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, 2021.

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "The fiscal first quarter exceeded our expectations on all fronts with impressive operating leverage that showcases the earnings power of our efficient dealership network. On a consolidated basis, we drove a 26% increase in equipment sales and a 10% increase in our combined parts and service business during the quarter compared to the prior year. At the segment-level, we are very happy with our Agriculture segment, which generated pre-tax income growth of 82%. We are also pleased with the continued progress we are making in our Construction segment, which generated solid top-line growth and drove another quarter of positive pre-tax income and builds upon the momentum from its profitable fiscal 2021 performance. Our International segment experienced a resurgence during the quarter with strong equipment demand and delivered a corresponding improvement in pre-tax income as well. I'm proud of our team's performance and pleased to share this success with all our stakeholders."

Fiscal 2022 First Quarter Results

Consolidated ResultsFor the first quarter of fiscal 2022, revenue increased to $372.7 million compared to $310.2 million in the first quarter last year. Equipment sales were $276.0 million for the first quarter of fiscal 2022, compared to $218.5 million in the first quarter last year. Parts sales were $62.6 million for the first quarter of fiscal 2022, compared to $56.6 million in the first quarter last year. Revenue generated from service was $27.7 million for the first quarter of fiscal 2022, compared to $25.6 million in the first quarter last year. Revenue from rental and other was $6.4 million for the first quarter of fiscal 2022, compared to $9.5 million in the first quarter last year.

Gross profit for the first quarter of fiscal 2022 was $71.0 million, compared to $58.4 million in the first quarter last year. Gross profit margin increased 20 basis points to 19.0% versus the comparable period last year. The increase in gross profit was primarily the result of increased equipment sales and improved equipment margins compared to the first quarter of last year.

Operating expenses increased by $3.4 million to $56.4 million for the first quarter of fiscal 2022, compared to $53.1 million in the first quarter last year primarily due to higher variable expenses on increased revenues. Operating expenses as a percentage of revenue decreased 200 basis points to 15.1% for the first quarter of fiscal 2022, compared to 17.1% of revenue in the prior year period.

Floorplan and other interest expense was $1.5 million in the first quarter of fiscal 2022, compared to $2.1 million for the same period last year. The decrease was due to lower borrowings and a lower interest rate environment.

In the first quarter of fiscal 2022, net income was $10.5 million, or earnings per diluted share of $0.47, compared to net income of $2.3 million, or earnings per diluted share of $0.10, for the first quarter of last year.

On an adjusted basis, net income for the first quarter of fiscal 2022 was $10.4 million, or adjusted earnings per diluted share of $0.46, compared to adjusted net income of $3.4 million, or adjusted earnings per diluted share of $0.15, for the first quarter of last year. Adjusted first quarter fiscal 2022 net income excludes a $0.1 million Ukraine remeasurement gain, while the adjusted first quarter fiscal 2021 net income excludes $1.7 million of expenses, including ERP transition costs, impairment charges, and a Ukraine remeasurement loss.

Adjusted EBITDA was $19.8 million in the first quarter of fiscal 2022, compared to $11.1 million in the first quarter of last year.

Segment ResultsAgriculture Segment - Revenue for the first quarter of fiscal 2022 was $229.6 million, compared to $193.6 million in the first quarter last year. The increase in revenue was primarily driven by strong demand for equipment. Pre-tax income for the first quarter of fiscal 2022 was $11.2 million, compared to $6.2 million of pre-tax income in the first quarter last year.

Construction Segment - Revenue for the first quarter of fiscal 2022 was $68.6 million, compared to $60.1 million in the first quarter last year. The increase in revenue was driven by increased equipment sales partially offset by lower rental revenue. Pre-tax income for the first quarter of fiscal 2022 was $0.1 million, compared to a pre-tax loss of $2.9 million and an adjusted pre-tax loss of $2.7 million in the first quarter last year.

International Segment - Revenue for the first quarter of fiscal 2022 was $74.5 million, compared to $56.5 million in the first quarter last year. The increase in revenue was driven by strong equipment sales. Pre-tax income for the first quarter of fiscal 2022 was $2.8 million, compared to a pre-tax loss of $0.3 million in the first quarter last year. Adjusted pre-tax income for the first quarter of fiscal 2022 was $2.7 million, compared to adjusted pre-tax income of $0.5 million in the first quarter last year.

Balance Sheet and Cash Flow

Cash at the end of the first quarter of fiscal 2022 was $89.7 million. Inventories decreased to $415.7 million as of April 30, 2021, compared to $418.5 million as of January 31, 2021. This inventory decrease includes a $7.7 million decrease in equipment inventory, which reflects an increase in new equipment inventory of $5.3 million and a $13.0 million decrease in used equipment inventory. Outstanding floorplan payables were $169.1 million on $770.0 million total available floorplan lines of credit as of April 30, 2021, compared to $161.8 million outstanding floorplan payables as of January 31, 2021.

