Q2 2025 Titan International Inc Earnings Call

Alan Snyder: If you should need assistance during the call, please signal by pressing star followed by one on your star followed by zero on your telephone keypad. It is now my pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Business Relations from Titan. Mr. Snyder, the floor is yours.

Good morning, ladies and gentlemen, and welcome to the Titan International Inc. Second quarter 2025 earnings conference call. At this time, all participants have been placed on a listen-only mode, we will open the floor for your questions and comments after the presentation, if you should need assistance during the call, please see them by pressing star for by 1. On your start, followed by zero on your telephone keypad. It is now my pleasure to turn the floor over to Amish Schneider vice president financial planning investor relations from Titan. It's just Snider, floor is yours.

David Martin: Thank you and good morning. I'd like to welcome everyone to Titan's Second Quarter 2025 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 this morning, along with our Form 10-Q, which was also filed with the Securities and Exchange Commission this morning. 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.

Thank you and good morning. I'd like to welcome everyone. To tighten second quarter 2025 earnings call on the call with me today are Paul writes, Titans president, and CEO. And David. Martin Titan, 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 this morning along with our form 10q, which was also found with the Securities and Exchange Commission this morning.

David Martin: 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 our latest Form 10-K and Forms 10-Q, all of which have been filed with the SEC. 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. The Q2 earnings release is available on the company's website.

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.

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 8K filed earlier.

As well as our latest form, 10K, and forms 10q. All of which have been filed with the SEC.

In addition to 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.

David Martin: 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.

The Q2 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.

Paul Reitz: Thanks, Alan. Overall, our Titan team had a solid quarter. We're pleased with our Q2 results that were within our guidance ranges for both revenue and adjusted EBITDA, while also driving positive free cash flow for the quarter. Our Titan team continues to execute well. We're taking operational, commercial, and administrative actions as needed in response to the extended market softness we are continuing to experience. At a high level, conditions for the OEMs in our end markets remain similar to last quarter as buyers of equipment continue to take a wait-and-see approach. Based on our conversations with dealers, farmers, and OEMs, it seems clear that this cautious mindset is primarily a function of waiting for interest rates to come down, coupled with a desire for more clarity on tariffs and trade policy.

I would now like to turn the call over to Paul.

Thanks alen.

Overall, our Titan team had a solid quarter. We're pleased with our our Q2 results that were within our guidance. Ranges for both revenue and adjusted. EBA we also, driving positive, free cash flow for the quarter.

Yeah, our Titan team continues to execute, well we we're taking operational commercial and administrative actions as needed in response to the extended Market softest. We are continuing to experience.

At a high level conditions for the oems and our end markets remain similar to last quarter as buyers of equipment, continue to take a wait and see approach.

Paul Reitz: We have continued to experience some fairly large drop-in orders, similar to what I mentioned last quarter, as OEMs need to adjust rapidly when they see lower inventory levels get out of sync with pull-through retail demand. You're looking ahead, the macro environment appears to be similar to what we've seen. And so for the coming period, our Q3 guidance indicates exactly that. Digging into the trade and tariff topics a bit more, we have seen the tariffs have an impact on our consumer segment this quarter, as many aftermarket customers are choosing to wait for some resolution on tariffs to the extent possible before restocking their shelves. The positive is that we have seen some consumer customers in July place good-sized orders to get inventory back in line with sales.

Based on our conversations with dealers farmers and oems, it seems clear that this cautious mindset is primarily a function of waiting for interest rates to come down coupled with a desire for more clarity on tariffs and trade policy.

We have continued experience in Fairly large, drop in orders to what I mentioned, last quarter as oems need to adjust rapidly. When they see lower inventory levels, get out of sync with pull through retail demand,

you're looking ahead, the macro environment appears to be similar to what we've seen and and so for the coming period, our Q3 guidance indicates exactly that

Paul Reitz: Recall our commentary has been that trade policy applied somewhat consistently around the globe would benefit Titan in the long term, and we still believe that. The bottom line remains it is important that tariffs and trade policy result in a more level playing field in the end. The cases we have won with the International Trade Commission over the past couple of decades illustrate we have not been competing in a level playing field regarding off-road tires. Again, I want to reiterate that our US-based production, amidst a strong global footprint, has us well positioned to benefit as tariffs are levied on imports. A number of industries in the US, with steel and tires being a couple of prominent examples, have had to compete with foreign producers that take advantage of cheap labor and significant government subsidies for many years.

Digging into the trade and tariff topics a bit more. Uh, we have seen the tariffs have an impact on our consumer segment. This quarter as many aftermarket customers are choosing to wait for some resolution on tariffs to the extent possible before restocking their shelves. The positive is that we have seen some consumer consumer customers in July. Place good-sized orders to get inventory. Back in line with sales

Recall, our commentary has been a trade policy applied somewhat, consistently around the globe would benefit Titan in the long term and we still believe that.

The bottom line remains. It is important that tariffs and trade policy result in a More Level Playing Field in the end.

The cases we have won with the International Trade Commission over the past couple, couple decades illustrate. We have not been competing in a Level Playing Field regarding off-road tires.

Again, I want to reiterate that our us-based production amidst, a strong Global footprint has as well, positioned to benefit as tariffs are levied on Imports.

Paul Reitz: And on the whole, we are glad to see these efforts to end unfair competition. Our position is, and our customers say it as well, that Titan has an exceptional competitive position in the markets we serve, and that is further solidified when irrational import pricing is removed from the equation. Central to that is our one-stop shop strategy. Our culture of innovation and customer service driven by our large product portfolio and product production capabilities puts us in a good position. We pride ourselves on our ability to deliver products to our customers quickly, whether it be North America, Latin America, or Europe. The markets we serve demand maximum uptime from their equipment, and our ability to deliver replacement tires and undercarriage parts quickly helps make us a key partner for these customers.

A number of Industries in the US with steel and tires. Being a couple prominent examples have had to compete with foreign producers that take advantage of cheap labor and significant govern government government subsidies for many years. And on the whole we are glad to see these efforts to end unfair competition.

Our position is and our customers, say it as well. That Titan has an exceptional competitive position. In the markets we serve and that is further solidified when irrational import pricing is removed from the equation Central to that is our 1-stop shop strategy, our culture of innovation and customer service driven by large, or large product portfolio and production capabilities. Puts us in a good position.

we pride ourselves on our ability to deliver products to our customers quickly, whether it be North, America Latin, America, or Europe,

Paul Reitz: I also want to briefly touch on the recent legislation that was passed, as we think it will be a long-term positive for our farmers on the whole. With the increased depreciation rate as the most important element, that's getting a lot of the attention, the ability to appreciate 100% of the investment in new equipment, such as tractors, in year one is obviously beneficial and should improve farmers' balance sheets over time. So bringing these general comments together, I want to stress that we are by no means sitting back waiting for our markets to turn. We continue to be proactive on a variety of fronts to drive growth wherever we can and continue to invest in product development and constructive partnerships. Last quarter, we highlighted our expanded licensing agreement with Goodyear.

The markets, we serve demand maximum uptime from their equipment and our ability to deliver replacement tires and undercarriage Parts. Quickly helps make us a part a key partner for these customers.

I also want to briefly touch on the recent legislation that was passed. As we think it will be a long-term positive for Farmers on the whole

With the increase depreciation rate is the most important element that's getting a lot of the attention. Um the ability to appreciate 100% of the investment in new equipment such as tractors and year, 1 is obviously beneficial and should improve Farmers balance sheets over time. So bringing these General comments together. Yeah, I I want to stress that we are by no means sitting back waiting for our markets to turn. We continue to be proactive on a variety of fronts to drive growth wherever we can and continue to invest in product development and constructive Partnerships.

Paul Reitz: We're busy working to maximize this opportunity with the Goodyear brand, which we've been doing successfully for over 20 years, and we think it will absolutely help drive growth over time. The new partnership, the new segments of this partnership that we added with the new agreement. I'm also excited to announce that we signed an initial minority investment in a strategic partnership with Brazilian wheel manufacturer, Rodeiros. We have been actively looking for an opportunity to get into the Brazilian wheel market for a number of years, and this is a great partnership to do so. Over the years, we have been talking with OEMs about this, and they have expressed enthusiasm about bringing wheels and tires and assemblies into that market, just like we have done successfully here in North America.

Last quarter. We highlighted our expanded licensing agreement with Goodyear.

Which you we've been doing successfully for over 20 years, uh, and we think it would absolutely help Drive growth over time. The new partnership, the new segments of this, this partnership that we added with the new agreement.

I'm also excited to announce that we signed an initial minority investment in a strategic partnership with Brazilian Wheel. Manufacturer rodos

we have been actively looking for an opportunity to get into the Brazilian wheel market for a number of years and this is a great partnership to do so

Paul Reitz: Rodeiros is the second largest manufacturer of agricultural wheels in Brazil, and we look forward to working with them on the development of integrated solutions tailored to the Brazilian and South American markets. Brazil has become an increasingly important market for Titan as our ag economy has grown, and we think this investment is an excellent use of some of our local cash to further extend our leadership in that market. We expect this transition transaction to close in the third quarter, which is subject to some customary regulatory approval. Turning more specifically to the ag segments, farmers are guardedly optimistic about their businesses. I know I'm repeating myself and saying that the feedback we get from them centers around interest rates.

