Q1 2027 Titan Machinery Inc Earnings Call

June 9, 2026

Operator: Greetings, welcome to the Titan Machinery Inc.'s Q1 Fiscal 2027 Earnings Call. At this time, all participants are in listen only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jeff Sonnek of ICR. Thank you. Please go ahead.

Speaker #2: We'll follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #2: I would now like to turn the conference over to your host, Mr. Jeff Sonnek of ICR. Thank you. Please go ahead.

Speaker #1: Thank you. Welcome to Titan Machinery's first quarter fiscal 2027 earnings conference call. On the call today from the company are Bryan Knutson, President and Chief Executive Officer; and Bo Larsen, Chief Financial Officer.

Jeff Sonnek: Thank you. Welcome to Titan Machinery's Q1 fiscal 2027 earnings conference call. On the call today from the company are Bryan Knutson, President and Chief Executive Officer, and Bo Larsen, Chief Financial Officer. By now, everyone should have access to the earnings release for the fiscal Q1 ended 30 April 2026, which is also available on Titan's investor relations website at ir.titanmachinery.com. In addition, we're providing a supplemental presentation to accompany today's prepared remarks, along with webcast and replay information, which can also be found on Titan's investor relations website within the Events and Presentations section. We'd also like to remind everyone that the prepared remarks contain forward-looking statements, management may make additional forward-looking statements in response to your questions. The statements do not guarantee future performance and therefore undue reliance should not be placed upon them.

Speaker #1: By now, everyone should have access to the earnings release for the fiscal first quarter ended April 30th, 2026, which is also available on Titan's Investor Relations website at ir.titanmachinery.com.

Speaker #1: In addition, we're providing a supplemental presentation to accompany today's prepared remarks, along with webcast and replay information, which can also be found on Titan's Investor Relations website within the events and presentations section.

Jeff Sonnek: In addition, we're providing a supplemental presentation to accompany today's prepared remarks, along with webcast and replay information, which can also be found on Titan's investor relations website within the Events and Presentations section. We'd also like to remind everyone that the prepared remarks contain forward-looking statements, management may make additional forward-looking statements in response to your questions. The statements do not guarantee future performance and therefore undue reliance should not be placed upon them.

Speaker #1: We'd also like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions.

Speaker #1: The statements do not guarantee future performance and therefore undo reliance should not be placed upon them. These forward-looking statements are based on management's current expectations and involve inherent risks and uncertainties including those identified in the forward-looking statements section of today's earnings release and the company's filings with the SEC.

Jeff Sonnek: These forward-looking statements are based on management's current expectations and involve inherent risks and uncertainties, including those identified in the forward-looking statement section of today's earnings release and the company's filings with the SEC, including the Risk Factors section of Titan's most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These risks and uncertainties could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. Please note that during today's call, we may discuss non-GAAP financial measures, including results on an adjusted basis.

Speaker #1: Including the risk factors section of Titan's most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These risks and uncertainties could cause actual results to differ materially from those projected in any forward-looking statements.

Speaker #1: Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Speaker #1: Please note that during today's call, we may discuss non-GAAP financial measures including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly when comparing underlying results from period to period.

Jeff Sonnek: Please note that during today's call, we may discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly when comparing underlying results from period to period. We've included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure in today's release and supplemental presentation. At the conclusion of our prepared remarks, we'll open the call to take your questions. With that, I'd now like to introduce the company's President and CEO, Bryan Knutson. Bryan, please go ahead.

Jeff Sonnek: We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly when comparing underlying results from period to period. We've included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure in today's release and supplemental presentation. At the conclusion of our prepared remarks, we'll open the call to take your questions. With that, I'd now like to introduce the company's President and CEO, Bryan Knutson. Bryan, please go ahead.

Speaker #1: We've included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure in today's release and supplemental presentation. At the conclusion of our prepared remarks, we'll open the call to take your questions.

Speaker #1: And with that, I'd now like to introduce the company's President and CEO, Bryan Knutson. Bryan, please go ahead.

Speaker #2: Thank you, Jeff. I will start today with an overview of our first quarter performance and our continued progress on the operational priorities we set heading into fiscal 2027.

Bryan Knutson: Thank you, Jeff. I will start today with an overview of our Q1 performance and our continued progress on the operational priorities we set heading into fiscal 2027. I will then walk through what we are seeing across each of our segments before turning the call over to Bo for his financial review and comments on our fiscal 2027 modeling assumptions. Fiscal 2027 Q1 results came in slightly ahead of our expectations. Equipment margin improvement arrived sooner than anticipated, and we view this as a direct result of the disciplined work our team has done over the past several quarters to clear aged inventory and position the business for the next phase of the cycle. We are still well below the normal range for equipment margins, but it is good to see continued improvement, which is reflective of the work we have done to improve inventory health.

Speaker #2: I will then walk through what we are seeing across each of our segments before turning the call over to Bo for his financial review and comments on our fiscal 2027 modeling assumptions.

Speaker #2: Fiscal 2027 first quarter results came in slightly ahead of our expectations. Equipment margin improvement arrived sooner than anticipated, and we view this as a direct result of the disciplined work our team has done over the past several quarters to clear aged inventory and position the business for the next phase of the cycle.

Bryan Knutson: Fiscal 2027 Q1 results came in slightly ahead of our expectations. Equipment margin improvement arrived sooner than anticipated, and we view this as a direct result of the disciplined work our team has done over the past several quarters to clear aged inventory and position the business for the next phase of the cycle. We are still well below the normal range for equipment margins, but it is good to see continued improvement, which is reflective of the work we have done to improve inventory health.

