Titan Machinery Inc. Announces Results for Fiscal Second Quarter Ended July 31, 2021

- Revenue for Second Quarter of Fiscal 2022 Increased 24.4% to $377.6 million -

- GAAP EPS for Second Quarter of Fiscal 2022 was $0.50 and Adjusted EPS was $0.57 -

- Company Increases Fiscal 2022 Modeling Assumptions -

WEST FARGO, N.D., Aug. 26, 2021 (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, 2021.

David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, "Equipment demand momentum continued through our second fiscal quarter with our equipment revenues increasing 35% versus prior year. The current environment is supported by our healthy inventory position and robust demand, along with continued strength in our parts and service business, driving strong consolidated pre-tax income growth of 89% during second quarter compared to prior year second quarter. From a segment perspective, our Agriculture business was well-positioned and produced exceptional growth as high commodity prices are offsetting drought conditions in areas of our footprint. However, we are especially pleased with the improved performance of both our Construction and International segments. Our construction segment pre-tax income grew 105% versus the prior year and our International segment pre-tax income increased by $0.9 million, and on an adjusted basis by $2.4 million, versus the prior year. Our operational improvements have enhanced the performance of each of our segments, as well as added value to our customers' businesses. Looking forward, our team is ready to support our customers through the upcoming busy harvest and end of year construction seasons, as we complete the second half of our fiscal year."

Fiscal 2022 Second Quarter Results

Consolidated Results
For the second quarter of fiscal 2022, revenue increased to $377.6 million compared to $303.5 million in the second quarter last year. Equipment sales were $272.7 million for the second quarter of fiscal 2022, compared to $202.7 million in the second quarter last year. Parts sales were $65.3 million for the second quarter of fiscal 2022, compared to $61.5 million in the second quarter last year. Revenue generated from service was $29.7 million for the second quarter of fiscal 2022, compared to $28.0 million in the second quarter last year. Revenue from rental and other was $9.9 million for the second quarter of fiscal 2022, compared to $11.4 million in the second quarter last year. Rental revenue was down due to a decrease in inventory rentals, a reduced rental fleet and the January 2021 divestiture of the company's construction stores in Arizona. While the fleet was smaller compared to the prior year, the dollar utilization of the fleet improved to 26.6% in the quarter compared to 22.2% in the same period last year.

Gross profit for the second quarter of fiscal 2022 was $75.0 million, compared to $62.7 million in the second quarter last year. The Company's gross profit margin decreased to 19.9% in the second quarter of fiscal 2022, compared to 20.7% in the second quarter last year. Gross profit margin decreased due to mix, with a greater proportion of equipment revenue this year versus higher margin parts and service revenue as compared to the second quarter of the prior year.

Operating expenses increased by $4.0 million to $57.1 million for the second quarter of fiscal 2022, compared to $53.1 million in the second quarter last year, primarily due to higher variable expenses on increased revenues. Operating expenses as a percentage of revenue decreased 240 basis points to 15.1% for the second quarter of fiscal 2022, compared to 17.5% of revenue in the prior year period. The Company also recognized impairments related to intangible and long-lived assets within our International segment of $1.5 million in the second quarter of fiscal 2022 compared to none in the prior year quarter.

Floorplan and other interest expense was $1.5 million in the second quarter of fiscal 2022, compared to $1.9 million for the same period last year. The decrease was primarily due to lower borrowings.

In the second quarter of fiscal 2022, net income was $11.2 million, or earnings per diluted share of $0.50, compared to net income of $6.4 million, or earnings per diluted share of $0.28, for the second quarter of last year.

On an adjusted basis, net income for the second quarter of fiscal 2022 was $13.0 million, or adjusted earnings per diluted share of $0.57, compared to adjusted net income of $6.6 million, or adjusted earnings per diluted share of $0.29, for the second quarter of last year.

Adjusted EBITDA was $23.5 million in the second quarter of fiscal 2022, compared to $15.8 million in the second quarter of last year.

Segment Results
Agriculture Segment - Revenue for the second quarter of fiscal 2022 was $219.4 million, compared to $169.1 million in the second quarter last year. The increase in revenue was primarily driven by strong demand for equipment. Pre-tax income for the second quarter of fiscal 2022 was $12.1 million, compared to $6.8 million in the second quarter last year.