Over the years, we have been talking with oems about this and they have expressed enthusiasm about bringing wheels and tires and assemblies into that market. Uh, just like we have done successfully here in North America.

Rodos is the second largest manufacturer of Agriculture Wheels in Brazil and we look forward to working with them, on the development of Integrated Solutions, tailored to the Brazilian and South American markets.

Brazil has become an increasingly important market for Titan as our, a economy has grown and we think this investment is an excellent use of some of our local cache. To further extend our leadership in that market, we expect this transition transaction to close in the third quarter which is subject to some customary regulatory approval.

Paul Reitz: It seems to be a fairly universal opinion that they need to come down, with farmers and dealers citing financing costs as one of the main impediments to a pickup in large equipment purchasing. Yeah, that hesitancy is elongating OEMs' efforts to further destock their finished good inventories, but we are starting to see some pockets where distributors have let inventory get too low. As we did in Q1, we've seen some good large-sized drop-in orders this quarter, and we think that sort of buy-as-you-need-it ordering behavior will persist until rates come down. At Titan, our priority is to manage costs effectively while staying close to our customers and being prepared to ramp up to meet demand when needed.

Turning more specifically to the a segment. Uh, farmers are guardedly optimistic about their businesses. I know I'm repeating myself and saying that the feedback we get from from them centers around interest rates.

It seems to be a fairly universal opinion that they need to come down with farmers and dealers, citing financing costs as one of the main impediments to pickup and large equipment purchasing.

You know, that hasn't hasn't to see is is elongating oems efforts to further destock their finished goods inventories, but we are starting to see some Pockets where Distributors have let inventory get too low.

Uh as we did in q1 uh we've seen some good large-sized drop drop drop in orders this quarter and we think that sort of buyers you need at ordering Behavior will persist until rates come down.

Paul Reitz: You know, reiterating a point I made last quarter, when the cycle turns, it typically turns fast, and our team and the breadth of our production capabilities are best suited to meet our customer needs in those moments. Shifting away into our non-US markets, there are cross-currents which are ultimately resulting in flattish demand in Europe. You know, while Brazil has generally fared the best of our operating regions, as a reminder, we have largely localized manufacturing in Brazil and Europe, so our sales in those regions will continue to be a function of local economic activity. Our consumer segment was most directly impacted by tariffs, as we mentioned earlier. Thus far, US consumer-related economic data has not really shown any significant deterioration, but it is also clear that people are being cautious when it comes to discretionary equipment purchases.

You know, our at tighten, our priority is to manage costs effectively while staying close to our customers and being prepared to ramp up to meet demand when needed, you know, reiterating a point I made last quarter when the cycle turns it typically turns fast and our team in the breadth of our production, capabilities are best suited to meet our customer needs in those moments.

Shipping away into our non-us markets. There are are cross currents which are ultimately resulting in flattish, demand in Europe. You know why Brazil has generally fared? The best of our operating regions

As a reminder, we have largely localized Manufacturing in Brazil and Europe. So our sales in those regions will continue to be a function of local economic activity.

Paul Reitz: As with ag, we expect interest rate cuts will help spur demand in our consumer segment, you know, to the obvious reduced cost of financing, whether it be at the dealer or end customer level. To the extent that settled trade policy will make various market sectors more stable in their staffing and hire plans, that would also be a positive for our consumer segment, as outdoor enthusiasts might feel more secure in being able to afford a discretionary purchase. Moving over to our EMC segment, there has been little change from Q1. We continue to view European infrastructure investment as the primary driver for activity. That investment is a function of many inputs, including trade policy and continued military conflict in the region. While those items remain unsettled, there really was no material change in our EMC segment activity.

Our consumer segment was most directly impacted by tariffs as we mentioned earlier. Um, this far us consumer related, economic data, has not really shown any significant deterioration, but is also clear that people are being cautious when it comes to discretionary equipment, purchases,

As with a we expect interest rate Cuts will help spur demand in our consumer segments uh you know, do the obvious reduce cost of financing. Whether it be at the dealer or End customer level

To the extent that settle trade policy will will make various Market sectors, more stable and their Staffing to higher plans. That would also be a positive for Consumer segments. As as outdoor enthusiasts, might feel more secure in being able to forward a discretionary purchase.

Moving over to our EMC segment. There has been little change from q1. We continue to view European infrastructure investment as the primary driver for activity.

Paul Reitz: That being said, equipment continues to be used and wear out, so the demand for aftermarket parts and the time will come when owners have no choice but to replace that equipment. So let me wrap things up here. You know, we are really doing quite well and holding our own despite some significant macro challenges thus far in 2025. We are focused on our customers and our execution as success on both of those fronts is the best approach to delivering success, not only this year, but beyond. We are well positioned to do so when the end markets start moving upwards, which they most certainly will. With that, I'll hand it over to David.

That investment is a function of many inputs, including trade policy and continued military conflict in the region while those items remain unsettled. There really was no material change in our EMC segment activity that being said, equipment continues to be used and wear out. So the demand for aftermarket parts and the time will come when owners have no choice but to replace that equipment.

David Martin: Hey, thanks, Paul. Good morning to everyone, and thanks for listening in today. As Paul noted, our results in the second quarter were in line with our expectations, as revenues were $461 million, with adjusted EBITDA of $30 million. We were also able to drive positive cash flow in the quarter of $4 million. It's important to restate the fact that we continue to navigate this cyclical trough with agility, and we remain in a strong position as a company. On a sequential basis, our gross margins improved 100 basis points from 14% in the first quarter, with product mix being the main reason for the sequential improvement. Looking at margins by segment in the quarter, all three showed expansion versus the first quarter. Ag gross margin was 14.6% compared to 12.4% in the first quarter.

She'll be wrap things up here. You know, we are really doing quite well and holding our own, despite some significant macro challenges. Thus, far in 2025, we are focused on our customers and our execution. As success on both of those fronts is the best approach to delivering success. Not only this year, but beyond we are well positioned to do so when the end markets start moving upwards, which they most certainly will with that, I will hand it over to David.

Hey thanks Paul. Good morning to everyone and thanks uh for listening in today.

As Paul noted, our results in the second quarter were in line with our expectations, as revenues were $461 million with adjusted EVA of $30 million.

We were also able to drive positive cash flow in the in the quarter of $4 million. It's important to restate. The fact that we continue to navigate this cyclical, trough with agility and we remain in a strong position as a company.

In the first quarter with product mix uh being the main reason for the sequential Improvement.

David Martin: EMC gross margin was 11.5% versus 10.4%, and then consumers' gross margin was 20.4% compared to 19.6%. Year over year, in Q2, our margins of 15% were down from 16.5% when adjusting out the impact of the Carl Star inventory step-up last year. This gross margin decline was driven by the leverage on overhead, which is expected with our organic revenue decline that we saw year over year. Our teams have done an exceptional job at managing production and our costs, and our performance shows significant improvements in margins as compared to the last time we saw a market like this. Our SG&A expense for the second quarter was $52 million, or around 11% of sales, which was up about 1.5% from last year. And that's really generally due to inflation in the business around labor costs.

Looking at margins. By segments in the quarter, all 3, showed expansion versus the first quarter. Aggros margin was 14.6% compared to 12.4% in the first quarter.

EMC, gross margin was 11.5% versus 10.4% and then consumers, gross margin was 20.4% compared to 19.6%.

Year-over-year in Q2, our margins of 15% were down from 16 and a half percent. When adjusting out the impact of the carlstar inventory, step up last year,

This gross margin decline was driven by The Leverage on overhead you know which is expected with our organic Revenue decline that we saw year-over-year.

In exceptional job of managing production and our costs. Uh and our performance shows significant improvements in margins as compared to the last time we saw a market like this.

Our sg&a expense for the second quarter was 52 million or around 11% of sales, which was up about 1 and a half percent from last year.

And that's really generally due to uh inflation uh in the business around labor costs.

David Martin: R&D expenses were $4.3 million in the second quarter compared to $4.2 last year, so not a big change year over year for the business, again, inflation being the factor. We generated positive operating income for the second quarter of $10 million. Now, turning to cash flow, we were able to drive the $4 million of positive cash flow in the second quarter by moderating our CapEx spend to $10 million in the quarter, as we were judicious with our spending. Working capital was also a positive driver for free cash flow in the quarter when adjusting out the FX impact of the weakening US dollar within the quarter. Our net debt at quarter-end declined $10 million from the first quarter to $401 million.

R&D expenses were 4.3 million in the second quarter compared to 4.2 last year. So not a big change year-over-year for the business. Again, inflation being the factor.

