Q4 2020 Earnings Call
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Greetings welcome to take in machinery first quarter fiscal 2021 earnings call.
This time, all participants are the listen only mode. A question and answers that Jim will follow the formal presentation. If any unless you acquire operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
I'll now turn the conference over to John Mills, but I see our thank you may begin.
Great. Thank you good morning, ladies and gentlemen, and welcome to the Titan machinery first quarter fiscal 2021 earnings conference call on the call today from a company or David Meyer, Chairman and Chief Executive Officer, and Mark Kalvoda Chief Financial Officer.
By now everyone should have access to the earnings release for the fiscal first quarter ended April Thirtyth 2020, which went out this morning at approximately 645 am eastern time.
If you've not received the release it is available in the Investor Relations page tightens website at <unk>, our dot Titan machinery Dot com.
This call is being webcast a replay will be available on the company's website as well.
In addition, we're providing a presentation to accompany today's prepared remarks, you may access the presentation now by going to tightens website at <unk> IR Dot Titan machinery Dot com. The presentation is available directly below the webcast information in the middle of the page.
You'll see on slide two of the presentation are safe Harbor statement.
You would like to remind everyone that appeared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed a cargo.
These forward looking statements are based upon current expectations of management and involve inherent risks and uncertainties, including those identified the risk factor section tightens. Most recently filed annual report on form 10-K.
These risk factors contained a more detailed discussion at the factors that could cause actual results to differ materially from those projected in any forward looking statements.
Except as may be required by applicable law tighten assumes no obligation to update any forward looking statements that may be made in today's release or call. Please note that during today's call will discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transfer.
Guarantee in the tightens ongoing financial performance, particularly when comparing underlying results from period to period.
We've included a reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure in today's release.
The call will last approximately 45 minutes at the conclusion of our prepared remarks, we will open the call to take your questions now I'd like to introduce the company's chairman and CEO Mr., David Meyer go ahead David.
Thank you John good morning, everyone.
Welcome to our first quarter fiscal 2021 earnings conference call.
Today's call her provides a summary of our results than an overview for each of our business segments.
Mark will then review financial results for the first quarter of fiscal 2021.
Turning to slide three you will see an overview of our first quarter financial result.
Our first quarter revenue was $310 million, which was a 32 million dollar improvement over the prior year period.
Adjusted pre tax income increased 4.2 million to $4.9 million, resulting in adjusted earnings per diluted diluted share of 15 cents.
Pro forma segment overview I want to address a few high level comments related to covert 19.
As a shirt on our Q4 earnings call in March.
Took the early covert 19 guidance potential risks the most important the safety of employees and customers very seriously and we're very active and employee a customer messaging.
Occasion, and putting the CDC recommended safety procedures in place.
Fortunately our employees stepped up state healthy.
And we were able to support our customers through the important busy spring planting a construction season.
As a result, we're able to deliver auto solid quarter, especially where their domestic acre equipment visit.
We were on a critical in a central industry.
As we support our farmers ranchers and contractors, who build impede the world.
With that said, we have kept our employees volume.
Fully employed.
Coal is our new banks and the good credit facility.
Placed our company not an excellent liquidity and financial position.
I'll now provide additional detail for our three operating segments, consisting of our domestic agriculture construction segments and our international segment.
On slide four is an overview of our domestic agriculture segment.
With the late 2019 harvest standing corn going into winter, a cautious farmer sentiment due to the uncertainties with unharvested crops on commodity prices. We believe some of the new one use Q4 equipment business would have taken place a normal weather year moved into our fiscal 21.
First quarter.
This also supported our parts and service business. There's no only was corn bean combined in February and March but much of the equipment faced tough duty cycle through the late in the wet harvest recording service and maintenance prior to this year as farming season.
In addition, the fleets continue the age we quite an additional progresso servers on repairs.
Work will get into more detail on the double digit increase of our domestic egg parts and service revenues.
As this fixed cost absorption the only provides installation and these down cycles, but as fewer a long term strategy.
As noted on the slide crops in our southern a footprint are in really good shape because of an ideal spring planting a growing conditions.
