UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 31, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File No. 001-33866

TITAN MACHINERY INC.

(Exact name of registrant as specified in its charter)


Delaware						45-0357838
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)

644 East Beaton Drive

West Fargo, ND 58078-2648

(Address of Principal Executive Offices)

Registrant’s telephone number (701) 356-0130

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value per share	TITN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~December~~September 1, ~~2022, 22,706,865~~2023, 22,863,911 shares of Common Stock, $0.00001 par value, of the registrant were outstanding.

Table of Contents

TITAN MACHINERY INC.

QUARTERLY REPORT ON FORM 10-Q

Table of Contents


		Page No.
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2220
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3733
ITEM 4.	CONTROLS AND PROCEDURES	3733
PART II.	OTHER INFORMATION	3834
ITEM 1.	LEGAL PROCEEDINGS	3834
ITEM 1A.	RISK FACTORS	3834
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3834
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	3834
ITEM 4.	MINE SAFETY DISCLOSURES	3834
ITEM 5.	OTHER INFORMATION	3834
ITEM 6.	EXHIBITS	3834
Exhibit Index		3935
Signatures		4036

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)


		October 31, 2022		January 31, 2022			July 31, 2023		January 31, 2023

Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash	Cash	$	45,852	$	146,149	Cash	$	52,765	$	43,913
Receivables, net of allowance for expected credit losses	Receivables, net of allowance for expected credit losses	111,849		94,287		Receivables, net of allowance for expected credit losses	119,753		95,844
Inventories, net	Inventories, net	630,377		421,758		Inventories, net	979,427		703,939
Prepaid expenses and other	Prepaid expenses and other	15,625		28,135		Prepaid expenses and other	13,543		25,554

Total current assets	Total current assets	803,703		690,329		Total current assets	1,165,488		869,250
Noncurrent Assets	Noncurrent Assets					Noncurrent Assets
Property and equipment, net of accumulated depreciation	Property and equipment, net of accumulated depreciation	215,954		178,243		Property and equipment, net of accumulated depreciation	252,187		217,782
Operating lease assets	Operating lease assets	52,091		56,150		Operating lease assets	44,241		50,206
Deferred income taxes	Deferred income taxes	2,937		1,328		Deferred income taxes	3,769		1,246
Goodwill	Goodwill	32,022		8,952		Goodwill	31,157		30,622
Intangible assets, net of accumulated amortization	Intangible assets, net of accumulated amortization	16,852		10,624		Intangible assets, net of accumulated amortization	18,354		18,411
Other	Other	1,211		1,041		Other	1,820		1,178
Total noncurrent assets	Total noncurrent assets	321,067		256,338		Total noncurrent assets	351,528		319,445
Total Assets	Total Assets	$	1,124,770	$	946,667	Total Assets	$	1,517,016	$	1,188,695

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	43,338	$	25,644	Accounts payable	$	41,254	$	40,834
Floorplan payable	Floorplan payable	273,083		135,415		Floorplan payable	595,728		258,372

Current maturities of long-term debt	Current maturities of long-term debt	6,895		5,876		Current maturities of long-term debt	11,174		7,241
Current operating lease liabilities	Current operating lease liabilities	9,671		9,601		Current operating lease liabilities	9,533		9,855
Deferred revenue	Deferred revenue	56,812		134,146		Deferred revenue	63,083		119,845
Accrued expenses and other	Accrued expenses and other	56,980		59,339		Accrued expenses and other	49,360		58,159
Income taxes payable	Income taxes payable	15,918		4,700		Income taxes payable	7,871		3,845
Total current liabilities	Total current liabilities	462,697		374,721		Total current liabilities	778,003		498,151
Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Long-term debt, less current maturities	Long-term debt, less current maturities	91,055		74,772		Long-term debt, less current maturities	87,052		89,950
Operating lease liabilities	Operating lease liabilities	50,737		55,595		Operating lease liabilities	42,168		48,513
Deferred income taxes	Deferred income taxes	1,974		2,006		Deferred income taxes	9,569		9,563
Other long-term liabilities	Other long-term liabilities	7,020		4,374		Other long-term liabilities	3,543		6,212
Total long-term liabilities	Total long-term liabilities	150,786		136,747		Total long-term liabilities	142,332		154,238
Commitments and Contingencies (Note 15)	Commitments and Contingencies (Note 15)					Commitments and Contingencies (Note 15)
Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Common stock, par value $.00001 per share, 45,000 shares authorized; 22,707 shares issued and outstanding at October 31, 2022; 22,588 shares issued and outstanding at January 31, 2022		—		—
Common stock, par value $.00001 per share, 45,000,000 shares authorized; 22,863,628 shares issued and outstanding at July 31, 2023; 22,697,761 shares issued and outstanding at January 31, 2023						Common stock, par value $.00001 per share, 45,000,000 shares authorized; 22,863,628 shares issued and outstanding at July 31, 2023; 22,697,761 shares issued and outstanding at January 31, 2023	—		—
Additional paid-in-capital	Additional paid-in-capital	256,073		254,455		Additional paid-in-capital	256,984		256,541
Retained earnings	Retained earnings	266,672		182,916		Retained earnings	343,070		284,784
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(11,458)		(2,172)		Accumulated other comprehensive loss	(3,373)		(5,019)
Total stockholders' equity	Total stockholders' equity	511,287		435,199		Total stockholders' equity	596,681		536,306
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	1,124,770	$	946,667	Total Liabilities and Stockholders' Equity	$	1,517,016	$	1,188,695

See Notes to Condensed Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue	Revenue									Revenue
Equipment	Equipment	$	508,996	$	329,814	$	1,240,579	$	878,528	Equipment	$	480,122	$	375,216	$	909,498	$	731,582
Parts	Parts	108,719		80,521		254,974		208,464		Parts	108,510		77,693		205,116		146,255
Service	Service	38,960		32,026		101,847		89,405		Service	42,478		33,365		77,411		62,887
Rental and other	Rental and other	12,098		11,614		28,923		27,914		Rental and other	11,458		10,269		20,174		16,825
Total Revenue	Total Revenue	668,773		453,975		1,626,323		1,204,311		Total Revenue	642,568		496,543		1,212,199		957,549
Cost of Revenue	Cost of Revenue									Cost of Revenue
Equipment	Equipment	436,156		288,576		1,070,378		772,584		Equipment	414,800		323,988		783,062		634,222
Parts	Parts	72,146		55,654		172,162		146,184		Parts	73,086		52,706		138,190		100,015
Service	Service	13,456		10,249		35,288		29,314		Service	14,208		11,072		26,617		21,832
Rental and other	Rental and other	7,435		7,016		17,522		17,754		Rental and other	7,075		6,078		12,351		10,087
Total Cost of Revenue	Total Cost of Revenue	529,193		361,495		1,295,350		965,836		Total Cost of Revenue	509,169		393,844		960,220		766,156
Gross Profit	Gross Profit	139,580		92,480		330,973		238,475		Gross Profit	133,399		102,699		251,979		191,393
Operating Expenses	Operating Expenses	84,861		62,943		217,841		176,460		Operating Expenses	88,751		68,828		170,066		132,980

Impairment of Intangible and Long-Lived Assets		—		—		—		1,498

Income from Operations	Income from Operations	54,719		29,537		113,132		60,517		Income from Operations	44,648		33,871		81,913		58,413
Other Income (Expense)	Other Income (Expense)									Other Income (Expense)
Interest and other income	Interest and other income	1,804		616		3,169		1,935		Interest and other income	641		873		1,362		1,365
Floorplan interest expense	Floorplan interest expense	(588)		(259)		(1,087)		(1,027)		Floorplan interest expense	(2,457)		(245)		(3,729)		(499)
Other interest expense	Other interest expense	(1,257)		(1,071)		(3,802)		(3,292)		Other interest expense	(1,241)		(1,349)		(2,514)		(2,545)
Income Before Income Taxes	Income Before Income Taxes	54,678		28,823		111,412		58,133		Income Before Income Taxes	41,591		33,150		77,032		56,734
Provision for Income Taxes	Provision for Income Taxes	13,421		7,007		27,656		14,521		Provision for Income Taxes	10,270		8,191		18,745		14,235
Net Income	Net Income	$	41,257	$	21,816	$	83,756	$	43,612	Net Income	$	31,321	$	24,959	$	58,287	$	42,499

Earnings per Share:	Earnings per Share:									Earnings per Share:
Basic	Basic	$	1.82	$	0.97	$	3.70	$	1.93	Basic	$	1.38	$	1.10	$	2.56	$	1.88
Diluted	Diluted	$	1.82	$	0.97	$	3.70	$	1.93	Diluted	$	1.38	$	1.10	$	2.56	$	1.88

Weighted Average Common Shares:	Weighted Average Common Shares:									Weighted Average Common Shares:
Basic	Basic	22,393		22,213		22,365		22,228		Basic	22,476		22,387		22,474		22,350
Diluted	Diluted	22,399		22,222		22,372		22,238		Diluted	22,484		22,392		22,480		22,357

See Notes to Condensed Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Net Income	Net Income	$	41,257	$	21,816	$	83,756	$	43,612	Net Income	$	31,321	$	24,959	$	58,287	$	42,499
Other Comprehensive Income (Loss)	Other Comprehensive Income (Loss)									Other Comprehensive Income (Loss)
Foreign currency translation adjustments	Foreign currency translation adjustments	(5,132)		(744)		(9,285)		(2,185)		Foreign currency translation adjustments	550		(2,963)		1,646		(4,153)
Comprehensive Income	Comprehensive Income	$	36,125	$	21,072	$	74,471	$	41,427	Comprehensive Income	$	31,871	$	21,996	$	59,933	$	38,346

See Notes to Condensed Consolidated Financial Statements

Table of Contents

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

(in thousands)


		Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity				Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
		Shares Outstanding	Amount								Shares Outstanding								Amount
BALANCE, January 31, 2022		22,588	$	—			$	254,455						$	182,916			$	(2,172)		$	435,199
BALANCE, January 31, 2023																			BALANCE, January 31, 2023	22,698			$	—		$	256,541		$	284,784		$	(5,019)		$	536,306
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(19)	—		(685)				—			—				(685)			Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(29)					(993)									(993)
Stock-based compensation expense	Stock-based compensation expense	—	—		620				—			—				620			Stock-based compensation expense						659									659
Net income	Net income	—	—		—				17,540			—				17,540			Net income									26,965						26,965
Other comprehensive loss		—	—		—				—			(1,191)				(1,191)
BALANCE, April 30, 2022		22,569	$	—	$	254,390			$	200,456		$	(3,363)			$	451,483
Other comprehensive income																			Other comprehensive income												1,096			1,096
BALANCE, April 30, 2023																			BALANCE, April 30, 2023	22,669			$	—	$	256,207		$	311,749		$	(3,923)		$	564,033
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	126	—		(5)				—			—				(5)			Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	195					(7)									(7)
Stock-based compensation expense	Stock-based compensation expense	—	—		803				—			—				803			Stock-based compensation expense						784									784
Net income	Net income	—	—		—				24,959			—				24,959			Net income									31,321						31,321
Other comprehensive loss		—	—		—				—			(2,963)				(2,963)
BALANCE, July 31, 2022		22,695	—		255,188				225,415			(6,326)				474,277
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax		12	—		—				—			—				—
Stock-based compensation expense		—	—		885				—			—				885
Net income		—	—		—				41,257			—				41,257
Other comprehensive loss		—	—		—				—			(5,132)				(5,132)
BALANCE, October 31, 2022		22,707	$	—	$	256,073			$	266,672		$	(11,458)			$	511,287
Other comprehensive income																			Other comprehensive income												550			550
BALANCE, July 31, 2023																			BALANCE, July 31, 2023	22,864			—		$	256,984		$	343,070		$	(3,373)		$	596,681


		Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity				Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
		Shares Outstanding	Amount								Shares Outstanding								Amount
BALANCE, January 31, 2021		22,553	$	—			$	252,913						$	116,869			$	1,499		$	371,281
BALANCE, January 31, 2022																			BALANCE, January 31, 2022	22,588			$	—		$	254,455		$	182,916		$	(2,172)		$	435,199
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(33)	—		(975)				—			—				(975)			Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(19)			—		(685)			—			—			(685)
Stock-based compensation expense	Stock-based compensation expense	—	—		609				—			—				609			Stock-based compensation expense	—			—		620			—			—			620
Net income	Net income	—	—		—				10,547			—				10,547			Net income	—			—		—			17,540			—			17,540
Other comprehensive loss	Other comprehensive loss	—	—		—				—			(2,379)				(2,379)			Other comprehensive loss	—			—		—			—			(1,191)			(1,191)
BALANCE, April 30, 2021		22,520	$	—	$	252,547			$	127,416		$	(880)			$	379,083
BALANCE, April 30, 2022																			BALANCE, April 30, 2022	22,569			$	—	$	254,390		$	200,456		$	(3,363)		$	451,483
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	76	—		(2)				—			—				(2)			Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	126			—		(5)			—			—			(5)
Stock-based compensation expense	Stock-based compensation expense	—	—		584				—			—				584			Stock-based compensation expense	—			—		803			—			—			803
Net income	Net income	—	—		—				11,249			—				11,249			Net income	—			—		—			24,959			—			24,959
Other comprehensive income		—	—		—				—			938				938
BALANCE, July 31, 2021		22,596	—		253,129				138,665			58				391,852
Common stock issued on grant of restricted stock and exercise of stock options, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax		(4)	—		(4)				—			—				(4)
Stock-based compensation expense		—	—		657				—			—				657
Net income		—	—		—				21,816			—				21,816
Other comprehensive income		—	—		—				—			(744)				(744)
BALANCE, October 31, 2021		22,592	$	—	$	253,782			$	160,482		$	(686)			$	413,578
Other comprehensive loss																			Other comprehensive loss	—			—		—			—			(2,963)			(2,963)
BALANCE, July 31, 2022																			BALANCE, July 31, 2022	22,695			—		$	255,188		$	225,415		$	(6,326)		$	474,277

See Notes to Condensed Consolidated Financial Statements

TITAN MACHINERY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


		Nine Months Ended October 31,					Six Months Ended July 31,
		2022		2021			2023		2022
Operating Activities	Operating Activities					Operating Activities
Net income	Net income	$	83,756	$	43,612	Net income	$	58,287	$	42,499
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	18,356		16,336		Depreciation and amortization	14,637		10,987
Impairment of intangible and long-lived assets		—		1,498

Deferred income taxes	Deferred income taxes	(1,835)		(3,116)		Deferred income taxes	(2,495)		(1,005)
Stock-based compensation expense	Stock-based compensation expense	2,308		1,850		Stock-based compensation expense	1,443		1,423
Noncash interest expense	Noncash interest expense	182		163		Noncash interest expense	129		121

Other, net	Other, net	7,072		8,248		Other, net	3,250		4,583
Changes in assets and liabilities, net of effects of acquisitions	Changes in assets and liabilities, net of effects of acquisitions					Changes in assets and liabilities, net of effects of acquisitions
Receivables, prepaid expenses and other assets		168		(18,463)
Receivables						Receivables	(20,623)		(2,913)
Prepaid expenses and other assets						Prepaid expenses and other assets	7,540		8,357
Inventories	Inventories	(115,734)		3,181		Inventories	(263,121)		(137,708)
Manufacturer floorplan payable	Manufacturer floorplan payable	78,972		45,801		Manufacturer floorplan payable	150,906		105,415
Deferred revenue	Deferred revenue	(83,029)		(35,894)		Deferred revenue	(58,482)		(43,530)
Accounts payable, accrued expenses and other and other long-term liabilities	Accounts payable, accrued expenses and other and other long-term liabilities	2,650		9,059		Accounts payable, accrued expenses and other and other long-term liabilities	(14,166)		(9,182)

Net Cash Provided by (Used for) Operating Activities		(7,134)		72,275
Net Cash Used for Operating Activities						Net Cash Used for Operating Activities	(122,695)		(20,953)
Investing Activities	Investing Activities					Investing Activities
Rental fleet purchases	Rental fleet purchases	(8,601)		(12,159)		Rental fleet purchases	(2,690)		(6,020)
Property and equipment purchases (excluding rental fleet)	Property and equipment purchases (excluding rental fleet)	(16,829)		(17,534)		Property and equipment purchases (excluding rental fleet)	(25,347)		(8,487)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	2,110		667		Proceeds from sale of property and equipment	6,029		1,628
Acquisition consideration, net of cash acquired	Acquisition consideration, net of cash acquired	(100,471)		—		Acquisition consideration, net of cash acquired	(27,935)		(7,675)
Other, net	Other, net	(176)		20		Other, net	(795)		(182)
Net Cash Used for Investing Activities	Net Cash Used for Investing Activities	(123,967)		(29,006)		Net Cash Used for Investing Activities	(50,738)		(20,736)
Financing Activities	Financing Activities					Financing Activities
Net change in non-manufacturer floorplan payable	Net change in non-manufacturer floorplan payable	32,212		(30,104)		Net change in non-manufacturer floorplan payable	185,026		35,716

Proceeds from long-term debt borrowings	Proceeds from long-term debt borrowings	8,415		6,380		Proceeds from long-term debt borrowings	6,503		8,415
Principal payments on long-term debt and finance leases	Principal payments on long-term debt and finance leases	(5,596)		(6,593)		Principal payments on long-term debt and finance leases	(8,701)		(3,879)
Payment of debt issuance costs		—		—

Other, net	Other, net	(698)		(998)		Other, net	(1,009)		(689)
Net Cash Provided by (Used for) Financing Activities		34,333		(31,315)
Net Cash Provided by Financing Activities						Net Cash Provided by Financing Activities	181,819		39,563
Effect of Exchange Rate Changes on Cash	Effect of Exchange Rate Changes on Cash	(3,529)		(404)		Effect of Exchange Rate Changes on Cash	466		(1,966)
Net Change in Cash	Net Change in Cash	(100,297)		11,550		Net Change in Cash	8,852		(4,092)
Cash at Beginning of Period	Cash at Beginning of Period	146,149		78,990		Cash at Beginning of Period	43,913		146,149
Cash at End of Period	Cash at End of Period	$	45,852	$	90,540	Cash at End of Period	$	52,765	$	142,057
Supplemental Disclosures of Cash Flow Information	Supplemental Disclosures of Cash Flow Information					Supplemental Disclosures of Cash Flow Information
Cash paid during the period	Cash paid during the period					Cash paid during the period
Income taxes, net of refunds	Income taxes, net of refunds	$	15,711	$	22,130	Income taxes, net of refunds	$	15,215	$	11,116
Interest	Interest	$	4,595	$	4,091	Interest	$	5,377	$	2,851
Supplemental Disclosures of Noncash Investing and Financing Activities	Supplemental Disclosures of Noncash Investing and Financing Activities					Supplemental Disclosures of Noncash Investing and Financing Activities
Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	$	5,436	$	15,795	Net property and equipment financed with long-term debt, finance leases, accounts payable and accrued liabilities	$	5,175	$	2,667
Long-term debt to acquire finance leases		$	7,119	$	7,761
Net transfer of assets from (to) property and equipment to (from) inventories		$	(4,686)	$	2,168

Net transfer of assets to property and equipment from inventories						Net transfer of assets to property and equipment from inventories	$	(1,232)	$	(2,849)

See Notes to Condensed Consolidated Financial Statements

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TITAN MACHINERY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. The quarterly operating results for Titan Machinery Inc. (the “Company”) are subject to fluctuation due to varying weather patterns, which may impact the timing and amount of equipment purchases, rentals, and after-sales parts and service purchases by the Company’s agriculture, construction and international customers. Therefore, operating results for the ~~nine-months~~six-months ended ~~October~~July 31, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the fiscal year ending January 31, ~~2023.~~2024. The information contained in the consolidated balance sheet as of January 31, ~~2022~~2023 was derived from the audited consolidated financial statements of the Company for the fiscal year then ended. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2022~~2023 as filed with the SEC.

Nature of Business

The Company is engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States and Europe. The Company’s North American stores are located in Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin, and Wyoming and its European stores are located in Bulgaria, Germany, Romania, and Ukraine.