In the first three months of fiscal 2022, net cash provided by operating activities was $27.0 million, compared to net cash used for operating activities of $5.4 million in the first three months of fiscal 2021. 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 $7.0 million in the first three months of fiscal 2022, compared to adjusted net cash used for operating activities of $3.6 million in the first three months of fiscal 2021.

Mr. Meyer concluded, "The renewed strength across the agriculture complex, following an improved commodity outlook, is having a positive impact on all our businesses. The positive shift in industry conditions is recognized by our customers, and we are beginning to see some of the pent-up demand come back after several years of more conservative posturing. Titan Machinery continues to be in a strong position to serve our customers, while simultaneously serving shareholders with higher levels of profitability that we knew were possible following our multi-year effort to streamline our organization and improve our balance sheet."

Fiscal 2022 Modeling Assumptions

The following are the Company's current expectations for fiscal 2022 modeling assumptions.

  Current Assumptions Previous Assumptions
Segment Revenue    
Agriculture(1) Up 15-20% Up 10-15%
Construction(2) Up 2-7% Down 0-5%
International Up 17-22% Up 12-17%
     
Diluted EPS(3) $1.65 - $1.85 $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 10-15%.
(3) Includes expenses related to ERP implementation.

Conference Call and Presentation InformationThe 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, June 10, 2021, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13719598.

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. Generally, the non-GAAP financial measures include adjustments for items such as valuation allowances for income tax, costs associated with impairment charges, Ukraine remeasurement gains/losses and charges associated with our Enterprise Resource Planning (ERP) system transition for fiscal 2021. 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, adjusted income (loss) before income taxes, and adjusted net cash provided by (used for) operating activities (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, 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. 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, 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 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.John Mills, jmills@icrinc.comManaging Partner646-277-1254

 
 
TITAN MACHINERY INC.
Consolidated Balance Sheets
(in thousands, except per share data)
(Unaudited)
       
  April 30, 2021   January 31, 2021
Assets      
Current Assets      
Cash $ 89,729       $ 78,990  
Receivables, net of allowance for expected credit losses 71,928       69,109  
Inventories 415,660       418,458  
Prepaid expenses and other 11,275       13,677  
Total current assets 588,592       580,234  
Noncurrent Assets      
Property and equipment, net of accumulated depreciation 158,364       147,165  
Operating lease assets 68,962       74,445  
Deferred income taxes 4,613       3,637  
Goodwill 1,433       1,433  
Intangible assets, net of accumulated amortization 7,696       7,785  
Other 1,081       1,090  
Total noncurrent assets 242,149       235,555  
Total Assets $ 830,741       $ 815,789  
       
Liabilities and Stockholders' Equity      
Current Liabilities      
Accounts payable $ 24,618       $ 20,045  
Floorplan payable 169,108       161,835  
Current maturities of long-term debt 5,128       4,591  
Current operating lease liabilities 10,624       11,772  
Deferred revenue 49,109       59,418  
Accrued expenses and other 37,110       48,791  
Income taxes payable 14,508       11,048  
Total current liabilities 310,205       317,500  
Long-Term Liabilities      
Long-term debt, less current maturities 64,868       44,906  
Operating lease liabilities 69,030       73,567  
Other long-term liabilities 7,555       8,535  
Total long-term liabilities 141,453       127,008  
Stockholders' Equity      
Common stock        
Additional paid-in-capital 252,547       252,913  
Retained earnings 127,416       116,869  
Accumulated other comprehensive income (loss) (880 )     1,499  
Total stockholders' equity 379,083       371,281  
Total Liabilities and Stockholders' Equity $ 830,741       $ 815,789  
 
 
TITAN MACHINERY INC.
Consolidated Condensed Statements of Operations
(in thousands, except per share data)
(Unaudited)
       
  Three Months Ended April 30,
  2021   2020
Revenue      
Equipment $ 275,980       $ 218,505  
Parts 62,626       56,614  
Service 27,702       25,600  
Rental and other 6,398       9,489  
Total Revenue 372,706       310,208  
Cost of Revenue      
Equipment 243,676       197,046  
Parts 44,440       39,617  
Service 9,294       8,345  
Rental and other 4,318       6,790  
Total Cost of Revenue 301,728       251,798  
Gross Profit 70,978       58,410  
Operating Expenses 56,442       53,058  
Impairment of Intangible and Long-Lived Assets       216  
Income from Operations 14,536       5,136  
Other Income (Expense)      
Interest and other income 665       130  
Floorplan interest expense (418 )     (1,152 )
Other interest expense (1,104 )     (966 )
Income Before Income Taxes 13,679       3,148  
Provision for Income Taxes 3,132       886  
Net Income 10,547       2,262  
       
Diluted Earnings per Share $ 0.47       $ 0.10  
Diluted Weighted Average Common Shares 22,179       22,012  
 
