Q2 2024 Titan International Inc Earnings Call
Ladies and gentlemen, the Titan International Inc. 2nd Quarter 2024 Earnings Call will begin shortly. We appreciate your patience.
Operator: 2020 for Ireland school will begin shortly. We appreciate your patience.
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If you'd like to ask a question during the call, please press star followed by 1 on your telephone keypad. And to remove yourself from that question queue, it's star followed by 2. We will begin shortly. Thank you.
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Operator: Thank you.
Operator: Good morning, ladies and gentlemen. Welcome to the Titan International Inc second call to 2020 for Ireland's Conference School. At this time, all participants have been prepared to join us. We are placed on 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 operable assist you.
Operator: ?? ?? Good morning, ladies and gentlemen, and welcome to the Titan International Inc. second quarter 2024 earnings conference call. At this time, all participants have been placed on 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, Financial Planning, and Investor Relations for Titan. Mr. Snyder, the floor is yours.
Alan Snyder: It is now more pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Investor Relations to Titan.
Alan Snyder: 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.
Alan Snyder: We firmly believe improving conditions are a matter of when, not if, as the secular demand drivers for the economic sectors we serve remain very much intact. The last item I'll touch on is our innovative product portfolio. That is something we're proud of and a key differentiator here at Titan. With our products, such as LSW tire wheel assemblies, Over the last few years, we've also devoted significant resources to optimizing our operations. The second theme I noted at the outset of my comments was that our aftermarket business is one of the positives helping to offset some of the OEM weakness we are facing.
Alan Snyder: Mrs. Snyder, the floor is yours. Thank you, Carly. Good morning. I'd like to welcome everyone to Titan's second quarter, 2024 earnings call. On the call of me today are Paul Reitz, Titan's President and CEO, and David Martin, Titan Senior Vice President and CFO.
Alan Snyder: 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 is also filed with the Securities and Exchange Commission yesterday. 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 within the safe harbor statement included in the earnings release attached to the company's Form 8-K filed earlier, as well as their latest Form 10-K and Forms 10-Q, all of which have been filed with the SEC.
Speaker Change: 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.
can be found within the Safe Harbor Statement included in the earnings release attached to the company's Form 8K filed earlier, as well as their latest Form 10K and Forms 10Q, 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.
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.
Alan Snyder: The Q2 earnings release is available on the company's website.
Alan Snyder: 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.
Paul Reitz: I would now like to turn the call over to Paul. Thanks, Alan. Good morning. Overall, Titan had a solid quarter performance, generating good cash flow. Those of you that have been finally tightened or the ag industry are likely well aware that industry conditions are difficult. Yet, there are really several key positive things for Titan that I want to highlight. First, our management team here at Titan has a deep reservoir of experience operating a cyclical business. And the actions we have taken over the past several years have a company well positioned to manage through the cyclical trough and continue to drive accelerating growth as macro conditions improve.
Speaker Change: Overall Titan had a solid quarter performance generating good cash flow.
Speaker Change: Those of you that have been following Titan or the ag industry are likely well aware that industry conditions are difficult. Yet there are really several key positive things for Titan that I want to highlight.
Paul Reitz: Group. We firmly believe improving conditions are a matter of win, not if, as a secular demand drivers for the economic sectors we serve remained very much intact. Second, we have a strong aftermarket business in both consumer and ag, fortified by market-leading one-stop shop strategy, which we have talked about on prior calls. That strategy is helping offset some of the OEM-centric weakness in the marketplace, and we expect it to be a strong attribute through all phases of the economic cycle. Beyond the strategic importance of the aftermarket, which was strengthened by our Carl Star acquisition, I also would like to say that the integration is progressing quite well.
Paul Reitz: The last item I'll touch on is our innovative product portfolio. That is something we're proud of and a key differentiator here at Titan, with our products such as LSW tire wheel assemblies, which we've noted still have plenty of opportunity for growth both in ag and potential new markets such as Canada, Brazil, and the military. So to provide some content context on current market conditions, really the primary headwinds can be summarized as interest rates, where we're seeing market participants await potential rate cuts and then farmer income. Agriculture equipment is a significant purchase for farmers, stayed in the obvious there, and financing costs are an important part of that equation.
The last item I'll touch on is our innovative product portfolio. That is something we're proud of and a key differentiator here at Titan, with our products such as LSW tire wheel assemblies.
which we've noted, still have plenty of opportunity for growth both in ag and potential new markets such as Canada, Brazil, and the military.
Agriculture equipment is a significant purchase for farmers, stating the obvious there, and financing costs are an important part of that equation.
Paul Reitz: The prospect of rates coming down as soon as this fall has led many to defer such purchases, and OEMs have responded by reducing their production schedules. Then you look at the USDA, which forecast 2024 net farmer income to drop 25% from 23, following a 16% decline from 2022 to 23. That would mark the two largest dollar value drops in history. That has certainly created some paralysis within the industry, and we're seeing some ag tire volumes down to levels well below the last cyclical trough in 2019. And again, this is primarily due to these reduced OEM purchases, along with some of that inventory stocking that is taking place.
Paul Reitz: You know, as recently as two years ago when we were seeing record-setting sales, I don't think many of us would have predicted volumes falling this far, this quickly. But even so, as we look back on those periods, the Titan has used that strong cash flow in 21, 22, and then again this year to rapidly deliver our balance sheet, knowing that doing so would create significant strategic and financial flexibility for the future. So if you look prior to acquiring Karl Starr, our leverage was down to one time. From there, we were at more than 10 times as recently as 2020.
Speaker Change: The Titan has used that strong cash flow in 21, 22, and then again this year to rapidly delever our balance sheet, knowing that doing so would create significant strategic and financial flexibility for the future.
Speaker Change: So if you look prior to acquiring Carl Starr, our leverage was down to one time.
Speaker Change: From there, we were at more than 10 times as recently as 2020.
Paul Reitz: And then today, even after the Karl Starr acquisition, we're still at a very reasonable 1.8 times. You know, of course, David will expand further on our balance sheet and our capital allocation, but the point is that I really want to emphasize that, compared with prior cyclical troughs, Titan is in a significantly better position through this part of the cycle than the past. Over the last few years, we've also devoted significant resources to optimizing our operation. through this consistent effort to drive process efficiency, and you've seen it result in a better margin profile that we're seeing in both good times and bad.