Speaker #2: We are still well below the normal range for equipment margins, but it is good to see continued improvement, which is reflective of the work we have done to improve inventory health.

Speaker #2: Overall, we had a relatively strong start to the year due to timing of deliveries. But the underlying demand environment for our customers remains challenged as their margins are under pressure from a combination of low commodity prices and higher input costs.

Bryan Knutson: Overall, we had a relatively strong start to the year due to timing of deliveries, but the underlying demand environment for our customers remains challenged as their margins are under pressure from a combination of low commodity prices and higher input costs. As such, we are maintaining our full year guidance. As we discussed last quarter, our focus has shifted from absolute inventory reduction to mix optimization. The disciplined work our team has executed over the past two years has strengthened our foundation, and we believe has positioned the business well for the next phase of the cycle. Total inventory at the end of Q1 was modestly higher than year-end, which was in line with our expectations and reflects the normal seasonal cadence. Most importantly, our aged equipment inventory has continued to decline each month so far this year.

Speaker #2: As such, we are maintaining our full-year guidance. As we discussed last quarter, our focus has shifted from absolute inventory reduction to mixed optimization. The disciplined work our team is executed over the past two years has strengthened our foundation, and we believe has positioned the business well for the next phase of the cycle.

Bryan Knutson: The disciplined work our team has executed over the past two years has strengthened our foundation, and we believe has positioned the business well for the next phase of the cycle. Total inventory at the end of Q1 was modestly higher than year-end, which was in line with our expectations and reflects the normal seasonal cadence. Most importantly, our aged equipment inventory has continued to decline each month so far this year.

Speaker #2: Total inventory at the end of the first quarter was modestly higher than year-end, which was in line with our expectations and reflects the normal seasonal cadence.

Speaker #2: Most importantly, our age equipment inventory has continued to decline each month so far this year. And this is a critical leading indicator of sustained equipment margin improvement.

Bryan Knutson: This is a critical leading indicator of sustained equipment margin improvement. We still have work to do across certain use categories and select slower-moving seasonal new equipment categories, but the overall health of our inventory continues to trend in the right direction, and we believe this focus has put Titan in an advantageous position relative to our dealer industry peers. Our customer care initiative remains central to our operating strategy as we navigate what we expect is the bottom of the equipment cycle. Our parts and service businesses delivered another quarter of stability, which is a meaningful accomplishment in an environment where many growers have increasingly shifted to a fix-as-fail mentality.

Speaker #2: We still have work to do across certain use categories and select slower-moving seasonal new equipment categories, but the overall health of our inventory continues to trend in the right direction, and we believe this focus has put Titan in an advantageous position relative to our dealer industry peers.

Speaker #2: Our customer care initiative remains central to our operating strategy, as we navigate what we expect as the bottom of the equipment cycle. Our parts and service businesses delivered another quarter of stability, which is a meaningful accomplishment in an environment where many growers have increasingly shifted to a fix-is-fail mentality.

Speaker #2: Holding the parts and service business steady at trough industry volumes is a credit to the partnerships our team has built with our customers across our footprint.

Bryan Knutson: Holding the parts and service business steady at trough industry volumes is a credit to the partnerships our team has built with our customers across our footprint, and we believe this engagement will continue to translate into share wallet gains as growers return to more normalized purchasing patterns. With that, I'll now turn to our segments. In domestic ag, the environment for our grower customers remains very challenging. Commodity prices continue to sit below break even for many producers. While we have seen some positive movement in corn prices over the past several weeks, grower profitability remains challenged. Government funds remain a critical near-term variable to provide support, and we continue to be active in Washington advocating for farmers.

Speaker #2: And we believe this engagement will continue to translate into share of wallet gains as growers return to more normalized purchasing patterns. With that, I'll now turn to our segments.

Speaker #2: In domestic ag, the environment for our grower customers remains very challenging. Commodity prices continue to sit below break-even for many producers, and while we have seen some positive movement in corn prices over the past several weeks, grower profitability remains challenged.

Speaker #2: Government funds remain a critical near-term variable to provide support. And we continue to be active in Washington advocating for farmers. Year-round E15 adoption remains a top policy priority for our customers, and we are also encouraged by ongoing momentum around biodiesel and sustainable aviation fuel.

Bryan Knutson: Year-round E-15 adoption remains a top policy priority for our customers, and we are also encouraged by ongoing momentum around biodiesel and sustainable aviation fuel, each of which would help alleviate the structural oversupply of corn and soybeans. We expect the presale order period, which begins this month, to be an important indicator for back half activity, and we will continue to monitor OEM programming and grower sentiment closely to identify where deals can be made. In construction, infrastructure and data center activity continues to provide a healthy baseline of demand across our footprint. Residential activity has tracked in line with our expectations. As a reminder, a meaningful portion of our construction segment sales go to farmers, and that portion of the business is where we are experiencing the same softness we are seeing in our domestic agriculture segment.

Speaker #2: Each of which would help alleviate the structural oversupply of corn and soybeans. We expect the presale order period, which begins this month, to be an important indicator for back-half activity, and we will continue to monitor OEM programming and grower sentiment closely to identify where deals can be made.

Speaker #2: In construction, infrastructure and data center activity continues to provide a healthy baseline of demand across our footprint. And residential activity has tracked in line with our expectations.