We generated positively operating income for the second quarter of 10 million. Now, turning to cash flow, we were able to drive the 4 million of positive cash flow in the second quarter. By moderating, our capex, spend to 10 million in the quarter. As we were judicious with our spending working. Capital was also a positive driver for free cash flow in the quarter. When adjusting out, the FX impact of the weakening US dollar within the quarter,

David Martin: As noted before, we expect free cash flow generation in the second half, and we are confident we'll exit the year with a debt ratio closer to our target of less than three times adjusted EBITDA. As a reminder, our debt structure provides us flexibility with our domestic credit line and our long-term bonds. Again, we are in a much stronger position as a company compared to the last historical cyclical low. Our second quarter income tax expense was $4.7 million, with an effective rate well over 100%. Well, this elevated tax rate continues to be a function of where our profits and losses are distributed geographically and the associated tax regimes within those areas. I expect it will remain at this elevated level for the short term as we continue to navigate this lower market.

our net debt at quarter, end declined, 10 million from the first quarter to 401 million as noted before. And we expect free cash flow generation in the second half and we are confident, we'll exit the year with a debt ratio closer to our Target of Less Than 3 times adjusted Ava die.

As a reminder, our debt structure provides us flexibility with our domestic credit line and our long-term bonds. Again we are in a much stronger position as a company compared to our the last historical cyclical low.

Our second quarter income tax expense, was 4.7 million with an effective rate, well over 100%.

David Martin: As we see a rebound in market conditions and our improved profitability across the globe, we can get back to normalized tax rate levels. Now, moving on to our financial guidance for Q3, our guidance ranges for the quarter are revenues of $450 to $475 million, adjusted EBITDA of $25 to $30 million, and I also expect to see tax expense of around $4 to $5 million, which is similar to our Q2 level. The midpoints of our revenue and adjusted EBITDA guidance imply growth in both metrics when compared to Q3 of last year, as well as relatively flat performance versus Q2. That sequential comparison is notably positive, as it runs counter to our normal seasonality, in which sales traditionally drop from Q2 to Q3 due to normal plant shutdowns and holiday schedules in the summer.

Well this this elevated tax rate continues to be a function of where our profits and losses are distributed geographically and the Associated Tax regimes. Within those areas, I expect that will remain at this elevated level for the short term as we continue to navigate this lower lower Market.

As we see a rebound in market conditions and our improved profitability across the globe, we can get back to normalized tax rate levels.

Now moving on to our financial guidance for Q3 our guidance ranges for the quarter are revenues of 450 to 475 million.

Adjusted Eva, dive 25 to 30 million. And I also expect to see tax expense of around 4 to 5 million, which is similar to our Q2 level.

The midpoints of our revenue and adjusted EBIT guidance imply growth in both metrics when compared to Q3 of last year.

David Martin: The main factor underpinning this positive dynamic is our expectation that the consumer segment will rebound a bit as channel inventories have gotten too low, as Paul talked about earlier. Reiterating our prior comments on cash flow, we will continue to manage working capital tightly, allowing us to reduce our debt. Our financial condition does remain solid, and I'm fully confident we're putting ourselves in a position to accelerate future performance. So thanks for your time this morning, and I'd like to turn it over to the callback to the operator for our Q&A session.

As well as relatively flat performance versus Q2, that sequential comparison is a notably positive as it runs counter to our normal seasonality in which sales traditionally dropped from Q2 to Q3 due to normal plant shutdowns and holiday schedules in the summer.

the main factor underpinning this positive event Dynamic is our expectation that the consumer segments will rebound a bit as Channel inventories have gotten too low as Paul talked about earlier,

Reiterating our prior comments on cash flow, we will continue to manage working capital tightly, allowing us to reduce our debt. Our financial condition does remain solid, and I'm fully confident. We're putting ourselves in a position to accelerate future performance.

So thanks for your time this morning, and I'd like to turn it over to the call, back to the operator for our Q&A session.

Alan Snyder: Thank you very much. We'd like to open the lines for Q&A. If you'd like to ask a question, please signal by pressing star followed by one on your telephone keypad. And if you'd like to remove yourself line of questioning, it will be star followed by two. As a reminder, to raise a question, it will be star followed by one. Our first question comes from Mike Slowsky. Sorry, from DA Davidson. Mike, your line is now open. Mike, can we just confirm your line is unmuted?

Thank you very much. We like to open the line for Q&A.

If you'd like to ask a question, please press 1 on your telephone keypad and if you'd like to remove yourself, the line of questioning will be staffed by 2 as a reminder, to raise a question will be staff followed by 1?

Our first question comes from Mike Floski. Sorry, uh, actually...

From day Davidson Mike, your line is not open.

Mic. Can we just confirm your line is unmuted?

Michael Shlisky: I'm sorry. Thank you. David, can you maybe clarify that the last few comments there? I might have misinterpreted here. So in the third quarter, you're saying sales could be roughly similar to what you just saw in Q2, but the EBITDA could be down 10 to 15 percent. That's what the numbers are kind of saying. So if we may break down a little bit about what's behind that assumption, is there any kind of mix or other issue that's just three Q specific here?

David can you give me to clarify that the last few comments there? Somebody might have misinterpreted here.

So in the third quarter you're saying see how it's going to be roughly similar to what you just saw in Chuchu, but the Eva could be down 10 to 15%.

That's what the numbers are just kind of thing. So if we may break down a little bit about what's behind that assumption, and you want to kind of mix or other issue, that's just the Riku specific here.

David Martin: Yeah, there's nothing to really call out, but you know we normally have our seasonal shutdowns of plant and equipment, you know, for the summer maintenance schedules, as well as the holiday schedules in Europe. Overall, the product mix, we don't think it's going to be quite the same as what we saw in Q2. So moderately, you know, off, but you know, nothing significant. So again, you know, we have the opportunity on the high end to achieve what we achieved in Q2, but a little bit of moderation in some areas.

Yeah, there's nothing nothing to really call out but you know we normally have our, you know, seasonal shutdowns of of the plant and Equipment, you know, for the you know the summer maintenance schedules as well as the holiday schedules in Europe. Uh overall the the product mix. We don't think it's going to be quite the same as what we saw in Q2 so moderately you know off but you know nothing significant. So again our you know we have the opportunity on the high end to to achieve what we achieved in Q2, but a little bit of moderation in some areas.

Michael Shlisky: Okay. Don't want to look too far ahead, but looking at the fourth quarter, if you recall last year, I think folks were throwing a bit of a curve. You know, you had kind of EBITDA that was not seen since pre-pandemic when you were a very different company. I don't know if you're ready to actually give us guidance yet, but are you getting any indicators that these OEMs are going to have a large shutdown again this fourth quarter, or is that just kind of in the past at this point?

Okay.

Um, go on. Look too far ahead. We're looking at the fourth quarter if you recall last year.

I think folks were throwing a bit of a curve, you know, you you had kind of you thought that was not seen since pre-pandemic when you were a very different company.

Um, I don't know if you're ready to actually give us guidance yet. But are you getting indicators that?

These oems are going to have a large shutdown again. This fourth quarter or is that just kind of in the past at this point.

David Martin: Yeah, you know, we're seeing very similar schedules. You know, I don't think it's really changing a lot, but you know, certainly I would be encouraged by them picking up production, but right now we're not seeing any indication of that. It's just kind of fairly flat at this point.

Yeah, you know, we're we're seeing very similar schedules, you know, I don't think it's really changing a lot, but, you know, certainly I would be encouraged by them picking up reduction, but right now, we're not seeing any indication of that, it's just kind of Fairly flat.

At this point.

Michael Shlisky: Okay. I also wanted to ask about maybe the broader ag sector in general. It sounds to me as if you're seeing some inflection, but it's just still happening only in Brazil. Are you getting any sense that you'll start seeing an improvement in the United States, or are the OEMs still just saying, "We're just not going to build anything more until we start seeing actual farmer orders get better"?

Okay.

Um I also wanted to ask uh about maybe the the the broader a sector in general. It sounds to me as if you're um,

as if you're seeing,

Some inspection but just still happening. Only in Brazil, are you getting any sense that you'll start seeing an improvement in the United States or the OEM still just staying? We're just not going to build anything more until we start seeing um,

Actual farmer orders, get better.

Paul Reitz: Yeah, I think there's an overall tone that's just pretty quiet, and I would say that's different than prior years, that quietness. I don't think that indicates negativity, but I think it just means right now there's definitely a pause to wait and see on, you know, obviously what's going on currently with some of the tariff deadlines and, you know, any Fed action later in the year. Where we see some positives, though, in our industry, you mentioned Brazil. I think Brazil continues on a good path, but where we're seeing some net positive in our industry is that wheel and tire inventory just has been dragged down too low, or equipment inventory has been dragged down too low. And that's where we get these drop-in orders that can be fairly largeable in size.

yeah, I think there's there's an overall tone that's just pretty quiet and and and I would say that's different than than prior years that that quietness

Paul Reitz: As I've mentioned, we saw them in Q1, Q2, seeing some good trends starting off Q3 so far in July related to our consumer segment, as David has mentioned as well. So each quarter, we're seeing some very positive trends with good-sized orders coming in from different customers serving kind of some different markets with products. But that's where Titan's ability and what we have been instructing our team all along is that when our customers need us, we have to be there. And so it's easy to say it on a call today. It's much more difficult, and it shows the strength of Titan to do it in reality. And so we are positioned to take these large orders as they come and service our customers, and we are starting to see them.

