Q3 2025 Titan International Inc Earnings Call
Speaker #1: Good morning , ladies and gentlemen , and welcome to the Titan International , Inc. . Third quarter 2020 Earnings Conference Call . At this time , all participants have been placed on a listen only mode , and we will open the floor for your questions and comments .
Speaker #1: After the presentation . If you need assistance during the call , please press star followed by zero on your telephone keypad . It is now my pleasure to turn the floor over to Alan Snyder .
Speaker #1: Vice President , Financial Planning and Investor Relations for Titan , Mr. Snyder . The floor is now yours .
Speaker #2: Thank you and good morning . I'd like to welcome everyone to Titan's third quarter 2020 earnings call . On the call with me today are Paul writes , Titan's president and CEO .
Speaker #2: 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 .
Speaker #2: 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 .
Speaker #2: 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 form 10-q , all of which have been filed with the SEC .
Speaker #2: 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 .
Speaker #2: 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 .
Speaker #2: The Q3 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 .
Speaker #2: On Titan's website . I would now like to turn the call over to Paul .
Speaker #3: Thanks , Allen , and good morning , everyone . Our Q3 2025 results continue to demonstrate the ability of our business and our team to perform well in a challenging time .
Speaker #3: Our AG and EMC segments reported solid sales growth of 8% and 7% , respectively , compared with the prior year , while consumer was off just a little year over year .
Speaker #3: The segment sales rebounded nearly 15% sequentially . As a result , we were able to deliver consolidated revenues in line with guidance along with adjusted EBITDA .
Speaker #3: Near the higher end of our range . Free cash flow was also a highlight in the quarter , allowing us to continue investing in the business while also working to reduce our debt .
Speaker #3: Stepping back from the quarter for a moment , this has been a year filled with many companies talking about unusual business conditions around the globe .
Speaker #3: Our end markets , especially AG , fall into that category . However , there are a number of positives that are taking hold .
Speaker #3: Maybe they're not fully taken root yet , but they are certainly in place to provide a foundation to help drive more positive market conditions .
Speaker #3: First Secretary . He provided some details after the Trump G meeting , highlighting an agreement with China to resume purchasing soybeans at a minimum of 25 million metric tons annually , which puts the floor level of purchases right around the average level seen since 29 , 2009 .
Speaker #3: After strong positive moves in corn and soy leading up to the segment , the immediate reactions to the meeting have been muted a little bit .
Speaker #3: Surprising , to be honest , but this agreement should be seen as a positive that will aid improvement in market conditions as we move into 26 .
Speaker #3: Moving on to everybody's favorite topic , tariffs . This is a complex and layered topic for Titan . I will remind you that Titan has significant in US manufacturing assets , and we are very proud to be the only domestic manufacturer in many of our product categories , along with our US manufacturing assets .
Speaker #3: We have significant offshore capabilities . And third party sourcing partners , which help us to serve our customers across the globe , regardless of the exact outcomes of tariffs .
Speaker #3: We are well positioned to win . We do believe there is a short term impact this year that was driven by other factors , not just the tariffs .
Speaker #3: The fed actions regarding rate cuts are another net positive as higher interest rates have been impacting purchasing decisions , especially as buyers waited on these fed actions .
Speaker #3: You know, lastly, dealer inventories in the AG segment are decreasing. We've talked throughout this year about seeing some drop in orders that have been positive for us.
Speaker #3: As inventories get too low , with some products and customers . I've been talking about inventory levels quite a bit in recent calls , so I'm simply going to say it's good to see that they're getting better .
Speaker #3: So given that backdrop , one aspect of our business that I want to emphasize is our competitive positioning . We are positioned as a one stop shop across the spectrum of tire , and wheel size ranges needed in our end markets , along with an undercarriage portfolio that reaches the largest earthmoving equipment products that Titan is known for , such as our Lsds and Rj14 tires and the wheels .
Speaker #3: They are mounted on are not easily mass produced . Building these tires and wheels requires skilled labor and significant investment in manufacturing assets .