No no other than the end of our footprint, there's still some of last year's corn still standing in North Dakota, along with what fields cousins delayed planting or in some cases farmers elect to receive a preventable planet payment as part of the multi peril crop insurance program and situations in which allowed us to west to farm. This spring.
The biggest concern weighing on our farmer sentiment is a depressed commodity prices.
According to the May 12, U.S.T.A. WASDE report, both corn and soybean acres and yields are forecast to increase putting downward pressure on season the average prices.
WASDE as forecasted a year over year decrease so 40 cents on corn at 30 cents on soybeans.
These are reductions from already oil prices.
Corn prices could be additionally, challenged by a strong dollar and the impact from significantly lower ethanol production.
Approximately 40% of the U.S. corn production goes into ethanol production.
Well the closing of schools in restaurants, the price of milk is down.
Livestock producers have concerns with the lower prices due to the corporate 19 disruptions with slaughterhouses and meet the man channels.
On a positive note.
We see and also the 16 billion dollar U.S.D.A. grown a virus food assistance for grab CFA P. Providing direct payments are farmers and ranchers for drop in prices of commodity is a livestock do the krona virus.
In addition, farmers are also experience and benefiting from lower fuel and propane costs, a low interest rate environment.
And participation in the PPP program of the carriers Act.
Well the impact on commodity prices from phase one of the U.S. trying to trade agreement may not be realized until calendar year 2020 harvest the signing of U.S.M.C.A. trade agreement is viewed as a positive for our customers.
Replacement the man of precision technology are creating demand for new and late model equipment as we see the continued trends have improved yields and data driven solutions.
We closed on the acquisition of the Horizon was three store case age complex in the beginning of May and we believe we'll have additional domestic egg acquisition opportunities as the year progresses.
Turning to slide five you'll see an overview of our domestic construction segment.
What's the stronger economy in February the first one through our quarter or construction equipment business had a solid start only be tempered by the economic impact of corporate 19, and extreme decline in oil prices.
Even though we are essential industry and our contractor customers are experiencing a lower interest rate environment Durbin some disruptions from covert 19 business closings and stayed shutdowns.
We continue to experience some level of construction activity as we stayed focused on the aftermarket parts and service business along with rental.
We believe that our recent operational improvements position as well as will be profitable in the construction equipment business when the industry returns to normal.
On slide six.
We have an overview of our international segments, including our markets within the countries are Bulgaria, Germany, Romania, Serbia and Ukraine.
Similar to our experience with the C segment, our international segments started the year very strong with some pullback as the countries. We do business in reacted to the covered 19 pandemic.
Water storage in Europe were deemed essential business has been impacted by border shutdowns timing of equipment shipments and in country regulations.
Farmers continue to plantar crops created demand for parts and service.
There are pockets of very dry conditions in the Balkans, Ukraine Black sea regions. The reports or when are we done right crops being destroyed or build for feed in Romania, due to the excess heat and lack of moisture.
We have the fundamentals in place to be successful and profitable in these developing countries. We will continue to focus on the parts and service business and manage our new and used an imminent equipment inventories as we support our end user customers for the challenges with dry weather and depressed commodity prices.
Before I turn the call Mark I want to take all our employees for their efforts and staying safe and supporting our customers. During this very challenging covered 19 crisis at the same tie in producing some excellent financial results.
I wish all our employees customers and suppliers all with their families. All the best as we come out the back side of the covert 19 pandemic.
Now, let's turn the call word a mark to review our financial results in more detail.
Thanks, David.
Turning to slide seven.
We generated total revenue of $310.2 million for the fiscal 2021 first quarter.
Which was an increase of 11.5 per cent compared to last year.
Our parts and service business continued to generate solid results in the first quarter, increasing 9% and 12.1% respectively.
Agriculture.
Segment led the way with another quarter, a double digit growth compared to the prior year quarter.
Our focus in this area continues to be complemented by an aging customer fleet and the addition of the Northwood location also added to the year over year results.
International parts and service also performed well, but was offset by the softness we are seeing in our construction segment as a result of the pandemic.
However, the upside for the quarter was largely driven by our equipment business, which increased 12.7% versus prior year.
Equipment growth.
Was driven by our agriculture segment.
Where we believed delayed fourth quarter sales were realized in the first quarter as farmers were late harvesting last year's crop.
