Q1 2024 Titan International Inc Earnings Call
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Operator: Excuse me, ladies and gentlemen. Thank you for your patience. The call will begin momentarily. Again, thank you for your patience.
Speaker Change: Excuse me, ladies and gentlemen, thank you for your patience the call will begin momentarily.
Speaker Change: Thank you for your patience the call will begin momentarily.
Speaker Change: [music].
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Titan International incorporated first quarter 2024 earnings Conference call. At this time, all participants have been placed on a listen only mode and we will open the floor for your questions and comments after the presentation.
Operator: The call will begin momentarily. Good morning, ladies and gentlemen, and welcome to the Titan International Incorporated first quarter 2024 earnings conference call. At this time, all participants have been placed in a listen-only mode, and we will open the floor for your questions and comments after the presentation. If you need assistance, please disconnect and dial back in, and an operator will assist you. It is now my pleasure to turn the floor over to Alan Snyder, Vice President of Financial Planning and Investor Relations for Titan. Mr. Snyder, the floor is yours.
Alan Snyder: If you need assistance, please disconnect and dial back in and an operator will assist you. It is now my pleasure to turn the floor over to Allan Snider, Vice President financial planning and Investor Relations for Titan Mr. Snyder the floor is yours.
Alan Snyder: Thank you Meghan good morning, I'd like to welcome everyone to Titans first quarter 2024 earnings call on the call with me today are Paul Reitz Titans, President and CEO and David Martin Tightened Senior Vice President and CFO I will begin with a reminder, that the results. We are about to review were presented in the earnings release issued yesterday, along with our form 10.
Alan Snyder: Thank you, Megan. Good morning. I'd like to welcome everyone to Titan's first quarter 2024 earnings call. On the call with me today are Paul Reitz, Titan's President and CEO, and David Martin, Titan's Senior Vice President and CFO. I will begin with a reminder that the results we are about to review were presented in the earnings release issued yesterday, along with our Form 10-Q, which was also filed with the Securities and Exchange Commission yesterday.
Alan Snyder: Cute, which was also filed with the Securities and Exchange Commission yesterday.
Alan Snyder: As a reminder, during this call, we will be discussing certain forward-looking information, including the company's plans and projections for the future that involve risks, uncertainties, and assumptions that could cause our actual results to differ materially from the forward-looking information. Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward-looking statements can be found in the Safe Harbor Statement included in the earnings release attached to the company's Form 8K filed earlier, as well as our latest Form 10K and Forms 10Q, all of which have been filed with the SEC.
Alan Snyder: As a reminder, during this call we will be discussing certain forward looking information, including the company's plans and projections for the future.
Alan Snyder: The risks uncertainties and assumptions that could cause our actual results to differ materially from the forward looking information additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward looking statements can be found within the safe Harbor statement included in the earnings release attached to the company's form 8-K filed earlier.
Alan Snyder: As well as our latest Form 10-K and forms 10-Q, all of which have been filed with the SEC.
Alan Snyder: In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement, but not be a substitute for, the most directly comparable GAAP measures. The earnings release, which accompanies today's call, contains financial and other quantitative information to be discussed today, as well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures. The Q1 earnings release is available on the company's website. A replay of this presentation, a copy of today's transcript, and the company's latest quarterly investor presentation will all be available soon after the call on Titan's website. I would now like to turn the call over to Paul.
Alan Snyder: In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement but not be a substitute for the most directly comparable GAAP measures. The earnings release, which accompanies today's call contains financial and other quantitative information to be discussed today as well as a reconciliation of the non-GAAP measures to the most comparable GAAP measures.
Alan Snyder: Our Q1 earnings release is available on the company's website a replay of this presentation a copy of today's transcript in the company's latest quarterly investor presentation. We will all be available soon after the call on Titans website, I would now like to turn the call over to Paul.
Paul George Reitz: Thanks, Alan. Good morning, everyone.
Paul: Thanks, Alan Good morning, everyone.
Paul George Reitz: As noted in our last earnings call, we saw our OneTitan team step up to get our transformative acquisition of Carl Starr over the goal line right at the end of February. Of course, that was just the beginning, as we've been full speed ahead over the past 60 days, integrating their operations into Titan's. And I have to say at this point, I'm really pleased with how that has gone thus far.
Paul: As noted in our last earnings call. We saw our one Titan team step up to get our transformative acquisition of Carl Star over the goal line right at the end of February of.
Paul George Reitz: Of course that was just the beginning as we've been full speed ahead over the past 60 days integrating their operations into Titans and I have to say at this point I'm really pleased with how that has gone thus far.
Paul George Reitz: Carl Starr has a really good team from top to bottom, and it's been great to see them embrace the transition and really see a good future ahead for the combined company. On the Titan side, it has similarly been terrific to see how the new folks have been welcomed with open arms and have been integrated quickly into our One Titan team. So I want to take a minute and thank our entire team, both the existing members and the new ones, for all their hard work and commitment in the recent months with the integration effort.
Paul George Reitz: Carl Star has a really good team from top to bottom and has been great to see them embrace the transition and really envision a good future ahead for the combined companies.
Paul George Reitz: On the tightened side has been similarly been terrific to see how are the new folks had been welcomed with open arms.
Paul George Reitz: <unk> integrated quickly into our one Titan team.
Paul George Reitz: So I'll take a minute and thank our entire team both the existing members and the new ones for all their hard work and commitment in recent months with the integration efforts.
Paul George Reitz: Let me shift gears to look beyond the present it towards the future with our newly combined company.
Paul George Reitz: Let me shift gears to look beyond the present and towards the future with our newly combined company. We believe Titan is now positioned well to deliver more consistent, stronger results throughout various market cycles for a number of reasons, but I will touch quickly on just a few.
Paul George Reitz: We believe Titan is now positioned well to deliver more consistent stronger results throughout various market cycle for a number of reasons. Let me touch quickly got just a few.
Paul George Reitz: First, we have made substantial structural changes in recent years, including portfolio optimization, addressing underperforming and non-core businesses, our pricing strategies, and fortifying our balance. Next, we have a tremendous focus on product development that's centered around our entrepreneurial culture, which is connected to end users and has filled our portfolio with innovative products. And lastly, the Carl Starr Acquisition, which was accretive from the onset.
Paul George Reitz: First we have made substantial structural changes in recent years, including portfolio optimization.
Paul George Reitz: Dressing underperforming or noncore businesses, our pricing strategies and fortifying our balance sheet.
Paul George Reitz: Next we have a tremendous focus on product development that centered around our entrepreneurial culture, which is connected to end users and is build our portfolio with innovative products.
Paul George Reitz: And lastly, the <unk> acquisition. This was accretive from the onset as we discussed last quarter. This transforms our company with growth and synergy opportunities.
Paul George Reitz: As we discussed last quarter, this transforms our company with growth and synergy opportunities. And now Titan has the broadest wheel and tire product offering in our business that covers everything from ATVs and UTVs, to high-speed trailers, to construction, and then, of course, the entire agricultural segment from small to large. Carl Starr brings to us a one-stop shop that diversifies our customer base with a good balance between OEMs and after
Paul George Reitz: And now Titan has the broadest wheel and tire product offering in our business that covers everything from ATV and Utv's the high speed trailers to construction and then of course, the entire AG segment from small to large.
Paul George Reitz: Carl Star brings to us a one stop shop that diversifies, our customer base with a good balance between Oems and aftermarket.
Paul George Reitz: So using that as a basis, along with our recent financial performance of Titan and Carl Starr, we've discussed with our board that the combined companies, in a typical year, would have earnings power of $250 million to $300 million of adjusted EBITDA, and that would also produce free cash flow of at least $125 million. Keep in mind that AIP, the prior owners of Carl Starr, believed in the value of the combined company based on the amount of stock they took as part of the transaction.
Paul George Reitz: So using that as a basis along with our recent financial performance of tightening Carl Star, We've discussed with our board that the combined companies in a typical year would have earnings power of 250 million to $300 million of adjusted EBITDA.
Paul George Reitz: Also would produce free cash flow of at least $125 million.
Paul George Reitz: Keep in mind the AIP the prior owners of Carl Star believed in the value of the combined company based on the amount of stock they took as part of the transaction.
Paul George Reitz: That's a nice positive to see their belief in Titan and our stock. And let's not forget, our board also represents a significant shareholder base of Titan. I say all that to bring forward the point that we feel good about the future prospects of our company, and we are currently working on short and long-term actions to deliver those numbers I presented earlier and more. While you won't see that performance this year with softer market conditions, it is good for our investors to have a perspective of where Titan and our board see the future.
Paul George Reitz: Its a nice positive to see their belief and tightened and our stock and let's not forget our board also represents a significant shareholder base of Titan.
Paul George Reitz: I say all of that to bring forward the point that we feel good about the future prospects of our company and we are currently working on short and long term actions to deliver those numbers I presented earlier and more.
Paul George Reitz: While you won't see that performance this year with softer market conditions. It is good for our investors to have a perspective of where Titan and our board see the future.
Paul George Reitz: For today's call now I would like to share some thoughts on a couple of primary themes before handling the handing the call over to David for his comment on our financials.
Paul George Reitz: For today's call now, I'd like to share some thoughts on a couple of primary themes before handing the call over to David for his comment on the financials. I want to talk about current market conditions, because that's naturally on everybody's mind. So I'll spend some time there.
Paul George Reitz: I want to talk about current market conditions, that's naturally on everybody's mind. So I'll spend some time, there and then I'd like to talk more about Carl start how we're attacking the opportunities with that acquisition.
Paul George Reitz: And then I'd like to talk more about Carlstar and how we're attacking the opportunities with that acquisition. So let's start with the market conditions. Most everyone in the ag sector is currently characterizing the market as being in a cyclical trough, although many expect this cycle to be shallower and shorter-lived than previous ones.
Paul George Reitz: So let's start with the market conditions, most everyone in the AG sector is currently characterized the market as being in a cyclical trough.
Paul George Reitz: Although many expect this cycle to be shallower and shorter lived than previous ones.