Speaker #3: Our skew runs consist of far fewer units than the passenger vehicle tires we all see on the roads , and when you take that into account , including our standing relationships with leading equipment OEMs and aftermarket dealers , we are confident our business has a good moat around it .
Speaker #3: We are also cognizant of the need to keep reinforcing that moat by innovating and creating new products that add value to our customers and our end users .
Speaker #3: You know , on that line , we've been working hard to expand on our Goodyear product portfolio following the expansion of our license agreement , which we announced last quarter .
Speaker #3: One initial focus area has been outdoor power equipment . Tires like those you find on commercial turf applications , and we've been pleased with the market response .
Speaker #3: And when demand for new equipment begins to pick up , we're optimistic that this will be another growth driver for Titan . At the same time , professional buyers such as landscapers continue to run their equipment .
Speaker #3: That's driving demand for aftermarket replacement tires . And again , that is helping offset some of the softness we see with the OEMs long .
Speaker #3: So switching gears and really looking at our three segments at a higher level , our strategic goal of diversifying our business is proving its merit .
Speaker #3: Year to date , AG has accounted for 41% of our revenues , and EMC consumer accounting for 31 and 28% , respectively . Overall , we think our revenue and gross profit split across the three segments is healthy and an important reason we continue to drive profitability and cash flow well above our prior cyclical troughs .
Speaker #3: Looking at the conditions in each of our segments , starting off with consumer , we see that business benefiting from a couple primary characteristics relative to our other two segments .
Speaker #3: First , it has historically included a larger aftermarket business equipment owners tend to regularly use their machinery in this segment , especially those that are businesses .
Speaker #3: As a result , demand for replacement tires is less cyclical than OEM driven demand . Our consumer sector also includes a wider range of consumer customers and use cases from hunters using ATVs to boat and trailer owners to landscaping companies .
Speaker #3: You know , that type of diversity also helps us weather macro environments like we're seeing now . Moving over to AG , which really is represented who we are as a company since our founding , you know , this year's global crop has been a good one that has continued to increase supply , which is working to suppress the price of leading crops , corn and soybeans .
Speaker #3: American farmers have also borne the brunt of tariff driven trade wars , and as a result , US farmers are looking at a less profitable 2025 .
Speaker #3: And as we all know , farmer income is the primary driver of equipment sales . Conversely , what we have seen , though , and we've been talking about this for about a year now , Brazilian ag interests have picked up much of that slack .
Speaker #3: And again , our diversity as a leading ag tire manufacturer in Brazil , Titan has been able to offset some of those US based weakness .
Speaker #3: The US government also continues to make it clear we have seen a number of these actions over the last couple . Couple of weeks that farmers will be financially supported .
Speaker #3: Government aid is by no means growth . Capital , but if it allows farmers to enter 26 with their finances and reasonable order , that would obviously be good for OEMs in the sector .
Speaker #3: Additionally , that aid would provide the sort of capital needed to support demand for aftermarket tires . Farmers need to keep equipment like tractors and combines operating .
Speaker #3: Moving over to our EMC segment that did experience some growth due to some drop in orders I mentioned in our last call . Most notably in small construction tires and wheels in the US .
Speaker #3: You know , in the Europe , you know , where our EMC segment is , our strongest area . You know , demand has remained somewhat stagnant on the OEM side of the business .
Speaker #3: But we are seeing really good demand on our aftermarket mining , which continues to be a good source of growth for Titan . So wrapping these comments up , I want to just conclude by mentioning again , our team is working hard .
Speaker #3: We're doing a good job servicing our customers . We occupy a strong competitive position in the markets we serve and are a trusted partner to our customers and users .
Speaker #3: Titan continues to execute, and as David will discuss, we are continuing to perform at levels well above the last cyclical bottom. We remain well positioned to benefit when our end markets return to growth.
Speaker #3: With that , I'll turn it over to David .
Speaker #4: Hey , thank you Paul . Good morning . And thanks for joining us today . I'll be quick and to the point today .