Speaker Change: through this part of the cycle than the past.
Speaker Change: Through this consistent effort to drive process efficiency, you've seen it result in a better margin profile that we're seeing in both good times and bad.
Paul Reitz: As we work through the truck portion of the cycle, that improved margin profile is driving our ability to continue to generate positive free cash flow. So, to turn it to the secular demand drivers for the sectors we serve, we really see no reason to think anything has changed for the long term and that those positive attributes are still there. Global population continues to increase. That's going to drive demand for food. While AI is the talk of the town, and it's causing changes in some industries, farming still requires putting seeds in the ground and nurturing plants through to harvest.
Speaker Change: As we work through the trough portion of the cycle, that improved margin profile is driving our ability to continue to generate positive free cash flow.
Speaker Change: So turning to the secular demand drivers for the sectors we serve, we really see no reason to think anything has changed for the long term and that those positive attributes are still there.
Speaker Change: While AI is the talk of the town and is causing changes in some industries, farming still requires putting seeds in the ground and nurturing plants through to harvest.
Paul Reitz: Doing so requires capital equipment such as tractors, sprayers, combines. Farmers continue to work their fields to feed the world and use the equipment that in turn continues to age. That drives demand for replacement tires and slowly but surely creates pent-up demand for new equipment over time. And our LSWs make both new and older model equipment perform better. The second theme I noted at the outset of my comments was that our aftermarket business is one of the positives helping to offset some of the OEM weakness we are facing. Stating the obvious, one of the good things about the tire business is they need to be replaced over time.
Speaker Change: Doing so requires capital equipment such as tractors, sprayers, combines. Farmers continue to work their fields to feed the world and use the equipment that, in turn, continues to age.
Speaker Change: And our LSWs make both new and older model equipment perform better.
Speaker Change: The second theme I noted at the outset of my comments was that our aftermarket business is one of the positives helping to offset some of the OEM weakness we are facing.
Speaker Change: Stating the obvious, one of the good things about the tire business is they need to be replaced over time.
Paul Reitz: In both our consumer and ag segments, people may be deferring purchases of new machinery, again, such as tractors, lawnmowers, ATVs, but they're still using their equipment. And as those tires on those old machines were out, they need replacing. Titan is well positioned because we have built a strong global aftermarket presence. And our recent acquisition adds to that strength with the one-stop shop strategy that is the only expanded our aftermarket offering further. We are seeing our consumer aftermarket hold up quite well at this point, which is a testament to our dealers and wholesalers in this segment.
Speaker Change: In both our consumer and ag segments, people may be deferring purchases of new machinery, again, such as tractors, lawnmowers, ATVs, but they're still using their equipment. And as those tires on those old machines wear out, they need replacing.
Titan: Titan is well positioned because we have built a strong global aftermarket presence and our recent acquisition adds to that strength with a one-stop shop strategy that has only expanded our aftermarket offering further.
Paul Reitz: And the resilience of our aftermarket business, even when OEM market conditions are challenged. Using that to give you an update on the Carl Start integration, I'm very pleased to see that it continues to go very well. As our teams are working together to create additional value for our customers and shareholders. It is important to note that Carl Start's aftermarket customers, especially wholesalers and distributors, are mainly complimentary to Titan dealers. This creates a great opportunity to cross-sell Titan products within Carl Start's network. And the other side of the coin is we would sell Carl Start products within Titan dealers.
Speaker Change: This creates a great opportunity to cross-sell Titan products within Carl Starr's network. And the other side of the coin is we would sell Carl Starr products within Titan dealers.
Paul Reitz: Our sales and engineering teams have been working extensively on this effort, but we really only scratch the surface since we're only six months in at this point. There are also wide open opportunities to sell Carl Start products in Europe and Latin America where Titan currently has limited consumer presence. And at the same time, Carl Start can benefit from existing Titan distribution there. These are just a couple of examples of commercial opportunities presented from the acquisition. And David will touch further on cost synergies, which I will at least note at this time are progressing nicely as well.
Alan Snyder: Our sales and engineering teams have been working extensively on this effort, but we've really only scratched the surface since we're only six months in at this point. There are also wide open opportunities to sell Carl Starr products in Europe and Latin America, where Titan currently has limited consumer presence. And at the same time, Carl Starr can benefit from existing Titan distribution there. In our press release, I detailed how our LSW tires provide a number of tangible benefits for farmers, ranging from direct cost savings on fuel, reduced soil compaction, and to a more comfortable ride in both the field and on the road.
Speaker Change: There are also wide-open opportunities to sell Carl Starr products in Europe and Latin America, where Titan currently has limited consumer presence, and at the same time, Carl Starr can benefit from existing Titan distribution there.
Paul Reitz: The final theme I discussed at the beginning of the call is we also continue to prioritize investments in R&D. As our innovation pipeline is a key difference here in Titan and in the field with R&U. In our press release, I detailed how our LSW tires provide a number of tangible benefits for farmers, ranging from direct cost savings on fuel, reduced soil compaction, and to a more comfortable ride in both the field and on the road. We think we still have plenty of room to increase LSW penetration in the ag market, and I'm looking forward to an opportunity to meet with several key Canadian farmers that also happen to be key influencers in the farming community.
Speaker Change: In our press release, I detailed how our LSW tires provide a number of tangible benefits for farmers, ranging from direct cost savings on fuel, reduced soil compaction, and to a more comfortable ride in both the field and on the road.
Alan Snyder: We think we still have plenty of room to increase LSW penetration in the ag market. And I'm looking forward to an opportunity to meet with several key Canadian farmers that also happen to be key influencers in the farming community. I use this opportunity in Canada as just an example of how Titan sees a continuing growth path ahead for LSWs to increase penetration there and abroad in Brazil while also continuing to grow our base in the U.S.
Titan: We think we still have plenty of room to increase LSW penetration in the ag market. And I'm looking forward to an opportunity to meet with several key Canadian farmers that also happen to be key influencers in the farming community.