Bryan Knutson: In construction, infrastructure and data center activity continues to provide a healthy baseline of demand across our footprint. Residential activity has tracked in line with our expectations. As a reminder, a meaningful portion of our construction segment sales go to farmers, and that portion of the business is where we are experiencing the same softness we are seeing in our domestic agriculture segment.

Speaker #2: As a reminder, a meaningful portion of our construction segment sales go to farmers, and that portion of the business is where we are experiencing the same softness we are seeing in our domestic agriculture segment.

Speaker #2: Setting that aside, there are generally good market conditions for our construction segment. In Europe, we completed the majority of our wind-down activities for our German operations during the first quarter, marking an important milestone in our footprint optimization efforts.

Bryan Knutson: Setting that aside, there are generally good market conditions for our construction segment. In Europe, we completed the majority of our wind-down activities for our German operations during Q1, marking an important milestone in our footprint optimization efforts. We are pleased to have this work behind us, and our team remains focused on the markets where we believe we can deliver the strongest long-term returns. As expected, Romania will have challenging year-over-year comparables as we lap last year's European Union subvention program activity. While Bulgaria and Ukraine are expected to achieve modest growth for the full fiscal year.

Speaker #2: We are pleased to have this work behind us, and our team remains focused on the markets where we believe we can deliver the strongest long-term returns.

Speaker #2: As expected, Romania will have challenging year-over-year comparables as we lap last year's European Union subvention program activity. While Bulgaria and Ukraine are expected to achieve modest growth for the full fiscal year.

Speaker #2: In Australia, our customers are facing disproportionate pressure from elevated input costs, particularly in diesel fuel and fertilizer. Both of which have experienced pronounced cost increases in the country, following the onset of the conflict in the Middle East.

Bryan Knutson: In Australia, our customers are facing disproportionate pressure from elevated input costs, particularly in diesel fuel and fertilizer, both of which have experienced pronounced cost increases in the country following the onset of the conflict in the Middle East. While substantial input inflation is top of mind for growers, increased rainfall across most of our footprint in Australia is setting up more favorable growing conditions relative to recent years. We continue to like our long-term position in this market, and our dual brand strategy with Case IH and New Holland continues to expand our reach. Before turning the call over to Bo, I want to thank our team for the continued discipline and execution they have demonstrated in Q1. The strategic work we have been doing over the past several years to strengthen our business is becoming more visible in our operating results with each passing quarter.

Speaker #2: While substantial input inflation is top of mind for growers, increased rainfall across most of our footprint in Australia is setting up more favorable growing conditions relative to recent years.

Speaker #2: We continue to like our long-term position in this market, and our dual-brand strategy with Case IH and New Holland continues to expand our reach.

Bryan Knutson: We continue to like our long-term position in this market, and our dual brand strategy with Case IH and New Holland continues to expand our reach. Before turning the call over to Bo, I want to thank our team for the continued discipline and execution they have demonstrated in Q1. The strategic work we have been doing over the past several years to strengthen our business is becoming more visible in our operating results with each passing quarter. I am convinced that our position today is setting us up for stronger performance as industry conditions improve. With that, I will turn the call over to Bo for his financial review.

Speaker #2: Before turning the call over to Beau, I want to thank our team for the continued discipline and execution they have demonstrated in the first quarter.

Speaker #2: The strategic work we have been doing over the past several years to strengthen our business is becoming more visible in our operating results with each passing quarter.

Speaker #2: And I am convinced that our position today is setting us up for stronger performance as industry conditions improve. With that, I will turn the call over to Beau for his financial review.

Bryan Knutson: I am convinced that our position today is setting us up for stronger performance as industry conditions improve. With that, I will turn the call over to Bo for his financial review.

Speaker #1: Thanks, Brian. And good morning, everyone. Starting with our consolidated results for the fiscal 2027 first quarter: Total revenue was $522.4 million, compared to $594.3 million in the prior year period.

Bo Larsen: Thanks, Bryan, and good morning, everyone. Starting with our consolidated results for the fiscal 2027 first quarter. Total revenue was $522.4 million compared to $594.3 million in the prior year period, reflecting a 10.4% decrease in same-store sales driven by softer demand in our domestic ag, construction, and Europe segments, partially offset by growth in our Australia segment. Despite the sales headwinds in the first quarter, gross profit was down only slightly at $89.3 million compared to $90.9 million in the prior year period. While gross profit margin expanded 180 basis points to 17.1% as compared to 15.3% in the prior year. This year-over-year improvement primarily reflects stronger equipment margins driven by the continued benefit from our aged inventory reduction efforts, alongside a higher mix of parts and service revenue in our consolidated total. Equipment margins in the fiscal 2027 first quarter increased approximately 100 basis points year-over-year to 7.8%.

Speaker #1: Reflecting a 10.4% decrease in same-store sales, driven by softer demand in our domestic ag, construction, and Europe segments, partially offset by growth in our Australia segment.

Speaker #1: Despite the sales headwinds in the first quarter, gross profit was down only slightly at $89.3 million, compared to $90.9 million in the prior year period.

Bo Larsen: Despite the sales headwinds in the first quarter, gross profit was down only slightly at $89.3 million compared to $90.9 million in the prior year period. While gross profit margin expanded 180 basis points to 17.1% as compared to 15.3% in the prior year. This year-over-year improvement primarily reflects stronger equipment margins driven by the continued benefit from our aged inventory reduction efforts, alongside a higher mix of parts and service revenue in our consolidated total. Equipment margins in the fiscal 2027 first quarter increased approximately 100 basis points year-over-year to 7.8%.

