remeasurement (gain) / loss 201     (28 )   1,174     (616 )
Total Adjustments 1,350     4,934     7,344     5,645  
Adjusted EBITDA $ 13,693     $ 8,086     $ 65,372     $ 52,485  
               
Adjusted Net Cash Provided by Operating Activities              
Net Cash Provided by Operating Activities         $ 172,996     $ 955  
Net Change in Non-Manufacturer Floorplan Payable         (106,414 )   50,158  
Adjustment for Constant Equity in Inventory         81,900     (33,359 )
Adjusted Net Cash Provided by Operating Activities         $ 148,482     $ 17,754  
               
 
(1) The tax effect of U.S. related adjustments was calculated using a 26% tax rate, determined based on a 21% federal statutory rate and a 5% blended state income tax rate. The tax effect of the Germany related adjustments was calculated using a 29% tax rate. Included in the tax effect of the adjustments is the tax impact of foreign currency changes in Ukraine of ($0.1 million) for the three months ended January 31, 2021 and $1.2 million for the fiscal year ended January 31, 2021.
(2) Adjustments are net of amounts allocated to participating securities where applicable.