Paul Reitz: Creating enthusiasm with end users is what got us here with LSW. It is important for us as it continues to create buy-in with the dealers that serve those farmers and, in turn, the OEMs. The large farmers I'll be visiting in Canada have a lot of influence amongst their peers, and people do pay attention to what they are saying. I use this opportunity in Canada as just an example of how Titan can seize a continuing growth path ahead for LSW to increase penetration there and abroad in Brazil while also continuing to grow our base in the U.S.
Speaker Change: Creating enthusiasm with end-users is what got us here with LSW and is important for us as it continues to create buy-in with the dealers that serve those farmers and in turn the OEMs.
Speaker Change: The large farmers I'll be visiting in Canada have a lot of influence amongst their peers, and people do pay attention to what they are saying.
Paul Reitz: Beyond LSW, there are other significant areas of innovation going on here at Titan. We continue to work on those extensively across our portfolio and wheel tires and undercarriage using the strength of our Titan Carls, darn ITM brands, and I really look forward to sharing more of that with all of you in the future and more specifically with our customers and users that use our products.
Speaker Change: Beyond LSWs, there are other significant areas of innovation going on here at Titan. We continue to work on those extensively across our portfolio in wheels, tires, and undercarriage.
Paul Reitz: Before I hand the call off to David, I want to spend a few more minutes expanding on market conditions in our key geographic areas. In the U.S. I already noted how interest rates and farmer income continue to be a significant headwind. Speaking about conditions in the EMC segment, I mean purchases of construction equipment are impacted by some of those same macro issues as ag equipment. But conversely, that end market demand for EMC equipment also has positive differences tied to infrastructure spending and demand from minerals, and at this time we're seeing that segment hold up better for us.
Paul Reitz: Outside the U.S., European farmer sentiment continues to be weaker due to the ongoing geopolitical concerns, particularly the potential increase of some protectionist trade policy in that region. In South America, many of you are aware of the significant flooding that occurred in Brazil from late April into May. It hit Brazil's southernmost state, Rio Grande de Soil, that happens to be home to a significant production of agricultural economy and come out of these, excuse me. And we'll have a negative impact on the current year demand and what it was already a down market. So really taking that full circle in summary, macroeconomic conditions continue to be difficult.
Speaker Change: In South America, many of you are aware of the significant flooding that occurred in Brazil from late April into May.
Speaker Change: It hit Brazil's southernmost state, Rio Grande do Sul, that happens to be home to a significant production of agriculture economy that come out of these, excuse me, and will have a negative impact on the current year demand in what is already a down market.
Speaker Change: So really taking that full circle in summary, macroeconomic conditions continue to be difficult.
Paul Reitz: But really thanks to the superb efforts of everyone on the Titan team, what we've built here through recent years, the connection we have with our customers and our end users, we are continuing to produce solid results. We're well positioned for growth as cyclical conditions improve, and we firmly believe they will.
Speaker Change: We're well positioned for growth as cyclical conditions improve, and we firmly believe they will.
David Martin: With that, I would now like to turn the call over to David. Thank you, Paul, and good morning. It's good to catch up with everyone on Titan again this quarter. We've been intensely focused on protecting our margins and cash flow as it worked through the increasingly challenging market conditions.
Speaker Change: With that, I would now like to turn the call over to David.
David: Hey, thank you, Paul, and good morning, and it's good to catch up with everyone on Titan again this quarter.
David Martin: Disgust. I'll start with a brief review of the key items in the second quarter and then provide more detail in our margin in cash flow strategies. Revenue is in the second quarter of 532 million, with adjusted EBITDA 49 million in free cash flow of 53 million. We're particularly satisfied to have significantly exceeded our free cash flow guidance for the quarter. We've been very focused on our aftermarket business, and that it's been central to our M&A and investment strategies. The results that we're seeing validate the decisions we have been making and that will be even more impactful in the long term.
David: Revenues in the second quarter were $532 million with adjusted EBITDA of $49 million and free cash flow of $53 million.
Alan Snyder: We've been very focused on our aftermarket business, and that has been central to our M&A and investment strategy. Our adjusted gross margin for Q2 was 16.5% compared to 17.9% a year ago, reflecting lower sales.
Speaker Change: We've been very focused on our aftermarket business, and that has been central to our M&A and investment strategies.
Speaker Change: The results that we're seeing validate the decisions we have been making and that will be even more impactful in the long term.
David Martin: Our adjusted gross margin for Q2 was 16.5 percent compared to 17.9 percent a year ago, reflecting lower sales. In order to facilitate an apples-to-apples comparison, second quarter 2024 gross margin was adjusted to exclude amortization of stepped-up inventory values that rolled through Q2 from the acquisition. On a segment basis, Ag segment adjusted gross margin was 15.5 percent, Consumer adjusted gross margin was 21.8 percent, and EMC adjusted gross margin was 13 percent. Our FGNA expenses for the second quarter were 52 million, or 9.7 percent of sales, compared to 35 in the prior year, or 7.2 percent of sales.
David Martin: Again, with the acquisition, FGNA increased; without that, the expenses related to Carl Starr, FGNA would have been down 1 percent year over year. R&D expenses were 4.2 million in the second quarter compared to 3.2 million a year ago. I'll just reiterate here that our ability to continue to fund R&D is one of the many benefits that follow from our ability to continue to drive, keep free cash flow, and we're continuing to focus on those investments that will drive market innovation for years to come. Our operating income was 22.3 million for the quarter, and operating cash flow was 71 million.
Speaker Change: Operating income was $22.3 million for the quarter and operating cash flow was $71 million.
David Martin: Working capital management has been a core strength of our team over the last number of years. This was demonstrated in the second quarter with 44 million in positive contribution to operating cash flow. Second quarter CapEx totaled 17.6 million compared to 15.9 million during the prior year period. This included 4.5 million related to CapEx with the acquisition. As we noted in the earnings release, we intend to reduce the pace of CapEx investments in the second half in response to the weaker demand environment and will continue to prioritize a flexible posture as we navigate the current environment like we normally do.
Speaker Change: Second quarter CapEx totaled $17.6 million compared to $15.9 million during the prior year period.
David Martin: We also used cash to fund our share repurchase program, buying back 775,000 shares for a total of 6.4 million during the quarter, and we have approximately 9.6 million of available capacity remaining on our share repurchase program. We will continue to be active with share repurchases in the third quarter. Net debt at quarter and was 326 million or 1.8 times leverage compared to 370 million on March 31st. A very healthy improvement quarter to quarter. Our priorities continue to be the paydown of debt we took on related to the acquisition, and we will pace that based on our cash.