~~Russia/Ukraine Geopolitical Conflict~~

In February, 2022, the ongoing Russia/Ukraine conflict significantly intensified, and the sustained conflict and disruption in the region is ongoing. Titan Machinery Ukraine, LLC ("Titan Machinery Ukraine"), the Company's wholly owned Ukrainian subsidiary, has ten locations throughout Ukraine primarily in western and central Ukraine. The conflict has caused disruptions in our Ukrainian operations, with our revenues for the three months and nine months ended October 31, 2022 down 40.7% and 38.8%, respectively, from the prior year periods. These disruptions have not been material to the Company's consolidated financial statements. However, if the conflict intensifies in western and central Ukraine, it could significantly increase the adverse effect on the Company in future periods.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, particularly related to realization of inventory, impairment of long-lived assets, goodwill, or indefinite lived intangible assets, collectability of receivables, and income taxes.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material accounts, transactions and profits between the consolidated companies have been eliminated in consolidation.

Recently Adopted Accounting Guidance

In September 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2022-04, Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. This new standard requires that the buyer in a supplier finance program discloses information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a rollforward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption of this ASU is permitted. Entities must apply the amendments of this ASU retrospectively to all periods in which a balance sheet is presented, with the exception of the amendment on disclosure of rollforward information, which entities only need to apply prospectively. On February 1st, 2023 we adopted ASU No. 2022-04 with no impact to our consolidated financial statements.

The Company has agreements with financial institutions to facilitate the purchase of inventory from designated suppliers under certain terms and conditions. Under these agreements, the Company receives extended payment terms and agrees to pay the financial institution a stated amount of confirmed invoices from its designated suppliers. The Company may incur interest in accordance with the terms of the agreements. Additionally, the Company has no involvement in establishing the terms or conditions of the arrangements between its suppliers and the financial institution.

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The amounts outstanding under these agreements as of July 31, 2023 and January 31, 2023 were $42.1 million and $13.0 million, respectively, and are presented as Floorplan payable on the Company's condensed consolidated balance sheet.

NOTE 2 - EARNINGS PER SHARE

The following table sets forth the calculation of basic and diluted earnings per share (EPS):


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands, except per share data)									(in thousands, except per share data)
Numerator:	Numerator:									Numerator:
Net income	Net income	$	41,257	$	21,816	$	83,756	$	43,612	Net income	$	31,321	$	24,959	$	58,287	$	42,499
Allocation to participating securities	Allocation to participating securities	(563)		(309)		(1,039)		(655)		Allocation to participating securities	(400)		(291)		(689)		(502)
Net income attributable to Titan Machinery Inc. common stockholders	Net income attributable to Titan Machinery Inc. common stockholders	$	40,694	$	21,507	$	82,717	$	42,957	Net income attributable to Titan Machinery Inc. common stockholders	$	30,921	$	24,668	$	57,598	$	41,997
Denominator:	Denominator:									Denominator:
Basic weighted-average common shares outstanding	Basic weighted-average common shares outstanding	22,393		22,213		22,365		22,228		Basic weighted-average common shares outstanding	22,476		22,387		22,474		22,350
Plus: incremental shares from vesting of restricted stock units	Plus: incremental shares from vesting of restricted stock units	6		9		7		10		Plus: incremental shares from vesting of restricted stock units	8		5		6		7
Diluted weighted-average common shares outstanding	Diluted weighted-average common shares outstanding	22,399		22,222		22,372		22,238		Diluted weighted-average common shares outstanding	22,484		22,392		22,480		22,357

Earnings Per Share:	Earnings Per Share:									Earnings Per Share:
Basic	Basic	$	1.82	$	0.97	$	3.70	$	1.93	Basic	$	1.38	$	1.10	$	2.56	$	1.88
Diluted	Diluted	$	1.82	$	0.97	$	3.70	$	1.93	Diluted	$	1.38	$	1.10	$	2.56	$	1.88

NOTE 3 - REVENUE

~~Revenues are~~Revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to collect in exchange for those goods or services. Sales, value added and other taxes collected from our customers concurrent with our revenue activities are excluded from revenue.

The following tables present our revenue disaggregated by revenue source and segment:
Three Months Ended October 31, 2022 Nine Months Ended October 31, 2022
Agriculture Construction International Total Agriculture Construction International Total
(in thousands) (in thousands)
Equipment $ 380,007 $ 56,534 $ 72,455 $ 508,996 $ 901,574 $ 143,536 $ 195,469 $ 1,240,579
Parts 81,420 13,350 13,949 108,719 178,474 37,229 39,271 254,974
Service 29,831 6,807 2,322 38,960 76,514 18,932 6,401 101,847
Other 1,201 639 89 1,929 2,881 1,441 540 4,862
Revenue from contracts with customers 492,459 77,330 88,815 658,604 1,159,443 201,138 241,681 1,602,262
Rental 865 9,073 231 10,169 1,386 22,251 424 24,061
Total revenues $ 493,324 $ 86,403 $ 89,046 $ 668,773 $ 1,160,829 $ 223,389 $ 242,105 $ 1,626,323


		Three Months Ended October 31, 2021								Nine Months Ended October 31, 2021									Three Months Ended July 31, 2023								Six Months Ended July 31, 2023
		Agriculture		Construction		International		Total		Agriculture		Construction		International		Total			Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
		(in thousands)								(in thousands)									(in thousands)								(in thousands)
Equipment	Equipment	$	205,230	$	49,679	$	74,905	$	329,814	$	530,895	$	148,511	$	199,122	$	878,528	Equipment	$	352,533	$	53,697	$	73,892	$	480,122	$	678,193	$	99,155	$	132,150	$	909,498
Parts	Parts	52,090		13,413		15,018		80,521		132,515		37,449		38,500		208,464		Parts	82,246		12,537		13,727		108,510		151,793		26,202		27,121		205,116
Service	Service	23,003		6,819		2,204		32,026		63,908		19,773		5,724		89,405		Service	32,526		7,347		2,605		42,478		58,793		13,683		4,935		77,411
Other	Other	824		622		132		1,578		2,301		1,477		413		4,191		Other	1,235		588		193		2,016		2,402		948		552		3,902
Revenue from contracts with customers	Revenue from contracts with customers	281,147		70,533		92,259		443,939		729,619		207,210		243,759		1,180,588		Revenue from contracts with customers	468,540		74,169		90,417		633,126		891,181		139,988		164,758		1,195,927
Rental	Rental	359		9,202		475		10,036		803		22,076		844		23,723		Rental	529		8,694		219		9,442		1,085		14,872		315		16,272
Total revenues		$	281,506	$	79,735	$	92,734	$	453,975	$	730,422	$	229,286	$	244,603	$	1,204,311
Total revenue																		Total revenue	$	469,069	$	82,863	$	90,636	$	642,568	$	892,266	$	154,860	$	165,073	$	1,212,199

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	Three Months Ended July 31, 2022								Six Months Ended July 31, 2022
	Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
	(in thousands)								(in thousands)
Equipment	$	270,472	$	43,184	$	61,560	$	375,216	$	521,565	$	87,002	$	123,015	$	731,582
Parts	52,548		11,816		13,329		77,693		97,054		23,879		25,322		146,255
Service	24,730		6,302		2,333		33,365		46,683		12,125		4,079		62,887
Other	880		500		246		1,626		1,679		803		451		2,933
Revenue from contracts with customers	348,630		61,802		77,468		487,900		666,981		123,809		152,867		943,657
Rental	326		8,220		97		8,643		522		13,177		193		13,892
Total revenue	$	348,956	$	70,022	$	77,565	$	496,543	$	667,503	$	136,986	$	153,060	$	957,549

Unbilled Receivables and Deferred Revenue

Unbilled receivables from contracts with customers amounted to ~~$26.8~~$32.1 million and ~~$17.1~~$19.8 million as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, respectively. This increase in unbilled receivables is primarily the result of a seasonal increase in the volume of our service transactions in which we recognize revenue as our work is performed and prior to customer invoicing.

Deferred revenue from contracts with customers amounted to ~~$55.8~~$62.0 million and ~~$132.2~~$118.1 million as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, respectively. Our deferred revenue most often increases in the fourth quarter of each fiscal year due to a higher level of customer down payments or prepayments and longer time periods between customer payment and delivery of the equipment asset, and the related recognition of equipment revenue, prior to its seasonal use. During the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, the Company recognized ~~$126.3~~$107.7 million and ~~$55.8~~$105.1 million, respectively, of revenue that was included in the deferred revenue balance as of January 31, ~~2022~~2023 and January 31, ~~2021,~~2022, respectively. No material amount of revenue was recognized during the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 or ~~2021~~2022 from performance obligations satisfied in previous periods.

The Company has elected as a practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of service of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for parts installed and services performed. The contracts for which the practical expedient has been applied include (i) equipment revenue transactions, which do not have a stated contractual term but are short-term in nature, and (ii) service revenue transactions, which also do not have a stated contractual term but are generally completed within 30 days. For such service contracts, we recognize revenue at the time we perform the work, in the amount for which we have the right to invoice for services completed to date.

NOTE 4 - RECEIVABLES

The Company provides an allowance for expected credit losses on its nonrental receivables. To measure the expected credit losses, receivables have been grouped based on shared credit risk characteristics as shown in the table below.

Trade and unbilled receivables from contracts with customers have credit risk and the allowance is determined by applying expected credit loss percentages to aging categories based on historical experience that are updated each quarter. The rates may also be adjusted to the extent future events are expected to differ from historical results. In addition, the allowance is adjusted based on information obtained by continued monitoring of individual customer credit.

Trade receivables from finance companies, other receivables due from manufacturers, and other receivables have not historically resulted in any credit losses to the Company. These receivables are short-term in nature and deemed to be of good credit quality and have no need for any allowance for expected credit losses. Management continually monitors these receivables and should information be obtained that identifies potential credit risk, an adjustment to the allowance would be made if deemed appropriate.

Trade and unbilled receivables from rental contracts are primarily in the United States and are specifically excluded from the accounting guidance in determining an allowance for expected losses. The Company provides an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts.