Speaker #1: Gross profit margin expanded by 180 basis points to 17.1%, compared to 15.3% in the prior year. This year-over-year improvement primarily reflects stronger equipment margins, driven by the continued benefit from our aged inventory reduction efforts.

Speaker #1: Alongside a higher mix of parts and service revenue in our consolidated total. Equipment margins in the fiscal 27 first quarter increased approximately 100 basis points year-over-year to 7.8%.

Speaker #1: Operating expenses were $94.4 million for the first quarter of fiscal 2027, down from $96.4 million in the prior year period. Our headcount and discretionary spending continue to be down year-over-year as a result of disciplined expense management.

Bo Larsen: Operating expenses were $94.4 million for the first quarter of fiscal 2027, down from $96.4 million in the prior year period. Our headcount and discretionary spending continued to be down year-over-year as a result of disciplined expense management, partially offset by higher variable expenses tied to driving sales. Floor plan and other interest expense was $8.2 million, a decrease of 26% from last year's $11.1 million, reflecting the significant reduction in interest-bearing inventory levels over the past year. In the first quarter of fiscal 2027, net loss was $12.6 million with loss per diluted share of $0.55 compared to a net loss of $13.2 million with loss per diluted share of $0.58 in the prior year period. Adjusted EBITDA was $1 million compared to $2.6 million last year. Now turning to a brief overview of our segment results for the first quarter.

Speaker #1: Partially offset by higher variable expenses tied to driving sales. Floor plan and other interest expense, with $8.2 million, a decrease of $26% from last year's $11.1 million, reflecting the significant reduction in interest-bearing inventory levels over the past year.

Speaker #1: In the first quarter of fiscal 2027, net loss was $12.6 million, with a loss per diluted share of $0.55, compared to a net loss of $13.2 million, with a loss per diluted share of $0.58 in the prior year period.

Bo Larsen: In the first quarter of fiscal 2027, net loss was $12.6 million with loss per diluted share of $0.55 compared to a net loss of $13.2 million with loss per diluted share of $0.58 in the prior year period. Adjusted EBITDA was $1 million compared to $2.6 million last year. Now turning to a brief overview of our segment results for the first quarter.

Speaker #1: Adjusted EBITDA was $1 million, compared to $2.6 million last year. Now, turning to a brief overview of our segment results for the first quarter.

Speaker #1: Our domestic ag segment achieved sales of $344.2 million. Reflecting a same-store sales decrease of 8.2%. Driven by continued softness in equipment demand against the challenging industry backdrop.

Bo Larsen: Our domestic ag segment achieved sales of $344.2 million, reflecting a same-store sales decrease of 8.2%, driven by continued softness in equipment demand against the challenging industry backdrop. However, these results were stronger than our initial expectations and benefited from a pull forward of deliveries to customers relative to our expected quarterly cadence. As Bryan alluded to, we are leaving our full year revenue guidance intact as we think this balances out throughout the rest of the year. Segment pretax loss improved to $6.2 million compared to a pretax loss of $12.8 million in the first quarter of the prior year, reflecting the actions we have taken to accelerate inventory reductions and the resulting improvement in equipment margins that we have achieved. In our construction segment, same-store sales decreased by 6.5% to $67.5 million, driven primarily by the timing of equipment deliveries.

Speaker #1: However, these results were stronger than our initial expectations, and benefited from a pull-forward of deliveries to customers relative to our expected quarterly cadence. As Brian alluded to, we are leaving our full-year revenue guidance intact as we think this balances out throughout the rest of the year.

Bo Larsen: As Bryan alluded to, we are leaving our full year revenue guidance intact as we think this balances out throughout the rest of the year. Segment pretax loss improved to $6.2 million compared to a pretax loss of $12.8 million in the first quarter of the prior year, reflecting the actions we have taken to accelerate inventory reductions and the resulting improvement in equipment margins that we have achieved. In our construction segment, same-store sales decreased by 6.5% to $67.5 million, driven primarily by the timing of equipment deliveries.

Speaker #1: Segment pre-tax loss improved to 6.2 million, compared to a pre-tax loss of 12.8 million in the first quarter of the prior year. Reflecting the actions we have taken to accelerate inventory reductions and the resulting improvement in equipment margins that we have achieved.

Speaker #1: In our construction segment, same-store sales decreased by 6.5%. To 67.5 million. Driven primarily by the timing of equipment deliveries. We are leaving our full-year revenue guidance intact and expect modest year-over-year growth for the balance of the year.

Bo Larsen: We are leaving our full year revenue guidance intact and expect modest year-over-year growth for the balance of the year. Pretax loss narrowed to $0.6 million compared to a pretax loss of $4.2 million in the first quarter of the prior year. In our Europe segment, sales declined to $60.4 million for the quarter, which included a $4.2 million net benefit related to foreign currency fluctuations. On a constant currency basis, revenue decreased approximately 40%, primarily reflecting the expected softening of demand in Romania following the prior year period, which had benefited from a strong response to European Union subvention program activity. Additionally, I'd like to call out that our Germany divestiture had an immaterial impact in the segment revenue decline year-over-year, but it will have a larger year-over-year impact in future quarters.

Speaker #1: Pre-tax loss narrowed to $0.6 million, compared to a pre-tax loss of $4.2 million in the first quarter of the prior year. In our Europe segment, sales declined to $60.4 million for the quarter.