Alan Snyder: We will continue to be active with share repurchases in the third quarter. Net debt at quarter end was $326 million, or 1.8 times leverage. We're also pushing hard to realize the various acquisition synergies we outlined last quarter. Immediate focus, areas of focus include redundant back office areas, raw materials, and procurement, among other things. The more we can hold margin as a result of these strategies, the better positioned we are to generate positive cash flow, and that is precisely our focus.
Speaker Change: Our priorities continue to be the pay down of debt we took on related to the acquisition and we will pace that based on our cash flow. Beyond that, we will continue the strong focus on our investments in R&D and strategic growth.
David Martin: overflow. Beyond that, we will continue to the strong focus on our investments in R&D and strategic growth. Along with opportunistic share repurchases, it will be a balanced approach. The second quarter included a significant increase in our effective tax rate, which was 81.9% on a reported basis and 65% on an adjusted basis. This was due to the impact of where our different geographic entities produced profits and losses. With the reduction in our U.S. operations profitability expected in 2024. we're now faced with additional nondeductible interest expense. We also have some temporary negative impacts of the tax structure of the acquisition, which we are actively managing through this year.
Speaker Change: along with opportunistic share repurchases. It will be a balanced approach.
Speaker Change: This was due to the impact of where our different geographic entities produce profits and losses. With the reduction in our U.S. operations profitability expected in 2024, we're now faced with additional non-deductible interest expense.
Speaker Change: We also have some temporary negative impacts of the tax structure of the acquisition, which we are actively managing through this year.
David Martin: In 2024, we're seeing more challenge conditions on our tax rate, and it will be higher than normal. Cash taxes continue to be significantly lower, though, than the reported income tax expense. For the first six months of 2024, our cash taxes were 12 million. And I expect the full year cash taxes will be in the range of 20 million to 20 to 25 million. Now, looking ahead to the third quarter in the remainder of the year, we're cautiously optimistic that some of the macro headwinds will start to evade, but we're managing the business as if it won't.
Speaker Change: Now looking ahead to the third quarter and the remainder of the year, we're cautiously optimistic that some of the macro headwinds will start to abate, but we're managing the business as if it won't.
David Martin: When and if the Fed will cut interest rates seem to shift with the each round of economic news, so we're focusing on the things within our control. That means aggressively managing our labor and our production schedules, and we have strong plans around exhausting the raw materials and other input costs. We're also pushing hard to realize the various acquisition synergies we outlined last quarter. Immediate focus areas of focus include redundant back office areas, raw materials procurement, among other things. Regarding the latter, various inputs will see contracts and set moving forward, and as that occurs, we expect to find more savings as market prices have come down.
Speaker Change: When and if the Fed will cut interest rates seem to shift with each round of economic news, so we're focusing on the things within our control. That means aggressively managing our labor and our production schedules, and we have strong plans surrounding sourcing of raw materials and other input costs.
Speaker Change: We're also pushing hard to realize the various acquisition synergies we outlined last quarter. Immediate focus, areas of focus include redundant back office areas, raw materials, procurement, among other things.
Speaker Change: Regarding the latter, various inputs will see contracts sunset moving forward, and as that occurs, we expect to find more savings as market prices have come down.
David Martin: During the second quarter, we've realized 2 million in cost savings and other acquisitions-related synergies on our early wins. With our aftermarket business, fairing better than the OEM's given the various dynamics we've been discussing, that higher margin sales mix also adds a positive bias to our margins that can offset some of the weakness elsewhere. The more we can hold margins as a result of these strategies, the better position we are in to generate positive cash flow, and that is precisely our focus. In the second half, we'll manage working capital very diligently, as usual. In discussing the capex earlier, I noted that we would tend to throttle back on some of that spend in the third quarter in order to preserve as much cash flow as possible.
Speaker Change: During the second quarter, we realized $2 million in cost savings and other acquisition-related synergies on our early wins.
Speaker Change: With our aftermarket business faring better than the OEM side given the various dynamics, we've been discussing that higher margin sales mix also adds a positive bias to our margins.
Alan Snyder: In the second half, we'll manage working capital very diligently as usual. Also, as we noted in the earnings release and our commentary, our leverage ratio is very manageable, so interest expense is not nearly the burden that it was during the last industry downturn.
Speaker Change: In discussing the CapEx earlier, I noted that we would intend to throttle back on some of that spend in the third quarter in order to preserve as much cash flow as possible.
David Martin: Also, as we noted in the earnings release and our commentary, our leverage release ratio is very manageable. So interest expense is not nearly the burden that it was during the last industry downturn. All these things will help us to build strength through the cycle. Moving on to our financial guidance. With conditions remaining in a state of uncertainty, we have chosen to continue with quarterly guidance again this quarter. Our guidance ranges for the third quarter are revenues of 450 to 500 million, adjusted EBITDA of 25 to 30 million, free cash flow of 20 to 30 million.
Speaker Change: Also, as we noted in the earnings release and our commentary, our leverage ratio is very manageable, so interest expense is not nearly the burden that it was during the last industry downturn. All these things will help us to build strength through the cycle.
David Martin: and CapEx of 10 to 15 million.
David Martin: Thank you for your time this morning, and your attention to what matters for Titan.
Speaker Change: Thank you for your time this morning and your attention to what matters for Titan. We'd now like to turn the call back over to Carly, our operator, for the Q&A session.
Operator: We now like to turn the call back over to Carly, our operator, for the Q&A session. Thank you. We will now begin the question and answer session. To ask a question, please press star for the one on your telephone keypad. If you're using speakerphone, please ensure that you pick up your handset before pressing the keys, and to withdraw your question, please press star, then two.
Operator: Thank you. We will now begin the question and answer session. To ask a question, please press star followed by one on your telephone keypad. If you're using speakerphone, please ensure that you pick up your handset before pressing the keys, and to withdraw your question, please press star then two.
Stephen Ferazani: Our first question comes from Steve Feranzi, both to Dorothy.