Construction Segment - Revenue for the second quarter of fiscal 2022 was $80.9 million, compared to $77.7 million in the second quarter last year. The increase in revenue was driven by increased equipment sales partially offset by lower parts, service and rental revenue as a result of our previously announced divestment in Arizona. Pre-tax income for the second quarter of fiscal 2022 was $2.8 million, compared to $1.4 million in the second quarter last year.

International Segment - Revenue for the second quarter of fiscal 2022 was $77.3 million, compared to $56.7 million in the second quarter last year. The increase in revenue was driven by strong equipment sales. Pre-tax income for the second quarter of fiscal 2022 was $0.4 million, compared to a pre-tax loss of $0.4 million in the second quarter last year. Adjusted pre-tax income for the second quarter of fiscal 2022 was $1.9 million, compared to an adjusted pre-tax loss of $0.6 million in the second quarter last year.

Fiscal 2022 First Six Months Results

Revenue was $750.3 million for the first six months of fiscal 2022, compared to $613.7 million for the same period last year. Net income for the first six months of fiscal 2022 was $21.8 million, or $0.97 per diluted share, compared to a net income of $8.7 million, or $0.39 per diluted share, for the same period last year. On an adjusted basis, net income for the first six months of fiscal 2022 was $23.4 million, or $1.04 per diluted share, compared to an adjusted net income of $10.0 million, or $0.44 per diluted share, in the same period last year. Adjusted EBITDA was $43.3 million in the first six months of fiscal 2022, compared to $26.9 million in the same period last year.

Balance Sheet and Cash Flow

Cash at the end of the second quarter of fiscal 2022 was $65.6 million. Inventories increased to $427.1 million as of July 31, 2021, compared to $418.5 million as of January 31, 2021. This inventory increase includes a $10.6 million increase in parts inventory and a $2.5 million decrease in equipment inventory, which reflects an increase in new equipment inventory of $31.4 million and a $34.0 million decrease in used equipment inventory. Outstanding floorplan payables were $185.5 million on $771.0 million total available floorplan lines of credit as of July 31, 2021, compared to $161.8 million outstanding floorplan payables as of January 31, 2021.

In the first six months of fiscal 2022, net cash provided by operating activities was $28.6 million, compared to net cash provided by operating activities of $13.0 million in the first six 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 used for operating activities was $19.0 million in the first six months of fiscal 2022, compared to adjusted net cash provided by operating activities of $16.1 million in the first six months of fiscal 2021.

Mr. Meyer concluded, "The current environment is providing us the opportunity to showcase the improvements we've made to our business over the past several years. Our inventory turns are continuing to trend upward and we are receiving inventory shipments that are allowing us to surpass our revenue targets. While supply chains remain tight, we are confident in our ability to drive growth through the second half of our fiscal year and, as a result, we are raising our modeling assumptions accordingly."

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 18-23% Up 15-20%
Construction(2)Up 2-7% Up 2-7%
InternationalUp 27-32% Up 17-22%
    
Diluted EPS(3)$2.00 - $2.20 $1.65 - $1.85
    
(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 approximately 10-15%.
(3) Includes expenses related to ERP implementation.


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) 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, September 9, 2021, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13722439.

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, impairment charges, Ukraine remeasurement gains/losses and charges associated with our Enterprise Resource Planning (ERP) system transition during 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.com
Managing Partner
646-277-1254


TITAN MACHINERY INC.
Consolidated Condensed Balance Sheets
(in thousands, except per share data)
(Unaudited)
    
 July 31, 2021 January 31, 2021
Assets   
Current Assets   
Cash$65,584  $78,990 
Receivables, net of allowance for expected credit losses82,068  69,109 
Inventories427,109  418,458 
Prepaid expenses and other20,684  13,677 
Total current assets595,445  580,234 
Noncurrent Assets   
Property and equipment, net of accumulated depreciation162,657  147,165 
Operating lease assets66,934  74,445 
Deferred income taxes5,265  3,637 
Goodwill1,433  1,433 
Intangible assets, net of accumulated amortization6,558  7,785 
Other1,079  1,090 
Total noncurrent assets243,926  235,555 
Total Assets$839,371  $815,789 
    