Paul George Reitz: A fair amount of the reasons behind the cycle that we're in are macro factors that extend beyond the typical AG sector drivers such as farmer income and inventory levels.
Paul George Reitz: A fair amount of the reasons behind the cycle that we're in are macro factors that extend beyond the typical ag sector drivers such as farmer income and inventory levels. You know, we all spent a lot of time seeing the headlines and understanding the Fed's steady rate increases in 2022 and 2023 are certainly having an impact on credit availability, and, in turn, spending in parts of our business. Geopolitical tensions are running high on a global basis, that's stating the obvious, but it also impacts countries that are significant producers of grain commodities and, in turn, significant markets for ag equipment. There's also the presidential election this fall. It's everyone's favorite or least favorite topic, I guess.
Paul George Reitz: We all spend a bunch of times seen the headlines and understanding the fed's steady rate increases in 2022 and 'twenty three are certainly having an impact on credit availability and in turn spending in parts of our business.
Paul George Reitz: Geopolitical tensions are running high on a global basis, that's stating the obvious but it also impacts countries that are significant producers of grain commodities and in turn significant markets for AG equipment.
Paul George Reitz: There's also the presidential election. This fall, it's everyone's favorite or at least favorite topic I guess.
Paul George Reitz: But the reality is that this may have a material impact on US trade policy. So you put that all together, and it's easy to see why a lot of economic factors are causing more uncertainty in our end markets than we would otherwise have at this point in the year. On a positive note, the election is something that's not going to go on forever. It has a known end date, so to speak, and I think it's also reasonable to expect we'll have more directional clarity with the Fed and interest rates fairly soon.
Paul George Reitz: But the reality is that this may have a material impact on U S. Trade policy. So you put that altogether and it's easy to see why a lot of economic factors are causing more uncertainty in our end markets than we would otherwise have at this point in the year.
Paul George Reitz: On a positive note.
Paul George Reitz: The election as something that's not going to go on forever. It hasnt known and date so to speak and I think it's also reasonable to expect we will have more directional clarity clarity with the fed and interest rates fairly soon.
Paul George Reitz: So what that means is the uncertainty phase a pickup in end market demand should translate.
Paul George Reitz: So what that means is the uncertainty phase, a pickup, and end market demand should translate pretty directly into positive activity for Titan. And more specific to the ag sector now is farmer incomes. We've talked about the direct correlation between that and demand. We have seen the estimates for the year trending lower, but let's keep in mind the overall farmer balance sheets have been and continue to be described as healthy. You know, according to the USDA, we're seeing farmer incomes projected to be down around 25% this year. Sentiment has been up or down, but it's somewhat neutral right now. But it really bears note that farmer incomes have reached an all-time high in the past couple years.
Paul George Reitz: Pretty directly into positive activity for Titan.
Paul George Reitz: So more specific to the AG sector now is farmer incomes, we've talked about the direct correlation between that and demand.
Paul George Reitz: Have seen the estimates for the year trending lower.
Paul George Reitz: But let's keep in mind, the overall farmer balance sheets have been and continue to be described as healthy.
Paul George Reitz: According to the USDA, we're seeing farmer incomes projected to be down around 25%. This year sentiment has been up or down, but it's somewhat neutral right now.
Paul George Reitz: But it really bears note that farmer incomes have reached an all time high the past couple of years.
Paul George Reitz: So even though the direction has retreated, they are still at quite healthy levels. Also, with each passing day, let's not forget farmers are out there in the fields with their equipment, doing the work they need to do, and that drives a need for aftermarket replacement tires. I speak with customers on a regular basis, and that uncertainty I noted is something that is weighing on everyone's minds. Of course, in agriculture, there is always some uncertainty this time of year with the planting season, as dealing with the weather is just part and parcel of being in the ag business. Even so, I consistently hear our customers say that the visibility at this time of year is below what they would normally expect.
Paul George Reitz: So even though the direction has retreated they are still at quite healthy levels.
Paul George Reitz: Also with each passing day, let's not forget farmers are out there in the fields with their equipment through.
Paul George Reitz: Doing the work they need to do and that drives a need for aftermarket replacement tires.
Paul George Reitz: I speak with customers on a regular basis and that uncertainty I noted is something that is weighing on everyone's minds of course in AG. There is always some uncertainty this time of year with the planting season is dealing with the weather is just part and parcel of being in the AG business.
Paul George Reitz: Even even so I am consistently hearing our customers say that the visibility at this time of year is below what they would normally see.
Paul George Reitz: Without that visibility from customers combined with the macro factors, the normal and logical reaction for dealers is to adopt a risk-adverse position with their inventory, which then flows back to the OEMs who adjust their production accordingly. We have seen tire and wheel inventory levels improve at the dealer channels and with the OEMs, but this slowing of demand has resulted in overall levels not yet reaching a normal state.
Paul George Reitz: Without that visibility from customers combined with the macro factors the normal and logical reaction for dealers is to adopt our risk adverse positioning with their inventory, which then flows back to the Oems to adjust their production accordingly.
Paul George Reitz: We have seen tire and wheel inventory levels improve with the dealer channels and with Oems.
Paul George Reitz: This slowing of demand has resulted in overall levels not yet reaching a normal state again, we are confident this is a temporary dynamic as some of the macro factors that I've noted will not simply last.
Paul George Reitz: Again, we are confident this is a temporary dynamic, as some of the macro factors that I've noted will not simply last. Outside the U.S., farmer sentiment has weakened, geopolitical concerns are taking a toll, this has resulted in reductions in demand, and inventory is still running higher than normal. In South America, strong harvests have negatively impacted commodity prices.
Paul George Reitz: Outside the U S. Europe farmer sentiment has weakened geopolitical concerns are taking a toll has resulted in a reduction in demand and inventory is still running higher than normal in South America strong harvests have negatively impacted commodity prices, notably according to some research we've reviewed regional.
Paul George Reitz: Notably, according to some research we've reviewed, regional commodity sales there have trended below normal, resulting in some farmers still holding unsold grain. So moving away from agriculture over to the consumer segment, which I want to remind you now represents approximately 25%, or approximately 25% of our revenues. The same macro factors are impacting the market there as inflation, as you expect inflation would. Even though the pace of increase has slowed with inflation, it is apparent that consumers are still feeling the effects of it with higher gas and food prices.
Paul George Reitz: <unk> sales there have trended below normal, resulting in some farmers still holding unsold grains.
Paul George Reitz: So moving away from AG over to the consumer segment, which I want to remind you now represents 25, approximately 25% of our revenues.
Paul George Reitz: The same macro factors are impacting the market there as inflation as you expect inflation would even though the pace of increase has slowed with inflation. It is imperative that consumers are still feeling the effects of it with higher gas and food prices.
Paul George Reitz: What that ultimately means is someone who might have thought about buying a new riding lawn mower, for example, is sticking with their old one this summer. Similarly, the off-road ATV and UTV vehicle market is feeling the effect of the various economic factors I noted. As with agriculture, our view is that this is more a pause in end market demand than anything else. The person that wants a new lawn tractor, a recreational vehicle, is still sitting on an aging piece of equipment that they will eventually replace.
Paul George Reitz: What that ultimately means is someone who might have thought about buying a new riding lawn mower. For example is sticking with their old one this summer.
Paul George Reitz: Similarly, the off road ATV UTV vehicle market is feeling the effects of the various economic factors I noted.
Paul George Reitz: As with <unk>. Our view is that this is more a pause in end market demand than anything else.
Paul George Reitz: So that the person that wants a new yard tractor recreational vehicle is still sitting on an aging piece of equipment that they will eventually replace.
Paul George Reitz: So on a positive note I want to point out the Titan has a robust aftermarket offerings in the consumer segment, just like we do in AG.
Paul George Reitz: So on a positive note, I want to point out that Titan has a robust aftermarket offering in the consumer segment, just like we do in agriculture. We have a one-stop shop that serves the consumer marketplace. This helps us offset that delayed demand dynamic that I mentioned, as the same customer who is delaying buying a new lawnmower or ATV might still opt for, and would be expected to still opt for, new tires that would replace the worn out old ones. And it helps to maximize that performance, that existing equipment that they're still using. We've seen this for years in agriculture.
Paul George Reitz: We have a one stop shop and the consumer that serves the consumer marketplace. This helps us offset that delayed demand dynamic that I mentioned as the same customer who has deferred buying a new law more ATV might still ops and would be expected to still out for new tires that would replace the worn out old ones and it helps to.
Paul George Reitz: That performance that existing equipment that they are still using.
Paul George Reitz: We've seen this for years in AG, that's where our <unk> have continued to perform well as in the aftermarket replacement space. So we know the game plan and we know how to maximize our opportunities.
Paul George Reitz: That's where our LSWs have continued to perform well in the aftermarket replacement space. So we know the game plan, and we know how to maximize our opportunities. Needless to say, we are happy that we've expanded the aspect of our product offering in the consumer segment and what the Carlstar acquisition has brought to Titan. So moving over to earth-moving construction, we are seeing broad macro uncertainty impact demand. We do see these mid- to long-term drivers for the sectors remaining very much intact, though.
Paul George Reitz: Needless to say, we are happy that we've expanded the aspect of our product offerings in the consumer segment and what Karl Karl <unk> acquisition has brought to Titan.
Paul George Reitz: So moving over to earthmoving construction, we are seeing the broad macro uncertainty impact demand.
Paul George Reitz: We do see these mid to long term drivers for this sector remains very much intact, though in the U S. Nonresidential construction activity continues to trend higher led by the need for facilities like data centers and the onshoring of manufacturing outside the U S where equipment is used for activities like mining demand for precious metals remains strong.
Paul George Reitz: In the US, non-residential construction activity continues to trend higher, led by the need for facilities like data centers in the onshore manufacturing. Outside the US, where equipment is used for activities like mining, demand for precious metals remains strong, especially with geopolitical factors driving prices of commodities such as gold to levels not seen in many years.
Paul George Reitz: Especially with the geopolitical factors driving prices of commodities, such as Gould to levels not seen in many years.
Paul George Reitz: Yeah.