Speaker #1: Which included a $4.2 million net benefit related to foreign currency fluctuations. On a constant currency basis, revenue decreased approximately 40%, primarily reflecting the expected softening of demand in Romania following the prior-year period.

Bo Larsen: On a constant currency basis, revenue decreased approximately 40%, primarily reflecting the expected softening of demand in Romania following the prior year period, which had benefited from a strong response to European Union subvention program activity. Additionally, I'd like to call out that our Germany divestiture had an immaterial impact in the segment revenue decline year-over-year, but it will have a larger year-over-year impact in future quarters.

Speaker #1: Which had benefited from a strong response to European Union subvention program activity. Additionally, I'd like to call out that our Germany divestiture had an immaterial impact on the segment revenue decline year-over-year.

Speaker #1: But it will have a larger year-over-year impact in future quarters. Pre-tax loss for the segment was $0.9 million, compared to pre-tax income of $4.7 million in the first quarter of last year.

Bo Larsen: Pre-tax loss for the segment was $0.9 million compared to a pre-tax income of $4.7 million in the first quarter of last year. In our Australia segment, sales increased 14% to $50.3 million compared to $44 million in the first quarter of last year, which included a $5.1 million net benefit related to foreign currency fluctuations. On a constant currency basis, revenue increased $1.2 million or 2.8%. With the current period benefiting from additional revenue related to BelleVue Machinery acquisition completed last fall. Pre-tax loss for the segment was $1.8 million, compared to a pre-tax loss of $0.6 million in the first quarter of last year. Now on to our balance sheet and inventory position. We had cash of approximately $30 million and an adjusted debt to tangible net worth ratio of 1.6 times as of 30 April 2026, which is well below our bank covenant of 3.5 times.

Speaker #1: In our Australia segment, sales increased 14% to $50.3 million, compared to $44 million in the first quarter of last year, which included a $5.1 million net benefit related to foreign currency fluctuations.

Speaker #1: On a constant currency basis, revenue increased $1.2 million, or 2.8%, with the current period benefiting from additional revenue related to the Bellevue Machinery acquisition completed last fall.

Bo Larsen: On a constant currency basis, revenue increased $1.2 million or 2.8%. With the current period benefiting from additional revenue related to BelleVue Machinery acquisition completed last fall. Pre-tax loss for the segment was $1.8 million, compared to a pre-tax loss of $0.6 million in the first quarter of last year. Now on to our balance sheet and inventory position. We had cash of approximately $30 million and an adjusted debt to tangible net worth ratio of 1.6 times as of 30 April 2026, which is well below our bank covenant of 3.5 times.

Speaker #1: Pre-tax loss for the segment was $1.8 million, compared to a pre-tax loss of $0.6 million in the first quarter of last year. Now, on to our balance sheet and inventory position.

Speaker #1: We had cash of approximately $30 million and an adjusted debt-to-tangible net worth ratio of 1.6 times as of April 30, 2026, which is well below our bank covenant of 3.5 times.

Speaker #1: Total inventory at quarter end was $914.8 million—a modest increase of $12 million compared to year-end. This increase was in line with our expectations and reflects the normal seasonal cadence.

Bo Larsen: Total inventory at quarter end was $914.8 million, a modest increase of $12 million compared to year-end. This increase was in line with our expectations and reflects the normal seasonal cadence. As Bryan Knutson noted, our focus in fiscal 2027 is on mix optimization rather than inventory reduction, and we expect total inventory to fluctuate seasonally throughout the year. Turning to our fiscal 2027 modeling assumptions. We are reaffirming each of the modeling assumptions for fiscal 2027 we introduced on last quarter's call. While our first quarter performance was modestly better than our expectations, the underlying demand environment remains consistent with our prior outlook. As a reminder, our segment revenue assumptions are for agriculture to be down 15% to 20%, construction flat to up 5%, Europe down 20% to 25%, and Australia up 10% to 15%.

Speaker #1: As Brian noted, our focus in fiscal 27 is on mixed optimization rather than inventory reduction. And we expect total inventory to fluctuate seasonally throughout the year.

Speaker #1: Turning to our fiscal 27 modeling assumptions. We are reaffirming each of the modeling assumptions for fiscal 27 we introduced on last quarter's call. While our first quarter performance was modestly better than our expectations, the underlying demand environment remains consistent with our prior outlook.

Bo Larsen: Turning to our fiscal 2027 modeling assumptions. We are reaffirming each of the modeling assumptions for fiscal 2027 we introduced on last quarter's call. While our first quarter performance was modestly better than our expectations, the underlying demand environment remains consistent with our prior outlook. As a reminder, our segment revenue assumptions are for agriculture to be down 15% to 20%, construction flat to up 5%, Europe down 20% to 25%, and Australia up 10% to 15%.

Speaker #1: As a reminder, our segment revenue assumptions are: for agriculture to be down 15 to 20 percent, construction flat to up 5%, Europe down 20 to 25%, and Australia up 10 to 15%.

Speaker #1: From a margin perspective, we continue to expect consolidated full-year equipment margin to be approximately 8.4%, which compares to 7.3% in fiscal 2026. This expected year-over-year improvement is a direct reflection of the work we have done to right-size our inventory and reduce aged equipment.

Bo Larsen: From a margin perspective, we continue to expect consolidated full year equipment margin to be approximately 8.4%, which compares to 7.3% in fiscal 2026. The progress we have demonstrated in the first quarter supports our confidence in delivering against this expectation across the balance of the year. Operating expenses are expected to decline year-over-year, although we intend to continue to invest in our customer care strategy, which is supporting stability in our parts and service businesses. We continue to expect operating expenses to be approximately 17% of sales.