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October 31, 2022 January 31, 2022
(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers $ 49,856 $ 30,041
Unbilled receivables 26,830 17,129
Less allowance for expected credit losses 2,814 1,979
73,872 45,191
Trade receivables due from finance companies 15,976 17,937
Trade and unbilled receivables from rental contracts
Trade receivables 4,175 3,055
Unbilled receivables 884 538
Less allowance for expected credit losses 300 469
4,759 3,124
Other receivables
Due from manufacturers 16,736 22,979
Other 506 5,056
17,242 28,035
Receivables, net of allowance for expected credit losses $ 111,849 $ 94,287

~~Table of Contents~~


	July 31, 2023		January 31, 2023
	(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers	$	57,220	$	47,298
Unbilled receivables	32,110		19,764
Less allowance for expected credit losses	3,251		3,080
	86,079		63,982

Trade receivables due from finance companies	17,556		11,212

Trade and unbilled receivables from rental contracts
Trade receivables	3,804		3,629
Unbilled receivables	1,076		776
Less allowance for expected credit losses	436		360
	4,444		4,045
Other receivables
Due from manufacturers	10,766		15,007
Other	908		1,598
	11,674		16,605
Receivables, net of allowance for expected credit losses	$	119,753	$	95,844

Following is a summary of allowance for credit losses on trade and unbilled accounts receivable by segment:
Agriculture Construction International Total
(in thousands)
Balance at January 31, 2022 $ 244 $ 193 $ 1,542 $ 1,979
Current expected credit loss provision 47 74 1,036 1,157
Write-offs charged against allowance 41 147 148 336
Credit loss recoveries collected 24 9 — 33
Acquisition 94 — — 94
Foreign exchange impact — — (113) (113)
Balance at October 31, 2022 $ 368 $ 129 $ 2,317 $ 2,814


	Agriculture		Construction		International		Total
	(in thousands)
Balance at January 31, 2023	$	367	$	124	$	2,589	$	3,080
Current expected credit loss (benefit) provision	(15)		123		244		352
Write-offs charged against allowance	143		56		53		252
Credit loss recoveries collected	13		1		42		56

Foreign exchange impact	—		—		15		15
Balance at July 31, 2023	$	222	$	192	$	2,837	$	3,251

Agriculture Construction International Total
(in thousands)
Balance at January 31, 2021 $ 228 $ 1,074 $ 1,690 $ 2,992
Current expected credit loss provision (benefit) 109 144 (235) 18
Write-offs charged against allowance 135 177 65 377
Credit loss recoveries collected 9 8 — 17
Foreign exchange impact — — (50) (50)
Balance at October 31, 2021 $ 211 $ 1,049 $ 1,340 $ 2,600


	Agriculture		Construction		International		Total
	(in thousands)
Balance at January 31, 2022	$	244	$	193	$	1,542	$	1,979
Current expected credit loss provision	79		35		846		960
Write-offs (recoveries) charged against allowance	30		97		61		188
Credit loss recoveries collected	16		4		—		20
Foreign exchange impact	—		—		(49)		(49)
Balance at July 31, 2022	$	309	$	135	$	2,278	$	2,722

The increase in the credit loss provision in the International segment, during the nine months ended October 31, 2022, was driven by a $0.8 million bad debt provision placed on the accounts receivables due from customers of Titan Machinery Ukraine, primarily due to the ongoing Russia-Ukraine conflict.

The following table presents impairment losses (recoveries) on receivables arising from sales contracts with customers and receivables arising from rental ~~contracts:~~
Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
(in thousands)
Impairment losses (recoveries) on:
Receivables from sales contracts $ 197 $ 20 $ 1,196 $ 340
Receivables from rental contracts 49 54 81 24
$ 246 $ 74 $ 1,277 $ 364

~~NOTE 5 - INVENTORIES~~
October 31, 2022 January 31, 2022
(in thousands)
New equipment $ 345,689 $ 195,775
Used equipment 128,521 128,047
Parts and attachments 150,308 95,890
Work in process 5,859 2,046
$ 630,377 $ 421,758

contracts reflected in Operating Expenses in the Condensed Consolidated Statements of

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Operations:


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
	(in thousands)
Impairment losses on:
Receivables from sales contracts	$	69	$	186	$	351	$	999
Receivables from rental contracts	71		43		123		32
	$	140	$	229	$	474	$	1,031

NOTE 5 - INVENTORIES


	July 31, 2023		January 31, 2023
	(in thousands)
New equipment	$	598,926	$	369,828
Used equipment	194,730		164,761
Parts and attachments	179,527		164,553
Work in process	6,244		4,797
	$	979,427	$	703,939

NOTE 6 - PROPERTY AND EQUIPMENT


		October 31, 2022		January 31, 2022			July 31, 2023		January 31, 2023
		(in thousands)					(in thousands)
Rental fleet equipment	Rental fleet equipment	$	77,676	$	65,117	Rental fleet equipment	$	77,848	$	75,386
Machinery and equipment	Machinery and equipment	26,221		22,819		Machinery and equipment	31,241		27,220
Vehicles	Vehicles	74,568		58,650		Vehicles	87,816		80,122
Furniture and fixtures	Furniture and fixtures	52,864		50,228		Furniture and fixtures	56,069		53,937
Land, buildings, and leasehold improvements	Land, buildings, and leasehold improvements	139,688		123,323		Land, buildings, and leasehold improvements	169,601		140,773
		371,017		320,137			422,575		377,438
Less accumulated depreciation	Less accumulated depreciation	155,063		141,894		Less accumulated depreciation	170,388		159,656
		$	215,954	$	178,243		$	252,187	$	217,782

The Company includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in Cost of Revenue, which was ~~$2.6~~$2.2 million and ~~$2.6~~$2.0 million for the three months ended ~~October~~July 31, 2023 and 2022, and ~~2021, and $6.0~~$3.9 million and ~~$6.4~~$3.5 million for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively. All other depreciation expense is included in Operating Expenses, which was ~~$4.2~~$5.2 million and ~~$2.9~~$3.6 million for the three months ended ~~October~~July 31, 2023 and 2022, and ~~2021 and $11.3~~$10.0 million and ~~$8.9~~$7.1 million for the ~~nine~~six months ended ~~October~~July 31, ~~2022~~2023 and ~~2021,~~2022, respectively.

The Company reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset group) may not be recoverable. ~~During~~Due to the ~~three months ended October 31, 2022,~~results of the analyses, the Company ~~identified one such asset group in the Construction segment, and performed an impairment test, and~~ concluded ~~that~~no impairments were necessary, thus no impairment was ~~present, thus the Company did not recognize any impairment~~recognized for the three and ~~nine~~six months ended ~~October~~July 31, 2023 and 2022. ~~The Company recognized impairment of long-lived assets of $0.4 million in its International segment for the nine months ended October 31, 2021.~~

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NOTE 7 - INTANGIBLE ASSETS AND GOODWILL

Finite-Lived Intangible Assets

The Company's finite-lived intangible assets consist of customer relationships and covenants not to compete. The following is a summary of intangible assets with finite lives as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022.~~2023.

October 31, 2022 January 31, 2022
Cost Accumulated Amortization Net Cost Accumulated Amortization Net
(in thousands) (in thousands)
Customer relationships $ 5,338 $ (393) $ 4,945 $ 497 $ (252) $ 245
Covenants not to compete 1,025 (168) 857 250 (79) 171
$ 6,363 $ (561) $ 5,802 $ 747 $ (331) $ 416

The Company acquired intangible assets with finite lives, consisting of customer relationships totaling $5.0 million with a weighted-average amortization period of 5.0 years and covenants not to compete totaling $0.8 million with a weighted-average amortization period of 5.0 years, as part of the business combinations completed during the period ended October 31, 2022. The Company acquired intangible assets with finite lives, consisting of customer relationships totaling $0.2 million and covenants not to compete totaling $0.1 million for the year ended January 31, 2022.


	July 31, 2023						January 31, 2023
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
	(in thousands)						(in thousands)
Customer relationships	$	538	$	(234)	$	304	$	538	$	(180)	$	358
Covenants not to compete	1,133		(333)		800		1,025		(222)		803
	$	1,671	$	(567)	$	1,104	$	1,563	$	(402)	$	1,161

Future amortization expense, as of ~~October~~July 31, ~~2022,~~2023, is expected to be as follows:


Fiscal Year Ended January 31,	Fiscal Year Ended January 31,	Amount		Fiscal Year Ended January 31,	Amount
		(in thousands)			(in thousands)
2023 (remainder)		$	321
2024		1,273
2024 (remainder)				2024 (remainder)	$	173
2025	2025	1,248		2025	325
2026	2026	1,206		2026	282
2027	2027	1,180		2027	232
2028				2028	92
Thereafter	Thereafter	574		Thereafter	—
		$	5,802		$	1,104

Indefinite-Lived Intangible Assets

The Company's indefinite-lived intangible assets consist of distribution rights assets. The following is a summary of the changes in indefinite-lived intangible assets, by segment, for the ~~nine~~six months ended ~~October~~July 31, ~~2022:~~2023:
Agriculture Construction Total
(in thousands)
January 31, 2022 $ 10,136 $ 72 $ 10,208
Arising from business combinations 842 — 842
October 31, 2022 $ 10,978 $ 72 $ 11,050


	Agriculture		Construction		Total
	(in thousands)
January 31, 2023	$	17,178	$	72	$	17,250



July 31, 2023	$	17,178	$	72	$	17,250

Goodwill

The following presents changes in the carrying amount of goodwill, by segment, for the ~~nine~~six months ended ~~October~~July 31, ~~2022:~~2023:

Agriculture Total
(in thousands)
January 31, 2022 $ 8,952 $ 8,952
Arising from business combinations 23,070 23,070
October 31, 2022 $ 32,022 $ 32,022


	Agriculture		International		Total
	(in thousands)
January 31, 2023	$	30,622	$	—	$	30,622
Arising from business combinations	69		471		540
Foreign currency translation	—		(5)		(5)

July 31, 2023	$	30,691	$	466	$	31,157

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NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT

On October 31, 2022, the Company entered into Amendment No. 2 to the Third Amended and Restated Credit Agreement ("the Bank Syndicate Agreement") to replace the reference rate from LIBOR to the secured overnight financing rate (SOFR) and to add the Heartland Companies as borrowers. The Company elects at the time of any advance to choose a Base Rate Loan or a SOFR Rate Loan. The SOFR Rate is based upon one-month, three-month, or six-month SOFR, as chosen by the Company, plus an applicable margin of 11.4 basis points for one-month, 26.2 basis points for three-month, and 42.8 basis points for six-month loans. In no event shall the SOFR Rate be less than zero. The Base Rate is the greater of (a) the prime rate of interest announced, from time to time, by Bank of America plus applicable margin; (b) the Federal Funds Rate plus 50.0 basis points plus applicable margin, or one-month SOFR plus 100.0 basis points plus applicable margin plus 11.4 basis points. The applicable margin for Base Rate loans remains unchanged from prior versions of the agreement and is based on excess availability under the Bank Syndicate Agreement and ranges from .5% to 1.0%.