Stephen Ferazani: Steve, your line's not with him. Thank you, morning, Paul. David, appreciate all the detail on the call.
Stephen Ferazani: I think I asked about this the last quarter, but I'm going to ask again because the numbers that seem odd to me are in the EMC segment, which, Paul, you noted is holding up a lot better because the infrastructure and mining sales are down only 5%. But you know, sales are down, what about 9 million. Your gross profit came down 8 million. Your segment income came down to 7.5 million.
Speaker Change: Thank you. Morning, Paul, David. Appreciate all the detail on the call. I think I asked about this the last quarter, but I'm going to ask again, because the numbers that seem odd to me are in the EMC segment, which, as Paul, you noted, is holding up a lot better because of infrastructure and mining. Sales are down only 5%.
Speaker Change: But, you know, sales were down, what, about $9 million? Your gross profit came down $8 million. Your segment income came down $7.5 million. Given that you're not seeing a collapse in that market, those decremental margins seem...
Paul Reitz: Given that you know, you're not seeing a collapse in that market; those detrimental margins seem really high. Is there something else going on there? No, it's a bit of a mix of the volume that we have going through the segment. We had some challenges within our wheel and tire business, particularly here in the U.S. during the quarter. ITM itself is performing well. It had a quarter where it performed pretty much on par with where we expected them to be and actually better than the first quarter. So it's really entirely around the mix of the products that we sell more than anything.
Unnamed Speaker: Really high. Is there something else going on here?
Speaker Change: really high. Is there something else going on there?
Speaker Change: Now it's a bit of a mix of the volume that we have going through this segment. You know we had we had some challenges within our wheel and tire business particularly here in the US during the quarter.
Speaker Change: So it's really entirely around the mix of the products that we sold more than anything. We do have, you know, steel prices have come down. You don't have as much leverage on that this quarter either. So those are really the key elements.
Paul Reitz: We do have, you know, steel prices have come down. You don't have as much leverage on that this quarter either. So those are really the key elements.
Paul Reitz: I mean, that doesn't cover why very gross profit down almost the same amount of sales. Yeah, I'm just saying that the mix of the products where we had the higher margin products are the ones that we lost this quarter, and we have challenges in our production with volume on the wheel and tire part of the business.
Unnamed Speaker: you know, almost the same amount of sales.
Paul Reitz: Do you expect any kind of margin improvement in what would be seasonally slower, second half? I would expect margins to be pretty solid for the second half of the year, particularly for our teams. Okay, thanks for that.
Unnamed Speaker: Do you expect any kind of margin improvement in what would be a seasonally slow or second half?
Speaker Change: Do you expect any kind of margin improvement in what would be seasonally slower second half?
Paul Reitz: Again, and I know you may not want to say this, but can you tell me how Carl stars performing year over year? Qualitatively, absolutely. I mean, I would say that, as we note in our comments, I mean, Carl Star is performing very well, and there's solid reasons behind it. I mean, the business they're in with their one-stop strategy, they do an exceptional job, and with the aftermarket focus they have in the consumer segment, it's just they're doing an exceptional job, and the market that they're in via the aftermarket, as we noted, is holding up really well.
Speaker Change: They're in, with their one-stop strategy, they do an exceptional job. And with the aftermarket focus they have in the consumer segment.
Speaker Change: It's just they're doing an exceptional job and the market that they're in via the after or the segment they're in via the aftermarket as we noted is holding up
Paul Reitz: So, I think on both performance and integration, and then kind of throw in their synergies that David talked about six months in. I mean, we're very happy with where we're at. We're not even six months on; I'm overstating that.
Speaker Change: really well. So, you know, I think on both performance and integration and then kind of throw in their synergies that David talked about six months in, I mean we're very happy with where we're at.
Paul Reitz: Can you talk about the drivers of recovery? This provided you a little bit more diversification. Obviously, with Ag, you pointed to interest rates and farmer income. What's the recovery?
Unnamed Speaker: What's the recovery? What's the catalyst for a recovery in some of these consumer markets for Colostar? And is it differentiated significantly from ag?
Paul Reitz: What's the catalyst for recovery in some of these consumer markets for call star? And is it differentiated significantly from Ag? Yeah, I'll answer that two ways.
Paul Reitz: First, I think the key thing to point out is how Titan is rebuilding itself and diversifying our portfolio as a company. And this acquisition was a great springboard for that gave us exposure into complementary products. It gave us good exposure into the aftermarket. Now, those are things that all Titan legacy Titan was building on. I mean, we have an exceptional aftermarket business for tires in North America and South America. But this just really brings us to that next level. It opens up cross selling opportunities, as I noted. And so I would say, let's look at the diversification of Titan going forward, along with the fact that we can take that one stop shop, our incredible global portfolio; we can grow within it.
David: Yeah, I'll answer that two ways. First, I think the key thing to point out is how Titan is rebuilding itself and diversifying our portfolio as a company.
Speaker Change: gave us good exposure into the aftermarket. Now those are things that all Titan, legacy Titan was building on. I mean we have an exceptional aftermarket business for tires in North America and South America.
Paul Reitz: We look to grow the brands that we have, the manufacturing opportunities that we have with partners and joint ventures. And so, I mean, I look at the future as almost, you know, kind of like this endless picture that we're starting to fill in as we, every time we get together and talk about it here at Titan. But, you know, to answer your question about the drivers within that, interest rates are big. There's no doubt about it. I think the news that we're starting to see with interest rates looking like they're going to crack here is definitely a positive.
Speaker Change: There's no doubt about it. I think the the news that we're starting to see with interest rates looking like they're going to crack here is definitely a positive and You know with with interest rates moving
Paul Reitz: And, you know, with interest rates moving, you know, I think those deferred purchases will get a little shot in the arm that'll benefit it.
Paul Reitz: But again, I think we got a look here at Titan towards the long run. I mean, the long term and in the long run, I think we're in a really good position for a lot of growth opportunities that can come out of the newly combined company.
Paul Reitz: As the markets, and you've been through these cycles many times, Paul, as the markets start to recover, how quickly will channels need to restock? How fast can that come? Or do we still need to work? Will we need to work through some inventory first? I would rely on history to answer that question and say that, you know, our business doesn't go up or down 5%. When it goes down, it goes down more than that. And part of that is because they bleed the inventory out of it. And we've seen OEMs be very aggressive during this cycle to get inventory out of the equation, both their own and within their dealer networks.
