Q1 2023 Titan Machinery Inc Earnings Call
Hello, and welcome to the Titan machinery first quarter fiscal 'twenty 'twenty three earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this.
Competences being recorded its now my pleasure to turn the call over to your host Jeff Sonic of ICR. Thank you you may begin.
Thank you good morning, and welcome to Titan machinery first quarter fiscal 2023 earnings conference call on the call today from the company are David Meyer, Chairman and Chief Executive Officer, Mark <unk>, Chief Financial Officer, and Brian can Knudsen Chief operating officer by now everyone should have access to the earnings release.
For the fiscal first quarter ended April 32022, which went out this morning at approximately approximately 645 am eastern time.
We've not received the release, it's available on the Investor Relations page of Titans website at IR Dot Titan machinery Dot Com. This call is being webcast and replay will be available on the company's website as well. In addition, we are providing a presentation to accompany today's prepared remarks you.
You may access the presentation now by going to Titans website, IR dot tightened 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, our safe Harbor statement.
We would like to remind everyone that the prepared 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 upon them.
These forward looking statements are based on current expectations of management and involved inherent risks and uncertainties, including those identified in the risk factors section of Titans. Most recently filed annual report on Form 10-K, as offset as updated and subsequently filed quarterly reports on Form 10-Q.
These risk factors contained a more detailed discussion of 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 Titan assumes no obligation to update any forward looking statements.
May be made in today's release or call. Please note that during today's call, we'll 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 transparency into Titans ongoing financial performance, particularly when comparing.
Underlying results from period to period.
Included 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'll open the call to take your questions now I'd like to introduce the company's chairman and CEO , Mr. David Meyer David go ahead.
Thank you Jeff Good morning, everyone welcome to our first quarter fiscal 'twenty 'twenty three earnings conference call on today's call I'll provide a summary of our results and then Brian can Olson, our chief operating officer.
Given overview for each of our business segments.
Mark <unk>, our CFO will then review financial results for the first quarter of fiscal 'twenty to 'twenty, three and provide an update or for your modeling assumptions.
If you turn to slide three you'll see an overview of our first quarter financial results.
Our momentum continued in the first fiscal first quarter 2023, with strong operating leverage across each of our segments.
Combined for a 24% increase in revenue to $461 million and a 66% increase in earnings per share to 78 cents.
At the segment level, our agriculture segment benefited from robust demand, which was supported by an increase in equipment deliveries from our suppliers.
Following a delay in fiscal fourth quarter 'twenty to 'twenty two.
Our construction segment continued to demonstrate improved levels of pre tax profitability as we achieve operating improvements across our optimized footprint.
Well revenue growth on the international segment was negatively affected by the conflict in Ukraine.
The impact on our operations as last time, we originally anticipated.
We're supporting our Ukrainian customers farming activities with equipment.
Arts and service to the extent possible.
The resolve of our customers our employees has been nothing short of inspiring.
More broadly our business across the European footprint proved to be resilient to the conflicts indirect effects.
And we were able to generate an improvement in pretax income margins. Despite a slight decrease in revenue.
In terms of M&A on the domestic front, we remain active with our pipeline of potential acquisition candidates as we seek to grow our business through quality acquisitions. In addition to our continuous focus on same store organic growth you.
You saw this most recently with the closing of our acquisition of the March machinery in April, which followed our acquisition of a J Cox implement in December 2020 one.
We're very pleased with our full integration immediate accretion and valuable contributions to the Titan machinery team and store footprint.
We remain positive on the broader environment. Despite some of the recent market turbulence.
As a result, we have increased.
Our modeling assumptions, which mark will talk through with it in greater detail. We continue to expect our exceptional fiscal 'twenty to 'twenty three at Titan machinery.
Now I'll turn the call over to Brian can loosen.
Yeah.
Thank you David.
Good morning, and good afternoon, everyone.
I'll first provide an update on our domestic agriculture segment, and then follow with some additional color on our construction and international business segments.
On slide four is an overview of our domestic agriculture segment <unk>.
Demand for new and used equipment is in the highest we've seen in decades supported by ongoing momentum in commodity prices, which remain at high levels through our first quarter.
While it's been of late and wet spring there has been good planting progress in our markets in Iowa, Nebraska, Southern Minnesota, and Southern South Dakota.
Recent rainfalls had been very welcome in the dry or Western Dakota, and Nebraska territories, and we expect planting to get into full swing as fields finally, dry out and our North Dakota, and northern Minnesota footprint.