In addition, we aggressively moved some used agriculture equipment during the quarter.
Rental and other revenue was essentially flat versus prior year.
The dollar utilization of our construction.
Segment.
Rental fleet declined 160 basis points to 18.9% for the current quarter.
Compared to 20.5% in the same period last year.
The lower utilization was the result of the weaker end market conditions in oil and construction David spoke to earlier.
On slide eight.
Our gross profit for the quarter increased 8.4% to $58.4 million due to the increased sales.
The decrease in gross profit margin was partially due to revenue mix in two ways.
First equipment revenues made up a larger portion of overall revenues relative to the higher margin parts and service business and second are totally equipment sales mix was more weighted to agriculture, which generally experiences lower equipment margins than equipment sold and.
Our construction and international segments.
Finally, our AG used equipment margins also decreased over the prior year as we accelerated efforts to sell this inventory.
Our operating expenses were nearly flat versus prior year.
Increasing by $500000 to $53.1 million for the first quarter of fiscal 2021.
Our operating expenses as a percentage of revenue decrease from 18.9% in the first quarter last year to 17.1% in the first quarter fiscal 2021.
Despite the additional year over year costs associated with our new North which store expense growth was limited due to specific expense control efforts, such as overall salary and overtime reductions as well as co Ed impacted Eric expense areas, such as fuel and travel expense.
Yes.
This expense control combined with higher revenues resulted in much improved operating expense leverage.
Floorplan and other interest expense decreased 15.9% to $2.1 million in the first quarter fiscal 2021.
Compared to $2.5 million in the same quarter last year.
The decrease was due to lower interest expense, resulting from the May 2019 retirement of the remaining balance of the company's convertible notes.
In the first quarter fiscal 2021.
We realized a 2.9 million dollar increase in our adjusted net income to $3.4 million.
This adjusted figure for first quarter fiscal 2021 excludes $1.1 million of adjustments net of taxes.
Related to ERP transition costs impairment charges, and Ukraine, remeasurement costs, resulting from the recent devaluation of this currency to the U.S. dollar.
This compares to the prior year, where we excluded $900000 of similar adjustments net of taxes.
Our adjusted earnings per diluted share for the quarter was 15 cents compared to two cents in the first quarter of last year.
For the first quarter fiscal 2021, adjusted EBITDA increased 76.1% to $11.1 million compared to $6.3 million in the first quarter of last year.
You can find a reconciliation of adjusted net income adjusted income per diluted share and adjusted EBITDA to.
To their most comparable GAAP amounts and that appendix to this slide presentation.
On slide nine you will see an overview of our segment results for the first quarter of fiscal year 2021.
Our agriculture segment drove solid overall top and bottom line results in the first quarter.
We do not feel the effects of the pandemic are fully reflected in these results.
More on this and future expectations in a few minutes.
Our agriculture segment had a strong quarter with total sales, increasing 25.9% to $193.6 million driven by strength in equipment sales and supported by ongoing momentum in parts and service revenue.
The significant sales growth coupled with moderate increases in operating expenses created significant significant operating leverage at the segment level.
For the quarter adjusted pre tax income increased to $6.2 million compared to $1.9 million in the prior year period.
Turning to our construction segment.
Revenue decreased 15% to $60.1 million compared to the prior year period.
The decrease in revenue was primarily the result of lower equipment demand due to macroeconomic challenges and uncertainty.
Which also impacted parts service and rental to a lesser extent.
The segment's adjusted pre tax loss widened by $600000 to $2.7 million in the first quarter despite reductions in operating expenses.
In the first quarter of fiscal 2021.
Our international segment revenue increased 5% to $56.5 million.
However, strong early first quarter results have been largely offset by late quarter weakness.
Which we are seeing continue into our second quarter.
Nonetheless equipment parts and service revenues were all up compared to the prior year first quarter and drove a 300000 dollar increase and adjusted pre tax income.
On slide 10, we provide an overview of our balance sheet highlights at the end of the first quarter fiscal 2021.
We had cash of $50.8 million as of April 32020.
Our equipment inventory at the end of the first quarter was $501 million a decrease of $15 million from January 31, 2020, reflecting a $12 million decrease in newly equipment and a $3 million decrease in used equipment.