Paul George Reitz: While we face some headwinds, it is definitely worth repeating that we are focused on controlling what we can control. And as a global Titan team, we have extensive experience dealing with market cycles like this. Again, I want to repeat, our team is very experienced.
Paul George Reitz: While we face some headwinds it is definitely worth repeating that we are focused on controlling what we can control and.
Paul George Reitz: And as a global tightened team we have extensive experience.
Paul George Reitz: Dealing with market cycles like this.
Paul George Reitz: Again, I want to repeat our team is very experienced that understands how to make efficient timely decisions and dealing with cycles and conditions that we've seen to start 2020 for.
Paul George Reitz: It understands how to make efficient, timely decisions in dealing with the cycles and conditions that we've seen to start 2024. David will get into the financial details, but I want to say that we did a good job in a challenging environment this quarter, and we delivered solid financial results that our team is proud of. To close here, I do want to shift back to Carl Starr.
Paul George Reitz: David will get into the financial details, but I want to say that we did a good job in a challenging environment. This quarter and we've delivered solid financial results that our team is proud of.
Paul George Reitz: To close here I do want to shift back to Karl Starr as I noted previously I would I would cover. This this acquisition has really ramped up our aftermarket business is something we expect to benefit on several fronts.
Paul George Reitz: As I noted previously, I would cover this. This acquisition has really ramped up our aftermarket business, and this is something we expect to benefit on several fronts. You've heard us talk a lot already about the one-stop shop concept, and that is our central emphasis. By positioning Titan as a single provider of end-to-end wheel and tire solutions for our customers, we make their lives simpler and processes more efficient.
Paul George Reitz: You've heard us talk a lot already about the one stop shop concept and that is our central emphasis.
Paul George Reitz: By positioning tightened as a single provider of end to end wheel and tire solutions for our customers, we make their lives simpler and processes more efficient.
Paul George Reitz: Adding a robust aftermarket business also helps us control our own destiny a bit more than in the past. At Titan, we've done a good job expanding our tire aftermarket business in recent years in both the U.S. and South America. We've done that as well in the mining sector with our undercarriage business. Historically, as expected, our wheel business has been more of an OEM-centric type of operation, therefore relying on the production coming out of their factories to drive our demand.
Paul George Reitz: Adding robust aftermarket business also helps us control our own destiny, a bit more than the past.
Paul George Reitz: Titan we've done a good job expanding our tire aftermarket business in recent years in both the U S and South America.
Paul George Reitz: We've done that as well in the mining sector with our undercarriage business.
Paul George Reitz: Historically as expected our wheel business has been more of an OEM centric type of operation and therefore rely on the production coming out of their factories to drive our demand.
Paul George Reitz: But now Titan has a sizable aftermarket business in all of our end market segments. We have a revenue source that we expect will mute some of the cyclical nature of our end markets, and we certainly view that as a positive. Aftermarket sales also lead to a more positive basis for our margins. So the Carl Starr acquisition really is a win-win on all fronts. I reached out to a couple of our key aftermarket customers right after the closing of the acquisition, and the response has been positive about what the combined company is capable of doing to help them better serve the respective marketplace.
Paul George Reitz: But now tightened has a sizable aftermarket business and all of our end market segments.
Paul George Reitz: A revenue source that we expect will mute some of the cyclical nature of our end markets and we certainly view that as a positive.
Paul George Reitz: Aftermarket sales also lead to a more positive basis with our margins. So the <unk> acquisition really is a win win on all fronts.
Paul George Reitz: I reached out to a couple of our key aftermarket customers right. After the closing of <unk> acquisition and the response has been positive about what the combined company is capable of doing to help them better serve their respective marketplace.
Paul George Reitz: So putting that altogether.
Paul George Reitz: So putting that all together, we are executing well despite the challenging environment. It has only been two months, but the addition of Carl Starr is on track to drive the intended impact on our business we anticipate. We are focused on creating cost synergies, and David will talk more about progress in that area. We're also seeing a path to commercial synergies based on the one-stop-shop proposition that is really supported by an extensive product offering, and we expect to see that accelerate when overall end-market activity picks up. We are pleased to see the solid performance of our aftermarket business, particularly as we contend with weaker demand from our OEM partners. With that, I'd now like to turn the call over to David.
David: Executing well despite the challenging environment.
David: It has only been two months, but the addition of <unk> is on track to drive the intended impact on our business we envisioned.
Paul George Reitz: We are focused on creating cost synergies and David will talk more about progress in that area. We're also seeing a path to commercial synergies based on the one stop shop proposition that is really supported by an extensive product offering and we expect to see that accelerate when overall end market activity picks up.
David: We are pleased to see the solid performance of our aftermarket business, particularly as we contend with weaker demand from our OEM partners.
Paul George Reitz: With that I'd now like to turn the call over to David.
David A. Martin: Hey, thank you, Paul, and good morning to everybody on the call today. I'm very pleased that the One Titan team fought hard through more challenging conditions in the quarter, and we put up a respectable result in Q1. As a reminder, our first quarter included one month's contribution from Car Star, so we'll naturally see more benefit in the quarters to come. We are well underway with our synergy plans, and we have a clear line of sight into the near and long-term opportunities.
David: Hey, Thank you Paul and good morning to everybody on the call today.
David A. Martin: I'm very pleased that the one Titan team followed heart through more challenging conditions in the quarter and we put up a respectable result for Q1.
David A. Martin: As a reminder, our first quarter included one month's contribution from car stores. So we will naturally see more benefit in the quarters to come.
David A. Martin: We are well underway with our synergy plans and we have a clear line of sight into the near and long term opportunities for 2024, we're targeting bottomline contribution of approximately $5 million to $6 million and believe the longer term opportunity is in the $25 million to $30 million range on an annual basis.
David A. Martin: For 2024, we're targeting a bottom-line contribution of approximately $5 to $6 million, and believe the longer-term opportunity is in the $25-30 million range on an annual basis. Broadly, we're developing strong plans with actions to improve areas such as procurement, manufacturing, and distribution center optimization, and more direct cost reduction. We're being thorough in our analysis as we look to take advantage of the economies of scale and our buying power, along with ensuring the combined organization is efficient and working on driving value every day.
David A. Martin: Broadly, we're developing strong plans with actions to improve areas, such as procurement manufacturing and distribution center optimization.
David A. Martin: And with and more direct cost reductions.
David A. Martin: We're being thorough in our analysis as we look to take advantage of the economies of scale in our buying power along with ensuring the combined organization is efficient and working on driving value every day.
David A. Martin: For some opportunities in areas such as raw materials supplies. There are contracts in place that impact the timing of the changes we will be pursuing and the opportunities are significant there.
David A. Martin: For some opportunities in areas such as raw materials supplies, there are contracts in place that impact the timing of the changes we will be pursuing, and the opportunities are significant. There are meaningful commercial synergies, as Paul said, stemming from our one-stop-shop strategy and having complete offerings to serve our customers. And our teams are very focused on this, as well.
David A. Martin: There are meaningful commercial synergies as Paul said stemming from our one stop shop strategy and having complete offerings to serve our customers and our teams are very focused on this as we speak.
David A. Martin: Moving on to our results, we performed well in terms of margins during the quarter and as we move through the balance of the year, we will see a full year impact of Karl <unk> operations, we expect that it will create some gross margin lift all else being equal, although offset by a bit heavier SG&A, which I'll discuss a bit more.
David A. Martin: Moving on to our results, we performed well in terms of margins during the quarter, and as we move through the balance of the year, we'll see a full year impact from Carl Starr's operations. We expect this to create some gross margin lift, all else being equal, although offset by a bit heavier SG&A, which I'll discuss a bit more. Turning specifically to our financials for Q1, revenues in the quarter were $482 million, with adjusted EBITDA of $50 million, and adjusted EPS of $0.29.
David A. Martin: Turning specifically to our financials for Q1 revenues in the quarter were 482 million with adjusted EBITDA of $50 million and adjusted EPS of <unk> 29.
David A. Martin: Yes.
David A. Martin: Our adjusted gross margin for Q1 was 16, 7% compared to 17, 4% a year ago, but up sequentially from 14, 9% in the fourth quarter of 2023.
David A. Martin: Our adjusted gross margin for Q1 was 16.7% compared to 17.4% a year ago, but up sequentially from 14.9% in the fourth quarter of 2023. Drilling down into the gross margins a bit, the ag segment adjusted gross margin was 17.2% compared to 16.1% last year, a very healthy increase. On a comparable basis, which excludes the non-recurring inventory step-up charge we recorded in the quarter, consumer segment margins were 21.3% compared to 20.7% in the prior year.
David A. Martin: Drilling down into the gross margins a bit AG segment.
David A. Martin: <unk> gross margin was 17, 2% compared to 16, 1% last year, a very healthy increase.
David A. Martin: On a comparable basis, which excludes the non recurring inventory step up charge, we recorded in the quarter consumer segment margins were 21, 3% compared to 27.
David A. Martin: The prior year.
David A. Martin: The step-up charge of $3.4 million was a function of revaluing Carl Starr's inventory when we took it into our books at the time of the acquisition. This flowed mostly through the consumer segment and, to a lesser extent, the ag sector. Earth moving and construction segment gross margin in the first quarter was 14% versus 18.7% a year ago. It was a very difficult comparison.
David A. Martin: The step up charge of $3 4 million was a function of revaluing Karl <unk> inventory when we took it into our books at the time of the acquisition. This slowed mostly through to the consumer segment and to a lesser extent the exiting.
David A. Martin: Earthmoving and construction segment gross margin in the first quarter was 14% versus 18, 7% a year ago. It was a very difficult comparison with segment margins. This year were pressured by reduced sales volume as our OE customers in Europe, and Latin America responded to weaker demand.
David A. Martin: The segment margins this year were pressured by reduced sales volume as our OE customers in Europe and Latin America responded to weaker demand. Again, we have a long history of fighting through these issues, and I expect that we're going to manage through this with strong actions to manage costs to get our margins going in the right direction. Longer term, we continue to see a positive demand picture for that segment and expect margins to expand as activity picks up.