Speaker #4: As Paul noted , our results for the third quarter were solid with adjusted EBITDA coming in at the top of our guidance range with strong free cash flow .
Speaker #4: There are some important financial metrics to highlight this quarter . Sales grew 4% year over year , demonstrating that the market may be reaching the bottom .
Speaker #4: The gross margins expanded 210 basis points to 15.2% . Our operating margin expanded in the third quarter as well , and our adjusted EBITDA grew 45% to 30 million .
Speaker #4: Strong working capital discipline facilitated operating cash flow of 42 million , and pragmatic CapEx management furthered the quarter's free cash flow to 30 million .
Speaker #4: Our ability to drive solid profitability and cash flow , despite the challenging macro backdrop , is something we continue to be proud of .
Speaker #4: It stands as a testament to the quality of our team , our operations and our strategy . The adjustment revenues were up over 7% from the prior year , driven by higher volumes , especially in Latin America , where we continue to see positive impacts from solid grain demand .
Speaker #4: And what is anticipated to be another record crop yield in the region due to favorable weather and expansion of planted acreage . Additionally , pricing related to increased input costs contributed to this increase .
Speaker #4: EMC revenues were up 6% from the prior year to 145 million , which is primarily driven by some drop in orders from light construction customers in the US , as well as favorable FX impacts .
Speaker #4: Related to the strengthening of the euro . Year over year in consumer , we saw some of the deferred purchasing from Q2 come back to us in the third quarter , as we had anticipated , segment sales were 132 million , which was a decline of just under 3% from the prior year , mainly due to lower OEM activity .
Speaker #4: However , up 14% from Q2 , which is a very nice to see . Looking at margins in the segment in the quarter , all three showed expansion versus the prior year .
Speaker #4: Our AG gross margins were 13.4% compared to only 9.5% last year . EMC gross margins was was 10.4% versus 8.5% last year . And then consumer gross margins were 23% , compared to 22.3% the year before .
Speaker #4: With solid cash flow in the quarter , we reduced our net debt to 373 million from 391 million at the end of last quarter .
Speaker #4: And resulting leverage decreased to 3.7 . While we continued to invest in our business , third quarter income tax expense was 1 million , which was below the range .
Speaker #4: We discussed on our second quarter call . This was primarily due to the effect of tax planning related to deductibility of interest . Looking at Q4 , we think that benefit will be somewhat less .
Speaker #4: And for modeling purposes , I would expect tax expense of 2.5 million roughly for as a good number to use . Reiterating my comment from prior quarters , as we see a rebound in market conditions , we expect to get back to normalized tax rate levels as we see our our profitability increase .
Speaker #4: Now moving on to our financial guidance for Q4 , our guidance for the quarter is revenues of 385 million to 410 million . And adjusted EBITDA of approximately 10 million .
Speaker #4: I want to ensure that it's clear the midpoint of our revenue guidance and our adjusted EBITDA guidance imply growth in both metrics when compared to Q4 last year .
Speaker #4: Our other operating metrics should also be positive for the quarter . Last year in the fourth quarter , we had $2.6 million of other income , which was abnormally high amount for a single quarter .
Speaker #4: This is the key driver as to why Q4 guidance is only slightly showing a relatively small incremental improvement from the prior year result .
Speaker #4: It also bears repeating that our fourth quarter typically marks our seasonal low point , and with macro conditions continuing . I'm especially pleased to see our business performing well , reiterating our prior comments on cash flow .
Speaker #4: We will continue to manage working capital with discipline , allowing us to continue to reducing our debt and investing in our strategic initiatives , including our continued product innovations , our financial condition is good and it's improving , and I'm fully confident that we're putting Titan in position to accelerate our our future performance .
Speaker #4: We are positioned well . Thank you for your time this morning , and I'd like to turn the call back over to Becky , the operator , for Q&A session .
Speaker #1: Thank you . We'll now begin the question and answer session to ask a question . You may press star , followed by one on your telephone keypad .
Speaker #1: If you are using speakerphone , please pick up your handset before pressing the keys . To withdraw your question , please press star followed by two .