Speaker #1: And the progress we have demonstrated in the first quarter supports our confidence in delivering against this expectation across the balance of the year. Operating expenses are expected to decline year-over-year, although we intend to continue to invest in our customer care strategy.

Speaker #1: Which is supporting stability in our parts and service businesses. We continue to expect operating expenses to be approximately 17% of sales. On floor plan interest expense, we have continued to see aged inventory and floor plan interest expense decline quarter over quarter on a sequential basis, and we reiterate our prior expectation of an approximately 25% year-over-year decline because of the great work our team is doing to manage healthier levels of inventory and improved inventory turns.

Bo Larsen: On floorplan interest expense, we have continued to see aged inventory and floorplan interest expense decline quarter-over-quarter on a sequential basis, and we reiterate our prior expectation of an approximately 25% year-over-year decline because of the great work our team is doing to manage healthier levels of inventory and improved inventory turns. Bringing it all together, we are reaffirming our full year adjusted EBITDA range of $17 to $29 million and our adjusted diluted loss per share range of $1.25 to $1.75. In summary, the first quarter unfolded about as expected and the soft demand backdrop continues to suggest our expectations for the full year remain prudent. We remain focused on executing our near-term initiatives while continuing to lean into our customer care strategy with exceptional discipline and operational excellence to accelerate our earnings power as market conditions improve. This concludes our prepared comments.

Speaker #1: Bringing it all together, we are reaffirming our full-year adjusted EBITDA range of 17 to 29 million and our adjusted diluted loss per share range of $1.25 to $1.75.

Bo Larsen: Bringing it all together, we are reaffirming our full year adjusted EBITDA range of $17 to $29 million and our adjusted diluted loss per share range of $1.25 to $1.75. In summary, the first quarter unfolded about as expected and the soft demand backdrop continues to suggest our expectations for the full year remain prudent. We remain focused on executing our near-term initiatives while continuing to lean into our customer care strategy with exceptional discipline and operational excellence to accelerate our earnings power as market conditions improve. This concludes our prepared comments. Operator, we are now ready for the question and answer session of the call.

Speaker #1: In summary, the first quarter unfolded about as expected, and the soft demand backdrop continues to suggest our expectations for the full year remain prudent.

Speaker #1: We remain focused on executing our near-term initiatives, while continuing to lean into our customer care strategy with exceptional discipline and operational excellence to accelerate our earnings power as market conditions improve.

Speaker #1: This concludes our prepared comments. Operator, we are now ready for the question and answer session of the call.

Bo Larsen: Operator, we are now ready for the question and answer session of the call.

Speaker #2: Thank you. We'll now be conducting the question and answer session. To ask a question at this time, you may press star one from your telephone keypad, and the confirmation tone will indicate your line is in the question queue.

Operator: Thank you. We'll now be conducting the question and answer session. To ask a question at this time, you may press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. The first question comes from the line of Liam Burke with B. Riley. Please proceed with your questions.

Speaker #2: You may press star two if you'd like to withdraw your question from the queue. For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker #2: Thank you, and the first question comes from the line of Liam Burke with B Reilly. Please proceed with your questions.

Speaker #3: Thank you. Good morning, Brian. Good morning, Beth.

Liam Burke: Thank you. Good morning, Bryan. Good morning, Bob.

Speaker #4: Good morning.

Bo Larsen: Morning.

Liam Burke: Morning.

Bryan Knutson: Morning.

Speaker #3: Brian, could you give us some sense on the competitive pricing environment out there? I mean, it looks like things are stable, but could you give us some color on that, please?

Liam Burke: Bryan, can you give us some sense on the competitive pricing environment out there? It looks like things are stable, could you give us some color on that, please?

Speaker #4: Yeah, you know, used equipment values is a big piece of that, as most of our customers, especially in North America, have a trade-in, and so it's really about the trade difference and what boils down to their payment and, ultimately, the cost per acre on the ag side.

Bo Larsen: Yeah. Used equipment values is a big piece of that. As most of our customers, especially in North America, have a trade-in. It's really about the trade difference and what boils down to their payment and ultimately the cost per acre on the ag side. Definitely within this year we've seen stability in the used equipment prices after about 18 months of almost going two years of sequentially falling used equipment values. That stability all throughout the year here has been good in the used side. Also, we had some large price increases post-COVID, and over the recent years and also that's stable now. Very low single digits you're hearing CNH and Deere and AGCO talking that 1% to 2% range. A couple select categories maybe being as high as 3%, but generally 1% to 2%. They're managing through the tariffs as well.

Speaker #4: So definitely within the, this year we've seen stability in the used equipment prices after about 18 months of, you know, almost going on two years of sequentially falling used equipment values.

Speaker #4: So, that stability all throughout the year here has been good on the used side. Also, you know, we had some large price increases post-COVID, and over the recent years. That's stable now.

Bo Larsen: Also, we had some large price increases post-COVID, and over the recent years and also that's stable now. Very low single digits you're hearing CNH and Deere and AGCO talking that 1% to 2% range. A couple select categories maybe being as high as 3%, but generally 1% to 2%. They're managing through the tariffs as well. So ultimately, the pricing has stabilized, Liam, and it's really at this juncture about getting commodity prices up and inputs down and returning our farmers on the ag side to profitability here.