David A. Martin: Again, we have a long history of fighting through these issues and I expect that we're going to manage through this with strong actions to manage costs to get our margins and going in the right direction longer term, we continue to see a positive demand picture for that segment and <unk> margins can expand as activity picks up.
David A. Martin: SG&A expense for the first quarter was $39 million or eight 2% of sales.
David A. Martin: SG&A expense for the first quarter was $39 million, or 8.2% of sales, compared to $34 million in the prior year, or 6.3%, with the change primarily due to the partial year contribution of Carl Starr's operation. Recall from our announcement of the acquisition and our discussions on our Q4 call that Carl Starr has historically carried more SG&A expense as a percent of sales than Legacy Titan due to the distribution center model. In order to help everyone understand the impact of this particular line item, we added an item in our guidance where we note SG&A, including royalty and R&D expense, is expected to be 11% of sales for Q2 and should remain at a similar level for the rest of 2024. From Q2 on, the incremental SG&A expense associated with the DCs adds 160 to 170 basis points as a percentage of sales. Absent that, SG&A would be consistent with our legacy Titan operations.
David A. Martin: Compared to $34 million in the prior year or six 3% with the change primarily due to the partial year contribution of <unk> operations.
David A. Martin: Recall from our announcement of the acquisition and our discussions on our Q4 call that Carl Star has historically carried more SG&A expense as a percent of sales than legacy tightened due to the distribution center model in order to help everyone understand the impact of this particular line item, we added an item in our guidance we're.
David A. Martin: We note SG&A, including royalty and R&D expense is expected to be 11% of sales for Q2 and should remain at a similar level for the rest of 2024.
David A. Martin: From Q2 on the incremental SG&A expense associated with the Dcs add sort of 160 to 170 basis points as a percentage of sales absent that SG&A would be consistent with our legacy Titan operations.
David A. Martin: R&D expenses were $3.6 million in the first quarter compared to $3 million a year ago, reflecting our continued and strong emphasis on prioritizing R&D investment. Our adjusted operating income was $25.1 million for the quarter, and our operating cash flow was $2 million. Both of those figures were impacted by the reduced sales levels in the quarter as compared to last year's first quarter. However, if we back out the non-recurring expense stemming from the acquisition, along with the non-cash inventory step-up charge, adjusted net income would have been $9.6 million higher, as would have operating income. Operating cash flow would have been $8.2 million, reflecting the removal of those transaction costs.
David A. Martin: R&D expenses were $3 6 million in the first quarter compared to $3 million a year ago, reflecting our continued in.
David A. Martin: Strong emphasis on prioritizing R&D investments.
David A. Martin: Our adjusted operating income was $25 1 million for the quarter and our operating cash flow was $2 million. Both of those figures were impacted by the reduced sales level.
David A. Martin: Our levels in the quarter as compared to last year's first quarter. If we back out the nonrecurring expense stemming from the acquisition along with the noncash inventory step up charge. Adjusted net income would have been $9 6 million higher as would have operating income operating cash flow would have been $8 2 million, reflecting the removal of the.
David A. Martin: Transaction costs.
David A. Martin: So this was a solid quarter of cash flow generation when you look deeper into the numbers. First quarter CapEx of a total of $16.6 million in the quarter compared to $11.7 million last year as we continue to invest in improvements in production efficiency and select expansion in strategic areas along with product development. And, of course, this is inclusive of one month of CapEx related to Carl Starr. We also used cash to fund our stock repurchase program in the quarter, buying back 100,000 shares for a total of $1.4 million during the early part of the quarter.
David A. Martin: So this was a solid quarter of cash flow generation when you look deeper into the numbers.
David A. Martin: First quarter Capex totaled.
David A. Martin: <unk> totaled $16 6 million in the quarter compared to $11 7 million last year as we continue to invest in improvements in production efficiency and select expansion in strategic areas, along with product development and.
David A. Martin: And of course this is inclusive of one month of Capex related to Carl Star.
David A. Martin: We also used cash to fund our stock repurchase program in the quarter buying back a 100000 shares for a total of $1 4 million during the early part of the quarter, it's worth noting that given the timing of the <unk> acquisition, we were blacked out for much of the quarter.
David A. Martin: It's worth noting that given the timing of the Carl Starr acquisition, we were blacked out for much of the quarter. After our purchases in Q1, we have approximately 15 million of available capacity on our stock repurchase program. Net debt at the end of the quarter was $370 million compared to $205 million at the end of the year.
David A. Martin: After our purchases in Q1, we have approximately $15 million of available.
David A. Martin: Capacity on our stock repurchase program.
David A. Martin: Net debt at the end of the quarter.
David A. Martin: There was $370 million compared to $205 million at the end of the year.
David A. Martin: Our debt leverage at the end of the quarter was naturally higher after the funding of the Carl Starr Acquisition in February, while we continue to be in a solid balance sheet position with our stronger cash flow characteristics. Our priorities continue to be the pay down of debt we took on over time and continue to focus on the investments in R&D and strategic growth, along with opportunistic share repurchases. Our free cash flow so far in Q2 has enabled us to pay down the ABA line already.
David A. Martin: Our debt leverage at the end of the quarter was naturally higher after the funding of the <unk> acquisition in February.
David A. Martin: We continue to be in a solid balance sheet position with our stronger cash flow characteristics. Our priorities continue to be that pay down of debt. We took on over time.
David A. Martin: We continued our strong focus on the investments in R&D and strategic growth along with opportunistic share repurchases our free cash flow. So far in Q2 has enabled us to pay down on the ABL line already.
David A. Martin: Lastly, I want to touch on our financial guidance as Paul noted there is macro uncertainty right now, which is affecting many economic sectors, including ours and virtually our discussions with customers that ambiguity as a theme.
David A. Martin: Lastly, I want to touch on our financial guidance. As Paul noted, there is macro uncertainty right now, which is affecting many economic sectors, including ours, and in virtually all our discussions with customers, ambiguity is a theme. As their visibility for the balance of the year is not where they normally expect it to be, that is naturally impacting our outlook. Having given that dynamic, we felt it was prudent to provide second quarter guidance at this time.
David A. Martin: As our visibility for the balance of the year is not where they normally expect it to be that is naturally impacting our outlook.
David A. Martin: With given that dynamic we felt it was prudent to provide second quarter guidance at this time.
David A. Martin: One additional point to make with respect to our guidance relates to synergies. While we are addressing all the identified synergies, it is reasonable to expect that we will get increased traction over the balance of the year, and thus, more of an impact on our financial results will be in the second half of the year and even more impactful in 2025 and beyond. So our guidance ranges for the second quarter, our revenues of 525 to 575 million, our SG&A, including royalty and R&D expense of 11% of sales, and an adjusted EBITDA of 45 to 55 million, and free cash flow of $30 to $40 million, which is a solid contribution from working capital management in the quarter.
David A. Martin: One additional point to me with respect to our guidance relates to synergies.
David A. Martin: While we are attacking all of the identified synergies. It is reasonable to expect that we will get increased traction over the balance of the year and thus more of an impact on our financial results will be in the second half of the year and even more impactful in 2025 and beyond.
David A. Martin: So our guidance ranges for the second quarter, our revenues of $525 million to $575 million.
David A. Martin: SG&A, including royalty in R&D expense of 11% of sales and an adjusted EBITDA of $45 million to $55 million.
David A. Martin: Free cash flow of $30 million to $40 million.
David A. Martin: As a.
David A. Martin: The solid contribution from working capital management in the quarter.
David A. Martin: And then finally, our CapEx, we expect to be between $15 and $20 million in the quarter, similar to where we were in Q1. So with that said, we're excited about the future and what it holds for Titan, and our teams are very focused on driving value for our shareholders. So thank you for your time this morning and your attention to what matters to Titan. We would like to turn the call back over to Megan now, our operator, for the Q&A session.
David A. Martin: And then finally, our Capex, we expected to be between 15 and $20 million in the quarter similar to where we were in Q1.
Megan: So with that said, we're excited about the future.
Megan: What holds for Titan and our teams are very focused on driving value for our shareholders. So thank you for your time this morning, and your attention to what matters.
David A. Martin: Titan.
Megan: We would like to turn the call back over to Meghan <unk>, our operator for the Q&A session.
David A. Martin: Yeah.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then two. The first question comes from Steve Ferazani with Sodati and Company. Your line is now open.
Megan: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Operator: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Stephen Michael Ferazani: The first question comes from Steve <unk> with Sidoti <unk> Company.
Stephen Michael Ferazani: Your line is now open.
Stephen Michael Ferazani: Good morning, Paul Good morning, David.
Stephen Michael Ferazani: Morning, Paul. Morning, David.
Stephen Michael Ferazani: I wanted to ask about the <unk>.
Stephen Michael Ferazani: I wanted to ask about the year over year ag sales decline. It certainly was, you went into a little bit of detail, but it certainly was much sharper than we were anticipating. And I think, in your conversations in 4Q, probably much sharper than you were expecting. I have a couple of questions related to that, and it looks like your guidance implies it's going to extend to 2Q. What's changed in the dynamics? And can you provide a little bit of color on the geography there? How would the US compare it to your overall results and how much Brazil was hampering those results?
Stephen Michael Ferazani: Europe in your AG sales decline it was certainly and you wanted to get a little bit of detail, but it certainly was much sharper than we were anticipating and I think.
Stephen Michael Ferazani: In your conversations and <unk>, probably sharper than you were expecting a couple of questions related to that it looks like your guidance implies it's going to extend into Q.
Stephen Michael Ferazani: What's changed in the dynamics and can you provide a little bit of color around the geography there.
Stephen Michael Ferazani: Or would you ask compared to your overall and how much Brazil was hampering those results.
Speaker Change: Yes, Steve you're exactly right.
Paul George Reitz: Yeah, no, Steve, you're exactly right. And, you know, as we look back Let's go back about six months, as we were getting forecasts from our customers and we're discussing that internally, you know, we have seen a contrast between what we were hearing the market was going to be in 24 and where it's at now, like you highlighted. So I just want to be clear. The expectations we set were something that Titan was throwing a dart against the board and just saying, hey, that looks like a good number. It was really a deep, involved process.
Paul George Reitz: As we look back.