Speaker #1: Our first question comes from Mike Slutsky from D.A. Davidson . Your line is now open . Please go ahead .
Speaker #5: Good morning . Can you hear me ? Okay .
Speaker #4: Yeah , we can .
Speaker #5: Good morning . Hey , guys . Thanks again . Just off some ad ag related questions . What drove the year over year upside in AG ?
Speaker #5: Was it farmers ? Were , you know , fixing up their old tractors or was it OEM asking for more wheels and tires ?
Speaker #4: You're talking about the Q3 performance in terms of the ag growth , right ?
Speaker #5: Yes .
Speaker #4: Yeah . Okay . Just want to make sure I addressed your question appropriately . Yeah . We saw a nice improvements in primarily your customers with in aftermarket .
Speaker #4: You aftermarket has held steady has some slight improvements . But you know in OEMs but not not a significant amount . And then obviously our our Latin American activity is up year over year as well .
Speaker #4: So if you recall , last year in the second half , we were seeing a lot of weakness , a lot of , you know , destocking going on .
Speaker #4: And so this year you saw much more steady activity .
Speaker #5: Got it . Got it . I would just turn to the outlook for 2026 . Paul is the current plan to accept an upturn in in in 2026 .
Speaker #5: And if so , just tell us about the timing and kind of how that might play out . Or has it already started here for Titan , given what we just saw in the third quarter ?
Speaker #3: Yeah , I mean , we do see a return to growth , but describing it more specifically to Titan , it layering on to what David just said .
Speaker #3: I mean , we positioned Titan well in diversified US geographically and also strengthen our aftermarket position . And so where we see Titan continuing to grow will be through the innovations we put into the marketplace , along with aftermarket performance .
Speaker #3: Now we clearly have a strong OEM business , and we are watching that closely to see where we see 26 going . I think the best way to characterize that is we we we're at a bottom .
Speaker #3: But as far as the timing for the pickup , I think I'm going to point to the positives that have been laid into place with interest rates coming down with what the actions of Secretary Bessen and President Trump .
Speaker #3: I don't think that's coincidental that , you know , Trump is putting tweets out talking about supporting the soybean farmer and then Secretary Bessen is going on the TV networks and talking about his experience as a soybean farmer .
Speaker #3: It's not mere coincidence . I think the administration is going to stand behind the fact that we need to to support the farming communities .
Speaker #3: And what they do for our overall society . And so I think as we look towards the OEM forecast , I think they're they're delaying , giving us really good , solid information as to what they see throughout the entire year and kind of just saying what they see for the to start the year , which is , again , kind of a flat start to the year , you know , waiting for some of these initiatives to kick into gear .
Speaker #3: And I don't see how any of these initiatives are negative for 26 . I think they can be viewed as only positive . And if we're at a bottom and you got some positive factors that are now starting to influence things , you know , I do think we see an uptick in OEMs for 26 .
Speaker #3: But primarily we're we're going to hold off on making too many direct comments about where we see 26 for OEMs . Again , stay close to the situation .
Speaker #3: But we do see opportunities for growth with our product innovations . The Goodyear brand , where we can launch that in some new places , and then again with our aftermarket positioning .
Speaker #5: Great . And a similar question to construction , Paul , some of the major US players that have reported so far and have talked about 26 are already talking about improvement next year .
Speaker #5: And a good number of them are. How might that look for Titan in your business?
Speaker #3: Yeah , I think we're in a good position . You know , clearly seeing the same things that that you just mentioned that there's a lot of support coming from the governments that are going to they're going to put some bills into place that will that will help accelerate some spending .
Speaker #3: It's good for us around the world . I mean , our position , our business is pretty well diversified . You know , as far as exposure to Europe , exposure to market , mining and then obviously here in the US as well .
Speaker #3: But I do agree that we're seeing , you know , our early looks into 26 for EMC are that there's there's a good , good basis for some growth going into next year .
Speaker #3: And you know, I think that's something that, if anything, could accelerate throughout the year. I think it's going to start the year in a good position.