Speaker Change: Or do we still need to work through some inventory first?
Speaker Change: I'm going to rely on history to answer that question and say that our business doesn't go up or down 5%.
Speaker Change: When it goes down, it goes down more than that, and part of that is because they bleed the inventory out of it, and we've seen OEMs be very aggressive during this cycle to get inventory out of the equation, both their own and within their dealer networks.
Paul Reitz: Typically, what then that means is when the catalyst kicks into gear, you get that additional boost because inventory levels are not where they need to be. Dealers panic about losing sales. OEMs panic that their dealers don't have the product on their lot when people demand it. And so you see the order up to move rapidly. And so that's where I think our experience is really important at Titan. I can say on behalf of the entire team, we're taking the actions needed quickly, effectively now, where we don't have to get together in a team in a room and fight with each other or how to do it.
Speaker Change: you get that additional...
Speaker Change: boost because inventory levels are not where they need to be. Dealers panic about losing sales, OEMs panic that their dealers don't have the product on their lot when people demand it, and so you see the order uptick.
Speaker Change: I can say on behalf of the entire team, we're taking the actions needed.
Paul Reitz: We know what we need to do. But also what I've instructed my team to be prepared for is that when the market comes back. We better be prepared to serve our customers. They're counting on us. They expect it from us. We have the biggest, broadest portfolio in the industry. And so when that uptake happens, Steve, that you're talking about, I expect my team and I expect our company to be there for our customers as well. So it's, it's a fine line. It's an art, not a science, of how we, you know, we managed to this cycle.
Speaker Change: We better be prepared to serve our customers. They're counting on us, they expect it from us. We have the biggest, broadest portfolio in the industry.
Speaker Change: And so when that uptick happens, Steve, that you're talking about, I expect my team and I expect our company to be there for our customers as well.
Steve: It's a fine line. It's an art, not a science of how we manage through this cycle, but I do expect when those catalysts kick into gear that there will be some inventory restocking that takes place. That's historically what we've seen.
Paul Reitz: But I do expect when that catalyst kicks into gear that there will be some inventory. It's very restocking that takes place. That's historically what we've seen. Right.
Stephen Ferazani: Thanks, Paul. Thanks, David. Yeah, thanks. Thanks.
Unnamed Speaker: Yeah, thanks, Steve.
Paul: Thanks, Paul. Thanks, David.
Thomas Kerr: Next question comes from Tom Kerr of Zack's Capsule. Excuse me, Zack, small cap research.
Speaker Change: [inaudible]
Speaker Change: Our next question comes from Tom Kerr of Zach's Small Cap Research. Tom, your line is now open.
Thomas Kerr: Tom, your line is not open. Good morning, guys. We'll follow up on that last answer. And we talk about the aging agriculture equipment. And it has to be replaced. We know the catalysts are, but is there any way for the time frame on that? You know, a number on that. We've gotten six months, two years, ten years. How can we look at that? I would say with, with farmer income, we got to watch that first. Okay. So let's, let's start there. This year's crops look solid. We mentioned Brazil with what's going on with the flooding, but it looks like there's plenty of stocks in place that I think we kind of go through this year being what it is without a significant amount of change.
Tom Kerr: Good morning guys. I just want to follow up on that last answer and you're talking about the aging agriculture equipment and it has to be replaced. We know the catalysts are
Tom Kerr: But is there any way to put a time frame on that, you know, a number on that? Are we talking six months, two years, ten years? You know, how can we look at that?
Unnamed Speaker: I would say with this year's crops look solid. We mentioned Brazil and what's going on with the flooding.
Speaker Change: I would say with...
Speaker Change: with Farmer Income, we gotta watch that first. Okay, so let's start there.
Speaker Change: This year's crops look solid. We mentioned Brazil with what's going on with the flooding, but it looks like there's plenty of stocks in place.
Unnamed Speaker: But it looks like there are plenty of stocks in place that I think we kind of go through this year being what it is without a significant amount of change. But then I do think in 25 years, you look at farmer income first. You look at interest rates. Then you start looking at the age of the fleet.
Speaker Change: I think we kind of go through this year being what it is without a significant amount of change. But then, you know, I do think in 25 you look at farmer income first, you look at interest rates.
Paul Reitz: But then, you know, I do think in 25, you look at farmer income first. You look at interest rates. Then you start looking at the age of the fleet. Updated equipment is good for farmers. Updated technology and what we offer with wheels and tires is good for farmers. They can make more money via both. You know, so when we talk about LSWs, it's an income boost to our customers. It's not just, you know, something that's nice to have. And so, you know, as you look to next year, then I think when those catalysts kick in, then you see that inventory restocking take place.
Unnamed Speaker: Updated equipment is good for farmers. Updated technology and what we offer with wheels and tires is good for farmers. They can make more money via both. So when we talk about LSWs, it's an income boost for our customers. It's not just something that's nice to have. And so as you look to next year, then
Speaker Change: Then you start looking at the age of the fleet. Updated equipment is good for farmers. Updated technology and what we offer with wheels and tires is good for farmers. They can make more money via both.
Speaker Change: So when we talk about LSWs, it's an income boost to our customers. It's not just something that's nice to have. And so, as you look to next year, then...
Speaker Change: I think when those catalysts kick in, then you see that inventory restocking take place. So, it's not 10 years away. I would say at this point, I don't see much going on for the rest of this year.
Paul Reitz: So it's not 10 years away. I would say at this point, I don't see much going on for the rest of this year. But as we move the calendar into next year, I think it's when you start looking at those indicators and those forecasts closely to give you a better education in 25 to see when things uptick. So I think right now it's a little early to predict. I don't think this is a deep, long, prolonged downturn. But I would say for the rest of this year, there's not going to be much catalyst to drive change.
Speaker Change: But as we move the calendar into next year, I think it's when you start looking at those indicators and those forecasts closely to give you a better indication in 2025 to see when things uptick. So I think right now it's a little early to predict the exact time frame of when it upticks, but I don't think this is a deep, long...
Speaker Change: Prolonged downturn, but I would say for the rest of this year, there's not going to be much catalyst to drive change.