Equipment inventory turns were 1.6 versus 1.8 in the prior year period I.
I will provide a little more color on our inventory on the next slide.
Our rental fleet assets at the end of the first quarter increased slightly to $104.9 million compared to $104.1 million at the end of fiscal 2020.
We still anticipate our fleet size will decrease to about $100 million by the end of fiscal 2021.
As of April 32020, we had $378.3 million.
Outstanding Floorplan payables on $762 million of total floorplan lines of credit.
On April Threerd 2020, the company entered into a new five year amended and restated credit agreement maturing April 2025.
Replacing the previous credit facility scheduled to expire in October 2020.
The new the new facility provides for an aggregate $250 million financing commitment by the lenders.
Consisting of floor plan capacity of $185 million and working capital financing capacity of $65 million.
Floorplan facility features improved flexibility with higher advance rates on new and used inventory.
And the working capital facility provides for a greater breadth of add assets that can be utilized in the borrowing base as such as vehicles and real estate. In addition to higher advance rates compared to the prior facility.
The amended and restated credit agreement does not obligate the company to maintain financial covenants, except in certain circumstances with terms that are similar to those in the previous credit facility.
The interest rate for borrowings under the credit facility will be equal to LIBOR plus in applicable margin based on the company's liquidity position.
Overall, our borrowing costs under this facility should decrease by at least 50 basis points upgraded compared to the prior facility.
Our total liabilities to tangible net worth ratio is a healthy 1.9 compared to 2.1 in the prior year period.
As of the first quarter, we are now back to an apples to apples comparison, given the effects on the ratio from the adoption of the new lease accounting standard that went into effect on February one 2019.
Importantly, the ratio is well below 3.5, which is the leverage covenant required for our most restrictive bank facility.
Turning to slide 11.
The amount of new and used equipment inventories are reflected in the size of the red and blue bars on this slide.
We're pleased to finish the first quarter, the $15 million reduction in inventory versus fiscal year end levels, which demonstrates early progress in our plan to drive inventory turns higher in fiscal 2021 through prudent inventory management.
Historically, we have increased our new equipment inventory levels in the first quarter, which can be seen in the prior year.
Solid equipment sales and lower procurement levels of new equipment allowed us to decrease our inventories and slightly increase our turns to 1.6 from 1.5 for the Rolling four quarters ended April 32020, and January 31 2020.
The overall quality of our inventory remains healthy with 40.3% of our inventory under non interest bearing terms, which can be seen by the grey bar on the slide.
This is a good percentage, but is below the prior year comparable quarter percentage of 47.4% as we had a lot of new inventory stocking in that quarter, which carried new noninterest bearing terms.
Slide 12 provides an overview of our cash flows from operating activities for the first three months of fiscal 2021.
The GAAP reported cash flow use for finance for operating activities for the period was $5.4 million compared to cash provided by operating activities of $2.9 million in the first quarter last year.
As part of our adjusted cash flow provided by operating activities. We include all our equipment inventory financing, including non manufacturer floorplan activity and adjust our cash flow to reflect a constant equity in our equipment inventory.
Allowing us to evaluate cash flows exclusive of changes in equipment inventory financing decisions.
After applying these adjustments.
Our adjusted cash used for operating activities was $3.6 million for the three month period ended April 32020.
Compared to $37.4 million for the same period last year.
The much lower use of cash in the first quarter versus prior year was due to the substantially lower equipment stocking I referred to on the previous slide combined with the stronger bottom line results.
Consistent with our practice, thus far in fiscal 2021, we're not providing modeling assumptions due to the continued uncertainty in our business as a result of the covert 19 outbreak.
That said I'll provide some updated color on a few noteworthy items for you to consider as you look at our business for the balance of fiscal year 2021.
As you May recall in mid March we began restricting.
Customer access to our stores a mid covert 19 concerns.
As of a couple of weeks ago, we began allowing customers back in our facilities with safety protocols in place.
We felt very good about the uninterrupted service levels provided to our customers during that time.
Regarding our agriculture segment for the remainder of fiscal 2021, we do not believe our solid first quarter results are a good proxy for the rest of the year.