Speaker #3: But you know again , some of these these factors could have , I believe , a more positive impact than what some of the initial looks are .
Speaker #3: But again , we'll let that play out . But I agree with the assessment that , you know , as we look at the EMC segment , there's there's a good layer of growth that's coming into next year .
Speaker #5: All right . I appreciate those comments . I'll pass it along . Thank you .
Speaker #4: Thanks , Mike .
Speaker #1: Thank you . Our next question comes from Derek Soderberg from Cantor Fitzgerald . Your line is now open . Please go ahead .
Speaker #6: Yeah . Hey , guys . Thanks for taking the questions . Paul . You mentioned OEM inventory levels improving . Any insight to the degree to which that was the case , maybe over the past quarter ?
Speaker #6: I was just wondering if you could quantify that at all for us . You know how much it improved on a quarter over quarter basis ?
Speaker #6: Yeah , yeah .
Speaker #3: I mean , it does vary by product , by customer . And two ways I would look at it , I think as far as some of the large equipment inventories , you know , we've seen them come down roughly , you know , like a month , like a 30 days of inventory coming off and getting it to a more normalized level .
Speaker #3: Used is starting to move a little bit better as well with the incentives that are in place , which is going to help , obviously , get the the new moving .
Speaker #3: But , you know , for us , what we are watching and dealing with in a positive way is just the the drop in orders where the inventory gets out of balance .
Speaker #3: I mean , obviously there's a lot of forecasting and estimates that go into the positioning of inventory . And we've seen customers , you know , each quarter throughout this year have dropped in orders in specific areas where we've had to respond quickly and get the product produced .
Speaker #3: And again, I think that's an indication that the inventory is hitting the right level, if not too low of a level.
Speaker #3: In certain cases . And so , you know , the Titan team , our strength has , as we mentioned at the beginning of the year , is to be flexible , not just with our manufacturing assets , but with our labor to make sure we can respond .
Speaker #3: And it's , you know , our team has done a great job when these these orders get placed that we're able to respond .
Speaker #3: And again , further solidifying that relationship with our customers . So , you know , again , I think as we get into the forecast for 26 inventories at least coming in at a position where it's neutral .
Speaker #3: And one of the things that Titan's been battling throughout 25 is David mentioned is just the inventory destocking specifically for us . In our segments has had a negative impact .
Speaker #3: So I think for at a minimum for 26 , we started a good neutral level .
Speaker #6: That's helpful . And then any additional color on what's driving aftermarket mining , you know , is it precious metals ? Are you guys seeing any demand from you ?
Speaker #6: There's some trends in rare earths mining some of that onshoring . Can you provide any color on any end market demand trends ? You're seeing in that space ?
Speaker #6: Thanks .
Speaker #3: Yeah , it you know , clearly the operating activities of the mines support the business overall . But I think specifically for Titan , it's our position within the market that's allowing us to grab this , this growth .
Speaker #3: We do have the ability to produce , you know , customized cast products that are that are made in our foundry in Europe and can really meet the needs of the market .
Speaker #3: And again , a highly customized way that's very specific to the applications . And so as we see this growth , it's good across the board as far as operating activity .
Speaker #3: And that's more of our traditional undercarriage parts that we produce . You know our plants throughout the world . But where we've really been able to , you know , outperform and grab additional growth in aftermarket mining is really our ability through our foundry to to customize these cast parts and go attack a niche part of the market that you know , others can't quite get to .
Speaker #3: So there's a little bit of specific growth to Titan . That's that's outside the general trends . You may see overall in the mining segment .
Speaker #6: That's helpful . Thank you .
Speaker #3: Thanks , Derek .
Speaker #1: Thank you . Our next question comes from Steve Ferazani from Sidoti . Your line is now open . Please go ahead .
Speaker #7: Good morning Paul . Morning , David . Appreciate all the commentary on the call . Given the strength in three . Q and we were really surprised how strong AG was in 3QA little surprised at the top line guide for four .
Speaker #7: Q can you talk about the slightly different elements , because that number we know how dramatic the the OEM shutdowns were in the year ago .