Liabilities and Stockholders' Equity   
Current Liabilities   
Accounts payable$20,649  $20,045 
Floorplan payable185,549  161,835 
Current maturities of long-term debt5,455  4,591 
Current operating lease liabilities10,755  11,772 
Deferred revenue37,977  59,418 
Accrued expenses and other47,751  48,791 
Income taxes payable2,335  11,048 
Total current liabilities310,471  317,500 
Long-Term Liabilities   
Long-term debt, less current maturities63,624  44,906 
Operating lease liabilities66,678  73,567 
Other long-term liabilities6,746  8,535 
Total long-term liabilities137,048  127,008 
Stockholders' Equity   
Common stock   
Additional paid-in-capital253,129  252,913 
Retained earnings138,665  116,869 
Accumulated other comprehensive income58  1,499 
Total stockholders' equity391,852  371,281 
Total Liabilities and Stockholders' Equity$839,371  $815,789 



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,
 2021 2020 2021 2020
Revenue       
Equipment$272,733  $202,654  $548,713  $421,159 
Parts65,317  61,454  127,942  118,068 
Service29,676  27,986  57,379  53,586 
Rental and other9,904  11,371  16,300  20,860 
Total Revenue377,630  303,465  750,334  613,673 
Cost of Revenue       
Equipment240,332  180,231  484,008  377,278 
Parts46,089  43,032  90,529  82,649 
Service9,771  9,665  19,065  18,010 
Rental and other6,420  7,849  10,737  14,636 
Total Cost of Revenue302,612  240,777  604,339  492,573 
Gross Profit75,018  62,688  145,995  121,100 
Operating Expenses57,074  53,079  113,516  106,137 
Impairment of Intangible and Long-Lived Assets1,498    1,498  216 
Income from Operations16,446  9,609  30,981  14,747 
Other Income (Expense)       
Interest and other income654  562  1,320  692 
Floorplan interest expense(350) (901) (768) (2,054)
Other interest expense(1,118) (978) (2,222) (1,944)
Income Before Income Taxes15,632  8,292  29,311  11,441 
Provision for Income Taxes4,383  1,892  7,515  2,779 
Net Income11,249  6,400  21,796  8,662 
        
Diluted Earnings per Share$0.50  $0.28  $0.97  $0.39 
Diluted Weighted Average Common Shares22,276  22,119  22,220  22,068 



TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
    
 Six Months Ended July 31,
 2021 2020
Operating Activities   
Net income$21,796  $8,662 
Adjustments to reconcile net income to net cash provided by operating activities   
Depreciation and amortization10,602  11,286 
Impairment1,498  216 
Other, net4,893  5,661 
Changes in assets and liabilities   
Inventories(17,166) 31,885 
Manufacturer floorplan payable56,436  (26,726)
Other working capital(49,498) (17,949)
Net Cash Provided by Operating Activities28,561  13,035 
Investing Activities   
Property and equipment purchases(19,834) (10,473)
Proceeds from sale of property and equipment420  489 
Acquisition consideration, net of cash acquired  (6,790)
Other, net12  (20)
Net Cash Used for Investing Activities(19,402) (16,794)
Financing Activities   
Net change in non-manufacturer floorplan payable(22,731) 7,229 
Net proceeds from (payments on) long-term debt and finance leases1,334  (1,840)
Other, net(976) (870)
Net Cash Provided by (Used for) Financing Activities(22,373) 4,519 
Effect of Exchange Rate Changes on Cash(192) 3 
Net Change in Cash(13,406) 763 
Cash at Beginning of Period78,990  43,721 
Cash at End of Period$65,584  $44,484 



TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
    
 Three Months Ended July 31, Six Months Ended July 31,
 2021 2020 % Change 2021 2020 % Change
Revenue           
Agriculture$219,364  $169,072  29.8 % $448,915  $362,700  23.8%
Construction80,943  77,719  4.1 % 149,550  137,833  8.5%
International77,323  56,674  36.4 % 151,869  113,140  34.2%
Total$377,630  $303,465  24.4 % $750,334  $613,673  22.3%
            