As I mentioned earlier, we believe our first quarter equipment results were lifted by some delayed customer purchases and some aggressiveness on it on our part to in selling used equipment.
Our first quarter results far exceeded total us industry retail sales, which is down year to date through April.
Overall cobot 19 has created industry challenges and uncertainties in areas, such as ethanol livestock and international trade, which we believe will put pressure on equipment sales and push them lower than the prior year.
It is difficult to know the extent, however, given all the variables and uncertainties.
We still feel good about the potential parts and service opportunities for the year, but will likely not be able to sustain the growth we achieved in our first quarter.
May results are already showing parts and service well off the pace realized in the first quarter.
Additionally, please remember to account for a full year contribution from our recently acquired Northwood North Dakota location, which closed on October one 2019.
As well as horizon West acquisition that closed on May four 2020.
Both of these acquisitions both of these businesses had revenues of approximately $25 million in their most recently completed full fiscal year.
Within our construction segment.
We expect continued headwinds to persist, but the magnitude and duration are difficult to predict given the overlap we have with the energy markets.
All revenue categories were impacted in this segment and we expect this to continue while macroeconomic stress and uncertainties persist.
Keep in mind, the first quarter was only partially impacted as covert related shutdown started occurring in mid March.
We expect to continue to achieve some offset to the lower revenues through reduced expenses.
Additionally, as we referenced during our fourth quarter call. Please consider the January 2020 divestiture of our Albuquerque, New Mexico store, which generated approximately $8.5 million of revenue in fiscal 2020.
With regards to our international segment, we witnessed the good start in the first two months of our first quarter and then experienced deterioration in April results.
April revenues were 20%, 25% below the prior year.
We're also seeing parts and service being impacted in these markets in current months.
As David mentioned earlier in addition to the covert 19 challenges and uncertainties our European customers are currently facing difficult growing conditions.
We believe these factors will weigh on future quarters.
Expense controls will help mitigate pressured revenues, but this segment has less than the way of variable expenses, such as our domestic equipment commissions and overtime, which are not as prevalent in Europe.
This concludes our prepared comments operator, we're now ready for the question and answer session of our call.
Thank you.
I'd like to ask your question. Please press star one and your telephone keypad.
Ladies and gentlemen indicate your line is in the queue. You May press star to if he would like to remove your question from thank you.
Did you see speaker equipment and may be necessary to pick up your handset before pressing the star. He's our first question is from Steve Dyer with Craig Hallum. Please proceed.
Thanks, Good morning, guys I hope you're well.
Just as it relates to the first quarter it sounds like within AG there was some.
I guess, some some things moving around that's maybe not indicative of the rest of the year how much of the strength you feel like was just sort of.
Crop still standing in a push from Q4 versus.
The government programs or somebody's other things just trying to get some sense as to the.
What drove home what strength in the quarter.
Well.
I think it was it a little of law that all our combined Steve neutral.
I would say that there was about 40% of that corn still standing and at the end of the year and especially in North Dakota.
So there is definitely the delay there that fourth trying to the that market facilitation program, the 25% that was those actually bottom.
Started going out in February, but also I think that that help a little bit sole but a lot of our growers in almost all the uncertainties at the end of year in some of the normal.
Equipment purchases just didnt happen, but then they took place in the into the first quarter.
Got it Okay, and then since you reopened some of the stores and things like that.
Have you noticed any change sort of in behavior I mean, it sounds like on the whole, it's softer than the first quarter, but the first quarter only really probably half a quarter of cobot impact what have you seen some of the storage of reopened the customers.
Well most of our customers that another busy trying to get their crops and right now and the contractors are busy on the job sites sold theres, a little less floor traffic, but.
I think overall with all our employees you know there's definitely a safety concern you are all of those are the ones in Seoul.
They are being pretty careful night, we let our stores opened up each markets a little bit different so we kind of let them.
To make the decision when there were going to open up but but I know what are the system.
People are being careful people being safety I would probably be smarter, but what they do in and like I say this time of year, probably less less customer traffic because they all are all three are trending to their work done, but it's going to start moving back towards the normalization mold, what I'd say a little bit of Tentativeness comes in the sense of caution.