 
TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
       
  Three Months Ended April 30,
  2021   2020
Operating Activities      
Net income $ 10,547       $ 2,262  
Adjustments to reconcile net income to net cash provided by (used for) operating activities      
Depreciation and amortization 5,207       5,375  
Impairment of long-lived assets       216  
Other, net 2,359       3,568  
Changes in assets and liabilities      
Inventories (1,615 )     11,941  
Manufacturer floorplan payable 19,657       (10,669 )
Other working capital (9,199 )     (18,135 )
Net Cash Provided by (Used for) Operating Activities 26,956       (5,442 )
Investing Activities      
Property and equipment purchases (9,126 )     (5,414 )
Proceeds from sale of property and equipment 135       313  
Other, net 7       (21 )
Net Cash Used for Investing Activities (8,984 )     (5,122 )
Financing Activities      
Net change in non-manufacturer floorplan payable (9,141 )     18,781  
Net proceeds from (payments on) long-term debt and finance leases 3,281       (197 )
Other, net (974 )     (870 )
Net Cash Provided by (Used for) Financing Activities (6,834 )     17,714  
Effect of Exchange Rate Changes on Cash (399 )     (36 )
Net Change in Cash 10,739       7,114  
Cash at Beginning of Period 78,990       43,721  
Cash at End of Period $ 89,729       $ 50,835  
 
 
TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
   
  Three Months Ended April 30,
  2021   2020   % Change
Revenue          
Agriculture $ 229,554       $ 193,627       18.6 %
Construction 68,608       60,114       14.1 %
International 74,544       56,467       32.0 %
Total $ 372,706       $ 310,208       20.1 %
           
Income (Loss) Before Income Taxes          
Agriculture $ 11,224       $ 6,162       82.1 %
Construction 138       (2,873 )     n/m
International 2,808       (280 )     n/m
Segment income before income taxes 14,170       3,009       n/m
Shared Resources (491 )     139       n/m
Total $ 13,679       $ 3,148       n/m
 
 
TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands, except per share data)
(Unaudited)
         
    Three Months Ended April 30,
    2021   2020
Adjusted Net Income        
Net Income   $ 10,547       $ 2,262  
Adjustments        
ERP transition costs         721  
Impairment of long-lived assets         216  
Ukraine remeasurement (gain) / loss   (129 )     765  
Total Pre-Tax Adjustments   (129 )     1,702  
Less: Tax Effect of Adjustments (1)         580  
Total Adjustments   (129 )     1,122  
Adjusted Net Income   $ 10,418       $ 3,384  
         
Adjusted Diluted EPS        
Diluted EPS   $ 0.47       $ 0.10  
Adjustments (2)        
ERP transition costs         0.03  
Impairment charges         0.01  
Ukraine remeasurement (gain) / loss   (0.01 )     0.04  
Total Pre-Tax Adjustments   (0.01 )     0.08  
Less: Tax Effect of Adjustments (1)         0.03  
Total Adjustments   (0.01 )     0.05  
Adjusted Diluted EPS   $ 0.46       $ 0.15  
         
Adjusted Income Before Income Taxes        
Income Before Income Taxes   $ 13,678       $ 3,148  
Adjustments        
ERP transition costs         721  
Impairment of long-lived assets         216  
Ukraine remeasurement (gain) / loss   (129 )     765  
Total Adjustments   (129 )     1,702  
Adjusted Income Before Income Taxes   $ 13,549       $ 4,850  
         
Adjusted Loss Before Income Taxes - Construction        
Income (Loss) Before Income Taxes   $ 138       $ (2,873 )
Impairment of long-lived assets         216  
Adjusted Income (Loss) Before Income Taxes   $ 138       $ (2,657 )
         
Adjusted Income Before Income Taxes - International        
Income (Loss) Before Income Taxes   $ 2,808       $ (280 )
Ukraine remeasurement (gain) / loss   (129 )     765  
Adjusted Income Before Income Taxes   $ 2,679       $ 485  
         
         
Adjusted EBITDA        
Net Income   $ 10,547       $ 2,262  
Adjustments        
Interest expense, net of interest income   1,052       853  
Provision for income taxes   3,132       886  
Depreciation and amortization   5,207       5,375  
EBITDA   19,938       9,376  
Adjustments        
ERP transition costs         721  
Impairment charges         216  
Ukraine remeasurement (gain) / loss   (129 )     765  
Total Adjustments   (129 )     1,702  
Adjusted EBITDA   $ 19,809       $ 11,078  
         
Adjusted Net Cash Provided by (Used for) Operating Activities        
Net Cash Used for Operating Activities   $ 26,956       $ (5,442 )
Net Change in Non-Manufacturer Floorplan Payable   (9,141 )     18,781  
Adjustment for Constant Equity in Inventory   (10,850 )     (16,907 )
Adjusted Net Cash Provided by (Used) for Operating Activities   $ 6,965       $ (3,568 )
         
     
(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. Included in the tax effect of the adjustments is the tax impact of foreign currency changes in Ukraine of $0.3 million for the three months ended April 30, 2020.    
(2) Adjustments are net of amounts allocated to participating securities where applicable.      
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