Income (Loss) Before Income Taxes           
Agriculture$12,067  $6,752  78.7 % $23,292  $12,914  80.4%
Construction2,815  1,375  104.7 % 2,953  (1,498) n/m
International430  (432) n/m 3,238  (711) n/m
Segment income before income taxes15,312  7,695  99.0 % 29,483  10,705  n/m
Shared Resources320  597  (46.4)% (172) 736  n/m
Total$15,632  $8,292  88.5 % $29,311  $11,441  n/m



TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands, except per share data)
(Unaudited)
         
  Three Months Ended July 31, Six Months Ended July 31,
  2021 2020 2021 2020
Adjusted Net Income        
Net Income $11,249  $6,400  $21,796  $8,662 
Adjustments        
ERP transition costs   763    1,484 
Impairment charges 1,498    1,498  216 
Ukraine remeasurement (gain) / loss (53) (130) (183) 635 
Total Pre-Tax Adjustments 1,445  633  1,315  2,335 
Less: Tax Effect of Adjustments (1)   466    1,047 
Plus: Income Tax Valuation Allowance 278    278   
Total Adjustments 1,723  167  1,593  1,288 
Adjusted Net Income $12,972  $6,567  $23,389  $9,950 
         
Adjusted Diluted EPS        
Diluted EPS $0.50  $0.28  $0.97  $0.39 
Adjustments (2)        
ERP transition costs   0.03    0.07 
Impairment charges 0.07    0.07  0.01 
Ukraine remeasurement (gain) / loss (0.01)   (0.01) 0.02 
Total Pre-Tax Adjustments 0.06  0.03  0.06  0.10 
Less: Tax Effect of Adjustments (1)   0.02    0.05 
Plus: Income Tax Valuation Allowance 0.01    0.01   
Total Adjustments 0.07  0.01  0.07  0.05 
Adjusted Diluted EPS $0.57  $0.29  $1.04  $0.44 
         
Adjusted Income Before Income Taxes        
Income Before Income Taxes $15,632  $8,292  $29,311  $11,440 
Adjustments        
ERP transition costs   763    1,484 
Impairment charges 1,498    1,498  216 
Ukraine remeasurement (gain) / loss (53) (130) (183) 635 
Total Adjustments 1,445  633  1,315  2,335 
Adjusted Income Before Income Taxes $17,077  $8,925  $30,626  $13,775 
         
Adjusted Loss Before Income Taxes - Construction        
Income (Loss) Before Income Taxes $2,815  $1,375  $2,953  $(1,498)
Impairment charges       216 
Adjusted Income (Loss) Before Income Taxes $2,815  $1,375  $2,953  $(1,282)
         
Adjusted Income Before Income Taxes - International        
Income (Loss) Before Income Taxes $430  $(432) $3,238  $(711)
Adjustments        
Impairment charges 1,498    1,498   
Ukraine remeasurement (gain) / loss (53) (130) (183) 635 
Total Adjustments 1,445  (130) 1,315  635 
Adjusted Income (Loss) Before Income Taxes $1,875  $(562) $4,553  $(76)
         
         
Adjusted EBITDA        
Net Income $11,249  $6,400  $21,796  $8,662 
Adjustments        
Interest expense, net of interest income 1,049  938  2,100  1,792 
Provision for income taxes 4,383  1,892  7,515  2,779 
Depreciation and amortization 5,395  5,911  10,602  11,286 
EBITDA 22,076  15,141  42,013  24,519 
Adjustments        
ERP transition costs   763    1,484 
Impairment charges 1,498    1,498  216 
Ukraine remeasurement (gain) / loss (53) (130) (183) 635 
Total Adjustments 1,445  633  1,315  2,335 
Adjusted EBITDA $23,521  $15,774  $43,328  $26,854 
         
Adjusted Net Cash Provided by (Used for) Operating Activities        
Net Cash Provided by Operating Activities     $28,561  $13,035 
Net Change in Non-Manufacturer Floorplan Payable     (22,731) 7,229 
Adjustment for Constant Equity in Inventory     (24,842) (4,191)
Adjusted Net Cash Provided by (Used for) Operating Activities     $(19,012) $16,073 
         
(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 July 31, 2020 and $0.6 million for the six months ended July 31, 2020.  
(2) Adjustments are net of amounts allocated to participating securities where applicable.    


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