Speaker #7: So if inventories are getting a little bit better , you know , if you're guiding for pretty similar shutdowns on that side , and I know you guys have a pretty good picture on that , a little surprised there .
Speaker #7: And also , I'm guessing aftermarket is less of a benefit in four Q just in general than it would be in three Q .
Speaker #4: Yeah , and we're still we're seeing , you know , the kind of drop , you know , maybe not nearly as much as last year , but we are seeing a drop seasonally going from Q3 to Q4 .
Speaker #4: You know , I , I believe that OEMs are really just getting themselves prepared for next year , but they're not going to be , you know , they're not going to turn on production in Q4 .
Speaker #4: So we're not going to be seeing , upticks . So we're seeing the normal seasonality , very pragmatic decisions being made about it .
Speaker #4: And , you know , our aftermarket is is light in Q4 , as you know , we're going to be seeing a really nice seasonal uptick in Q1 .
Speaker #4: So and that's actually taking place not just here in the US , but it's also in Brazil . So that is , you know , same trends that we're seeing there .
Speaker #4: It's really across the board . So it yeah , it doesn't obviously imply the seasonal downturn that we typically see . Okay . We're being .
Speaker #4: helpful about it . Not not getting out over our skis I think we are positioned well . You know , to take the orders as we need to .
Speaker #4: But I believe , you know , much more , you know , being there , being very disciplined . And we will we will to .
Speaker #4: .
Speaker #7: So I mean , following Paul's commentary that maybe the start of the year on AG is pretty similar . I mean , you ran through the macro issues , which we can all see and hopefully a trade agreement pumps that up and we start seeing crop prices working .
Speaker #7: Having said all that , you're clearly doing very well in the aftermarket . It looks like you're even potentially gaining some share there .
Speaker #7: When we think about the start of the year , we're now going to be another year along without the replacement cycle . You've got more aging equipment .
Speaker #7: You're clearly gaining in those markets . Can we see nice uptick on aftermarket first half of the year year over year ?
Speaker #3: Yeah , I mean I , I think , you know , I was just with our VP of sales Tuesday and he's optimistic .
Speaker #3: So I think the answer is yes . To keep the to keep it brief . We the diversification of our company I think is just a key point .
Speaker #3: And Dave and I have spent a lot of time talking about that . You know , geographically be able to take advantage of the positioning of Brazil over the last year as the purchasing interests of China .
Speaker #3: Move that direction . And then as a company with what we've done in the consumer segment to continue to drive innovation into the aftermarket .
Speaker #3: I think Titan has been very well positioned to the aftermarket . We we share with investors how we've changed this company from where it was ten years ago .
Speaker #3: As far as our aftermarket splits to where we are now . And I think we continue to accelerate in that area . And so we are seeing a again , the feedback I got just on Tuesdays where , you know , we're seeing a good start to the pre-ordering for for next year .
Speaker #3: And you know , I do think you start you start the year off on a positive note with aftermarket .
Speaker #7: And then, also just kind of following along your commentary on the answer to one of your questions: historically, or at least in recent history, AG and EMC have directionally moved similarly.
Speaker #7: Maybe not quite the same levels . It sounds like you're indicating that maybe , at least in in the near term , those may going to a couple of different directions , which is not what we've seen in recent history .
Speaker #3: Yeah , yes and no . I mean , I think I think there's different drivers . I think the , the AG global markets have been hammered the last couple of years .
Speaker #3: Yeah . We've dealt with in our particular business , we've dealt with the inventory destocking in AG , but the way we position Titan with EMC and AG is that we've increased our aftermarket diversification .
Speaker #3: We were just over in Italy meeting with our leader of , you know , a big part of our EMC business . And there's a lot of confidence for continuing to see that diversification provide benefits to Titan as we move into 26 .
Speaker #3: I do think there is a potential for a bigger uptick in AG , as we all know , when the foundation of those actions start to take root , that you don't necessarily have an EMC where there's this more consistent growth as government spending , infrastructure spending , etc.