Our farm and ranch customers are seeing cost increases in farm inputs, such as fuel fertilizer seed and crop protection products.
In spite of this Ah recently published University of Illinois updated 2022 crop budgets report, which factored in recent crop inflation estimated that per acre profits for 2022 will be well above the 2011 peak.
This report illustrates our current net farm income levels will support continued machinery investment.
Again, this is attributable to exceptionally strong commodity prices and to some extent steadily improving yields over the past decade.
With the equipment supply challenges, we continue to focus on pre sells and procuring new equipment from our Oems.
Our parts and service customer support businesses continue to be a strong contributor to our bottom line and I'm happy to report our newly acquired J Cox and marks machinery stores were both accretive to our first quarter earnings.
This is a great time to be in the farm equipment business and we will continue to track the progress of our farmers crops as we get into the warmer summer growing months.
Turning to slide five you will see an overview of our domestic construction segment.
As we have discussed in previous calls the operating improvements we've been implementing in our construction equipment stores over the last several years are resulting in significantly improved bottom line results.
The economic backdrop of increased construction activity higher oil prices infrastructure projects and strong agricultural economics are all contributing to robust construction equipment demand, which is reflected in our 25% see same store sales increase in the first quarter.
Similar to our AG segment, we are seeing equipment supply side challenges with tight inventories and long lead times, but we are continuing to receive equipment inventory in this high demand market and as a result, we anticipate a very successful year for our domestic construction segment.
Okay.
Before we turn to our international I'll review I will provide a brief update on our ERP phase implant.
We have been successfully operating a pilot store in a newer ERP platform. Since July of 2020, we added three more stores. This last December and again two more stores in April .
Moving to slide six we have an overview of our international segment, which represents our businesses within the countries of Bulgaria, Germany, Romania and Ukraine.
Our European customers are also benefiting from the higher global commodity prices and carryover from a good 2021 crop year, which is creating strong demand for both new and used equipment.
The overall growing conditions, our European footprint are for the most part favorable.
Although there are some areas of dryness, developing and crops will need timely rains through the growing season to produce full yield potential.
Europe similar to our domestic business is experiencing an equipment supply side challenges new equipment delays and long lead times.
With regards to our business in Ukraine, we have opened or partially opened all of our stores to support our customers for their equipment parts and service needs during spring planting.
According to Ukrainian sources, 77% of the arable acres in markets in which Titan has locations have been ceded compared to 72% for Ukraine as a whole.
This speaks to Titans footprint in the central and western part of the country and demonstrates the resiliency of producers in those regions, which have largely kept pace with seasonal farming activities.
Although the conflict in Ukraine is extremely disruptive to our Ukrainian business. The impact has been less severe than projected in March as reflected in our updated modeling assumptions, which mark will explain in more detail.
I want to thank our European team for their solid first quarter performance in the face of the geopolitical uncertainties and ongoing conflict in Ukraine.
Likewise, our domestic businesses are firing on all cylinders, thanks to our very talented and dedicated team as they continue to support our customers in this dynamic environment.
Now I will turn the call over to Mark to review our financial results in more detail.
Yeah.
Ryan.
Turning to slide seven.
Total revenue increased 23, 7% to $461 million for the first quarter of fiscal 2023.
Our equipment business increased 29, 1% versus prior year, which was driven by strength in our agriculture and construction businesses and further supported by contribution from our J Cox and marks machinery acquisitions, which were not in the prior year's first quarter results.
Our parts and service business generated growth, increasing nine five and six 6% respectively.
Despite the later start to planting this season.
As compared to last year's early in efficient planting season.
I would anticipate more favorable quarter over quarter results and our parts and service business in the second quarter.
Rental and other revenue increased two 5% versus prior year with dollar utilization of our construction segment rental fleet, increasing to 24, 5% compared to 19, 2% in the prior year quarter.
This material improvement in utilization allowed us to grow revenues at a notably smaller fleet on a noticeably smaller fleet, which in turn drove strong margin expansion.
On slide eight our gross profit for the quarter increased 25% to $89 million and gross profit margin increased by 20 basis points.
Primarily driven by the expansion of equipment parts and rental margins.
This was partially offset by a shift in sales mix and lower service margins.
Equipment margins continue to be supported by very good end market conditions and healthy inventories.
Operating expenses increased $7 $7 million versus the prior year to $64 $2 million for the first quarter of fiscal 2023.