Uh, I don't think that indicates negativity. Um, but I think it just means right now there's definitely a pause to wait and see on, you know, obviously what's going on currently with some of the tariff deadlines and then, you know, any Fed action later in the year. Where we see some positives, though, in our industry—you mentioned Brazil. I think Brazil continues on a good path. Um, but where we're seeing some net positive in our industry is that the wheel and tire inventory just has been dragged down too low, or equipment inventory has been dragged down too low, and that's where we get these drops in orders that can be fairly large in size. As I've mentioned, we saw them in Q1 and Q2, seeing some good trends starting off Q3 so far in July related to our consumer segments, as David has mentioned as well. So, each quarter, we're seeing some very positive trends with good-sized orders coming in from different customers serving kind of some different markets with products. But, um, that's where Titan's ability and what we...

Paul Reitz: And so I think, Mike, what we believe as we get into next year, and it's very early to give you a fine-tuned comment, but you know, I think because of inventory and some general positive trends, you know, kind of leaving tariffs and interest rates to the side, you know, we do expect an uptick for next year. And quantifying that further is going to depend on, again, tariffs and interest rates and some of these elements that are causing the pause. But I think the underlying drivers there are there for us to see some uptick for next year.

Have been instructing our team all along, is that when our customers need us, we have to be there. And, and so it's easy to say it on a call today. Um, it's much more difficult and it shows the strength of Titan to do it in reality. And so we are positioned to take these large orders as they come and service. Our customers, and we are starting to see them and so I I, I think Mike, what we believe is we get into next year and, and it's, it's very early to give you a fine-tuned comment, but, you know, I think because of inventory.

Worry and some general positive Trends you know kind of leaving terrorists and interest rates to the side. You know we we we do expect an uptick for next year.

Um, and and quantifying that further is going to depend on again, tariffs and interest rates, and some of these elements that are causing the pause. But I think the underlying drivers that are are there for, for us to see some uptick for next year?

Michael Shlisky: All right. Maybe one last one. I've only gotten questions for the 10-Q. Given what happened with the taxes this quarter, are there any large NOLs, US NOLs that are on the books that we should be, you know, putting into our valuation going forward? Thanks.

All right, um, maybe 1 last 1, I've only got in particular for the 10q.

Um,

do you have given what happened with the taxes? This quarter. Are there any large nols us nols that are on the books?

That we, we, you know, put into our valuation. Um, going forward. Thanks.

David Martin: Yeah, so there are some NOLs that, you know, could potentially hit valuation allowances needed if we don't see market conditions improve. But, you know, again, I think it's important to focus on cash taxes and how we're paying. It's been relatively stable in that area. So that's really what, you know, we look at. You know, there can be some movement in the NOL valuation allowance from time to time, but, you know, we'll call it out separately.

Really, what? You know, we we look at, you know, there can be some movement in the in the nol

Valuation allowance from time to time but you know, we'll call it out separately.

Michael Shlisky: Okay. All right, guys. Appreciate the color. Have a great one. Thank you.

Okay.

David Martin: Yeah. Thanks, Mike.

Alan Snyder: Thank you very much. Our next question comes from Steve Feranzani from Siddharthi. Steve, your line is now open.

All right guys. Appreciate the color. Have a great 1. Thank you. Yeah, thanks, bye.

Steve Ferazani: Morning, Paul. Morning, David. Appreciate the detail on the call. Obviously, nice job on the gross margins. I know in a difficult market to get that kind of sequential improvement is impressive, and I know that's been something over the last couple of years you've been focused on. I'm hoping you can help me walk through what happened with a little bit more detail on consumer. You know, the expectation was if tariffs were an impact, we'd see it on your gross margins. We did not. Your gross margins improved sequentially. Is that a situation where you're trying to raise prices to offset and dealers and customers are rejecting that? Or can you just help out on what's going on in consumer?

Thank you very much. Our next question comes from Steve Franny from sedoti. Steve, your line is now open.

Good morning. Paul morning, David. Appreciate the detail on the call, uh, obviously. Nice job on the gross. Margins. I know when I, in a difficult Market to get, that kind of sequential Improvement is, is impressive. And I know that's been something over the last couple of years.

You've been focused on.

I do. I I'm hoping you can help me walk through what happened with a little bit more detail on consumer.

You know the expectation was if tariffs were an impact would see it on your gross margins. We did not your gross margins. Improved sequentially. Is that a situation where you're trying to raise prices to offset and cut and dealers and customers are rejecting that or can can you just help out on what's going on in consumer?

David Martin: Well, the sequential improvement in margins was a little bit had to do with just product mix, you know, different, you know, OEM versus aftermarket, and that's really it. And I want to be clear, you know, we're not going out trying to capture price per se. We're managing the tariff costs with, you know, moderation of prices accordingly. But it was not a material impact. In fact, there was no bottom line impact.

Well, the the the sequential Improvement in margins was a little bit had to do with just product mix. Uh, the you know, different, you know, OEM versus aftermarket.

and,

That that's really it. Um,

but,

Paul Reitz: Yeah, we're not, Steve, we're not having any. Pricing has been something that I think is a very big strength for Titan, not just consumer, but in ag. We understand the market well, the relationship with the customer. And so, like David was just saying, we look at it as pricing as neutral. So we're not looking to capture volume via pricing. We're not looking to, you know, take it on the chin with costs per se. And so I think our position to respond quickly to changes in the cost structure within our markets is reflective in the pricing that we're using to position our products in the market.

And and I want to be clear, you know, we're not we're not going out trying to capture price per se we we're we're managing the Tariff costs with, you know, the moderation of of prices accordingly. Uh, but I don't it was not a material impact, it had. In fact, I had there was no, bottom line impact.

Yeah, we're not Steve, we're not having any price pricing has. Been something that I think is, is very big strength for Titan, not just consumer, but in a, we understand the market, well, the relationship with the customer. So, like David was just saying, I mean, we are, we look at his pricing as neutral. Um, so we're not, we're not looking to capture volume via pricing, we're not looking to

Paul Reitz: And we have not had any significant issues, I can tell you, Steve, that have risen to my attention that I've had to be involved with on, you know, major pricing challenges, you know, which was the other part of your question. Are we seeing some pushback? And the answer is no.

Steve Ferazani: Then what can you help us out on what? So is it the decline in consumer? Are you saying that's not tariff-related? That's just pure demand, consumer uncertainty, and dealer destocking? Is that? I'm just trying to understand it.

Uh, you know, take take it on the chin with costs per se. Um and and so I I think our position to respond quickly to changes in the the cost structure within our markets is reflective in the pricing that we're we're using to position our products in the market and and we have not had any significant issues. I can tell you Steve that have risen to my attention that I've had to be involved with on you know, major pricing challenges, you know, which was the other part of your question. Are we seeing some push back? And the answer is no.

Then what can then, can you help us out on what? So is, it does a client in consumer? Are you saying that's not tariff related? That's just pure demand.

Consumer uncertainty and dealer destocking, is that? I'm just trying to understand it.

David Martin: That's a different question.

Steve Ferazani: That's a different question.

David Martin: In terms of going to see.

Steve Ferazani: It is. I'm just trying to ask. I'm trying to figure out the mix of what caused the consumer decline.

David Martin: Yeah. There was some, you know, mix. And again, you have to be very devil's in the details with products and so forth. But it's hard to explain sometimes. But the one thing that it's clear is that there was some pause in the market during Q2 for, you know, call it tariff impact, just the wait-and-see aspect and nobody wanting to hold inventory. And so, you know, you started to see, and that's why we're starting to see some recovery and some improvement in early Q3, because their inventories just got too low.

That's a different question. You know, in terms of in terms of going to see it is, I'm just trying, I'm trying to ask. I'm trying to figure out at the mix of what caused the consumer to climb. Yeah, there was some, you know, mix and again, that you have to be very that was in the details with products and so forth. But, you know, it's hard to explain sometimes. But, but the 1 thing that it's, it's clear, is that there was some pause in the market during Q2, uh, for, you know, call it tariff impact, uh, just the wait and see, um, aspect and nobody wanting to hold inventory.

And so you know you started to see that's why we're starting to see some recovery and some improvement uh in early Q3, uh, because they get their inventory is just got too low.

Steve Ferazani: Okay.

David Martin: Does that make sense, Steve?

Steve Ferazani: Helpful. Yeah. It's sort of. I mean, it's tough. I mean, you see what's behind it. It is tough to walk through it. And obviously, the consumer is much larger than it used to be, and the cycles are a little bit different than EMC and ag. So clearly, I have a little bit more questions on that one. But that's helpful. If I can ask briefly about the balance sheet, obviously, your net leverage, I think it's fair to say it's a bit elevated here, but apparently, you made that, you know, you're taking that minority interest. Can you just walk through any kind of covenants, financial constraints? And just as an add-on to that question, by our model, your year-over-year EBITDA improves in the second half. Cash flow seasonality tends to be better. This should, by our model, be peak leverage. Is that fair?

Okay. Does that make sense? I mean helpful. Yeah.

It's sort of a bit tough. I mean you you see what's behind it. It is tough to tough to walk through it. And obviously the consumers much larger than that used to be in the Cycles are a little bit different than EMC and a. So clearly I have a little bit more questions on that, on that 1. Um, but that's helpful. Um, if I can ask briefly about the balance sheet obviously, your net leverage, I think is fair to say. It's it's a bit elevated.