Speaker #3: continues to drive that in a positive way . I do think there's this hidden uptick in AG that's lurking out there somewhere . It's just nobody's exactly pinpointing the timing on it .
Speaker #3: But strategically , there's similarity . Clearly having the tire business in AG gives us more diversification to the aftermarket and more levers to pull .
Speaker #3: There . In north and South America . And the innovations and the positioning and the relationships we have with dealers . Whereas with EMC , we don't have that because there's steel based products , but we've really diversified our business .
Speaker #3: As I mentioned earlier , with the customized aftermarket mining products that we can produce and then touching into some other parts of the the steel based aftermarket with EMC as well .
Speaker #3: So again , I think it's a lot of this diversification of Titan is I think , really providing us good strong benefits that we're seeing in the 25 results that positions us well as we move into 26 , whichever direction markets go , which I do believe they're at a bottom with some uptick coming .
Speaker #3: But we're in a position to capture some of that growth wherever the markets may go .
Speaker #7: That's really helpful . Appreciate , Paul . Last one for me was just on the royalty expense line . That number being much higher sequentially and year over year would seem to indicate you were selling an awful lot of third party tires .
Speaker #7: Is that the right way to be thinking about that ?
Speaker #4: Well , certainly . You know , we have the new license agreement and we had a little bit of true up to the payments made in Q3 , a little bit .
Speaker #4: But certainly , the mix is is certainly favorable towards Goodyear .
Speaker #8: Okay . All right .
Speaker #7: Thanks , David . Thanks , Paul .
Speaker #8: Thanks , Steve .
Speaker #1: Thank you . Our next question comes from Joe Gomez from Noble Capital Partners . Your line is now open . Please go ahead .
Speaker #9: Well , this is Hans Baldo . I'm on for Joe . Could you talk about the potential M&A ? Do you know what the valuations are looking like or any areas that you all might target ?
Speaker #3: You know , I think what we have done as a company historically is look for opportunities when valuations are lower . You know , we we operate in a in an industry that could be considered a niche industry .
Speaker #3: And there's been opportunities that have presented themselves kind of on a on a consistent basis , not on an annual basis . And so we are we can continue to follow that approach .
Speaker #3: I know David spends a lot of time and effort managing the balance sheet , along with our entire team . And so , you know , we look at our our ability to be able to participate in any lower valuations and grow via M&A is something that Titan needs to be positioned to , along with investing in , in innovations which we've done .
Speaker #3: Do I think these market conditions potentially give us some opportunity ? You know , I hope so . I think historically it's presented some valuations that maybe do that .
Speaker #3: You know , is there anything imminent , you know , it's not really how our industry works . I mean it's sort of it's more opportunistic than it is .
Speaker #3: You know , pinpointing this is what we're going to go do because that if you pinpoint what you're going to go do strategically , usually that's the valuation gets too high for how tight it historically has done acquisitions .
Speaker #3: So , you know , you wait for the opportunity , work towards it and see if it comes together . And that's been our consistent approach to the years .
Speaker #3: And I think , you know , the acquisition we did last year is a really good illustration of that .
Speaker #9: Okay . Thank you . I appreciate that . And then could you add some color on the military market . How is your target targeting of the military market progressing ?
Speaker #3: I mean , the targeting has been been good . The results are , you know , just takes time . So the results could be better .
Speaker #3: I mean er my personal frustration since I got a microphone I might as well go ahead and do it . You know I see what European countries are doing .
Speaker #3: You know , just read this week about how Germany is going to get their guess what the German government is going to do .
Speaker #3: They're going to buy military components from German manufacturers . Guess what ? Europe is doing ? Look at Rheinmetall . They're buying products from European manufacturers .
Speaker #3: I need somebody explain to me why our US government can't buy from us manufacturers . I think it's a pretty simple formula . And I think Titan should be able to participate in that formula as our US government opens their eyes and realizes that we should be supporting our own companies here in the US , like every other country is choosing to do so .
Speaker #3: If you hear my frustration , there is frustration . I think . I think the opportunities are there . They move slower than they should .