Paul George Reitz: So let's go back about six months.
Paul George Reitz: We're getting forecast from our customers and we're discussing that internally.
Paul George Reitz: We have seen a contrast between.
Paul George Reitz: What we are hearing the market was going to be in 'twenty, four and where it's at now like you highlighted so I just want to be clear the expectations. We set were something that Titan was throwing a dart against the board and just saying hey that looks like a good number.
Paul George Reitz: It was really a deep involved process and what has changed over the last six months comes back to just the uncertainty comment.
Paul George Reitz: And what has changed? Over the last six months, it comes back to just that uncertainty comment. Interest rates have a big impact on it. And I know we read about it. We talk about it in our daily lives.
Paul George Reitz: Interest rates have a big impact on it.
Paul George Reitz: And I know, we read about it we talk about it in our daily lives and we think about it from an inflationary standpoint, but what it does is it impacts the amount of inventory people want to hold carrying cost.
Paul George Reitz: And we think about it from an inflationary standpoint. But what it does is it impacts the amount of inventory people want to hold, as well as carrying costs. So if aftermarket dealers look at it and say, if I was paying x before, now it's x plus something. I want to reduce inventory. From the OEM perspective, we've seen their dealers do the same thing. They want to reduce inventory, interest rates driving it, but also, as we've seen, that translates into a reduction in agricultural demand. You get the double effect, call it a double effect, where you want lower inventory because of the uncertainty, but you also want lower inventory because you see demand decreasing.
Paul George Reitz: Aftermarket dealers look at it and go if I was paying X before now it's X plus something I want to reduce inventory.
Paul George Reitz: From the OEM perspective, we've seen their dealers do the same thing they want to reduce inventory interest rates driving it but also as we've seen that.
Paul George Reitz: That translated into a reduction in AG demand.
Paul George Reitz: You get the double on call. It a double effect, where you want lower inventory, but because of the uncertainty, but he also want lower inventory because you see demand decreasing and so.
Paul George Reitz: And so we saw that take place in the forecast that we've seen in the first quarter and the activity of the first quarter more abruptly than what we saw and what we expected six months ago. So it's a combination, again, of inventory in the channels being reduced along with just overall macro uncertainty that we certainly, we all know a lot about that. I'm actually sure.
Paul George Reitz: We saw that take place in the forecast that we've seen in the first quarter and the activity of the first quarter more abruptly than what we saw and what we expected six months ago. So it's a combination again of inventory in the channels.
Paul George Reitz: Being reduced along with just overall macro uncertainty that we certainly we all know a lot about that.
Paul George Reitz: Yes.
Paul George Reitz: But I'm actually.
Paul George Reitz: Okay.
Doug: Doug IC.
Paul George Reitz: I was going to... go ahead, Paul.
Speaker Change: Got it.
Paul: Go ahead Paul.
Paul George Reitz: Well, the only thing I didn't touch on is Brazil. You asked about geography. We have seen Brazil be impacted more heavily than the U.S. and Europe, and that is, again, another action that In the long run, this is what needs to be done, and I'd rather have it be done quickly so we can get back to a more typical state, but it has been more severe than we had expected.
Paul: Well the only thing I didn't touch on is Brazil.
Paul George Reitz: I asked about geography.
Paul George Reitz: We have seen Brazil be impacted more heavily than U S and Europe and that that again is another action that.
Paul George Reitz: And I think, you know, you hear that from some others as well. I mean, Brazil. Brazil, just a number of macro factors are just weighing on the ag market down there. But with our experience in Brazil, and that's a market that does rebound quickly. We do have really strong market share there, and have great products. So, you know, I'm confident in the mid to long-range vision of where we're at for
Paul George Reitz: Over the long run is what needs to be done.
Paul George Reitz: Rather have it be done quickly. So we can get back to a more typical state, but it has been more severe than what we had expected and I think.
Paul George Reitz: You'll hear that from some others as well I mean, Brazil, Brazil.
Paul George Reitz: A number of macro factors are just weighing on the AG market down there.
Paul George Reitz: With our experience in Brazil.
Paul George Reitz: That's a market that does rebound quickly we do have really strong market share there great products. So.
Paul George Reitz: I am confident in the mid to long range vision of where we're at for Brazil, but in the short run yes, they are dealing with.
Paul George Reitz: But in the short run, yeah, they're dealing with, you know, excessive grains, commodity prices, inventory, and a few things that, you know, they gotta get cleared up in the system before they get back to a typical state.
Paul George Reitz: Excess of grains commodity prices inventory and a few things.
Paul George Reitz: They've got to get cleared up in the system before we get back to a typical.
Speaker Change: Alright, thanks on the flip side of it.
Stephen Michael Ferazani: On the flip side, I'm impressed with how strong your margins in ag and consumer, if you back out the inventory adjustments, held up given the volume declines. Would we expect to see further impact? I would have expected it to look more like what you reported in our EMC. How is that holding up, and would you expect further impact if this is a little bit more prolonged? Because just with fewer products going through your facilities, it should be, I would think it should be having more of an impact.
Stephen Michael Ferazani: Breast with how strong your margins in AG and consumer if you back out the inventory adjustments held up.
Stephen Michael Ferazani: Given the volume declines.
Stephen Michael Ferazani: Would we expect to see further impact I would've expected it should look more like what you reported in <unk>.
Stephen Michael Ferazani: How is that holding up when would you expect further impact. If this is a little bit more for long because just with fewer product going through your facilities. It should be I would think it should be having more of an impact.
Stephen Michael Ferazani: Yes.
David A. Martin: Yeah, Steve, that's a great question. You know, I think we've done a really good job managing our production, taking the right steps to manage labor and all of our variable costs associated with all of our planned activity. I think the teams responded well. We have good discipline in place, and that's enabled us to hold our margins up pretty strongly. I expect that, you know, as activity levels, I mean, even that said, Q1 is still traditionally a stronger quarter.
Speaker Change: It's a great question I think we've done a really good job managing our production, taking the right steps to manage.
David A. Martin: Labor and all of our variable costs associated with our planned activity.
David A. Martin: I think the teams responded well we have good discipline in place.
David A. Martin: It's enabled us to.
David A. Martin: Hold our margins pretty strongly I expect that.
David A. Martin: As activity.
David A. Martin: And then, as we see volume in this second quarter and beyond, it's going to be harder and harder. But again, I think the teams are doing a good job with it. So I think our margins will continue to be solid in the ag segment. But I'll contrast that with what EMC is experiencing, and I'll say it a little bit, it's a bit of a mixed issue there for EMC in that it's in Europe and Brazil that the activity has been much more affected.
David A. Martin: Even that said Q1 is still a traditionally stronger quarter and then as we see volume in this second quarter and beyond it's going to be it's going to be harder and harder, but again I think the teams are doing a good job with it so.
David A. Martin: Our margins will continue to be solid.
David A. Martin: In the AG segment.
David A. Martin: But I'll contrast that with EMC and I'll say, it a little bit it's bit of a mix issue there for EMC and that it is.
David A. Martin: In Europe, and Brazil, the activity has been much more.
David A. Martin: Impacted.
David A. Martin: You know, it's surprising to see how much activity has declined so rapidly, but it's much more of a steel component. And, you know, we have labor and a long lead time. So it was a little bit more impactful on the margin versus our ag and consumer.
David A. Martin: It's surprising to see how much activity has declined so rapidly but.
David A. Martin: It's much more of a steel component.
David A. Martin: We have labor and long lead time, so it was a little bit more impactful on the margin versus our AG and consumer.
Speaker Change: Great Thats helpful to get one more in.
Stephen Michael Ferazani: Great, that's helpful. To get one more in, you know, the question becomes, Paul, how do you think about temporary versus, you know, more than 12 months' impact on demand and how you approach cost cuts. How are you thinking about that? Because, clearly, you'd like to take some costs out of the system, but if this is temporary, you don't necessarily want to do that. How are you sort of thinking about that?
Stephen Michael Ferazani: The question becomes Paul how do you think about.
Stephen Michael Ferazani: Temporary versus.
Stephen Michael Ferazani: More than 12 months impact on on demand and how you approach.
Stephen Michael Ferazani: Todd how are you thinking about that clearly you'd like to take some costs out of the system, but if this is temporary you don't necessarily want to do that how are you sort of thinking about that.
Paul George Reitz: Yeah, and that's where we rely on the experience of our team. We know where we can attack costs quickly.
Stephen Michael Ferazani: And Thats, where we rely on the experience of our team.
Paul George Reitz: We know where we can attack costs quickly and we're doing that as David noted in his prior response.
Paul George Reitz: And we're doing that, as David noted in his prior response. I'm impressed to see how our team is able to react very swiftly and make timely, efficient, effective decisions in times like this. I said in my comments, and I'll repeat it again, that's the experience we have. If you look at the group of the Titan management team, we have extensive experience both with cycles and, more importantly, working together. And so the actions start happening fluidly on a consistent, regular basis where we can reduce costs.
Paul: I am impressed to see how our team is able to react very swiftly make timely efficient effective decisions in times like this.
Paul George Reitz: I said in my comments and I'll repeat it again.
Paul George Reitz: That's the experience we have if you look at the group of the Titan management team.
Paul George Reitz: We have extensive experience both with cycles, but more importantly, working together.
Paul George Reitz: And so the actions start happening fluidly on a consistent regular basis, where we can reduce costs.
Paul George Reitz: We're doing that, and it happens very, again, very quickly, efficiently, and effectively. And then we talk about it as a team, so one area knows what another area is doing, and we can learn from each other. But to answer your question about how you balance the temporary versus the longer-term outlook, I mean, that is how we see it. We do see this as more of a temporary situation.
Paul George Reitz: We're doing that and it happens very again very quickly efficiently and effectively and then we talk about it as a team. So one area knows what another area is doing and we can we can learn from each other but to answer your question about how you balance the temporary versus the the longer term outlook.
Paul George Reitz: That is how we see it that we do see this as more temporary.
Paul George Reitz: We see that this is a shallow trough I mean farmer income is still okay. It's still in good position their balance sheets are healthy.