Speaker #4: You know, a very low single digits you're hearing CNHN deer and egg wall talk in that, you know, one to two percent range, couple select categories maybe being as high as 3%.

Speaker #4: But generally one to two percent, they're managing through the, the tariffs as well. so ultimately, you know, the, the pricing has stabilized, Liam, and, and it's really at this juncture about, you know, getting commodity prices up and inputs down and, and, returning our farmers on, on the ag side to profitability here.

Liam Burke: So ultimately, the pricing has stabilized, Liam, and it's really at this juncture about getting commodity prices up and inputs down and returning our farmers on the ag side to profitability here.

Speaker #3: Sure. And then you discussed, I believe in the Parts and Service section, about how your customers are pushing hard on existing assets rather than maintaining them.

Liam Burke: Yeah, absolutely. That bodes well for us as we go through the cycle here and as things start to turn. The fleet's getting older, the hours on the machines are getting higher. Also, as we mentioned, in these tougher times, producers are having a bit of fix-this-fail mentality, which is a testament, as we said to our parts and service businesses, that we have the strength that we do there when frankly, they're trying to spend as little money as possible. They're not doing some of those upgrades that they would typically do through the parts and service side, as well as trading the machines. That'll bode well both on a parts and service side for us and especially on the machine trade cycle as we go forward.

Speaker #3: But I guess my question is, as those assets are being pushed harder, does that have a cyclical impact on new or equipment purchases down the road?

Speaker #4: Yeah, absolutely. So that bodes well for us as, as we go through the cycle here. And as things start to turn, the fleet's getting older, the hours on the machines are getting higher, also as we mentioned, you know, in, in this these tougher times, producers are, having a bit of fix-as-fail mentality, which, you know, is a testament, as we said, to our parts and service businesses that, we're, we have the strength that we do there when, you know, frankly, they're, they're trying to spend as little money as possible.

Bryan Knutson: Yeah, absolutely. That bodes well for us as we go through the cycle here and as things start to turn. The fleet's getting older, the hours on the machines are getting higher. Also, as we mentioned, in these tougher times, producers are having a bit of fix-this-fail mentality, which is a testament, as we said to our parts and service businesses, that we have the strength that we do there when frankly, they're trying to spend as little money as possible. They're not doing some of those upgrades that they would typically do through the parts and service side, as well as trading the machines. That'll bode well both on a parts and service side for us and especially on the machine trade cycle as we go forward.

Speaker #4: And so, they're not doing, some of those upgrades that they would typically do as well as certainly, with through the parts and service side as well as trading the machines.

Speaker #4: So, that'll bode well both on the parts and service side for us, and especially on the machine trade cycle as we go forward.

Speaker #3: Great. Thank you, Brian.

Liam Burke: Great. Thank you, Bryan.

Speaker #4: Yeah, thank you.

Bryan Knutson: Yeah, thank you.

Speaker #2: Our next question is from the line of Mick Dobrie with R.W. Baird. Please proceed with your question.

Operator: Our next question's from the line of Mig Dobre with RW Baird. Please proceed with your questions.

Speaker #5: Hey, good morning, guys. It's Joe Grabowski on from Mick this morning.

Joseph Grabowski: Hey, good morning, guys. It's Joseph Grabowski on for Mig this morning.

Speaker #6: Hey, Joe.

Bryan Knutson: Joe.

Speaker #5: Hey, good morning. So I, I, I I wanted to start with the delivery pull forward, maybe could you tell us what, what drove that?

Joseph Grabowski: Good morning. I wanted to start with the delivery pull forward. Maybe could you tell us what drove that? You said that it kind of balances out the rest of the year, but would it be safe to assume that maybe if Q1 was down less than the full-year guidance, maybe Q2 would be down a little more than the full-year guidance, or your thoughts on the cadence for the rest of the year?

Speaker #5: And then you said that it kind of balances out the rest of the year, but would it be safe to assume that maybe if Q1 was down less than the full-year guidance, maybe Q2 would be down a little more than the full-year guidance? Or your thoughts on the cadence for the rest of the year?

Speaker #6: Yeah, so ultimately that came down to, you know, the timing of when we received equipment and then were able to turn around and deliver to customers.

Bryan Knutson: Yeah. Ultimately that came down to timing of when we received the equipment and then were able to turn around and deliver to customers. I think it kind of pulls through the rest of the year. Really as we play it out, I anticipate that most of that offset really comes in H2, a little bit in Q2. Assuming we continue to receive and turn equipment around, essentially the same sort of thing will happen in Q2, Q3, and you'll get to Q4 at the end of the year there. The messaging there was intentional and obviously it wasn't massive, but we didn't want anybody to overread into Q1 expectations and, of course, setting our full-year expectations consistent with what we said at the beginning of the year. That's really what it came down to.

Speaker #6: I think it kind of pulls through the rest of the year. And really, as you know, we play it out, I anticipate that most of that offset really comes in the back half of the year, with a little bit in the second quarter.

Speaker #6: Assuming we continue to receive and turn equipment around, you know, we'll essentially the same sort of thing will happen in Q2, Q3, and then you'll get to Q4 a-at the end of the year there.

Bryan Knutson: Assuming we continue to receive and turn equipment around, essentially the same sort of thing will happen in Q2, Q3, and you'll get to Q4 at the end of the year there. The messaging there was intentional and obviously it wasn't massive, but we didn't want anybody to overread into Q1 expectations and, of course, setting our full-year expectations consistent with what we said at the beginning of the year. That's really what it came down to. We were able to get more of that equipment turned around and in customers' hands sooner than we thought we would.