This increase was more than offset by revenue growth and led to 120 basis points of operating expense leverage compared to the prior year rich.
Reducing our operating expenses to 13, 9% as a percentage of revenue from 15, 1% in the prior year period.
As we have mentioned operating expenses have been increasing due to higher sales volumes inflationary cost pressures and the build out of our ERP system, which is in the early stage of rollout.
It is important to note that despite these cost pressures, we have been able to consistently grow our absorption rates since fiscal year 2018 from under 70% to over 80% and our trailing 12 month period, which was driven by gains across all three of our segments that we expect will continue.
To frame this up at the segment level, our agriculture business is delivering about 90% absorption today and construction is at about 80% while opportunity remains for further improvement within the AG and construction. We think this really demonstrates the opportunity in our international business.
Which is currently approximately 55%.
Our success in AG and construction was a direct result of our unwavering focus on parts and service growth dollar utilization improvement in our rental fleet.
Footprint optimization in our construction segment and overall expense discipline.
Our goal is to bring that same focus to our international segment and generate steady long term improvement on this important operational metric.
A chart, reflecting this annual progress can be found in the appendix to this slide presentation.
Floorplan and other interest expense remained relatively flat at $1 $5 million compared to the prior year period.
In the first quarter of fiscal 2023, our adjusted net income increased 71, 2% to $17 $8 million.
Our adjusted earnings per diluted share for the quarter was.
With 79 cents.
And compares to last year's 46 cents.
Performance.
And adjusted EBITDA increased 52, 4% to $32 million compared to the first quarter of last year.
You can find a reconciliation of adjusted net income.
Adjusted earnings per diluted share and adjusted EBITDA to their most comparable GAAP amounts in the appendix to the slide presentation.
Yeah.
On slide nine you will see an overview of our segment results for the first quarter of fiscal year 2023.
Agriculture segment sales increased 38, 8% to $318 $5 million and helped drive nice operating leverage resulting in segment adjusted pre tax income, increasing 46, 6% to $16 $4 million, which represents a.
Pretax income margin of five 2%.
This is very solid margin performance, despite the quarterly headwinds on parts and service due to the late planting.
Turning to our construction segment.
Revenue decreased two 4% to $67 million compared to the prior year period.
Due to the lost sales contributions from the Companys recent divestitures in this segment.
On a same store basis, excluding the divested stores in the prior year period revenues were up 24, 9% for the quarter.
Pretax income improved significantly to $3 $2 million compared to $100000 in the prior year period.
Even after excluding the $1 $4 million gain associated with the sale of a single store location in North Dakota. During the quarter. This segment is showing strong improvement in pretax income margin versus the prior year quarter.
Our international segment generated revenue growth of one 3% to $75 $5 million. Despite the disruption in our Ukrainian market caused by the conflict with Russia.
Our other markets, particularly in Romania, and Bulgaria more than offset the business challenges in Ukraine and generated a 72.4% increase in adjusted pretax income to $4 $6 million, which represents a solid margin of six 1%.
These pretax results include a charge of $700000 for estimated bad debts in Ukraine, which is primarily related to the ongoing conflict in this region.
On slide 10, we provide an overview of our balance sheet highlights.
Cash of $147 million as of April 32022.
Our equipment inventory at the end of the first quarter was $387 million, an increase of $64 million from January 31 2022.
<unk> the net effect of a $66 million increase in new equipment, partially offset by a $2 million decrease in used equipment.
Strong sales and lower inventory levels continues to drive equipment inventory turns higher.
Which increased to three five versus $2 three in the prior year.
I will provide a little more color on our inventory on the next slide.
Yeah.
Parts inventory increased to $104 million at the end of the first quarter of fiscal 2023 from $96 million at the end of fiscal 2022.
This higher level of parts inventory as the result of a concerted procurement effort to better ensure parts availability as well as the first quarter acquisition of marks machinery.
The increased parts availability for our customers is critical given the global supply chain challenges and a compressed planting season.
Our rental fleet assets at the end of the first quarter increased slightly to $67 million compared to $65 million at the end of fiscal 2022.
We still anticipate our fleet size at the end of the fiscal 2023 to be around $70 million.
On our March call, we provided some context around assets and our Ukraine business.
Currently our total assets in this business decreased to $33 million from about $39 million in March and our in country assets and customer receivables have decreased to $24 million from $28 million previously.
More importantly, however, we have improved the positioning of our assets within the country to more secure and less risky locations, which are primarily in the western regions.