Paul George Reitz: I mean, farmer income is still okay, it's still in a good position, their balance sheets are healthy, and they're still planting and utilizing tractors. And so the investments they're making will drive changes in the marketplace that'll be positive. So we look at our customer base, the infrastructure spending for construction and going to our customer base is going to be solid in what I would call the midterm. And so what we're hearing from them is the same thing.
Paul George Reitz: We're still planning and utilizing tractors and so.
Paul George Reitz: The investments they are making will drive changes into the marketplace that'll be positive. So we look at our customer base the infrastructure spending for construction and grow our customer base.
Paul George Reitz: Is going to be solid in what I would call the mid term and so what we're hearing from them is the same thing.
Paul George Reitz: By 25, you're looking at things going in a positive direction. So what do you do for 24? You do what I was mentioning with our team, more temporary type actions. We take them quickly, but we're trying to avoid making those long-term decisions right now. Recruiting and retaining labor and talent is something that's critical to every company, and the last thing you want to do is overreact in the short run and then start spending money next year building the team and building the labor force back into place. So it's a fine line. It's a balance.
Paul George Reitz: By 'twenty five youre looking at things going in a positive direction. So what do you do for 'twenty four as you do what I was mentioning with our team more temporary type actions, we take them quickly.
Paul George Reitz: We're trying to avoid making those long term decisions right now.
Paul George Reitz: Recruiting and retaining labor and talent is something that's critical to every company and the last thing you want to do is overreact in the short run and then start spending money next year building the team in building the labor force back into place. So it's a fine line its a balance and that's why I rely in I believe in the experience of our team.
Stephen Michael Ferazani: And that's where I rely. And I believe in the experience of our team and our board. I mean, we're very fortunate that we have a board that understands the cycles that we go through as well. And so when we communicate with them, they can work with us as well to make sure we're making effective and timely decisions. Great. Thanks.
Stephen Michael Ferazani: And our board.
Stephen Michael Ferazani: We're very fortunate that we have a board that understands the cycles that we go through as well and so when we communicate with them.
Stephen Michael Ferazani: They can they can work with us as well to make sure, we're making effective and timely decisions.
Speaker Change: Alright, Thanks, Paul Thanks, David.
Operator: Great. Thanks, Paul. Thanks, David. Thanks, David.
Speaker Change: Thanks, Steve.
Speaker Change: Thank you.
Operator: The next question comes from Tom <unk> with Zacks investment Research. Your line is now open.
Thomas Kerr: The next question comes from Tom Kerr with Zacks Investment Research. Your line is now open.
Thomas Kerr: Good morning, guys.
Thomas Kerr: Good morning, guys. Can you go back to the construction earth moving segment? Were you saying that the sort of commercial construction macro outlook was deteriorating worse, and the mining was holding up? Or did I get that backwards, or maybe? Clarify those two. Oh. And Marcus. Tom, you got it right.
Thomas Kerr: Can you go back to the consumer.
Thomas Kerr: Moving segment.
Thomas Kerr: Where are you seeing that sort of commercial construction.
Thomas Kerr: Our outlook was deteriorating worse and the mining was holding up.
Thomas Kerr: Backwards.
Thomas Kerr: Clarify those two.
Thomas Kerr: Okay.
Speaker Change: Yes, Tom you got it right, it's mostly on the construction side our mining activity.
Paul George Reitz: Yeah, Tom, you got it right. It's mostly on the construction side. Our mining activity on the aftermarket side was solid, and we saw a more dramatic drop in our European and more global construction OEM segment.
Paul George Reitz: On the aftermarket side was solid.
Paul George Reitz: And you saw a more dramatic drop in our.
Paul George Reitz: Our European and more global construction.
Paul George Reitz: OEM segment.
Paul George Reitz: Or sector.
Paul George Reitz: And is that.
Thomas Kerr: Is that, I don't know, stabilized on commercial construction yet, or are those, you know, ongoing declines that stay the same throughout the year?
Paul George Reitz: Stabilized on the commercial construction, yet or are those ongoing declines that stay the same throughout the year.
Speaker Change: Yeah right now it seems like it's stable, it's come down and but relative to where we were a year ago still still in them.
David A. Martin: Yeah, right now, it seems like it's stable, you know, it's come down, but, you know, relative to where we were a year ago, it's still in the decline mode. But as we shift from Q1 to Q2, it's fairly similar.
David A. Martin: The decline mode, but as we shift from Q1 to Q2, it's fairly similar.
David A. Martin: And then on the consumer segment. If you look at the legacy segment I can back out the numbers, but that seem to be a substantial decline as well.
Thomas Kerr: Now, the consumer segment, if you look at the legacy segment, I can back out the numbers, but that seemed to be a substantial decline as well. Any other comments on just, you know, the legacy consumer side of the business?
Thomas Kerr: Any other comments on just the legacy consumer side of the business.
David A. Martin: Certainly, we had some decline in what we call the old utility truck tire segment. You know, that's mostly Latin America, and so you had some decline there, and we've had a little decline in our custom mixing as well, just because certain customers, their activity is down, and so that led to a bit of decline there as well.
Speaker Change: Certainly we had.
David A. Martin: Some decline in what we call it the old.
David A. Martin: Utility truck tire segment.
David A. Martin: That's mostly Latin America, and so you had some decline there and we've had a little decline in our custom mixing as well just because certain customers their activity is down and so that led to a bit of decline there as well, but then obviously you do have it.
Thomas Kerr: But then, obviously, you do have the contribution of Carl. And that's a very positive thing to think about, though. I think our margins have held up really well despite that.
Thomas Kerr: The contribution of Karl Star.
Thomas Kerr: And Thats very part anything to think about.
Thomas Kerr: Margins have held up really nicely despite that.
Speaker Change: Right well, one more quick financial one.
David A. Martin: One more quick financial one is the... Do you guys have a level of cash that you want to maintain or try to maintain? I mean, obviously, you could put a dent in the new debt easily with all that cash, but is there a dollar amount you guys try to keep on the cash side?
David A. Martin: You guys have a level of cash that you want to maintain a <unk> maintained I mean, obviously you can put it.
David A. Martin: And the new debt.
David A. Martin: With all that cash but is there a dollar amount you guys try to keep on the cost side.
David A. Martin: Well cash can be a little bit tricky in terms of where the cash is but we're looking to optimize where our cash is at the levels of cash that we have are adequate to run the business and we will look to pay down debt as well as even.
Thomas Kerr: Well, cash can be a little bit tricky in terms of where the cash is, but we're looking to optimize where our cash is, but the levels of cash that we have are adequate to run the business, and we'll look to pay down debt, as well as be opportunistic on the share repurchase side. You know, as stock prices move, we can certainly have, we have the flexibility to manage the business and do those things as well.
Thomas Kerr: Being opportunistic on the share repurchase side.
Thomas Kerr: Yes.
Thomas Kerr: Stock prices move we can certainly have we have the flexibility to manage the business and do those things as well.
Speaker Change: Alright, great Thats, all I have for now thanks.
Operator: All right, great. That's all I have for now. Thanks.
Speaker Change: Thanks, Tom.
Speaker Change: Thank you.
Kirk Ludtke: Thank you. The next question will go to Kirk Ludtke with Imperial Capital. Your line is now open.
Operator: The next question will go to Kirk Ludtke with Imperial capital. Your line is now open.
Kirk Ludtke: Paul David Alan Thank you for the call.
Kirk Ludtke: Paul, David, and Alan, thank you for the call. Good morning.
Kirk Ludtke: Good morning.
Kirk Ludtke: I noticed there is some very helpful pro forma numbers in the 10-Q I was wondering if you could.
Kirk Ludtke: I noticed there are some very helpful Proforma numbers in the 10-Q. I was wondering if you could... (inaudible) the first quarter 24 adjusted EBITDA pro forma for Carlster. So I see a net income. Do you have an adjusted EBITDA number in there for Carlster? Proforma for Carl's Jr. Now, we didn't publish that.
Kirk Ludtke: Sure.
Kirk Ludtke: The first quarter 'twenty four adjusted EBITDA pro forma for Karl Star. So I see a net income do you have a you have an adjusted EBITDA number in there for <unk>.
Kirk Ludtke: Former for Carlsberg.
David A. Martin: No, we didn't we didn't publish that, Kirk. Yeah, that's something that we wanted to, I mean... There's too many adjustments in it to make it noisy because of all the different things that happened with the acquisition.
Speaker Change: No we didn't publish that Kurt.
Speaker Change: That's something that we wanted to.
David A. Martin: <unk>.
David A. Martin: Theres too many adjustments in it to make its noisy because of all the different things that happened with the acquisition. So.
David A. Martin: I'd have to put too many adjustments on there to make it meaningful.
David A. Martin: But it's fair to say it was a very very fairly similar progress with ore.
David A. Martin: So I'd have to put too many adjustments on there to make it meaningful. But I've got to say it was a very, very fairly similar progress with or without. Good, strong margin contribution. They're certainly impacted by the same level of impact on the market that we are with their ag sector. But their consumer business, as we look at the numbers for the one month of contribution, was solid. And so, it may not be dramatically different than how Titan trended.
David A. Martin: Good strong margin contribution they are certainly impacted by the same level of impact on the market.
David A. Martin: That we are with their AG sector with their consumer business.
David A. Martin: As we look at the numbers for the one month of contribution it was solid and.
David A. Martin: So therefore.
David A. Martin: It may not be.
David A. Martin: Dramatically different than how tightened trended so.
David A. Martin: Okay.
David A. Martin:
Kirk Ludtke: The second quarter guidance, you know, it looks to be, at least in terms of adjustability, but it looks to be flattish with the first quarter, even though you've got two more months of it. Carl Starr. So I'm just, I'm just curious if, if, uh, does the guidance reflect a continuation of roughly the same type of, of trends by business, Titan versus Carl Starr, or, you know, is anything changing? Well, it's Carl Starr performing.
David A. Martin: The second quarter guidance.
Speaker Change: It looks to be at least in terms of adjusted EBITDA it looks to be flattish.
Speaker Change: With the first quarter, even though you have got two more months of.
Carl Starr: Carl start so I'm just I'm, just curious if if or the.