At this point, I understand you're referring to the minority interest. Can you just walk through any kind of covenants or financial constraints?

Steve Ferazani: So I know it's two different questions.

And just as an add-on to that question by our model do year-over-year IBA improves in the second half, cash flow seasonality tends to be better. This should by our model. Be peaked Leverage. Is that fair? So I know it's 2 different questions.

David Martin: That is, that's a very important aspect. Okay. So yeah, we see this being peak leverage. And you know, as we see free cash flow, you know, in the second half improve, you know, we'll be increasing cash. So all of that plays well within the leverage ratio. Again, I said it earlier, but you know, we have great flexibility within the bonds and our ABL facility. And there are covenants, but we, you know, those are more like, well, I call springing covenants. And we do not get ourselves in a position to where those ever come into play. And so from a covenant perspective, I don't see that being an issue, and we manage it accordingly. So.

That is, uh, that's a very important aspect. Okay. So yeah, we see this being peak leverage.

Um, and you know, as we see free cash flow, you know, in the second half improved, uh, you know, we'll be.

Great flexibility, within our.

Um, within the bonds or in our abl facility. Um, and there are covenants. But we, you know, they was a more like, uh, well, I call springing covenants and we do not get ourselves in a position to where those ever come into play. And so from a covenant perspective, I don't see that being an issue and we manage it accordingly. So

Steve Ferazani: Great. Thanks, Paul. Thanks, David.

great.

Thanks Paul. Thanks David.

Paul Reitz: Thanks, Steve.

Alan Snyder: Thank you. Thank you very much. As a reminder, to raise a question, it will be star followed by one on your telephone keypad. Our next question comes from Derek Soderbergh from Council Fitzgerald. Derek, your line is now open.

Thanks Steve.

Thank you.

Thank you very much. As a reminder to raise a question. We'll be staffed by 1 another and keep that

Our next question comes from Derek Soderbergh, from Council fish. Gerald, Derek, your line is not open.

Derek Soderberg: Yeah. Hey, guys. Thanks for taking the questions. Wanted to get your thoughts on the Japan trade deal, and then, you know, you've got this accelerated depreciation provision. Just to me, it feels like the setup is quite good for ag. Paul, you continue to mention interest rates. Seems like that's the gating factor, but you know, looking at some of these other trends going out in the market, it feels like, you know, that setup is good.

Derek Soderberg: And so I was wondering if you can kind of double-click on, you know, what you're seeing from a customer perspective, you know, your thoughts on some of the timeline for, you know, if these things are really going to start to have a positive impact, or it's really interest rates that are still the gating factor, and you know, we're going to be waiting until those rates come down, and that's sort of the biggest hurdle at this point. Just wondering if you could get some additional thoughts there.

Yeah. Hey guys, thanks for taking the questions. Um, wanted to, uh, get your thoughts on the Japan, uh, trade deal. Um, and then, you know, you've got this accelerated depreciation provision. Uh, just to me feels like the setup is quite good for a, uh, Paul. You, you continue to mention interest rates, um, seems like that's the gating Factor but, you know, looking at, um, some of these other Trends going out in the market, it feels like, you know, that setup is good. And so I was wondering if you can kind of double click on, you know what you're seeing from a customer perspective. Um, you know, your thoughts on some of the timeline for, you know, if these things are are really going to start to have a positive impact um or it's really interest rates that are still the getting factor and you know, we're going to be waiting until those rates come down and that's

Paul Reitz: Yeah. It's a good question with a lot of thoughts. I think you move in a positive direction. Like you said, getting to where we're seeing these tariff agreements settle is at a level that I would say is net positive for our business and really net positive for the sectors we serve overall. You know, I said in my comments, and I'll keep saying it, I mean, the world we compete in was not a fair, fairly competitive global marketplace. And you know, that was demonstrated when we went in front of the ITC twice, won unanimously. And the weakness has always been the Commerce Department. And so I think we're seeing the Commerce Department and the activity that's going on within the administration is what's really needed for companies like Titan. We make great products with great people, but it wasn't a fair playing field.

I'm at this point, just wondering, if you get some additional thoughts there.

Paul Reitz: So I think the Japan agreement, like you illustrated, is a good starting point for where we see the rest of the global, you know, market being settled related to tariffs. You know, I listened to Bessent this morning. He's phenomenal at what he's doing. He didn't exactly give clarity to answer your question, but I think he did point in some pretty good directions with, you know, some of the key market, the key countries that these deals haven't been settled with, you know, at this point. So I do feel good about where we're going. I think the farmer sentiment indicators are positive. I think the backdrop of the way the administration is stepping in with support for farmers. You know, you look in the construction segment, obviously, there's a lot going on there, but I think that both segments tie back to one thing.

Yeah, it's it's it's it's a good question with a lot of thoughts. I think. Do you move in a positive direction? Like you said, getting the where we're seeing these tariff agreements? Settle is at a level that I would say is net positive for, for our business. And, and really not positive for the sectors. We serve serve overall. Um, I said in my comments and I'll keep saying it, I mean, the the world we compete in, it was not a fair Fairly competitive Global Marketplace and, you know, that was demonstrated when we went in front of the ITC twice, 1 unanimously and the weakness has always been the Commerce department. And so, I think we're seeing the Commerce department. And and the activity that's going on within the administration is, is what's really needed for companies like Titan. Um, we make great products with great people, but it wasn't a fair playing field. So I think that Japan,

Agreement like you, you Illustrated is a good is a good starting point for where we see the the rest of the global.

You know, Market being settled related to the tariffs, you know, I listen to the best this morning. Um, yeah, he's he's he's phenomenal at what he's doing. He didn't exactly give Clarity to answer your question but I think he did point in some pretty good directions with um, you know, some of the key key Market, the key countries that these deals haven't been settled with, you know, at this point. So I I do I do feel good about where we're going. Um, I think the, the farmer sentiment indicators are positive, I think the backdrop of weight Administration,

Paul Reitz: It's just interest rates. We still see interest rates being that cloudy factor that's hanging out over making purchases and holding inventory because people are looking at it going, "What I pay today is too high to what it's going to be in the future." And I think once you remove that impediment, which maybe we got a step closer this week, then I do think it poised for a market that is going to start rebounding. You know, we've been in the ag cycle now for, you know, we're going on a two-year downturn, and I think all the indicators are that '26 will be an uptick. You know, the question is going to be when does that springboard into place? One of the things we're going to be working closely with our customers is kind of find out the answer to the question.

Stepping in with, with support for Farmers. Um, you know, you look in the construction segment, obviously, there's a lot going on there, but I think the both both segments, tie back to 1 thing. It's just interest rates.

Uh we we still see interest rates being that cloudy Factor that's hanging out over making those making purchases and holding inventory because people are looking at it going. What I pay today is too high to what it is going to be in the future. And I think once you remove that impediment, which maybe we got to step closer the this week. Um then I I do think your poised for a market that is is going to start rebounding. You know we've been in the a cycle now for

You know, we're going on a, a 2 year, 2 year, downturn. And I think all the indicators are that 20

Paul Reitz: And with the products we produce, Derek, you know, especially the wheel, we usually do get very good lead time. And right now, they're still fairly quiet on next year. But as I mentioned earlier, I do think there's going to be an uptick for '26. The question is, again, does it really spring into place to be a major uptick, or is it just sort of a get the year started, move it in a positive direction, and wait and see for the back half of the year if it really kicks in? So I can't quite answer that question, but something we'll be over the next few months working to get some more clarity.

6 will be an uptick; you know the question is going to be when does that springboard into place? One of the things we're going to be working closely with our customers on is kind of finding out the answer to that question regarding the products we produce. Derek, you know, especially with the wheel, we usually do get very good lead time, and right now, they're still fairly quiet on next year. But as I mentioned earlier, I do think there's going to be an uptick for 2026. The question is again, does it really spring into place to be a major, major uptick? Or is it just sort of a get the year started, moving in a positive direction, and wait and see for the back half of the year if it really kicks in? So, I can't quite answer that question, but it's something we'll be working to get some more clarity on over the next few months.

Steve Ferazani: That's helpful. My other questions were answered, but I think maybe if you could just provide some detail, some additional color on this deal in Brazil. It sounds like you're investing in one of the bigger companies over there. I think I missed the name on that, but I'm wondering if you could maybe help us plan for how we should model that, any impact to, you know, cash outflows, inflows, revenue outlook, anything that might help us model that. That impact would be helpful. Thanks.

Sound flows inflows. Um,

Paul Reitz: Yeah. I mean, I'm going to probably spend more time on the strategic side of it because it is a minority investment. So the modeling isn't going to be quite as, you know, transparent because it's not, we will not be consolidating their financials. But it's a strategic relationship we've been working on for a number of years. We've watched this company, we've gotten to know this company, worked with them with some deals, and seen them that they've really built a strong business for our particular product. So large ag, they've put the investment into the plant. They have a great technical team. And really, what we're looking at is if you can bring a wheel and tire as an assembled product to our customers, we are truly that one-stop shop. And that's something you keep hearing Titan say over and over again.

Revenue Outlook anything uh that might help us model that that impact would be helpful. Thanks.