Speaker #6: So you know, the messaging there was intentional, and obviously, it, it wasn't massive, but we didn't want anybody to overread into Q1 expectations and, and of course, setting our, full-year expectations consistent with what we said at the beginning of the year.

Speaker #6: That, that's really what it came down to. We were able to get more of that equipment turned around in, in customers' hands, sooner than we thought we would.

Bryan Knutson: We were able to get more of that equipment turned around and in customers' hands sooner than we thought we would.

Speaker #5: Got it. Okay. That's helpful. And then my follow-up question, y-you mentioned equipment margin, has been improving sooner than expected. But you kind of left your full year, guidance on equipment margin the same as last quarter.

Joseph Grabowski: Got it. Okay, that's helpful. My follow-up question, you mentioned equipment margin has been improving sooner than expected, but you kind of left your full-year guidance on equipment margin the same as last quarter. I guess sort of what would the drivers be to maybe get the equipment margin into the high 8% versus the 8.4% guidance?

Speaker #5: I, I, I guess sort of what, what would the drivers be, to maybe get the equipment margin, you know, into the high 8%, versus the, the 8.4% guidance?

Speaker #6: Yeah, for sure. So, you know, as we continue to make additional progress beyond what's anticipated from an aging profile perspective, as we already talked about, you know, absolute dollar value, we felt pretty good.

Bryan Knutson: Yeah, for sure. If we continue to make additional progress beyond what's anticipated from an aging profile perspective, as we already talked about absolute dollar value, we felt pretty good. Still a little work to do in some select new categories and on the used side. We are making progress quarter over quarter. We anticipate we'll continue to do so. At the same time, I think we prefaced that a little bit with the fact that we're in really a trough type environment with the lowest TIVs in multiple decades. Not anticipating that we'd see a sharp inflection. To start the beginning of the year, we were thinking from a domestic ag perspective that margins would be more like 5.25, and this quarter it was 6.

Speaker #6: Still a little work to do in some select new categories and on the used side. we are making progress quarter over so. At the same time, right, I, I, I think we, preface that a little bit with the fact that we're in, really a, a, a trough-type environment with the lowest TIVs in, in, multiple decades.

Speaker #6: So not anticipating, you know, that we'd see a sharp inflection. To start the beginning of the year, you know, we were thinking from a domestic ag perspective that, margins would be more like 5 and a quarter.

Bryan Knutson: To start the beginning of the year, we were thinking from a domestic ag perspective that margins would be more like 5.25, and this quarter it was 6. We were expecting it to be more like 5.25 first half of the year and then closer to 7.5 in the back of the year. I think what we're really seeing is kind of a pull forward and a leveling in Q1 with 6% for domestic ag, and we're expecting the rest of the year to be in that 6.5 to upwards of 7% for the rest of the quarters.

Speaker #6: And this quarter, it was 6. We were expecting it to be more like 5 and a quarter in the first half of the year, and then closer to 7 or 7 and a half in the back half of the year.

Bryan Knutson: We were expecting it to be more like 5.25 first half of the year and then closer to 7.5 in the back of the year. I think what we're really seeing is kind of a pull forward and a leveling in Q1 with 6% for domestic ag, and we're expecting the rest of the year to be in that 6.5 to upwards of 7% for the rest of the quarters. Just a little bit more flat than we originally anticipated. Glad to see that improvement coming. Again, just comparing that to the backdrop and what the demand has been and what we're expecting that to be the rest of the year, not getting out ahead of ourselves in where we think it'll go.

Speaker #6: I think what we're really seeing is kind of a pull forward and a leveling in, first quarter was 6% for domestic ag, and, and we're expecting the rest of the year to be in that 6 and a half to upwards of 7% for the, rest of the quarters.

Speaker #6: So just a little bit more flat than we originally anticipated. Glad to see that improvement coming, but again, just comparing that to the backdrop and, and what you know, the, demand has been, and what we're expecting that to be.

Bryan Knutson: Just a little bit more flat than we originally anticipated. Glad to see that improvement coming. Again, just comparing that to the backdrop and what the demand has been and what we're expecting that to be the rest of the year, not getting out ahead of ourselves in where we think it'll go. That said, again, really good to see that progress, feeling good about where inventory is going and definitely feel like we'll see a sharper inflection as we see demand normalize here.

Speaker #6: The rest of the year, not getting out ahead of ourselves in where we think it'll go. that said, again, really good to see that progress.

Bryan Knutson: That said, again, really good to see that progress, feeling good about where inventory is going and definitely feel like we'll see a sharper inflection as we see demand normalize here.

Speaker #6: Feeling good about where inventory is going, and definitely feel like we'll see a sharper inflection, you know, as we see demand normalize here.

Speaker #5: Great. okay. I appreciate it. thanks for taking my questions.

Joseph Grabowski: Great. Okay, I appreciate it. Thanks for taking my questions.

Speaker #4: Yeah, thanks, Joe.

Bryan Knutson: Yeah, thanks, Joe.

Speaker #2: Thank you. At this time, I'll turn the call back to management for closing remarks.

Operator: Thank you. At this time, I'll turn the call back to management for closing remarks.

Speaker #7: Thank you, everybody, for joining us on our call today. We look forward to updating you next quarter.

Bryan Knutson: Thank you everybody for joining us on our call today. We look forward to updating you next quarter.

Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Q1 2027 Titan Machinery Inc Earnings Call

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