Speaker Change: Does the guidance reflect a continuation of the roughly the same type of.
Kirk Ludtke: <unk>.
Carl Starr: Trends by business tightened versus Carl Star.
Speaker Change: Or is there anything changing.
Kirk Ludtke: Well as Carl Star Q1, performing.
Speaker Change: Yes sequentially yeah.
David A. Martin: Yes, sequentially, yeah. Yeah, I mean, if you think about how typical seasonality works in our business, you know, Q1 tends to be a larger quarter for sales in the ag segment. So you're shifting a little bit from a seasonality perspective. So it's seasonally down. And therefore, you know, but when you think about it, that's why when you do the EBITDA, in the 50s, it does feel flattish, maybe a little bit down in terms of overall activity, particularly in agriculture and construction.
David A. Martin: Yes.
David A. Martin: You think about how typical seasonality works in our business Q1 tends to be a larger quarter for sales in the AG segment, So you're shifting a little bit from a seasonality perspective, so it's seasonally down and.
David A. Martin: Therefore.
David A. Martin: But when you think that's why when you do the EBITDA.
David A. Martin: In the fifties it does feel flattish, maybe a little bit down in terms of overall activity.
David A. Martin: Particularly in AG and construction.
Speaker Change: Got it okay, well I appreciate that.
Kirk Ludtke: Got it. Okay. Well, I appreciate that. And I also appreciate the longer-term guidance.
Speaker Change: I also appreciate the longer term guidance.
Paul George Reitz: 250 to 300, including 25 to 30 of synergies. Can you maybe give us a sense for how that breaks down between the two businesses? The 250 to 30, minus the synergies. I imagine the synergies are coming from both sides.
Kirk Ludtke: $2 50 to 300, including 25 to 30 of synergies.
Paul George Reitz: Can you.
Paul George Reitz: Maybe give us a sense for how that breaks down between the two businesses.
Paul George Reitz: The $2 50 to 30 less the synergies.
Paul George Reitz: I imagine the synergies are coming from both sides.
Paul George Reitz: Yes.
Paul George Reitz: Yeah, I mean, I'll say at a high level, we looked at it as a combined company, and that's the way we're approaching it, as the company has and will continue just to move together and operate as one. And so we did not approach it by breaking it out between the two.
Speaker Change: I'll say at a high level, we looked at it as a combined company.
Paul George Reitz: It's the way we're approaching it is the company has and will continue just to move together and operate as one and so we did not approach it from breaking it out between the two.
Paul George Reitz: What we did use as a basis is kind of grounding. Our numbers is if you look at where the companies have performed in the past.
Paul George Reitz: What we did use as a basis for kind of grounding our numbers is, if you look at where the companies have performed in the past, the target of 250 to 300 is grounded in performance that is supported by both companies' historical results, and then you add the synergies on top of it. So that's why we look at it and say, in typical years, this is what Titan can do, is expected to do, but then you throw synergies on top of it, both cost and commercial, again, on both sides of the fence, Titan and Carl Starr, and you start going, we think we can do even more than that. So we wanted to get that out there because that's the way we're talking with our board. And it's important.
Paul George Reitz: The target of $202 50 to 300 is grounded in performance that is supported by both companies' historical results and then you add the synergies on top of it. So that's why we look at it and say a typical years. This is what Titan can do is expected to do but then you throw synergies on top of it both cost and <unk>.
Paul George Reitz: <unk>.
Paul George Reitz: Again on both sides of the fence tight NAND Carl Star and you start going we think we can do even more than that so we wanted to get that out there because that's the way we're talking with our board.
Paul George Reitz: It's important to me our board is substantial shareholders in Titan.
Kirk Ludtke: I mean, our board is a substantial shareholder in Titan, not just with AIP and their recent acquisition, which, again, is a strong signal that they took over Titan shares. But our existing board members represent a substantial shareholder base in Titan. And so I think it's just important information to say this is where the board sees Titan going. This is where management expects Titan to go. And I wanted to share that with investors. But we really don't have it broken down, though, between the two companies. That's just not the way we're looking at Titan going forward.
Kirk Ludtke: Not just with AIP and their recent acquisition, which again is a strong signal that they took titan shares, but our existing board members represent a substantial shareholder base of Titan and so I think it's just important information to say this is where the board sees tightened going this is where the management team expects tightened to go and wanted to share that.
Kirk Ludtke: Investors, but we really don't have it broken down there between the two companies.
Kirk Ludtke: Not the way, we're we're looking at Titan going forward.
Speaker Change: Got it I appreciate and I agree on that.
David A. Martin: Got it. Well, I appreciate it. I, you know, I agree. That's That's an important value, potentially an important valuation metric. Can you talk a little bit about now that you're into this? Uh..., a few months. I mean, can you talk a little bit about the synergies 25 to 30 of those, mostly revenue opportunities, cross selling opportunities, mostly costs, any kind of additional color there?
David A. Martin: That's that syndrome and important.
David A. Martin: Value is potentially an important valley.
David A. Martin: Valuation metric.
David A. Martin: Can you talk a little bit about now that you're into this.
Speaker Change: Uh huh.
David A. Martin: A few months I mean can you talk a little bit about the synergies 25 to 30 of those mostly.
David A. Martin: Revenue opportunities cross selling opportunities, mostly costs any kind of.
David A. Martin: Additional color there.
Speaker Change: Yes targets.
David A. Martin: Yeah, Kirk, it's, it's, it's a very balanced approach to it. There's a significant amount of commercial opportunities. And then when you think about supply chain in all of our buying, our procurement, there are great opportunities as we're a bigger company today. We're able to buy, get buying power, but also look at the number of things that we buy too.
David A. Martin: It's a very good balanced approach to it and there's a significant amount of commercial opportunities.
David A. Martin: And then when you think about.
David A. Martin: Supply chain.
David A. Martin: All of our buying our procurement there is great opportunities as we as we're a bigger company today.
David A. Martin: We're able to get buying power, but also look at.
David A. Martin: The number of things that we buy to and the.
David A. Martin: <unk>.
David A. Martin: The.
David A. Martin: Actually if you think about broadening our supply chain, we had they bought from certain vendors, we bought from certain vendors who would be the <unk>.
David A. Martin: Actually, if you think about broadening the supply chain, they bought from certain vendors, and we bought from certain vendors. The consolidation helps in bringing together the best of both worlds. So we're doing a lot of that. There are certainly cost reductions inside the business in terms of the alignment of our organizations. We'll do that.
David A. Martin: <unk> helps and bringing together the best of both worlds. So we're doing a lot of that there are certainly cost reductions within inside the business.
David A. Martin: The alignment of our organizations.
David A. Martin: We'll do that and then.
David A. Martin: Ultimately, there's the whole sourcing aspect of it. We're a global business, and there are a number of third-party buys that we have around wheels and tires that can be brought in. Or the combination of the two companies can provide more economies of scale, too. So there are a lot of things, but I would tell you it's a fairly balanced approach.
David A. Martin: Ultimately there is the whole sourcing aspect of it.
David A. Martin: We're a global.
David A. Martin: Business and Theres, a number of third party buys that we have around wheels and tires that it can be.
David A. Martin: Brought in or.
David A. Martin: The combination of the two companies can provide more economies of scale too so.
David A. Martin: There's a lot of things and I would spend I would tell you its a fairly balanced approach there's not it's not weighed heavily towards commercial.
David A. Martin: Although they are significant.
Speaker Change: Got it is there a revenue a range on revenue.
Kirk Ludtke: Got it. Is there a revenue, a range of revenue that you would put on that guide?
Kirk Ludtke: But you would put on on that guidance.
Kirk Ludtke: Yeah.
Speaker Change: I would rather wait a little bit before we start putting fund.
David A. Martin: I would rather wait a little bit before we start putting fun tips on that. But, you know, again, we'll provide more guidance on that at a later time. Okay, got it. That's it for me. I appreciate it.
Speaker Change: On that but again, we'll provide more guidance on that.
David A. Martin: Later time.
Kirk Ludtke: Okay, I got it. That's it for me. I appreciate it. Thank you.
Speaker Change: Okay got it that's it for me I appreciate it thank you.
Kirk Ludtke: Yes.
Kirk Ludtke: Thank you.
Kirk Ludtke: The next question comes from Alexander Blanton with clear Harbor asset management. Your line is now open.
Operator: The next question comes from Alexander Blanton with Clear Harbor Asset Management. Your line is now open.
Alexander Blanton: Thank you very much. I appreciate you taking the time to answer my questions.
Alexander M. Blanton: Oh, Thank you very much I appreciate you taking my questions.
Alexander Blanton:
Alexander Blanton: The thing that stood out to me the most was the decremental margin in ag, only 13%. You've talked about this, you've talked about this quite a bit. That's very low for the kind of... Boy, you're the kind you have in that business.
Alexander M. Blanton: The thing that stood out to me the most was.
Alexander Blanton: Yeah.
Alexander Blanton: The decremental margin is only 13% you've talked something you've talked to just two that are already quite a bit.
Alexander Blanton: That's very low for the kind of.
Alexander Blanton: Volume decline you had in that business.
Alexander Blanton: And it's quite a bit different than what happened in the earthmoving segment, which had a decremental margin of 42%. And I'm wondering why that is so different. I see in the text that you mentioned contractual price give back due to lower steel prices. And that was not in the Ag segment; at least it wasn't mentioned. Was that the main difference between the two? If you had to, [inaudible] Control and Ag. Why not? In the earth moving industry, it's basically the same kind of product.
Alexander Blanton: And it's quite a bit different than what happened.
Alexander Blanton: In.
Alexander Blanton: The engineering of the Earthmoving segment.
Alexander Blanton: Which was the decremental margin of 42%.
Alexander Blanton: Yes.
Alexander Blanton: And I'm wondering why that is so different I see in the text.
Alexander Blanton: That you've mentioned contractual price give backs.
Alexander Blanton: Due to lower steel prices.
Alexander Blanton: And that was not in the.
Alexander Blanton: AG segment at least it wasn't mentioned.
Alexander Blanton: Was that the main difference between the two.