Paul Reitz: If we can do that anywhere we operate, we feel like we're going to win. We're going to have the best customer service and the strongest customer relationship. And so Rodeiros is the name of the company to answer your question. They've done a great job gaining market share in Brazil with the products they produce in wheels, servicing ag and construction. And again, just somebody we've been working with, talking to for a number of years, and it's great to finally see it all come together. So I think you really have the formation of a healthy strategic partnership there. Two companies looking for ways to continue to grow and expand our relationship together. So we'll start off with an initial minority investment of $4 million for 20%. And then we do have some, you know, opportunities in the future to see that grow and expand.

Yeah, I mean, I would probably spend more time on the Strategic side of it because it is a minority investment. So the modeling is, isn't going to be quite as, um, you know, transparent because it's not, we will not be consolidating their financials. But uh, it it's a, it's a strategic relationship. We've been working on for a number of years. Um, we we've watched this company have gotten to know this company worked with them, with, with some deals, um, and, and seeing them. They've really built a strong business for our particular products. So large a, um, they, they've put the investment into the plant, they have a great technical team, and really what we're looking at, it is, if you can bring a wheel and tire as an assembled product to our customers, we, we are truly that 1-stop shop, and that's something you keep hearing Titans, say, over and over again, if we can do that,

Uh, anywhere where you operate. We feel like we're going to win. We're going to have the best customer service and the strongest customer relationship. And so, rodeos is the name of the company to answer your question. Uh, they've done a great job, gaining market share in Brazil, with, with the products they produce and, and, and wheels servicing a and construction. And again, just somebody we've been working with talking to, for a number of years, and it's great to finally see it all come together. So, I think you really have the formation of a healthy strategic partnership there, uh, 2 companies looking for ways to to

Paul Reitz: And at that point, then you would start bringing in the full financial consolidation and seeing the direct impact to the financial statement. So I do think it'll have a positive impact, definitely strategically for the coming months and next year. We'll work more on the modeling side of it after it gets closed to see the incremental volume that we can drive to Titan through the strategic partnership. But again, just to be clear, it won't be a consolidated as a full set of financials.

Continue to grow and expand our relationship together. So we'll start off with an initial minority investment of dollars for 20%. Um, and then we do have some, you know, opportunities in the future to see that grow and expand. And at that point, then you would start bringing in the full Financial consolidation and, and seeing the direct impact of the financial statement. So I I do think it'll have a positive impact. Definitely, strategically for for the coming months. And next year, um, we'll work more on the modeling side of it after it gets closed to see the incremental volume that we can we can drive 2 Titan through this strategic partnership. But again, just to be clear it won't it won't be a Consolidated as a full set of financials.

Steve Ferazani: That's helpful. Thanks.

Yeah, that's helpful. Thanks.

Paul Reitz: Thanks, Derek.

Alan Snyder: Thank you very much. Our next question comes from Joe Gomez from Noble Capital. Joe, your line is now open.

Joe Gomes: Good morning.

Paul Reitz: Hey, Joe.

Joe Gomes: I just wanted to start just for some more clarity here around the consumer side. And so what I'm hearing is what's giving you confidence that this was a temporary lull is the low inventory. And then if we get some positive resolution here or stabilization, let's call it on tariffs and our interest rates, that could even be a better environment for us. Is that accurate?

Paul Reitz: I think, Joe, yeah, you're on the right path with that. And I know David has spent a lot of time talking about it. And it does get complicated. I mean, these questions, there's so many moving parts when how we try to respond and answer. And part of it is also because we have a ton of information available to us. And I would say as we went into the quarter, we knew that volumes were moving downward. And there were a number of different factors like we've already highlighted in your question brings into play. Part of it is tariffs and interest rates were the obvious. Part of it was the timing of some of our sales that we had in kind of some programs from last year versus this year. So there's a lot of moving factors.

These questions. There's so many moving Parts when when how we try to respond and answer and and it's part of it is also because we have a ton of information available to us. And I would say as we went into the quarter, uh, we knew that volumes were

Paul Reitz: But what we were really watching closely, David and I, along with the leadership team from the specialty division, was what do we see in July? And what we have seen in July, and we spent some time yesterday just confirming all this, is that some of our customers had paused in Q2, as you see in the financials, for the reasons that have been noted. And they're now realizing that the retail pull-through demand has remained stronger than anticipated, and they're building back their inventory. So again, inventories have gotten too low relative to the retail sales. And so we've seen some really good orders come back in July, leading to the positive comments that you've heard from both David and I, that this was more of a temporary slowdown, still impacted by tariffs and really primary interest rates as we've talked about.

Moving downward and there was a number of different factors. Like we've already highlighted in your question brings into play part of it is, is is tears at interest rates for the obvious part of it was the timing of some of our sales that we had in kind of some programs from last year versus this year. So there's a lot of moving factors, but what we were really watching closely, um, David and I along with the leadership team from the specialty division was what do we see in July?

And what we have seen in July, and we spent some time yesterday just confirming. All this is that some of our customers had paused in Q2 as you see in the financials, um, for the reasons that have been noted and they real, they they're now realizing that the retail pull through demand has has remained stronger than anticipated and they're building back their inventory. So again, inventory is a gotten too low relative to the the retail sales and so we've seen some really good orders come back in July leading to the positive comments that you've heard from both David and I that there's

Paul Reitz: But there are positive indicators in Q3 that the fundamentals in the consumer segment are stronger than what was indicated in the actual Q2 results. Does that make sense? I'll kind of stop and stop there and let you digest it.

This was more of a temporary slowdown, still impacted by tariffs and really primary interest rates as we've talked about. But there is a positive indicators in in Q3 that the the fundamentals. And the consumer segments are stronger than what was indicated in the actual Q2 results.

Does that make sense? I'll kind of stop and stop there and let you digest it.

Joe Gomes: That's great. I appreciate that. Very, very informative. And then I was wondering maybe you could talk a little bit about some of your efforts that you talked about in the past, you know, getting some third-party source product and your move again back into the military market. You know, maybe you could just give us a little update on how those are going.

That's great, I I appreciate that. Um, very, very informative.

and then I was wondering, maybe you could talk a little bit about some of of your your efforts that you talked about in the past, you know, getting some third-party Source Products and your

Move again, back into the military Market, you know, maybe you could just give us a little update on on how those are going.

Paul Reitz: Yeah. I mean, we are going to continue to be that one-stop shop, which includes our incredible portfolio and production capabilities around the world, but also where we need those third-party partners or the JVs that we have in the ones that are existing and the new one that we just announced. But we are going to be that one-stop shop to service our customers. And what we bring to that equation with the third-party source products is we bring distribution, branding, and an incredible technical resource team that can stand behind the products. So we are willing and looking consistently to fill in either geographical or product gaps in our portfolio to service our customers with a high degree of confidence that if we find the right third-party partner, we will service that product and we will service the customers and do it well. We have been doing that.

Yeah, we— I mean, we are going to continue to be that one-stop shop, which includes our incredible portfolio and production capabilities around the world. Um, but also where we need those third-party partners or the JVs that we have in, um, the ones that are existing and the new one that we just announced. Um, but we are going to be that one-stop shop to service our customers. And what we bring to that equation with the third-party sourced products is we bring distribution, branding, and an incredible technical resource team that can stand behind the products.

Paul Reitz: We are currently doing that. And we believe strongly we can continue to grow via that strategy. And so really pleased with the progress. And you know, to be honest with you, we have an incredible team. So you know, doing this requires resources and strengths of people and market intelligence. And that's where Titan can really outrun and outshine the competition because our breadth and the depth of the places of the globe that we can touch is a step ahead of everybody else. So we're going to keep running and growing in that area. Military, we see the opportunities. In fact, I had a really good week with military, to be honest with you. You know, I'm glad you asked that question. It was a pretty busy week with earnings, but I've had some good meetings with the military this week.

So we are willing and, and looking consistently to fill in either geographical or product gaps in our portfolio. It's a service, our customers. Um, with a high degree of confidence that if we find the right third-party partner, we will service that product and we will service the customers and do it well. Um, we are, we have been doing that. We are currently doing that and we, we believe strongly, we can continue to grow, um, via that strategy. And so, um, really pleased with the the progress and, you know,

To be honest with you, we have an incredible team. So, you know, doing this,

Requires resources and strengths of, of, of people and in Market intelligence. And, uh, that's where Titan can really out outrun and outshine the competition because our, our breadth, and the depth of, of the places of the globe that we can touch, uh, is a step ahead of everybody else. So, we're going to keep running and growing in that area. Uh, military. Uh,

Paul Reitz: And now it's just kind of getting the technical needs from their side, cooperated with what our team and our capabilities are and really moving forward. So you know, at this point, there's nothing discreet because you know, projects do take time from an engineering standpoint. If it was just up to me, we'd sign a deal and we'd be running. But there's a lot of technical stuff you got to work through. But you know, it's a timely question because it was a positive week. You know, again, a meeting that I was involved in directly this week was moving in that direction. And we've already scheduled some follow-ups.