Got it and then I guess just given the challenges that you guys are seeing what most people are seeing here going forward does that change your thinking.
M&A strategy does that make.
Some of these dealer more apt to sell in sort of what's your view on how aggressive you want to be there that's it for me. Thanks.
Yeah, I'd say, even before the Golden 19, Steve you can see we were we were starting to be pretty active with the nor the northwood.
In the rise in west happened before the call with 19.
So so there was already has a motivated sellers.
So I see that going to continue this this might even ex accelerate the at some point.
So does from your perspective view you remain very interested in active buyers kind of through that suits that that remains the same.
Yes, definitely as you all especially I think we like gum.
Upper Midwest K sites good quality.
So successful accretive type acquisitions, and Theres, a normal those potential candidates out there.
Primarily on the AG side.
Proprietary up rather than the eggs cited the keysight trait.
Okay. Thank you.
Our next question is from me Gilbert with Baird. Please proceed.
Yes. Good morning, Thank you.
So I guess my question.
I'm trying to I'm trying to understand how you're thinking about the business your core AG business in North America on a go forward basis.
I recognize that you're not providing guidance, but at the same time your youre quite clear about Q1 trend not not being sustainable for the rest of the year.
Can you.
Maybe give us a little bit of context in terms of how demand trended in April may be similar to what you you talked about in your international segment.
And I'm curious as to what you're seeing in the month of May.
That that informs our framed your view for for the rest of the year.
So so maybe if you look at you know if you look at.
April industry numbers holds calm winds down 10% forward drives down 7% so from an industry standpoint.
April continued down and I think.
You are aware I, there is a direct relation between commodity prices and industry retail levels sole. So those are these commodities stay on these depressed levels and if what the us the a seasonal wiser reports drew is really going to drop another 30 40 cents.
It all of that average selling prices alert year Progressive general.
Lets can be difficult for these these customer true to pull the plug on all these five six $700000.
Horsepower equipment purchases. So so we are a little bit tentative and I think we really need is going to be a function of the commodity prices and and our end market farmer customers ability to cash solar operations and still I'm acquire this equipment not know the office offset to that you know as replacement demand and they start looking that they.
Can be making payments when this low interest rate environment on a on a new tractor combine rather than you know that 50 60 $70000 repair Bill you don't have that could more weight them and their bankers to to make those equipment purchase. So so I think you're going to see industry levels. It all in at Dawn at these lower comps at these lower ended the.
Spectrum, but there will be some amount of business, but it's going to be that lessees commodity prices a little bit better.
It's going to build a difficult.
If you remember a year ago over going to look year over year industry comps no. There was a good spike in commodity prices towards the end of June in early July were where corn at the elevator got up or $4 and.
In soybeans up over that nine dollar mark in a lot of the Gore's your old sold their.
Carryover stocks a contracted the 2019 crop way iron ore, even so guys contract and some of this year's crop during that time period you all.
We may not see that this year selected so when you look or year over year are you I think thats why were just a little cautious in and what we think those industry numbers going to be going ahead.
Well I appreciate that.
Although macro relationships that you you discussed I mean, I think we all understand that what I'm, what I'm trying to understand is what you're actually seeing in your business.
Today right correct throughout the month of May.
Is there is there a way to frame that maybe put differently.
Is our euro forward expectations simply based on your view of commodity prices in future behavior or have you actually started to see some softness in may.
That leads to this more cautious outlook.
Yes.
Mig Mark here so.
And you kind of asked about April and how April trend in April still looked good from AG April is a very critical month for our AG business.
Our February and March is not as.
As.
As.
Hi of the expectation month April came through and look good.
Some of our cautious tone is what we're seeing in May there was a definite.
Difference in the amount of like parts and service coming through in May some of that and we're still.
Like sorting out Theres, a definite difference in the timing of the planting that's going on in our footprint.
Between the north and south and sorting through some of that so.
We'll see how that goes but definitely there is a.
A difference in the trend on the parts and service in AG and then equipment sales it's difficult to say at this point I think up to this point its.
There hasn't been as much activity is certainly what we saw last month.
But there are few days left in the month and as you know when this business the last.
We have.
Of the month tends.
To grab the largest percentage of the of the equipment revenue for the month. So there is.