Thomas Kerr: Sounds good. That helps.
Thomas Kerr: And on the consumer segment, is there a way to let us know what the legacy business revenue decline would have been, you know, without Call Star. Do you have a number sort of same start sales decline in the consumer legacy business? I don't certainly don't believe it was. I don't have that number up top of my head. But the, you know, it wasn't, it's not as deep a trove as we're seeing in agriculture. You know, as you saw, not as much a deep impact on the EMC either. So I don't have this precise figure for you, but it's down.
Speaker Change: Sounds good, that helps. And on the consumer segment, is there a way to let us know what the legacy business revenue decline would have been, you know, without Carl Starr? Do you have a number for the same star sales decline in the consumer legacy business?
Thomas Kerr: sounds good. Two more quick ones.
Thomas Kerr: In the more color on the negative impacts of the tax structure of CoStar. And if that's a detailed answer, we can do that offline, but just any further color on that. I can give you further color. I mean, it's a, you know, this higher rate increase this year is probably a third of the impact of the higher rate than what we're saying. The rest of it is really relates to the non-deductible interest and other reasons why I know that the US tax rate is really high because of that, among a couple of other things. All right.
Unnamed Speaker: negative impacts on the tax structure of Coral Star and, if that's a...
Unnamed Speaker: I can give you further color. I mean, this higher rate increase this year is probably a third of the impact, you know, the higher rate than what we're saying. The rest of it is really relates to the non-deductible interest and other things.
Speaker Change: I can give you further color. I mean, it's a, you know, this higher rate increase this year is probably a third of the impact.
Speaker Change: you know, the higher rate than what we're saying. The rest of it is really relates to the non-deductible interest and other other
Thomas Kerr: That's about it. All right.
Thomas Kerr: And then lastly, I think last quarter, you gave a framework of what a normal year would look like. I think it would be the top. 250, 300 million cash flow, pre-cash flow, 125 million. You showed sticking to that guideline for the, you know, a normal year outlook. Yeah, absolutely. You know, again, that's a normalized year. You know, there's a lot of things that are variables that are taking place in the market right now that would prevent us from getting there, but normal sales level along with the operations that we set up. It's all there for the taking.
Unnamed Speaker: The operations that we've set up are all there for the taking, and it doesn't even include the significant synergies we see from the acquisition.
Speaker Change: The operations that we've set up, it's all there for the taking. And it doesn't even include the significant synergies we see from the acquisition.
Thomas Kerr: And it doesn't even include the significant synergies we see from that acquisition. Sounds good.
Thomas Kerr: Sorry, that's all I have for now. Thank you. Okay. Thanks, John.
Kat Luka: Our next question comes from Kat Luka of Imperial Capital. Kat Luka lines not open. Thank you. Paul, David. Alan, thank you for the call. I noticed the guidance, and that's very helpful. I appreciate it.
John: Okay. Thanks, John .
Speaker Change: Our next question comes from Kirk Ludtke of Imperial Capital. Kirk, your line is now open.
Unnamed Speaker: I noticed that
Kirk Ludtke: I noticed the
David Martin: Is there anything additional? Are there any additional cash requirements we should be thinking about, maybe cash restructuring costs, debt amortization? And then any thoughts you have on working capital in the second half would be very helpful. Well, you'll note from the guidance that we gave for the third quarter, you know, obviously volume being down pretty significantly that impacts margins, but we're able to impact working capital to the extent that it drives positive free cash for an investment for similar to the level of EBITDA. So that's really it. There's, as far as things that are unusual requiring cash, no, there really isn't.
Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the
Unnamed Speaker: That's really it. As far as things that are unusual, requiring cash, no, there really isn't anything.
David Martin: Okay, thank you. With respect to the third quarter guidance, is that the guidance consistent with the underlying market activity? Or are we still seeing some destocking of dealer and OE inventories in that number? Yeah, I think there is an impact of destocking still in that number. As they've lowered their production schedules, we do believe that there's some destocking that's still taking place and causing some additional decreases to RQ-3 output. You know, as we mentioned though in earlier questions, I think that destocking now will probably lead us down to path that creates some restocking when the catalyst kick into gear, and so I think the answer is yes 24 will continue to be impact by destocking, but we're also prepared for that restocking event to take place.
Speaker Change: Okay, thank you.
Speaker Change: Some de-stocking of dealer and OE inventories in that number.
Speaker Change: Yeah, I think there is an impact of de-stocking still in that number as they've lowered their production schedules.
Unnamed Speaker: We do believe that there's some destocking that's still taking place and causing some additional decreases in our Q3 output. As we mentioned earlier, though, in earlier questions, I anticipate sometime next year.
Speaker Change: We do believe that there's some destocking that's still taking place and causing some additional decreases to our Q3 output. As we mentioned, though, in earlier questions,
Speaker Change: I think that destocking now will probably lead us down a path that creates some restocking when the catalysts kick into gear. And so I think the answer is yes, 24 will continue to be impacted by destocking, but we're also prepared for that restocking event to take place.
David Martin: I envision sometime next year.
David Martin: Got it. Thank you. And then also even to mention some operating issues in the second quarter. Do those continue into the third? Well, maybe it's misconstrued on operating issues. It's just the volume levels are so low in certain aspects of our plants that you know he creates a pretty tough of George, and so that's why it really was reflected in the margin. It's not really issues, just under absorption. Yeah, got it. That's helpful.
Speaker Change: I envision sometime next year.
Speaker Change: Maybe it's misconstrued on operating issues, it's just the volume levels are so low in certain aspects of our plants that it creates a pretty tough
Unnamed Speaker: absorption. And so that's why it was really reflected in the market.
Speaker Change: absorption. And so that's why it really was reflected in the margin.
Speaker Change: It's not really easy. It's just under absorption.
Paul Reitz: Thank you. How much visibility do you have at this point into the fourth quarter? I would say at this point, probably not the way it has been in historic periods. It's we're clearly operating in a different environment when you listen to comments coming out of the, you know, our sector, the large, the large customers within our sector. Part of it's just a lot of uncertainty in the world. You know, I do think there's some hopeful catalyst that take place later this year, whether it's interest rate visibility. You know, you saw the Bank of England move today, looking like our Fed will the election.