Paul Reitz: So you know, we're going to continue to chase those military opportunities because the way I view it from Titan's standpoint, you know, in my tenure here as CEO and president, our military sales have been closer to zero than anything. You know, I know Titan historically had military sales, but you know, during my tenure, it's been close to zero. And so I think the direction the administration is going, where the military is going, favors manufacturers, producers like Titan. We're building those relationships, like I mentioned, and I see it as only as a positive. So we're not at risk of losing anything because we really don't have anything. So, you know, again, I think the meetings that took place this week are positive, and we're, we're, we're, I'm investing a time, and so will my team.

It's we see the opportunities. Uh, in fact, I had a really good week with military to be honest with you. Uh, you know, it's, I'm glad you asked that question. It's pretty busy week with Ernie's but I, I've had some good meetings with, um, with the military this week. And now it's just kind of getting the technical needs, um, from their side cooperated with what our cap, our team, and our capabilities are and, and really moving forward. So, you know, at this point there's nothing discreet because, you know, projects do take time from an engineering standpoint. If, if it was just up to me, we'd sign a deal and we'd be running. But um, there's a lot of technical stuff you got to work through. But, you know, but it is, is it's a timely question because it was a positive week. Um, you know, again, a meeting that I was involved with directly. This week was was moving in that direction and we've already scheduled some follow-ups. So, you know, we're going to continue to chase those military opportunities because the way I view it from Titan standpoint. Um you know in my tenure here is CEO and president, our military sales have been

Closer to zero than anything. You know, I know Titan historically had military sales but you know, during my tenure it's been close to zero and and so I think the direction the the administration is going where the military is going favors manufacturers. Producers like Titan. We're building those relationships like I mentioned and I see it as only as a positive. So we're not at risk of losing anything because we really don't have anything. So you know again I think the meetings that took place this week are positive and we're we're we're I'm investing a time and so we'll my team.

Joe Gomes: Great. And then one last one for me. You really haven't talked about LSW today. And I know one of the goals was you talked about was some penetration into the mid-size tractor market. Just wondering how those efforts are going and then the overall LSW efforts.

Paul Reitz: Yeah. LSW is something we're always going to be continuing to push behind the scenes. What we're really working on is the marketing towards those mid-size farms. We got some really good data from a farmer that was working, actually, he was a contract farmer working on a number of parcels, really good data that supported the yield improvements that LSW brings to the table every time you turn a piece of equipment. What we're really working on is creating a tool, and we're using, trying to bring in AI, to be honest with you, and some technical resources. But we want to create a marketing tool that makes this so intuitive and easy to interpret for a farmer that the sale drives itself. And to do that, you got to make sure you have all the right data.

Great. And then 1 last 1 for me, you, you really haven't talked about LSW today. Um, and I know 1 of the, the goals was you talked about with some penetration into the midsize tractor Market. Just wondering how those efforts are going and then the overall LS W efforts.

Yeah LSW is is is something we're always going to be continuing to push behind the scenes? What we're really working on is the marketing towards those those mid-size Farms. Um we we got some really good data.

From a farmer that uh was working, actually he was a contract farmer working on a number of parcels really good data that supported the, the yield improvements that yellow yellows, W brings to the table. Every time you you turn a piece of equipment. What we're really working on is, is creating a tool and we're using trying to bring in AI, to be honest with you and and some Technical Resources. But we want

Paul Reitz: So basically, what we're trying to do is you can plug in the size of the farm and what your needs are, and this calculator will tell you what the return on LSW would be and kind of the yield savings and improvements to your income that would be generated by having LSW. So we're trying to do it the right way from that regard, and it's going to take a little bit more time to do so. But you know, the data that we're getting on the support around LSW, it continues to even exceed our own expectations because, to be frankly, it's coming from outside our own internal testing.

Time to do so. But you know, the the data that we're getting on the support around LSW, is it continues to

Paul Reitz: It's coming from others providing the testing for us, which is clearly the best type of testing support you could have because it's somebody telling you, "Hey, your products are incredible." And we do have that, but now we're just trying to fine-tune it. So you know, I think there's other things we continue to look at. What David and I would love to be able to provide the farmers in that particular category is some attractive financing. Haven't been able to really get that going in today's markets. I was up in Canada earlier this week and talked with the Canadian team. They have really large farms up there. It's kind of the same thing. He's going to talk to some Canadian agriculture banks. Maybe we can get some financing.

Paul Reitz: I think that would really help drive the purchases of LSW if we could have, if we had an attractive financing package. So if you have the marketing plus the financing package in today's world, I think we can really kick those sales into gear. So you know, we're working on it. Got some smart people, you know, looking at these opportunities. But you know, again, the interest rates still are a hurdle to a lot of different things. And you know, that's something that hopefully we can take off the equation here soon.

Um, even exceed our own expectations because to be to be frankly, it's coming from outside our own internal testing, it's coming from others. Providing the testing for us, which is clearly the best type of testing support you could have. Because it's, it's somebody telling you, hey, your products are incredible. Um, and and we do have that but now we're just trying to fine-tune it. So, um, you know, I think there's other things we can continue to look at what Dave and I would love to be able to provide the farmers in that particular category is some attractive financing. Um, haven't been able to really get that going in today's markets. I was up in Canada earlier this week and talked with the Canadian team. They have really large Farms up there. It's kind of the same thing work. He's going to talk to some Canadian agriculture Banks. Maybe we can get some financing and I think that would really help Drive the the purchases of LSW. If we could have if we had a an attractive financing package. So if you have the marketing plus the financing package in today's world I I think we can really kick those sales into gear. So

um, you know, we're we're working on it, got got some smart people, you know, looking at these opportunities, but, um, you know, again, the interest rates,

uh, still

Still are are hurdle to a lot of different things and and you know that's that's something that hopefully we can take off the equation here soon.

Joe Gomes: Great. Thanks for that.

Great. Thanks for that.

Paul Reitz: You bet. Thanks, Joe.

You bet. Thanks Joe.

Alan Snyder: Thank you very much. As a reminder, to raise a question, it will be star followed by one on your telephone keypad. Our next question comes from Kirk Lude from Imperial Capital. Kirk, your line is now open.

Thank you very much. As a reminder, to raise a question will be start. Followed by 1 telephone keypad

Steve Ferazani: Thank you. Hello, Paul, David, Alan. Thank you for the call. A couple of follow-ups on Rodeiros. Do you need to make an investment there?

Our next question comes from Kirk L from imperial. Capital line is not open.

Thank you. Hello Paul, David Allen, thank you for the the call.

Um, a couple follow-ups. Um,

On rodder. Uh,

do you do you need to make an investment there?

Paul Reitz: No, not beyond that initial $4 million. They've done a great job making the investments into the operations and really put it into the world-class caliber company that it is now with good market share in Brazil. And so that's what we've been watching closely, to be honest with you, through the years. Kirk, to answer your question, is them making the investment both on the equipment side and the technical arena. And they've already done that. So they're not Titan's injection is not an injection of capital because they need capital to get to where they need to go. They've already gotten to where they need to go. So now it's strategically, how do we take the two companies and make them better? So I think it's a really good time from Titan's shareholders' perspective that we're able to do this.

Uh, no, not not beyond that initial 4 million. They they've done a a a, a great job.

Making the investments into the the operations and really put it into the world class caliber.

Company that it, it is now with with, with, with, with good market, share in Brazil. And so, that's what we've been watching closely to be honest with you. Through the years, Kirk to answer your question is, is them making the investment both on the equipment side, and the technical Arena? Um, and they've already done that. So they're not Titans. Injection is not an injection of capital because they need Capital to get to where they need to go. They've already gotten to where they need to go. So now it's strategically, how do we take the 2 companies and make them?

Paul Reitz: And I do want to say it shows the strength of Titan yet again, our brand and who we are. Rodeiros has other suitors. It's not like this company was sitting there on an island. I mean, they've, to answer your question, they built a great company with strong market share. And if you are doing that, you are going to have plenty of suitors. It's who Titan is and the value that we can bring together that really drives the relationship to be formed and signed like as we did this week. So again, strategically, it's very important. But from an investment standpoint, Kirk, we're in a great position because they've already done it.

Steve Ferazani: Interesting. Thank you. I guess I missed that. I guess he said there was a $4 million investment upfront.

Better. Um, so I think it's a really good time from Titan shareholders perspective that we're able to do this. And I, I, I, I do want to say it, it shows the strength of Titan yet again our brand and who we are Rodeo. Has other suitors. It's not like, this company was sitting there on an island. I mean, they, they, to answer your question, they built a great company with strong market share, uh, and, and if you are doing that, you are going to have plenty of suitors. It's who Titan is. And the value that we can bring together, that really drives the relationship to be formed and and and signed like as we did this week. So um, again strategically is very important, but from an investment standpoint Kirk, we're in a great position because they've already done it.

Paul Reitz: I didn't say it in my script. It was just, it was part of the Q&A. I didn't have that in my script. So no, you didn't really miss it from that standpoint.

Steve Ferazani: Okay. Got it. And so this sounds like it could be really, given that you know you're so successful there on the tire side, this sounds like it could be a pretty meaningful development. When do you think it might move the needle in terms of your results? You know.