There are there is a different noticing of a difference that we're seeing here between the months of April and May.
Okay.
You also talked about.
Used equipment.
Haven't been more aggressive in maybe getting getting rid of some of this.
Equipment through the quarter can you maybe help us understand.
How the magnitude of what you've done in the quarter was maybe different than than the normal or or maybe what you've done last year and I'm also curious in terms of.
How we used equipment prices are holding up.
Especially as you are trying to move.
More of that inventory.
I think as we moved so and this was later in the quarter as well as well, but I think just given the environment maybe some of the.
Some of the risks out there for the year. We just started prudent to get ahead of the game a little bit on some of that used.
So we did push more out there.
It's hard to.
I think overall I think we were up like 25% I think our used was up.
Similar amount, maybe even a little higher than that for the for the quarter.
To help give you the magnitude of that as far as pricing goes I think.
Outside of some of the aggressiveness that we had I think pricing remains similar to where it has had been so we did take a little bit in margin compression here to move.
Additional amounts of volume through it.
But outside of that I think overall pricing seems to be hanging in there on on the USAT frame.
That's great last question.
On international.
First I guess when I'm looking at this this segment you are up 5% revenue wise in spite of a very weak April so I'm I'm sort of surprises to the variability month to month, I mean that would that would basically imply your first couple of months being extremely strong and international.
Some kind of curious as to.
What may be drove that that outsized strength. If you have any color on that early on.
And then my my the second part of my question is really on margins here, if let's assume that down 25% is that if that trend that kinda sticks through next quarter, how should we think about your breakeven levels or or segment margins within.
That kind of volume decline contacts and that's it for me. Thank you.
Yeah, I can talk maybe a little bit about what was going on in Europe, then I'll, let mark gum answer the second part of your question here, but it also hold all these individual countries if.
In Europe, the yield we have border closings in on and we actually had shipments we couldn't get across the borders because of the boarding call universal So.
Delayed some of the things those same time digital lot of regulations within countries. There is cure for users times you could be on the street or it can be on the street.
Our employees getting to work on the getting off their customers you had to be back.
Before some said some things I ever before six o'clock I mean so.
All these things took quite a bit of a toll on or is this way to do business unit.
Instead are developing countries developing markets, probably not quite the level of maturity you always see.
Domestic United States business so.
That impacted the business in Europe.
Yes as far as how.
International May may play out and what that level of.
Reduction that I mentioned in April with that would have we wouldn't see I don't think we would see that for the whole rest of the year at least we would.
Hope it wouldn't stay.
That.
That negative as we get further along and things open up more.
Over there, but I think with those type of numbers.
For the next.
Quarter, maybe quarter and a half something like that.
And then some adjustments to expenses.
And I think I mentioned on the call as far as.
US being able to adjust those expenses naturally just through variable expenses coming down it's not as.
As easy to do that over there there as natural over there as it is over here with some of the different.
Expenses that are that are in our model over there a business model.
But overall I think with.
This level of decrease for the next quarter quarter, and a half you're probably looking at around a breakeven similar to last year.
Maybe just a little bit lower if things continue for that one.
I mean do we leave you really need to watch, though those weather situations over there or you know you're seeing pictures of big cracks in the ground in Ukraine, some of that rivers or or dawn of the lowest levels in decades, zillow some of them or even drying up bump.
No I saw pictures, Romania, where theyre, they're balan up the wheat crop for fees because or so.
It's definitely there is a huge pocket.
On the Black Sea region to Balkans.
Someone in Ukraine.
Even touched on in Germany little bit of so really really the dry conditions on.
So we need to track that too.
Absolutely.
But just to confirm Mark you think you're you're able to remain above breakeven with those kinds of but volume declines because looking at Q1, you were you know barely.
Positive from it from an income standpoint on what really was kind of a nice nice quarter.
Well, yes, so a couple of things a first of a seasonally Q1 is is more difficult Q2. In Q3 is typically where we make the money in international I think just to qualify what what Dave is talking about two if it continues at the weather continues to stay this bad over there as well it would be it will.
Definitely be difficult to be at a breakeven I think things could trend down from there but just.
Just saying I think yes, we could stay about breakeven right around breakeven if we just had on call. It the next quarter of.