As of ~~October~~July 31, ~~2022,~~2023, the Company had floorplan lines of credit totaling ~~$777.0~~$781.0 million, which is primarily comprised of three floorplan lines of credit: (i) a $500.0 million credit facility with CNH Industrial, ~~(amended as of August 1, 2022, to increase the total available domestic limit to $410 million and overall limit to $500 million),~~ (ii) a $185.0 million line of credit under the ~~Bank~~Third Amended and Restated Credit Agreement (the "Bank Syndicate ~~Agreement,~~Agreement", and (iii) a $50.0 million credit facility with DLL Finance LLC.

The Company's outstanding balances of floorplan lines of credit as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, consisted of the following:


		October 31, 2022		January 31, 2022			July 31, 2023		January 31, 2023
		(in thousands)					(in thousands)
CNH Industrial	CNH Industrial	$	161,837	$	94,054	CNH Industrial	$	318,447	$	177,337
Bank Syndicate Agreement Floorplan Loan	Bank Syndicate Agreement Floorplan Loan	45,000		—		Bank Syndicate Agreement Floorplan Loan	185,000		35,550
DLL Finance	DLL Finance	9,629		8,558		DLL Finance	37,739		9,914
Other outstanding balances with manufacturers and non-manufacturers	Other outstanding balances with manufacturers and non-manufacturers	56,617		32,803		Other outstanding balances with manufacturers and non-manufacturers	54,542		35,571
		$	273,083	$	135,415		$	595,728	$	258,372

As of ~~October~~July 31, ~~2022,~~2023, the ~~interest bearing~~interest-bearing U.S. floorplan payables ~~were primarily on the Bank Syndicate Agreement Loan with~~carried a variable interest rate with a range of ~~4.62%. As~~6.72% to 11.00% compared to a range of 5.94% to 10.25% as of January 31, ~~2022, generally all U.S. floorplan payables were non-interest bearing.~~2023. As of ~~October~~July 31, ~~2022,~~2023, foreign floorplan payables carried ~~various~~a variable interest ~~rates primarily ranging from 2.09%~~rate with a range of 5.36% to ~~4.15%~~6.17%, compared to a range of ~~1.40%~~4.16% to ~~6.11%~~4.96% as of January 31, ~~2022.~~2023, on multiple lines of credit. The Company had ~~non-interest bearing~~non-interest-bearing floorplan payables of ~~$211.4~~$360.4 million and ~~$106.8~~$213.0 million, ~~on October~~as of July 31, ~~2022~~2023 and January 31, ~~2022,~~2023, respectively.

NOTE 9 - LONG TERM DEBT

The following is a summary of long-term debt as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022:~~2023:


Description	Description	Maturity Dates	Interest Rates	October 31, 2022		January 31, 2022		Description	Maturity Dates	Interest Rates	July 31, 2023		January 31, 2023
				(in thousands)							(in thousands)
Mortgage loans, secured	Mortgage loans, secured	Various through May 2039	2.1% to 5.1%	$	69,144	$	57,801	Mortgage loans, secured	Various through May 2039	2.1% to 7.3%	$	69,682	$	68,689
Sale-leaseback financing obligations	Sale-leaseback financing obligations	Various through December 2030	3.4% to 10.3%	11,541		12,382		Sale-leaseback financing obligations	Various through December 2030	3.4% to 10.3%	10,658		11,252

Vehicle loans, secured	Vehicle loans, secured	Various through September 2027	2.1% to 4.3%	12,674		10,465		Vehicle loans, secured	Various through May 2029	2.1% to 6.8%	13,295		12,659
Other	Other	Various through July 2039	3.6%	4,591		—		Other	Various through July 2039	3.6%	4,591		4,591
Total debt	Total debt			97,950		80,648		Total debt			98,226		97,191
Less: current maturities	Less: current maturities			6,895		5,876		Less: current maturities			11,174		7,241
Long-term debt, net	Long-term debt, net			$	91,055	$	74,772	Long-term debt, net			$	87,052	$	89,950

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NOTE 10 - DERIVATIVE INSTRUMENTS

The Company holds derivative instruments for the purpose of minimizing exposure to fluctuations in foreign currency exchange rates to which the Company is exposed in the normal course of its operations.

From time to time, the Company uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans. The Company does not formally designate and document such derivative instruments as hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net income. The Company's foreign currency forward contracts generally have three-month maturities, maturing on the last day of each fiscal quarter. The notional value of outstanding foreign currency contracts as of July 31, 2023 was $5.1 million. There were no outstanding foreign currency contracts as of January 31, 2023.

As of July 31, 2023 and January 31, 2023, the fair value of the Company's outstanding derivative instruments was not material. Derivative instruments recognized as assets are recorded in prepaid expenses and other in the condensed consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in accrued expenses and other in the condensed consolidated balance sheets.

The following table sets forth the gains and losses recognized in income from the Company’s derivative instruments for the three and six months ended July 31, 2023 and 2022. Gains and losses are recognized in Interest and other income in the condensed consolidated statements of operations:


	Three Months Ended July 31,				Six Months Ended July 31,
	2023		2022		2023		2022
	(in thousands)
Foreign currency contract gain (loss)	$	21	$	—	$	(39)	$	—

NOTE 11 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the ~~nine~~six month periods ended ~~October~~July 31, ~~2022~~2023 and ~~October~~July 31, ~~2021:~~2022:
Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2022 $ (4,883) $ 2,711 $ (2,172)
Other comprehensive loss (1,191) — (1,191)
Balance, April 30, 2022 (6,074) 2,711 (3,363)
Other comprehensive loss (2,963) — (2,963)
Balance, July 31, 2022 $ (9,037) $ 2,711 $ (6,326)
Other comprehensive loss (5,132) (5,132)
Balance, October 31, 2022 $ (14,169) $ 2,711 $ (11,458)


	Foreign Currency Translation Adjustment		Net Investment Hedging Gain		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, January 31, 2023	$	(7,730)	$	2,711	$	(5,019)
Other comprehensive income (loss)	1,096		—		1,096
Balance, April 30, 2023	(6,634)		2,711		(3,923)
Other comprehensive income (loss)	550				550
Balance, July 31, 2023	$	(6,084)	$	2,711	$	(3,373)

Foreign Currency Translation Adjustment Net Investment Hedging Gain Total Accumulated Other Comprehensive Income (Loss)
(in thousands)
Balance, January 31, 2021 $ (1,212) $ 2,711 $ 1,499
Other comprehensive loss (2,379) — (2,379)
Balance, April 30, 2021 (3,591) 2,711 (880)
Other comprehensive income 938 — 938
Balance, July 31, 2021 $ (2,653) $ 2,711 $ 58
Other comprehensive loss (744) — (744)
Balance, October 31, 2021 $ (3,397) $ 2,711 $ (686)


	Foreign Currency Translation Adjustment		Net Investment Hedging Gain		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, January 31, 2022	$	(4,883)	$	2,711	$	(2,172)
Other comprehensive income (loss)	(1,191)		—		(1,191)
Balance, April 30, 2022	(6,074)		2,711		(3,363)
Other comprehensive income (loss)	(2,963)		—		(2,963)
Balance, July 31, 2022	$	(9,037)	$	2,711	$	(6,326)

NOTE 1112 - LEASES

As ~~Lessee~~

The Company, as lessee, leases certain of its dealership locations, office space, equipment and vehicles under operating and financing classified leasing arrangements. The Company has elected to not record leases with a lease term at commencement of 12 months or less on the consolidated balance sheet; these leases are expensed on a straight-line basis over the lease term. Many real estate lease agreements require the Company to pay the real estate taxes on the properties during the lease term and require that the Company maintain property insurance on each of the leased premises. These payments are deemed to be variable lease payments as the amounts may change during the term of the lease. Certain leases include renewal options that can extend the lease term for periods of one to ten years. Most real estate leases grant the Company a right of first refusal or other options to purchase the real estate, generally at fair market value, either during the lease term or at its conclusion. In most cases, the Company has not included these renewal and purchase options within the measurement of the right-of-use asset and lease liability. Most often, the Company cannot readily determine the interest rate implicit in the lease and thus applies its incremental borrowing rate to capitalize the right-of-use asset and lease liability. The Company estimates its incremental borrowing rate by incorporating considerations of lease term, asset class and lease currency and geographical market. The Company's lease agreements do not contain any material non-lease components, residual value guarantees or material restrictive covenants.

The Company subleases a small number of real estate assets to third-parties, primarily dealership locations for which it has ceased operations. All sublease arrangements are classified as operating leases.

~~Table of Contents~~

~~The components of lease expense were as follows:~~
Three Months Ended October 31, Nine Months Ended October 31,
Classification 2022 2021 2022 2021
(in thousands) (in thousands)
Finance lease cost:
Amortization of leased assets Operating expenses $ 231 $ 227 $ 645 $ 915
Interest on lease liabilities Other interest expense 48 49 137 201
Operating lease cost Operating expenses and rental and other cost of revenue 3,424 3,632 10,062 11,132
Short-term lease cost Operating expenses — 66 71 198
Variable lease cost Operating expenses 501 502 1,519 1,755
Sublease income Interest and other income (358) (226) (1,087) (643)
$ 3,846 $ 4,250 $ 11,347 $ 13,558

~~Right-of-use lease assets and lease liabilities consist of the following:~~
Classification October 31, 2022 January 31, 2022
(in thousands)
Assets
Operating lease assets Operating lease assets $ 52,091 $ 56,150
Finance lease assets(a)
Property and equipment, net of accumulated depreciation 2,440 9,045
Total leased assets $ 54,531 $ 65,195
Liabilities
Current
Operating Current operating lease liabilities $ 9,671 $ 9,601
Finance Accrued expenses and other 623 7,466
Noncurrent
Operating Operating lease liabilities 50,737 55,595
Finance Other long-term liabilities 2,144 1,518
Total lease liabilities $ 63,175 $ 74,180
~~(a)Finance lease assets are recorded net of accumulated amortization of $1.3 million as of October 31, 2022 and $1.7 million as of January 31, 2022.~~

~~Maturities of lease liabilities as of October 31, 2022 are as follows:~~
Operating Finance
Leases Leases Total
Fiscal Year Ended January 31, (in thousands)
2023 (remainder) $ 3,285 $ 214 $ 3,499
2024 12,760 776 13,536
2025 12,393 727 13,120
2026 11,881 589 12,470
2027 11,220 458 11,678
2028 9,697 317 10,014
Thereafter 10,781 343 11,124
Total lease payments 72,017 3,424 75,441
Less: Interest 11,609 657 12,266
Present value of lease liabilities $ 60,408 $ 2,767 $ 63,175

~~The weighted-average lease term and discount rate as of October 31, 2022 are as follows:~~


	~~October 31, 2022~~
~~Weighted-average remaining lease term (years):~~
~~Operating leases~~	~~5.9~~
~~Financing leases~~	~~4.8~~
~~Weighted-average discount rate:~~
~~Operating leases~~	~~6.0~~	%
~~Financing leases~~	~~7.9~~	%

~~Table of Contents~~

As Lessor

The Company rents equipment to customers, primarily in the Construction segment, on a short-term basis. Our rental arrangements generally do not include minimum, noncancellable periods as the lessee is entitled to cancel the arrangement at any time. Most often, our rental arrangements extend for periods ranging from a few days to a few months. We maintain a fleet of dedicated rental assets within our Construction segment and, within all segments, we may also provide short-term rentals of certain equipment inventory assets. Some rental arrangements may include rent-to-purchase options whereby customers are given a period of time to exercise an option to purchase the related equipment at an established price with any rental payments paid applied to reduce the purchase price.