And in addition to moving our assets and militaries ground activities are now farther away from our primary operations as they have shifted focus to the east and south eastern regions of Ukraine.
As I mentioned earlier, we did increase our reserve for bad debts by 700000 in the first quarter as an estimate of uncollectible accounts, primarily due to the conflict. However to date, we have had no material loss or damage to our inventories or dealership locations.
Turning to slide 11.
The amount of new and used equipment inventories are reflected in the size of the blue and red bars on this slide.
We are very pleased with the level of inventory shipments received from our suppliers during the first quarter the.
The receipt of these orders generated the higher sales performance and are reflected in the $66 million increase in new equipment inventory in the quarter.
At the end of the first quarter, we drove another sequential improvement in inventory turns to three five times.
Given the favorable industry conditions health of our inventory and ongoing supply chain challenges I expect we will continue to operate at higher turn levels throughout the year.
Slide 12 shows our updated fiscal 2023 annual modelling assumptions, which we are raising today.
While our.
Business continues to perform well amidst strong agriculture industry backdrop, the environment remains fluid.
Supply chains have yet to recover inflationary pressures continue to intensify.
And the situation in Ukraine could quickly change.
Thus please keep in mind that there is higher degree of uncertainty in these assumptions compare to a normal operating environment.
For the Agriculture segment, we are increasing our revenue growth assumption to up 27% to 32% from up 22% to 27%.
As a reminder, the assumption includes a full year revenue contribution from our <unk> acquisition that closed in December 2021, as well as partial year revenue contribution from the <unk> machinery acquisition, which closed in April 2022.
For the construction segment, we slightly increased our assumption from a revenue to improve from a range of down 12% to 17% to our current assumption of down to 10% to 15%.
Impacting this assumption is the divestment of our five construction equipment stores in Montana, Wyoming, and North Dakota in January and March of calendar 2022.
Which accounted for approximately $73 million of combined revenue.
Excluding these revenues from the from the prior year base, our assumption equates to same store sales growth of up approximately 10% to 15%.
For the International segment, we are increasing our revenue growth assumption to down zero to 5% from down 8% to 13%.
Our improved forecast is supported by the demonstrated resiliency of our customers in Ukraine, our dedicated tightened team that is servicing those customers and the transition of the direct ground offensive out of Titans footprint, particularly the <unk> region.
We are now modeling Ukraine revenues to be down approximately 50% versus 75% previously which would result in an associated loss of approximately <unk> 15 per share.
Versus 2025 per share previously.
As I mentioned earlier, we are also seeing more strength in other international markets markets than originally anticipated, particularly in Romania and Bulgaria.
Given the improved modeling assumptions across all three segments of our business. We are increasing our diluted earnings per share assumption by 30 cents at the midpoint to a new range of two $2 85 to $3 15 per share for fiscal 2023.
This concludes our prepared remarks, operator, we are now ready for the question and answer session of our call.
Thank you will now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one under telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before.
For pressing star one one moment, please while I pull for questions.
First question today comes from Steve Dyer from Craig Hallum. Your line is now live.
Oh. Thanks, Good morning, guys couple of quick ones for me.
First off.
You guys last reported here about 60 days ago, or so I think your <unk>.
Relatively concerned or cautious on inventory availability and it seems like you've got a lot more a lot quicker than you thought you would sort of how do you expect the inventory to flow throughout the remainder of the year I know at one point you kind of hoped it would get a little bit better in the second half, but seems to have already gotten better so maybe.
US how you think about that this year.
Yeah. Thank you Steve This is Bryan.
I'll talk to a little bit of the flow here and then mark can chime in as well, but yeah as you mentioned.
It has been coming in nicely here and we feel good about the the flow here.
Throughout the remainder of the model year 'twenty twos.
We.
We pre sold a lot of that equipment.
In the last year.
We're communicating with all our suppliers.
Daily basis and have good visibility to the order boards are as you know very dynamic environment, though so oh definitely.
Lee.
Counting on any implant to experience potential movement within quarters or are we are seeing continued shipping delays.
And then you know a good supply of it coming in though and then as you saw in the the increased.
Mount of inventory, we've got in hand, which is.
Is largely a function of which they would take the snapshot in a in a lot of that stuff is sold so it's really a function of how quickly we can get it through our shops and then out to the customers and then occasionally are waiting on a component on our end to finish off as well you know a retrofit or.