Three four months of some lower levels of revenues and then it picks back up later in the year.
Okay. Thank you.
As a reminder, just a one and your telephone keypad. If he would like to ask your question. Our next question is from Larry de Maria with William Blair. Please proceed.
Hi.
Everybody.
Hi, guys.
Has there been any cancellations and what is available to you look like for your large AG products.
I guess to covert disruptions fly coming to you, but also just based on your orders and when you can accept delivery I'm, just kind of trying to seeing how far out you have visibility.
The level of cancellations.
On the I'm, sorry, the business, you'll have very minimal and the cancellation side you. All those all were completed we did a little business and probably more had to do with the decrease in oil prices that we did see a little bit on the on the on our construction side of the business some earlier.
Due to due to the oil piece now measure, where we started off the year pretty strong on on high horsepower equipment on from an inventory standpoint. So so we think are good shape and all older factories are up and going on and and we think that right now we've we've got.
On the lead times stuffed in order to meet our customer demand with our current inventory and whats coming out of the plants. We think we're in good shape.
And bill.
Equipment, and you're kind of your own internal order boards.
Dealer wants and also a customer wants to depth. We got few months from now somebody walks in or do you had that inventory have sufficient continue satisfy yeah. I'd say, we've definitely have equipment to take us into the third quarter you at all and then if we'll just right and all inventories there we've got some open slots available.
In Q4, so so I think were good shape.
Okay, that's good to hear.
Can you discuss take rates on precision AG products.
Maybe one how maybe they are trending year over year.
Well.
It seems like Theres either.
Theres a real interest in the in the customers for for equipment that some illicit technologies technically advanced equipment. It whether it's planners words tractors you know that's that's what the customers are we looking for right now so sold all the privacy and all then our aftermarket like like say for pros.
Vision planning equipment on our aftermarket you don't last year that business with double so that continues.
Like I say and all of the whether its tractors are combines planners sprayers that technically advanced equipment definitely what the what the growers are looking for right now.
And they're paying up for it maybe software.
Premium software packages and things like that.
Yes, it doesn't seem like the prices if you've got what they want and you've got all of the softer works.
The price does not seem to be quite the does the object because of with all the value added.
Two more quick one Chris.
What would the comparable tractor <unk> eight are that you are has because it seems to be pretty well adopted.
Well adopted new product for the industry.
Is that a near term risk or how do you combat.
That new products by them.
In each product.
Yeah. That's that's that's our Magnum tractor I mean thats is on track to that just really had up some great heritage legacy behind it the already high performing high horsepower row crop crackers in the new model that came out in all its called the Allfast connect made them with all the bells and whistles a conductivity the telematics so that is.
Comparable model them to the radar.
Okay, if you wouldn't expect material shift.
Okay.
And then if I could ask one last question.
We see I'm curious are you the digital tools I think to employ service if those are working out.
Doing differently to get the service given that some of that.
[music].
Ill stores.
Closer internal traffic et cetera, and what's going on now does that make you rethink your footprint it maybe less square footage.
Attributed servers.
Probably most likely business as usual I think returned to normal.
No I think you'll definitely our customers are we're using technology E commerce from where we had dropbox is you know curbside pickup where some of course salespeople were delivering part so it's all that's going to continue.
You know a lot of our growers.
Really nice shops in all in we have a lot of big field service trucks, and that's that's going to did two new but there again I think what the size equipment in some of the things we do need to do in our or service locations there are going to exist but.
You know Azure is.
Three years ago, we made some is a major footprint changes is also now we're we're servicing bigger markets and bigger territories and I think we continue to I think the industry is going to be somewhat more consolidation that it all the it's going to happen but.
I think were we learned a lot from listeners really nice that we could produce those type of all the aftermarket support for the parts and service support was some cold front doors and be will use technology and and really smart about how we did business is really good to see it we could deliver these type of results you know under the the whole coal with 19.
Okay. Thank you guys and good luck.
This does conclude question answer session I would like to turn the conference back over to David Meyer CEO for closing remarks.
Okay. Thanks, everybody for your time this morning, it or your interest and Titan machinery and look forward to updating you on our progress is our next call.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.