Interesting, thank you. I, I guess I missed that that you said, I guess you said there was a $4 million investment up front. Um, it, I I didn't say my, my screen, it was, it was just, it was part of the Q&A. We, we we didn't, I didn't have that in my script. So no, you didn't really miss it from that standpoint.

Okay, got it. And so this sounds like it could be really good, given that you're so successful there.

On the tire side. Uh this sounds like it could be a pretty meaningful development. Um,

Uh, when, when do you think it might move the needle in terms of your results?

Paul Reitz: I think moving the needle, obviously, when we, if we buy enough, if we increase our investments to the point where we consolidate or our operational involvement increases and we consolidate it, that would move the results. And you know, it's at an evaluation that is attractive and reasonable for Titan's shareholders. So you know, I think from that standpoint, it's accretive because it's not, you know, it's a profitable, successful business. But as far as moving the needle, I think it's what we can do with our product portfolio together. You know, obviously, now we can sell wheels and tires assembled to the OEMs. We can push more of the LSW together into the marketplace. And so it's all areas that are good growth. But also what it does, and this is not answering your question directly, but it protects what we have.

You know, I I think moving the needle. Um, obviously when we, if we buy enough, if we increase our investments, to the point where we consolidate or our operational involvement increases, and we Consolidated that would move the results. And, you know, it's adding a, it's added evaluation. That is

it's

Paul Reitz: So if you think about, they have good market share, we have great market share. When you are a wheel tire assembly type operation, like we are in North America, the value and the leverage that you have and really the protection you can put around the relationships you have with customers only increases. And so again, looking at it from a strategic perspective, it's very difficult in Brazil to compete with a formal accommodation of Titan from the tire side and Rodeiros on the wheel side. And so more to come as we kind of get the deal finalized and kind of think about the strategy for next year. You know, we'll make a trip down to Brazil once it closes and work with them on the strategy of where we can market and move some additional products for next year.

Paul Reitz: So you know, at this point, because it's a, you know, a minority investment, moving the needle financially is indirectly there. Let's lay the groundwork strategically, and then we'll build the marketing tools around additional product sales for next year.

Steve Ferazani: Interesting. Thank you. And what percentage of Rodeiros would you own?

it protects what we have. So, if you think about, they have good market, share, we have great market share. Um, when you are a wheel tire assembly, type operation, like we are in North America, um, the value, and the leverage that you have. And really the protection, you can put around the relationships, you have with customers, only increases. And so, again, looking at from a strategic perspective, is very difficult in Brazil to compete with a formal accommodation of Titan. From the tire side and rodos on the wheel side. And so, um, more to come, as we kind of get the deal finalized and kind of think about the strategy for next year. You know, we'll make a trip down to Brazil once it closes and work with them on the strategy of where we can market and move some additional products for next year. So, um, you know, at this point because it's a, a, you know, a minority investment that, that moving the needle financially isn't directly there. Let's lay the groundwork strategically and then we'll build the marketing Tools around additional product sales for next year.

Interesting. Thank you. And what, what percentage of of Rodas would you own?

Paul Reitz: This initial is 20%. And then we have mechanisms that would drive that higher as time progresses.

Uh, this initial 20%.

And then and then we have mechanisms that would drive that higher as time progresses.

Steve Ferazani: Oh, interesting. Okay. Great. And then on the tariff side, so we've been, you know, hearing about tariffs now for, well, at least four months, longer. But you know, it just seems like, you know, your customers in the US would be making plans because it doesn't appear that you're going to, you know, imported tires are going to be tariffed by at least 15%, probably higher for some countries. What are they saying? Are they asking you about, you know, your, you know, capacity in the event that they need to move stuff onshore to US suppliers? I mean, is there any kind of anything you can say on that front about what your customers are saying? USA.

Oh interesting. Okay, great. Um,

uh, and then on the Tariff side, um,

So we've been, you know, hearing about tariffs now for well, at least 4 months.

Longer. But

You know, it just seems like.

you know, uh,

Your customers in the U.S. would be.

Paul Reitz: Yeah. No, that's a good question. We have had customers ask us about our capacity for next year. That has taken place. And I was at a customer last week, and the way the meeting closed, the head of the customer quietly said to me, "You know, Titan's in a good position for '26." That's kind of where we're at. It's more the questions around your capabilities for '26, feeling that we're well-positioned to service their needs for '26. But customers are just not talking a lot about '26 at this point. There's too much still, as you highlighted in your question, you know, still too much related to tariffs and interest rates. But I do like it. Like that meeting last week, you know, I like it when a customer quietly says something to me. You know, there was no need to do it. They didn't have to.

Making plans because it does appear that you're going to, you know, import it tires are going to be tough by at least 15% probably higher in for some countries. What are they saying? Are they asking you about, you know, your, you know, capacity, uh, in the event that they, they need to, to move, um, stuff on Shore to to us suppliers. I mean, is there any kind of anything you can say on that front about your, what your customers are saying?

USA. Yeah, no it's it's a good question. We had had had, we have had customers ask us about our capacity for next year.

Um, that is taking place and I I was at a customer last week.

And the way the, the meeting closed, the the they quietly.

The head of the customer quietly said to me, "You know, Titans in a good position for ’26."

Um, that's kind of where we're at is it's more the the questions around.

Your capabilities for 26 feeling that we're well positioned to to service their needs for 26. But customers are just not talking a lot about

26. At this point, there's too much still as you highlight in your question, you know, still too much related to tariffs and interest rates, um, but I I do like it like that meeting last week, you know, I like it when a customer.

quietly says, something to me, you know, there was no need to do it, they didn't have to

Paul Reitz: But you know, it does signal, I think, to me and what I'm there for, translating back to our team. And you even said it to the board in our meeting in the last month as well. We have to remain agile. We got to have the staffing in place and the people in place to do that. That's why I keep highlighting, again, these drop-in orders and our ability to service them. You know, I don't think all companies in our space can do that. I'm not them, so I can't speak directly for them. But that's not as easy in today's world to see Titan manage costs the way we have with our margins and our performance so far this year in a very significant downturn, but also be in a position when customers need us, we can respond.

They didn't have to um but you know it does signal. I think to me and the what I'm saying I'm there for

Paul Reitz: And so that's why, again, I keep highlighting, I'm not just throwing BS out there for the sake of doing it. It's really important in our business because our business has so many skews. It's incredibly complicated from a production operational standpoint. And so for our ability to, when a customer says, "I need you, and here's the order," and we can do it, that signifies the strength that Titan has. And so, again, what I'm saying to our team, investors, to the board, remain agile. We see a market that has potential for turning. It's going to turn in fits and starts, it looks like, for a period of time. But we got to be there to service our customers. And so that's what we're doing. And I think we're doing a good job getting through that so far this year.

Translating back to our team and, and, and even set it to our the board in our meeting, you know, last month as well. We have to remain agile. Um, we got to have the Staffing in place and, and the people in place to do that. That's why I keep highlighting again these drop in orders and our ability to service them. You know, I don't think all companies in our space can do that. Um, I'm not them, so I can't speak directly for them, but that's not as easy. In today's world to see Titan manage costs, the way we have um, with with our margins and our performance so far this year in a, in a very significant downturn, but also be in a position when customers need us, we can respond. And and so that's why again, I keep highlighting, I'm not just throwing BS.

Out there for the sake of doing it. Um, it's really important in our business because our business has so many SKUs. It's incredibly complicated from a production and operational standpoint. And so, for our ability to, when a customer says, "I need you, and here's the order," and we can do it, that signifies the strength Titan has. And so, um, again what I'm saying to our team, investors, and to the board.

Paul Reitz: I think the guidance that David highlighted for Q3 in a period where you have significant holidays and shutdowns, you know, it signifies that, you know, we're on a good pace for Q3 as well. So again, a lot of additional market commentary. I'll stop there. I got 100 thoughts in my head. I could keep talking for 20 more minutes, but I'll stop.

Remain agile. We see a market that has potential for turning. Um, it's going to turn and fits and starts. It looks like for a period of time, um, but we got to be there to service our customers. And so, um, that's that's what we're doing. And, and I think we're, we're doing a good job getting through that. So, far this year, I think, the guidance that David highlighted for Q3 in in a period where you have significant holidays and shutdowns, um, you know, is signifies that, you know, we're we're on a good pace for Q3 as well. Um, so

Market commentary, I'll stop there. I got a 100 thoughts in my head. I could keep talking for 20 more minutes but I'll I'll stop.

Steve Ferazani: That's great color. I really appreciate it. Thanks, guys.

Paul Reitz: You bet. Thanks, Kirk.

Oh, that's that's uh, that's a great color. We, I really appreciate it. Thanks thanks, guys.

Alan Snyder: Thank you very much. We currently have no further questions, so I'd like to hand back to Paul Reetz for any further remarks.

You bet, thanks Greg.

Paul Reitz: Well, hey, everybody, I appreciate it. Enjoy the rest of summer, and we'll talk to you at the end of Q3. Thanks a lot.

Thank you very much. We currently have no further questions so I'd like to hand back to Polaris for any further remarks.

Well, I had probably appreciate it. Enjoy the rest of Summer and we'll talk to you at the end of Q3. Thanks a lot.

Alan Snyder: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.

As we conclude today's call, we'd like to thank everyone for joining you now. Disconnect your lines