Or technology that way as well mark anything to add as well no I think it's good.
Okay. Thanks.
Just on slide 14, you talked about operating expense absorb absorption kind of nicely above that 80% Mark is that a sustainable level for the remainder of the year sort of based on what you see.
Yeah. So those absorption rates are trailing 12 months. So yeah, I think it kind of year over year, we've got some <unk>.
<unk> pressures that we talked about with inflationary pressures, but I do think we continue to make good efforts on our parts and service business I think international is doing a nice job, particularly this year on that with some expanded margins.
So yeah I think overall you know that we can.
We continue to see some and into the foreseeable future, where we can grow all of those those absorption numbers in each of our segments and therefore.
On a consolidated basis overall.
Got it.
Then lastly for me Floorplan interest has been fairly de Minimis for a long time, just given you know your equity in inventory and in rates.
From a modeling perspective would you expect it to move higher here with with rates or are you going to kind of do some things to keep it keep it low.
I think it would just be a very small level of increase because of rates on most of our floor plan just about a pretty much all domestically. Our floorplan is non interest bearing at this point.
So until we utilize all of our cash and get more into more of the the bank Syndicate line that we have there should be minimal impact on the on the Floorplan interest expense.
Yeah.
Okay. Thanks, guys. Good luck.
Thank you next question today is coming from Daniel and broke from Stephens. Your line is now live.
Yes, good morning, guys and congrats on the quarter.
I wanted to start on the profitability side no Mark this marks the third quarter of kind of equipment margins above 12% and rental margins in the high Thirty's.
On equipment can you parse out new and used are both strong are you seeing particular strength in one or the other and then can you talk about the outlook for kind of the gross profit line here I mean are these sustainable run rate for these parts of the P&L given the consistency we've seen ever.
Quarters.
You know what the equipment mix that we have in the first quarter. We did anticipate some level higher as you recall last quarter in the modeling assumptions when asked I think I indicated 12% overall for the year, which would have been similar to last year. If you take out those manufacturer incentives at the end of the year.
First quarter, we expected better, but it continued to be better than even what we had had expected. So I think at the 12 nine it's going to be hard to sustain especially out you know as you get out as we get out into the fourth quarter.
Unless we achieve those manufacturer incentives again generally that's a higher price ticket machinery that carries a little bit lower margin to it.
That being said you know I think.
You know at that I would say a solid 12, maybe just over 12 for the year is kind of how we're looking at it today.
Got it that's helpful. Alright, Yes, you did.
Did ask about the new and used and we're still seeing strength on both sides of those particularly used with the supply shortage out there the tight inventory supplies out there. So we are seeing it on both sides.
Thank you.
And then it's good to hear Europe , holding in better than expected the David I think the lessons in the release you did note there was some recent market turbulence.
Was that comment to indicate anything has changed here in the last few weeks of kind of second quarter to date or how should we interpret that comment.
You said, if you think about your visibility in the European segment.
No I figure I'll tackle it probably the overall mark the noise out there on the macro for your total market I think more sold than our specific you know I think if you look at the industries, we're doing business in a way you know building feed the world you know I think we're in a really good spot right now maybe a little bit different than the overall.
Macro backdrop.
Perfect Perfect and then last one for me.
David I'm on slide five you mentioned the potential for higher crop prices to support kind of construction, particularly for land upgrades in the farm economy.
That's been an opportunity for at least the last year, just given the stronger earnings for farmers. So I guess is this happening yet and you know what what do we need to see or what needs to happen to really capture this opportunity and drive those construction sales in those markets.
Well I think you know the one good thing that we've got going forward. If you look at our construction government footprint worrying about upper Midwest you all but some of the rural you all.
Mid sized markets. Some of these regional trade center as you know on and if you go across and look at a lot of our farms and are you going to see definitely skid steer loaders and forklifts because a lot of the like.
I guess from if you look at the Palletize, whether it's seed or chemical as I'll come on to Palletize. So.
The feedlots or you know big payload or going from you know the big pay orders and they are in the form of the farmer standpoint, Theres a big return on investment over buying new land is improving in your existing land, so removing true Gold's farm, removing farmsteads I'm putting in Thailand.
Piling irrigation so all of those things that are a huge return on them. So if you look on the farms or theres, good stirs forked forklifts or as many excavators excavators are as large wheel loaders.