All of the Company's leasing arrangements as lessor are classified as operating leases. Rental revenue is recognized on a straight-line basis over the rental period. Rental revenue includes amounts charged for loss and damage insurance on rented equipment. In most cases, our rental arrangements include non-lease components, including delivery and pick-up services. The Company accounts for these non-lease components separate from the rental arrangement and recognizes the revenue associated with these components when the service is performed. The Company has elected to exclude from rental revenue all sales, value added and other taxes collected from our customers concurrent with our rental activities. Rental billings most often occur on a monthly basis and may be billed in advance or in arrears, thus creating unbilled rental receivables or deferred rental revenue amounts. The Company manages the residual value risk of its rented assets by (i) monitoring the quality, aging and anticipated retail market value of our rental fleet assets to determine the optimal period to remove an asset from the rental fleet, (ii) maintaining the quality of our assets through on-site parts and service support and (iii) requiring physical damage insurance of our lessee customers. We primarily dispose of our rental assets through the sale of the asset by our retail sales force.

Revenue generated from leasing activities is disclosed, by segment, in Note 3. The following is the balance of our dedicated rental fleet assets, included in Property and equipment, net of accumulated depreciation in the condensed consolidated balance sheet, of our Construction segment as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022:~~2023:


		October 31, 2022		January 31, 2022			July 31, 2023		January 31, 2023
		(in thousands)					(in thousands)
Rental fleet equipment	Rental fleet equipment	$	77,676	$	65,117	Rental fleet equipment	$	77,848	$	75,386
Less accumulated depreciation	Less accumulated depreciation	26,791		23,501		Less accumulated depreciation	28,494		26,959
		$	50,885	$	41,616		$	49,354	$	48,427

NOTE 1213 - FAIR VALUE MEASUREMENTS

As of ~~October~~July 31, ~~2022~~2023, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material. These foreign currency contracts were valued using a discounted cash flow analysis, which is an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement.

The Company also valued certain long-lived assets at fair value on a non-recurring basis as of January 31, 2022 as part of its long-lived asset impairment testing. The estimated fair value of such assets as of January 31, 2022 ~~was $3.1 million.~~Fair value was estimated through an income approach incorporating both observable and unobservable inputs, and are deemed to be Level 3 fair value inputs. The most significant unobservable inputs include forecasted net cash generated from the use of the assets and the discount rate applied to such cash flows to arrive at a fair value estimate. In addition, in certain instances, in the prior year, the Company estimated the fair value of long-lived assets to approximate zero as no future cash flows were assumed to be generated from the use of such assets and the expected value to be realized upon disposition was deemed to be nominal.

The Company also has financial instruments that are not recorded at fair value in the consolidated balance sheets, including cash, receivables, payables and long-term debt. The carrying amounts of these financial instruments approximated their fair values as of ~~October~~July 31, ~~2022~~2023 and January 31, ~~2022. Fair~~2023. The fair value of these financial instruments was estimated based on

Table of Contents

Level 2 fair value inputs. The estimated fair value of the Company's Level 2 long-term debt, which is provided for disclosure purposes only, is as follows:

October 31, 2022 January 31, 2022
(in thousands)
Carrying amount $ 80,182 $ 63,237
Fair value $ 70,702 $ 68,267


	July 31, 2023		January 31, 2023
	(in thousands)
Carrying amount	$	82,977	$	81,349
Fair value	$	72,939	$	70,434

~~Table of Contents~~

NOTE 1314 - INCOME TAXES

Our effective tax rate was ~~24.5% and 24.3%~~24.7% for each of the three months ended ~~October~~July 31, 2023 and 2022 and ~~2021, respectively~~was 24.3% and ~~was 24.8% and 25.0%~~25.1% for the ~~nine~~six months ended ~~October~~July 31, 2023 and 2022, ~~and 2021,~~ respectively. In reviewing our foreign deferred tax assets as of October 31, 2022, it was concluded that based on recent income and sources of future income of our Bulgarian subsidiary, that the release of the remaining valuation allowance of our Bulgarian subsidiary was warranted. In the third quarter of fiscal 2023, the Company recorded a benefit of $0.3 million from the release of the valuation allowance related to the Company's Bulgarian subsidiary. The effective tax rate for the three and ~~nine~~six months ended ~~October~~July 31, 2023 and 2022 ~~and 2021 was also~~were subject to various other factors such as the impact of certain discrete items, mainly the vesting of share-based compensation, ~~and~~ the mix of domestic and foreign ~~income.~~income, and the change of valuation allowances in certain foreign jurisdictions.

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NOTE 1415 - BUSINESS COMBINATIONS

Fiscal 2024

On June 1, 2023, the Company acquired certain assets of Midwest Truck Parts Inc., ("Midwest Truck"). The acquired business consists of one location in Dawson, Minnesota. This location is included in the Company's Agriculture segment. The total consideration transferred for the acquired business was $4.0 million paid in cash, which includes the purchase of the real estate.

On May 1, 2023, the Company, through its German subsidiary, Titan Machinery Deutschland GmbH, acquired certain assets of MAREP GmbH ("MAREP") related to its full-service agriculture dealership business located in Mühlengeez and Radelübbe, Germany. Our acquisition of these assets from MAREP further expands our presence in the German market. The total consideration transferred for the acquired business was $4.4 million paid in cash, which includes the real estate of the Mühlengeez location. These locations are included in the Company's international segment.

On February 1, 2023, the Company acquired certain assets of Pioneer Farm Equipment Co., ("Pioneer Farm Equipment"). The acquired business consists of five agriculture equipment stores in American Falls, Blackfoot, Idaho Falls, Rexburg, and Rupert, Idaho. These locations are included in the Company's Agriculture segment. The total consideration transferred for the acquired business was $19.5 million paid in cash, which includes $9.4 million for the purchase of the real estate.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Pioneer Farm Equipment Co. Upon acquiring these inventories, the Company was offered floorplan financing by the manufacturer. In total, the Company acquired inventory and recognized a corresponding liability of $12.7 million. The recognition of these inventories and associated financing liabilities are not included as part of the accounting for the business combination.

Fiscal 2023

On August 1, 2022, the Company acquired all outstanding equity interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as "Heartland Companies") for $94.4 million in cash consideration. The Heartland Companies consist of 12 CaseIH commercial application agriculture locations in the states of Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and Wisconsin. The Heartland Companies have been a successful CaseIH commercial application dealer group and our acquisition of these entities provides the Company the opportunity for synergies due to the overlap of our footprints, which will allow us to package deals that will include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint. These locations are included in the Company's Agriculture segment. In the most ~~recent~~recently completed fiscal year prior to the acquisition, the Heartland Companies generated revenue of approximately $214 million. The ~~results of operations from the acquisition from the August 1, 2022 closing date through October 31, 2022, represented approximately $51.2 million of revenue and $3.4 million of pre-tax income. The~~ Company incurred $1.1 million in ~~acquisition related~~acquisition-related expenses in connection with this acquisition, which are included in operating expenses in the condensed consolidated statement of operations.

On April 1, 2022, the Company acquired certain assets of Mark's Machinery, Inc. The acquired business consisted of two agricultural equipment stores in Wagner and Yankton, South Dakota. These locations are included in the Company's Agriculture segment. The total cash consideration transferred for the acquired business was $7.7 million.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Mark's Machinery, Inc. Upon acquiring ~~such~~these inventories, the Company was offered floorplan financing by the respective manufacturers. In total, the Company acquired inventory and recognized a corresponding financing liability of $3.2 million. The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

~~Fiscal 2022~~

On December 1, 2021, the Company acquired certain assets of Jaycox Implement, Inc. The acquired business consisted of three agricultural equipment stores in Worthington and Luverne, Minnesota and Lake Park, Iowa. These locations are included in the Company's Agriculture segment. The total cash consideration transferred for the acquired business was $28.2 million. The Company completed the real estate purchase on December 31, 2021 for a purchase price of $5.5 million, which was partially financed with long-term debt and the remainder was paid in cash.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Jaycox Implement, Inc. Upon acquiring such inventories, the Company was offered floorplan financing by the respective manufacturers. In total, the Company acquired inventory and recognized a corresponding financing liability of $5.3 million. The recognition of these inventories and the associated financing liabilities are not included as part of the accounting for the business combination.