Speaker Change: Yeah, got it. That's helpful. Thank you. How much visibility do you have at this point into the fourth quarter?
Speaker Change: I would say at this point, it's probably not the way it has been in historic periods. We're clearly operating in a different environment when you listen to comments coming out of the, you know, our sector, the large customers within our sector.
Speaker Change: Part of it is just a lot of the uncertainty in the world. I do think there's some hopeful catalysts that take place later this year, whether it's
Unnamed Speaker: Interest rate visibility, you know, you saw the Bank of England move today, looking like our Fed will, the election, I think that's important to get some ideas of where we're going on, you know, tariff policies.
Speaker Change: interest rate visibility you know you saw the Bank of England move today looking like our Fed will the election I think that's important to get some ideas of where we're going on you know tariff policies
Paul Reitz: I think it's important to get some ideas of where we're going on, you know, tariff policies. And I think you get those events behind you, you start moving into next year. You know, we get back to more of a normal visibility outlook that we can provide and, you know, that we'll get from our customers. But I would say right now. We are in a different environment because of all the uncertainty. Were that to answer your question, that visibility going into Q4's just not historically what we would normally see. So I think what David provided with guidance is a good outlook.
Speaker Change: I think you get those events behind you and you start moving into next year.
Speaker Change: We'll get back to more of a normal visibility outlook that we can provide and that we'll get from our customers. But I would say right now,
Speaker Change: We are in a different environment because of all the uncertainty where that, to answer your question, that visibility going into Q4 is just not historically what we would normally see. So I think what David provided with guidance is a good outlook.
Paul Reitz: I think we're seeing our business hold up well, as David mentioned repeatedly in his comments. Let's generate cash flow has managed that balance sheet. Let's look at working capital. Make sure we're investing for the future, you know, prepared to take care of our customers. I think those are the key things we're going to be focused on. And, you know, where I look at is that we have an exceptionally strong team; our finance team works well with our businesses. And so we know where our working capital is. We know what these drivers of how we can we can continue to generate cash flow are for us.
Speaker Change: I think we're seeing our business hold up well, as David mentioned repeatedly in his comments.
Speaker Change: Let's generate cash flow, let's manage that balance sheet, let's look at working capital.
Speaker Change: Make sure we're investing for the future, you know prepared to take care of our customers I think those are the key things we're going to be focused on and you know Where I look at is that we have an exceptionally strong team. Our finance team works well with our businesses
David: And so, we know where our working capital is. We know what these drivers of how we can continue to generate cash flow are for us. And so, perhaps we're looking at it a little bit differently. Like David said, some parts of our business, the absorption levels are terrible.
Paul Reitz: And so, you know, perhaps we're looking at a little bit differently. Like David said, you know, some parts of our business, the absorption levels are terrible. You know, so if you look at margins when you're under absorbing, it's not a very good indicator of performance. And, you know, like David already said, those aren't operational issues. Those are just simple math.
Speaker Change: So if you look at margins when you're under absorbing, it's not a very good indicator of performance.
Paul Reitz: So let's trace. Let's let's follow the cash, make sure we are generating much cash flows we can for the business for our investors, our shareholders, and let's prepare for the future. And I think, you know, we got a great team that can do all that. And so, again, it's a different outlook because you don't have visibility. You have under absorption going on. But that doesn't mean we can't be successful in doing what we need to do now the best we can and put ourselves in a damn good position for the future.
Speaker Change: So let's follow the cash, make sure we are generating as much cash flow as we can for the business, for our investors, our shareholders, and let's prepare for the future, and I think we've got a great team that can do all that.
Speaker Change: Again, it's a different outlook because you don't have visibility, you have underabsorption going on, but that doesn't mean we can't be successful in doing what we need to do now the best we can and putting ourselves in a damn good position for the future.
Kat Luka: I appreciate it. Thank you.
Kat Luka: And then last, last question on seasonality. I, you know, I know the old, the legacy business was seasonally weakest. I think that December quarter, if I'm not mistaken, is it more seasonal now with Carlstar? I wouldn't say it's more seasonal. You know, I think we're going to see the typical seasonality in the second half and a little further exacerbated by the OEMs taking a lot of production out. But for Carlstar, they have more, I would say, even-killed quarterly seasonality. Maybe a little bit in Q4 just because of just the end of the year in holidays and things like that.
Speaker Change: Got it. I appreciate it. Thank you. And then last, last question on seasonality. I, you know, I know the old, the legacy business was seasonally weakest, I think, the December quarter, if I'm not mistaken. Is it more seasonal now with Carl Starr?
Speaker Change: I wouldn't say it's more seasonal. I think we're going to see the typical seasonality in the second half a little further exacerbated by the OEMs taking a lot of production out.
Speaker Change: But for Carl Starr, they have more, I would say, even-keeled quarterly seasonality.
Speaker Change: Maybe a little bit in Q4, just because of the end of the year and holidays and things like that, but Q3 is very similar to Q2 in that regard.
Kat Luka: But Q3 is very similar to Q2 in that regard. It might be less seasonal with Carlstar. Yeah, I think if you had everything up, yeah, I think you can make that conclusion.
Unnamed Speaker: It might be less seasonal with curls.
Speaker Change: It might be less seasonal with Curlster.
Unnamed Speaker: you can make that conclusion. Fantastic.
Kat Luka: Fantastic. I appreciate it.
Kat Luka: Thank you.
Speaker Change: Fantastic, I appreciate it, thank you.
Operator: This concludes our question on succession.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Reitz for any closing remarks.
Speaker Change: best.
Paul Reitz: I would like to turn the conference back over to Mr. Reitz for any closing remarks. I want to thank everybody for their attendance on our call this morning and your participation. I really appreciate your involvement with Titan. Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Mr. Reitz for any closing remarks.
Mr. Reitz: I want to thank everybody for their attendance on our call this morning and your participation. I really appreciate your involvement with Titan. Thank you. Have a great rest of your week. We'll talk to you in Q3.
Operator: Have a great rest of your week. We'll talk to you in Q3.
Operator: This concludes today's call. Thank you to everyone for joining. You may have disconnected your lines.
Speaker Change: This concludes today's call. Thank you to everyone for joining. You may now disconnect your lines.