Speaker #3: We are continuing to go after those opportunities and we will . We will put ourselves in position to grow our military business . But I don't understand why European countries can make decisions and move much quicker than our US government is .
Speaker #9: Understood . Thank you . That's everything for me .
Speaker #8: Thank you .
Speaker #1: Thank you . Our next question comes from Kirk Ludtke from Imperial Capital . Your line is now open . Please go ahead .
Speaker #10: Hello , Paul . David Allen , thank you for the call .
Speaker #8: Good morning . Good morning .
Speaker #10: Just a couple . Just a couple follow ups on on the on the Goodyear . You know , I think the idea is to use the brand on the Goodyear brand on more of your products .
Speaker #10: Just a couple . Just a couple follow ups on on the on the Goodyear deal
Speaker #10: Can you maybe comment on the potential of that initiative and the timing ?
Speaker #3: we do have to develop the products , get them into the market , test them , etc. , stating the obvious with that response , I was very excited and enthused that we were able to get the additional product categories with Goodyear .
Speaker #3: Is your is your negotiating ? You never know if that's going to happen . And so , you know , could we have started to product development earlier and assume that we were going to get these ?
Speaker #3: Maybe. But we didn't. And so, I'm very happy with how things turned out with Goodyear. I think the partnership only grows stronger by allowing us to participate in those additional categories.
Speaker #3: But we do have to do some product development , some testing . I think for me , it's great to see our team enthused that this what this addition of this brand can do and really what it what it does .
Speaker #3: Kirk , is , is , you know , the especially our specialty division , you know , through the Carl star acquisition has strong brands .
Speaker #3: But what we have seen at Titan with the Goodyear brand is it allows you to go into a premium segment with your really high end innovations .
Speaker #3: So you're capturing not just share , but you're capturing a stronger foothold on margin . And I think that's where the excitement the team is .
Speaker #3: So are we using it to go just relabel our existing brands ? Goodyear . No , because our brands are strong enough positioned in the market that we don't need to do that .
Speaker #3: So what we're doing with the Goodyear brand is , again , going into a market segment that maybe we couldn't have got to as easily before .
Speaker #3: And we've seen that play out in AG in North and South America . And I think we can do the same thing with , you know , the new product categories we have with the Goodyear name as well .
Speaker #3: So probably more of a longer tail on getting there . And less of a big splashy number that says , look at all these Goodyear sales .
Speaker #3: We have , but we'll get we'll get to the right position over time with a premium product that has good margin . It's a win win for us and Goodyear , and we've proven over the last two decades that's the case .
Speaker #10: Got it . Thank you . Appreciate it . On the the net sales . You know another another strong quarter in Latin America I think you you mentioned that you know why that's happening .
Speaker #10: But Asia was down over 20% year over year . Can you is there any anything you know to to any any kind of takeaways from that .
Speaker #4: Yeah I think it's just timing more than anything . That's , that's going to be your typical sales from our ITM business in the segment .
Speaker #4: And you'll see shifts in manufacturing to various customers . I think we had a stronger Q2 . So I think it's just timing more than anything .
Speaker #10: Okay . Got it . Thank you . And then lastly , did your Brazilian JV close the roads .
Speaker #8: Closed ?
Speaker #4: Yeah , we usually a press release last week actually . So we're really happy .
Speaker #8: Oh I missed it .
Speaker #4: We're happy to .
Speaker #8: Get .
Speaker #4: That concluded . And we're off and running .
Speaker #10: Nice . Congratulations .
Speaker #8: Yeah .
Speaker #10: Thank you. That's it for me. Thank you. Thank you.
Speaker #8: Thanks , Kurt .
Speaker #1: Thank you . This concludes our question and answer session . I would now like to turn the conference back to Mr. Wright's for any closing remarks .
Speaker #3: Well thanks everybody . Appreciate your participation in our Q3 call . And we'll talk to you again here soon with an update on the the fourth quarter in 2025 .
Speaker #3: Thanks , everybody .