Purchase Price Allocation

Each of the above acquisitions ~~has~~have been accounted for under the acquisition method of accounting, which requires the Company to estimate the acquisition date fair value of the assets acquired and liabilities assumed. ~~As of October 31, 2022, the~~The purchase price allocation for all business combinations completed in ~~fiscal year~~the six months ended July 31, 2023 are preliminary as we finalize the valuation of our intangible assets acquired. The purchase price ~~allocation~~allocations for all business combinations completed in fiscal year ~~2022~~2023 are complete. The following table presents the purchase price allocations for all acquisitions completed during the fiscal year ended January 31, ~~2022~~2023 and the ~~period~~six months ended ~~October~~July 31, ~~2022:~~2023:

1916

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		August 1, 2022		April 1, 2022			December 1, 2021
		(in thousands)				July 31, 2023				January 31, 2023
		Heartland Companies		Mark's Machinery			Jaycox Implement			(in thousands)
Assets acquired:	Assets acquired:								Assets acquired:
Cash	Cash	$	1,583	$	1		$	4	Cash	$	4	$	1,584
Receivables	Receivables	9,007		478			1,197		Receivables	885		9,485
Inventories	Inventories	103,504		3,386			13,780		Inventories	11,237		106,890
Prepaid expenses and other	Prepaid expenses and other	602		66			47		Prepaid expenses and other	—		668
Property and equipment	Property and equipment	20,204		4,088			8,236		Property and equipment	16,659		24,292
Operating lease assets	Operating lease assets	3,928		—			—		Operating lease assets	148		3,928
Intangible assets	Intangible assets	5,700		917			4,121		Intangible assets	—		8,017
Goodwill	Goodwill	22,487		583			7,519		Goodwill	540		21,670

Other									Other	$	110	—
		167,015		9,519			34,904			29,583		176,534

Liabilities assumed:	Liabilities assumed:								Liabilities assumed:
Accounts payable	Accounts payable	18,547		—			—		Accounts payable	—		18,547
Floorplan payable	Floorplan payable	31,699		—			—		Floorplan payable	—		31,699
Current operating lease liabilities	Current operating lease liabilities	541		—			—		Current operating lease liabilities	58		541
Deferred revenue	Deferred revenue	5,195		1,844			1,261		Deferred revenue	1,499		7,039
Accrued expenses and other	Accrued expenses and other	3,523		—			—		Accrued expenses and other	—		3,523
Long-term debt	Long-term debt	4,591		—			—		Long-term debt	—		4,591
Operating lease liabilities	Operating lease liabilities	3,387		—			—		Operating lease liabilities	91		3,387
Other long-term liabilities	Other long-term liabilities	5,152		—			—		Other long-term liabilities	—		5,152

		72,635		1,844			1,261			1,648		74,479
Net assets acquired	Net assets acquired	$	94,380	$	7,675		$	33,643	Net assets acquired	$	27,935	$	102,055

Goodwill recognized by segment:	Goodwill recognized by segment:								Goodwill recognized by segment:
Agriculture	Agriculture	$	22,487	$	583		$	7,519	Agriculture	$	69	$	21,670

International									International	$	471	$	—
Goodwill expected to be deductible for tax purposes	Goodwill expected to be deductible for tax purposes	$	22,487	$	583		$	7,519	Goodwill expected to be deductible for tax purposes	$	540	$	21,670

The recognition of goodwill in the above business combinations arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized. For the ~~Heartland Companies acquisition,~~business combinations completed during the six months ended July 31, 2023, the Company recognized a non-competition intangible asset of ~~$0.7~~$0.1 million ~~and~~in its International segment, which will be amortized over a ~~customer relationship intangible asset of $5.0 million.~~three year period. For the ~~Mark's Machinery acquisition~~business combinations completed during the fiscal year ended January 31, 2023, the Company recognized a non-competition intangible asset of $0.8 million and a ~~distribution rights~~customer relationship intangible asset of ~~$0.8~~$0.2 million. For the Jaycox acquisition the Company recognized a non-competition intangible asset of $0.1 million and a distribution rights intangible asset of $3.9 million. The non-competition and customer relationship assets will be amortized over five year periods. The distribution rights assets are indefinite-lived intangible assets not subject to amortization. The Company estimated the fair value of the intangible assets using a multi-period excess earnings model, which is an income approach. Acquisition related costs for the six month period ended July 31, 2023 amounted to $0.5 million, primarily related to the O'Connors, see Subsequent Event Note 18, acquisition. Acquisition related costs amounted to $1.1 million for the ~~period ended October 31, 2022, and acquisition related costs for the period~~fiscal year ended January 31, ~~2022, were not material.~~2023. All ~~acquisition related~~acquisition-related costs have been expensed as incurred and recognized as ~~operating expenses~~Operating Expenses in the condensed consolidated statements of operations.

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Pro Forma Information

The following summarized unaudited pro forma condensed statement of operations information for the three ~~and nine~~ months ended ~~October~~July 31, ~~2021~~2023 and 2022, assumes that the Heartland Companies acquisition occurred as of February 1, 2021. The Company prepared the following summarized unaudited pro forma financial results for comparative purposes only. The summarized unaudited pro forma information may not be indicative of the results that would have occurred had the Company completed the acquisition as of February 1, 2021 or that will be attained in the future.

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		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Total Revenues	Total Revenues	$	668,773	$	497,945	$	1,786,396	$	1,361,574	Total Revenues	$	642,568	$	561,194	$	1,212,199	$	1,117,622
Net Income	Net Income	$	41,707	$	23,106	$	92,590	$	51,041	Net Income	$	31,321	$	27,523	$	58,287	$	51,904

NOTE 1516 - CONTINGENCIES

The Company is engaged in legal proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between affected parties and governmental intervention. Based upon the information available to the Company and discussions with legal counsel, it is the Company's opinion that the outcome of these various legal actions and claims will not have a material impact on its financial position, results of operations or cash flows. These matters, however, are subject to many uncertainties, and the outcome of any matter is not predictable.

NOTE 1617 - SEGMENT INFORMATION

The Company has three reportable segments: Agriculture, Construction and International. Revenue between segments is immaterial. The Company retains various unallocated income/(expense) items and assets at the general corporate level, which the Company refers to as “Shared Resources” in the table below. Shared Resources assets primarily consist of cash and property and equipment.

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Certain financial information for each of the Company’s business segments is set forth below.


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)				(in thousands)					(in thousands)				(in thousands)
Revenue	Revenue									Revenue
Agriculture	Agriculture	$	493,324	$	281,506	$	1,160,829	$	730,422	Agriculture	$	469,069	$	348,956	$	892,266	$	667,503
Construction	Construction	86,403		79,735		223,389		229,286		Construction	82,863		70,022		154,860		136,986
International	International	89,046		92,734		242,105		244,603		International	90,636		77,565		165,073		153,060
Total	Total	$	668,773	$	453,975	$	1,626,323	$	1,204,311	Total	$	642,568	$	496,543	$	1,212,199	$	957,549

Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes									Income (Loss) Before Income Taxes
Agriculture	Agriculture	$	42,044	$	19,618	$	83,387	$	42,910	Agriculture	$	33,029	$	24,895	$	57,181	$	41,344
Construction	Construction	6,065		3,564		13,197		6,518		Construction	5,156		3,923		9,689		7,132
International	International	8,488		6,260		18,683		9,498		International	5,568		5,870		11,952		10,195
Segment income before income taxes	Segment income before income taxes	56,597		29,442		115,267		58,926		Segment income before income taxes	43,753		34,688		78,822		58,671
Shared Resources	Shared Resources	(1,919)		(619)		(3,855)		(793)		Shared Resources	(2,162)		(1,538)		(1,790)		(1,937)
Total	Total	$	54,678	$	28,823	$	111,412	$	58,133	Total	$	41,591	$	33,150	$	77,032	$	56,734


		October 31, 2022		January 31, 2022			July 31, 2023		January 31, 2023
		(in thousands)					(in thousands)
Total Assets	Total Assets					Total Assets
Agriculture	Agriculture	$	742,975	$	481,190	Agriculture	$	985,419	$	788,265
Construction	Construction	194,077		157,846		Construction	224,478		187,739
International	International	154,359		155,275		International	242,177		170,647
Segment assets	Segment assets	1,091,411		794,311		Segment assets	1,452,074		1,146,651
Shared Resources	Shared Resources	33,359		152,356		Shared Resources	64,942		42,044
Total	Total	$	1,124,770	$	946,667	Total	$	1,517,016	$	1,188,695

NOTE 18 - SUBSEQUENT EVENTS

On August 29, 2023, the Company entered into a definitive purchase agreement to acquire J.J. O’Connor & Sons Pty. Ltd. ("O’Connors"), which operates 15 CaseIH dealership locations and one parts center in the states of New South Wales, South Australia, and Victoria in Southeastern Australia. In its most recently completed fiscal year ended June 30, 2023, O’Connors generated revenue of approximately $258 million. The Company plans to close on the acquisition in the fourth quarter of calendar 2023. The consideration paid is estimated to be $63 million, subject to final working capital and other purchase price closing adjustments. The acquisition will be accounted for in accordance with Accounting Standards Codification ("ASC") Topic 805, "Business Combinations".

The Company plans to fund the acquisition with cash on hand and additional indebtedness under the floorplan and working capital loans of the Bank Syndicate. On September 1, 2023, the Company entered into Amendment No. 3 to the Third Amended and Restated Credit Agreement with the Bank Syndicate, the amendment increased the Floorplan loan capacity from $185 million to $250 million and the Revolver loan capacity from $65 million to $75 million.

2119

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2022.~~2023.

Overview

We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe. Based upon information provided to us by CNH Industrial N.V. or its U.S. subsidiary CNH Industrial America, LLC, we are the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the United States. We operate our business through three reportable segments: Agriculture, Construction and International. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.

Demand for agricultural equipment and, to a lesser extent, parts and service support, is impacted by agricultural commodity prices and net farm income. Based on ~~September 2022~~February 2023 U.S. Department of Agriculture publications, the estimate of net farm income for calendar year ~~2022~~2023 indicated an approximate ~~5.2% increase~~15.9% decrease as compared to calendar year ~~2021,~~2022, and an approximate ~~48.5%~~15.5% increase in net farm income for calendar year ~~2021~~2022 as compared to calendar year ~~2020.~~2021.