Lauder backhaul so across the board. So so we continue to I mean, we're in a good footprint. So we're continuing to see that you know, especially that's a good spot for some of the late model used construction equipment. So all in all the goods and if he's at these commodity prices and the shorter drove some of the new age of equipment.
You know all the farmers are going to say a good time to buy that will order the excavator loader backhoe, where that forklift or that's good yourself. So that's what we're seeing out there, yes and Dan. This is Brian I'll just add in you know.
We have been seeing that too to your point and expect to continue to see it in.
In addition to what David said the old saying the the agriculture dollar turns eight times over in the community.
And so with our footprint in the upper Midwest and.
The agricultural economics have a large impact on the Midwestern economy, so that money tends to get spent on a lot of things like building grain bins or even on the housing side as well so.
A lot of.
The other impact that way too.
Okay, great. Good luck going forward guys.
Thank you next question is coming from Mig <unk> from R. W. Baird. Your line is that right.
Hey, good morning, guys, it's Joe Grabowski on for Mig This morning.
There's the more Joel.
I guess I'd like to build upon a couple of previous question.
Starting off in North American egg you raised your revenue outlook by five percentage point, how do you kind of think about that increased outlook is it a function of more product availability from the OEM.
And user demand better realized pricing, how does that kind of breakdown versus 60 days ago.
Yeah, I think the big thing for US was the the inventory availability and the.
Late in the late in our first quarter, we did receive a good amount of shipments in that's reflected in the sales number in the in the build of that new inventory, so compared to fourth quarter and that's where some of this came from rate and we had that a shortage in the fourth quarter. Some of that ended up here in a in a in the first.
Quarter.
But there was a nice catch up if you will from our perspective on the deliveries of some of those inventory. So that that is the main driver of that.
Got it okay. Thank you.
And then yeah.
Switching to the outlook in Ukraine.
60 days ago, you thought revenue would be down 75% now you think revenue is going to be down 50%.
What's the outlook for a a worst case scenario and what are sort of a you know conditions on the ground that are built into the assumption for revenue being down 50% is there a chance for additional upside there.
Yeah, I think you know it was relative to I think we were a month and at the time when we had our call into the conflict are starting a number of our stores still weren't fully open there was a lot of military ground activity right around one of our bigger hubs over there in <unk>.
You have around the curve area.
Oh blast.
So some of the bigger changes for US is as a ground military offensive that was taking place there is no longer there as you know it's much more in the east and South East now are located there.
We really only have like one of our locations that location is still open now all locations are open but that location has some ground activity around it and the card keep a region, but otherwise all of our stores are pretty much fully functioning. So I think those are some of the big differences from.
When we spoke a couple of months ago.
And as far as upside you know yeah, you know, they're definitely could be upside if the if if the conflict ends tomorrow or in soon or you know starts.
Phasing down certainly that would help on that.
The overall.
You know atmosphere over there for a FERC for agriculture, and our customers' business and therefore affecting affecting us. So I would say, there's certainly some room for upside, but it could also go the other way if if the conditions.
Conditions over there goes the other way as well, but this is kind of our best and it's tough to estimate right. But this is probably our this is our best estimate at this time.
That makes sense a final question for me.
International margins were really good really strong and if you exclude the 700000 charge might've been the best margin ever in international Despite everything Thats going on so maybe just talk a little bit about what's what's driving the good margins.
Is it sustainable.
Yeah, we were very very pleased especially in the first quarter here because historically, that's not the strongest quarter he get into that second and third quarters are generally strengthens.
So a couple of things I would point out is just a again I mentioned on the call, but Romania and Bulgaria.
A very much a strong results and good from a margin perspective, good from bottom line top line perspective.
That more than offset what happens in Ukraine, Ukraine was still a drag year over year of course, but Romania, Bulgaria are very strong in the revenue from a revenue standpoint, and our margins and I would say margins kind of across the board in equipment parts.
Service.
And.
The parts and service I think you know they are getting.
Closer and I think this is a longer term trend, but I think theyre getting closer to the margins that we're seeing in the business over here domestically.
Equipment margins I think that's a little bit more of a you know with the supply shortage that type of thing where there was some strengthening margins in the quarter that showed up there, but I think the parts and services is more longer term.
Sustainable.
Great. Thank you for taking my questions.
Sure. Thank.
Thank you we reached end of our question and answer session I would like to turn the floor back over to Mr. Meyer for any further or closing comments.
Well, thank you everybody for participating on the call today, and we look forward to.
I'm talking to you next quarter.
Have a great day.
Thank you that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.