Alexander Blanton: If you had.
Alexander Blanton: Great cost.
Alexander Blanton: Throw in AG.
Alexander Blanton: Why not in the earthmoving, it's basically the same kind of product.
Speaker Change: Yes, that's a good question, Alex let me jump in first with a comment and then David.
Paul George Reitz: Yeah, that's a good question, Alex. Let me jump in first with a comment, and then David will touch on the financial aspects. And I know he's kind of touched on it already.
David: We will touch on the financial aspects and I know he is kind of touched on already but you look at AG think about what we have in AG, Alex where we got to <unk>.
David A. Martin: But you look at ag, think about what we have in ag, Alex, where we got the LSW. I mean, that LSW is just a tremendous product in what it delivers to the end user. It's a premium product for us, it's a premium product for the end user, and as well for our customers.
David A. Martin: I'll SW is just a tremendous product and what it delivers to the end user.
David A. Martin: It's a premium product for us, it's a premium product for the end user as well for our customers and so that <unk> serves the marketplace very well in aftermarket.
Paul George Reitz: And so that LSW serves the marketplace very well in the aftermarket. As we've noted in our comments in ag, I mean, the fields are still being planted, the work is still going on, and the LSW is that ultimate product that can take care of the customer's needs. One of the differentials we have in ag versus earth-moving construction is going to be the LSW.
Paul George Reitz: As we've noted in our comments in AG. The fields are still being planted the work is still going on and the <unk> that ultimate product that can that can take care of the customers' needs and so.
Paul George Reitz: One of the differentials, we have in AG versus versus earthmoving construction is going to be <unk>, we have other innovation besides <unk>.
Paul George Reitz: We have other innovations besides LSW. There are other products that serve the marketplace well, so I don't want to make it seem like LSW is the only one. But LSW stands up to test time, and in down markets and up markets, the demand is strong. We see it increasing in many aspects. So really, just one key differential, though, to keep in mind is just the pull through we get from LSW. We do have a strong aftermarket distribution channel.
Paul George Reitz: There's other products that do serve the marketplace well, so I don't want to make it seem like <unk> is it.
Paul George Reitz: Al SW stands up the test of time in down markets up markets. The demand is strong we see it increasing.
Paul George Reitz: In many aspects.
Paul George Reitz: So really just one key differential though to keep in mind is just the pull through we get a L. S. W. We do have a strong aftermarket distribution channel.
Paul George Reitz: We've talked about that, and we've worked very hard to have what we see and what we firmly believe is the best distribution, strong partners servicing the marketplace very well. We're connected to the end users. And so, again, that aftermarket piece in ag is really one of the drivers that is different between EarthMovie and construction. So go ahead, Dave. Yeah, the only thing I was going to add.
Paul George Reitz: We've talked about that and we've worked very hard to have what we see and what we firmly believe is the best distribution channel in North America for large AG.
Dave: Strong partners servicing the marketplace very well were connected to the end users and so again that aftermarket piece and egg.
Paul George Reitz: Is really one of the drivers that is different between earthmoving and construction stuff go ahead, Dave the only thing I was going to add there.
David A. Martin: Yeah, the only thing I was going to add there is that on the EMC side, it's more heavily weighted towards the OEMs and, in particular, in Europe and in Brazil. So you don't have that strong aftermarket opportunity on the EMC, so as the volume declines, you're just much more impacted there versus ag, where we have a good balance of... OEM and aftermarket and aftermarket margins.
David A. Martin: AMC side, it's more heavily weighted towards the Oems and in particular in Europe and in Brazil. So you don't have that has strong aftermarket opportunity.
David A. Martin: On AMC.
David A. Martin: As the volume declines.
David A. Martin: Just much more impacted there versus where we have a good balance of OA.
David A. Martin: OEM and aftermarket and aftermarket margins are good.
David A. Martin: Yeah.
Alexander Blanton: Well, I think I'll take The rest of that is offline because I still don't quite understand what the difference is between the same kind of product in both sectors, and one you had a big decline in margins, and the other you didn't. And much praise to Tim.
Speaker Change: I think I'll take.
Speaker Change: The rest of that offline because I still don't quite understand what the differences with the same kind of product.
Speaker Change: In both sectors and one you had a big decline in margins in the other you did.
Speaker Change: I'm not sure why.
Paul George Reitz: Yeah, before you go any further with it, and they are different products, the majority of our EMC segment is an undercarriage product. It's not wheels and tires. So it is different, and The Undercarriage.
Speaker Change: Before you before you go any further with it they are different products. The majority of our AMC segment is under carriage product.
Tim: Not wheels and tires.
Paul George Reitz: Yeah.
Tim: So it is different and undercarriage.
David A. Martin: It's the undercarriage. Undercarriage. Okay, and what is the effect of these givebacks on lower steel prices in that sector?
Tim: It's been under carriers under care of our business.
David A. Martin: Okay, and what is the effect of these give backs and the lower steel prices.
David A. Martin: In that sector.
David A. Martin: We typically try to line that up obviously, there's still comes down you've got steel prices come down in line, but you don't necessarily always get it exactly.
David A. Martin: We typically try to line that up. Obviously, when steel comes down, you've got steel, you know; your prices come down in line, but you don't necessarily always get it exactly. And, you know, there are leads and lags when you buy steel. So it can be more impactful, you know, in a given month or quarter. It's not tremendous, but there is some of that. But, you know, steel has moved in a reasonably downward fashion in Europe and Asia over the last year.
David A. Martin: Leads and lags it when you buy steel so it can be more impactful.
David A. Martin: Given month or quarter, it's not.
David A. Martin: <unk>, but there is some of that.
David A. Martin: But the steel.
David A. Martin: Has moved in a reasonably down fashion in <unk> and.
David A. Martin: In Europe and Asia.
David A. Martin: Over the last year.
Speaker Change: Okay. Thank you.
Alexander Blanton: The second question is on the... The guidance, and Eva Dahn. What is that in earnings per share for the second quarter?
David A. Martin: Yes.
David A. Martin: Question is on the.
Alexander Blanton: The guidance.
Alexander Blanton: In EBITDA.
Alexander Blanton: Sure.
Speaker Change: What is that in earnings per share.
Speaker Change: For the second quarter.
Speaker Change: Yes, Alex will.
David A. Martin: Yeah, Alex, well, it's going to be, you know, if you think about it, from a tax rate perspective, it shouldn't be totally different. So it should be fairly in line with how we did the first quarter. I don't have that number off the top of my head, but Alan, maybe, can help me out with that one.
Alan Snyder: It's going to be if you think about it.
David A. Martin: From a tax rate perspective, it shouldn't be a totally different so it should be fairly in line with how we did the first quarter I don't have that number off the top of my head, but Alan maybe you can help me out with that okay. So we're going to have basically flat earnings.
Alexander Blanton: OK, so we're going to have basically flat earnings in the second quarter versus Kerr, but the sales are 14% higher. So what's happening there? Yeah, again, that's a little bit of the mix and seasonality in the business in terms of the mix of where the products we're selling. That's primarily it. Okay, so you've modeled that out then.
Alexander Blanton: In the second quarter versus first.
Alexander Blanton: But to sales or 14% higher.
Alexander Blanton: So what's happening there.
Alexander Blanton: Yeah.
Alexander Blanton: Yes, again, thats, a little bit of the mix and seasonality in the business.
Alexander Blanton: In terms of the mix of where the.
Alexander Blanton: What products, we're selling so that's.
Alexander Blanton: That's primarily it.
Speaker Change: Okay, so you've modeled that out yet.
David A. Martin: Okay, so you've modeled that out, then? Yes. Okay. Thank you.
David A. Martin: Yes.
David A. Martin: Okay.
David A. Martin: Yes.
Speaker Change: I am Thank Yous General question, one more question on on that.
Alexander Blanton: This is a general question. One more question on that: why is it that you don't give us the guidance and the results? [inaudible] in EPS as well as in EBITDA. I mean, that's for a lot of people.
Alexander Blanton: Why is it that you don't give us any guidance.
Alexander Blanton: And the results.
Alexander Blanton: Okay.
Alexander Blanton: Uh huh.
Alexander Blanton: And EPS as well as EBITA.
Speaker Change: I mean, that's that's a great question.
David A. Martin: Alex, that's a great question. You know, that's a fair question, and we can look at that in the future, and we'll help you out with that, because most channels really use EPS more than EBITDA. And to get that, we have to calculate it from your numbers. If you're guiding an EB, in other words, the $250 to $300 million in Ibida that you're saying you have a love, termed target for. What is that in EPS? That's what people ask.
David A. Martin: That's a fair question.
David A. Martin: We can look at that in the future.
David A. Martin: Help me out with that.
David A. Martin: Because most analyst really.
David A. Martin: Use EPS more than EBITDA.
David A. Martin: And it could get that we have to calculate it from your numbers.
David A. Martin: Sure.
David A. Martin: In other words, the $250 million to $300 million.
David A. Martin: EBITA that you're saying you have a law.
David A. Martin: Term target for.
David A. Martin: What is that an EPS, that's what people really want to know.
David A. Martin: That's a great question.
David A. Martin: That's a great question. We'll look at that. That would be something you could do in the future.
Speaker Change: Look at that that would be something you could do it in the future. Thank you very much.
Alexander Blanton: Thank you very much. Yeah, thanks, Alex. I appreciate your question.
Speaker Change: Yes, Thanks, Alex I appreciate your questions.
Speaker Change: Thank you.
Paul George Reitz: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Reitz for closing remarks.
Alexander Blanton: This concludes our question and answer session I would like to turn the conference back over to Mr. Wright for closing remarks.
Operator: Yeah, thank you everybody. Appreciate your participation in our Q1 earnings call. Look forward to touching base here in the near future. Thank you.
Reitz: Yes. Thank you everybody appreciate your participation in our Q1 earnings call look forward to touching base here in the near future. Thank you.
Speaker Change: Thank you for attending today's presentation. The conference call has now concluded.
Operator: Thank you for attending today's presentation. The conference call has now concluded.
Operator: Yeah.
Operator: [music].
Operator: Okay.
Operator: [music].