For the ~~third~~second quarter of fiscal ~~2023,~~2024, our net income was ~~$41.3~~$31.3 million, or ~~$1.82~~$1.38 per diluted share, compared to a fiscal ~~2022 third~~2023 second quarter net income of ~~$21.8~~$25.0 million, or ~~$0.97~~$1.10 per diluted share. Our adjusted diluted earnings per share was $1.83 for the third quarter of fiscal 2023, compared to $0.96 for the third quarter of fiscal 2022. See the Non-GAAP Financial Measures section below for a reconciliation of adjusted diluted earnings per share to diluted earnings per share, the most comparable GAAP financial measure. Significant factors impacting the quarterly comparisons were:

•Revenue in the ~~third~~second quarter of fiscal ~~2023~~2024 increased by ~~47.3%~~29.4% compared to the ~~third~~second quarter of fiscal ~~2022.~~2023. The revenue increase was ~~primarily driven~~led by additional revenue resulting from the acquisitions of the Heartland Companies and Pioneer Farm Equipment, in August 2022 and February 2023, respectively. In addition, total Company ~~same store~~same-store sales ~~increase of 34.0%~~also increased by 12.1% compared to the prior year ~~third~~second quarter ~~and the acquisition~~(for a description of ~~the Heartland Companies, Mark's Machinery, and Jaycox Implement in August 2022, April 2022, and December 2021, respectively. Total equipment~~how we compute same-store sales, ~~increased 54.3% and total parts sales increased 35.0%.~~see discussion under Results of Operations),

•Gross profit in the ~~third~~second quarter of fiscal ~~2023~~2024 increased ~~50.9%~~29.9% compared to the ~~third~~second quarter of fiscal ~~2022.~~2023. The increase in gross profit was primarily the result of increased sales due to the aforementioned acquisitions and strong gross profit margins particularly in equipment where margins increased to 14.3% in the third quarter of fiscal 2023 from 12.5% in the third quarter of fiscal 2022. Parts gross profit margins also increased to 33.6% in the third quarter of fiscal 2023 from 30.9% in the third quarter of fiscal 2022.same-store sales.

Supply Chain

Equipment availability of certain product categories continues to be ~~challenging~~constrained as supply chain disruptions ~~throughout 2021~~ and ~~continuing into 2022, along with increased domestic and global demand for equipment inventory,~~labor shortages have caused many manufacturers to be unable to ~~produce enough equipment to~~ meet demand. ~~Many manufacturers~~Meanwhile, customer demand has remained strong, driven by favorable agriculture fundamentals. This has caused certain product categories to be supplied on an allocation basis with abnormally long lead times. While we continue to experience less than desired shipments of certain product categories, primarily high-horsepower tractors and self-propelled sprayers, there are other product categories for which we have partially built equipment at their factories waiting for certain parts and components in order to finish production and ship the equipment to dealers. The timing as to the receipt of those parts and components may move completion of that equipment and the resulting delivery to the end customer from quarter to quarter or in some cases, year to year, thereby potentially impacting when we arebeen able to receive ~~the~~enough inventory ~~enter into sales transactions with our customers,~~to meet demand and recognize the revenue. These supply chain issues are further complicated by labor shortages including the ongoing strike at the CNH Industrial plants in Racine, Wisconsin and Burlington, Iowa, as well as the announcement by CNH Industrial that it will be implementing an equipment allocation methodology to determine production slots starting in late calendar year 2022. All of these factors may limit our ability to match customer demand on certain products in fiscal 2024.also have stock available for sale. We will continue to work with our manufacturers to source ~~future inventory~~the high demand equipment to fulfill as much customer demand as possible.

Russian-Ukrainian Conflict

~~Since~~In February 2022, Russian military forces invaded Ukraine, and although the ~~onset~~length, impact, and outcome of the ~~active~~ongoing conflict in ~~February 2022, most of Titan Machinery Ukraine's customers have been able~~Ukraine is highly unpredictable, this conflict has led, and could continue to ~~continue their work, although at a reduced capacity~~lead, to significant market and ~~schedule. The Company's business systems~~other disruptions, including instability in financial markets, supply chain interruptions, political and social instability, and increases in cyberattacks. We are actively monitoring the situation in Ukraine ~~have continued~~

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~~to function but could be negatively impacted in the future. Some of Titan Machinery Ukraine's back office employees have been able to relocate outside of Ukraine~~ and ~~continue to work, while the customer support and sales teams have remained in Ukraine.~~assessing its impact on our business. For the ~~nine~~six months ended ~~October~~July 31, ~~2022,~~2023, Titan Machinery Ukraine's revenues are down approximately ~~38.8%~~13.6% from the prior year period.

As of ~~October~~July 31, ~~2022,~~2023, the Company had total assets of ~~$28.7~~$33.5 million in Ukraine. The physical assets (e.g. inventory and fixed assets) are almost exclusively located in central and western areas of the country. Total assets in Ukraine as of January 31, ~~2022,~~2023, was ~~$32.7~~$27.4 million.

~~The situation in Ukraine is highly complex and continues to evolve.~~

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If the Company cannot provide efficient and uninterrupted services to its customers, this could worsen the conflict's adverse effect on the Company's operations and business in Ukraine. In addition, the Company's ability to maintain adequate liquidity for our operations in Ukraine is dependent on a number of factors, including Titan Machinery Ukraine's revenue and earnings, which have been and could continue to be significantly impacted by the conflict. Further, any major breakdown or closure of utility services, any major threat to civilians in our footprint, disruption of commodity exports from Ukraine, or international banking disruption could materially impact the operations and liquidity of Titan Machinery Ukraine.

Acquisitions

Fiscal 2024

On June 1, 2023, the Company acquired certain assets of Midwest Truck. The acquired business consists of one location in Dawson, Minnesota. This location is included in the Company's Agriculture segment. The total consideration transferred for the acquired business was $4.0 million paid in cash which includes the purchase of the real estate.

On May 1, 2023, the Company, through its German Subsidiary, Titan Machinery Deutschland GmbH, acquired certain assets of MAREP related to its full-service agriculture dealership businesses located in Mühlengeez and Radelübbe,Germany. Our acquisition of these assets from MAREP further expands our presence in the German market. The total consideration transferred for the acquired business was $4.4 million paid in cash, which includes the real estate of the Mühlengeez location. These locations are included in the Company's international segment.

On February 1, 2023, the Company acquired certain assets of Pioneer Farm Equipment. The acquired business consists of five agriculture equipment stores in American Falls, Blackfoot, Idaho Falls, Rexburg, and Rupert, Idaho. These locations are included in the Company's Agriculture segment. The total consideration transferred for the acquired business was $19.5 million paid in cash, which includes $9.4 million for the purchase of the real estate.

In connection with the acquisition, the Company acquired from CNH Industrial and certain other manufacturers equipment and parts inventory previously owned by Pioneer Farm Equipment. Upon acquiring these inventories, the Company was offered floorplan financing by the manufacturer. In total, the Company acquired inventory and recognized a corresponding liability of $12.7 million. The recognition of these inventories and associated financing liabilities are not included as part of the accounting for the business combination.

Fiscal 2023

On August 1, 2022, the Company acquired all outstanding equity interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as "Heartland Companies") for $94.4 million in cash consideration. The Heartland Companies consist of twelve CaseIH commercial application agriculture locations, in Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and Wisconsin. The Heartland Companies have been a successful CaseIH commercial application dealer group and our acquisition of these entities provides the Company the opportunity for synergies due to the overlap of our footprints, which will allow us to package deals that will include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint. The Heartland Companies are included in the Agriculture segment. In the most recent completed fiscal year prior to the acquisition, the Heartland Companies generated revenue of approximately $214 million.

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On April 1, 2022, the Company acquired certain assets of Mark's Machinery, Inc. The acquired business consisted of two agricultural equipment stores in Wagner and Yankton, South Dakota. These locations are included in ~~our~~the Company's Agriculture segment. In its most recent fiscal year prior to the acquisition, Mark's Machinery, Inc. generated revenue of approximately $34.0 million. The total cash consideration paid for the acquired business was $7.7 ~~million.~~

~~Fiscal 2022~~

On December 1, 2021, the Company acquired certain assets of Jaycox Implement, Inc. The acquired business consisted of three agricultural equipment stores in Worthington and Luverne, Minnesota and Lake Park, Iowa. These locations are included in our Agriculture segment. In its most recent fiscal year, Jaycox Implement, Inc. generated revenue of approximately $91 million. The total cash consideration paid for the acquired business was $33.6 million.

ERP Transition

The Company is in the process of converting to a new Enterprise Resource Planning ("ERP") application. The new ERP application is expected to provide data-driven and mobile-enabled sales and support tools to improve employee efficiency and deliver an enhanced customer experience. The Company integrated one pilot store on the new ERP system in the second quarter of fiscal 2021 and also integrated the five stores acquired through the Jaycox Implement and Mark's Machinery acquistions in December 2021 and April 2022, respectively. In June, the Company began thehas implemented a phased roll-out ~~integrating three existing locations~~plan to integrate all of its domestic stores to the new ERP. We will continue ~~our~~the phased ~~roll-out~~rollout until all remaining domestic locations have been transitioned to the new ERP.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are included in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended January 31, ~~2022.~~2023. There have been no changes in our critical accounting policies and estimates since January 31, ~~2022.~~2023.

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Results of Operations

The results presented below include the operating results of any acquisition made during these periods, from the date of acquisition, as well as the operating results of any stores closed or divested during these periods, up to the date of the store closure. The period-to-period comparisons included below are not necessarily indicative of future results. Segment information is provided later in the discussion and analysis of our results of operations.

Same-store sales for any period represent sales by stores that were part of the Company for the entire comparable period in the current and preceding fiscal years. We do not distinguish between relocated or recently expanded stores in this same-store analysis. Closed stores are excluded from the same-store analysis. Stores that do not meet the criteria for same-store classification are described as excluded stores throughout this Results of Operations section.

Comparative financial data for each of our four sources of revenue are expressed below.


		Three Months Ended October 31,						Nine Months Ended October 31,							Three Months Ended July 31,						Six Months Ended July 31,
		2022			2021			2022			2021				2023			2022			2023			2022
		(dollars in thousands)						(dollars in thousands)							(dollars in thousands)						(dollars in thousands)
Equipment	Equipment													Equipment
Revenue	Revenue	$	508,996		$	329,814		$	1,240,579		$	878,528		Revenue	$	480,122		$	375,216		$	909,498		$	731,582
Cost of revenue	Cost of revenue	436,156			288,576			1,070,378			772,584			Cost of revenue	414,800			323,988			783,062			634,222
Gross profit	Gross profit	$	72,840		$	41,238		$	170,201		$	105,944		Gross profit	$	65,322		$	51,228		$	126,436		$	97,360
Gross profit margin	Gross profit margin	14.3		%	12.5		%	13.7		%	12.1		%	Gross profit margin	13.6		%	13.7		%	13.9		%	13.3		%
Parts	Parts													Parts
Revenue	Revenue	$	108,719		$	80,521		$	254,974		$	208,464		Revenue	$	108,510		$	77,693		$	205,116		$	146,255
Cost of revenue	Cost of revenue	72,146			55,654			172,162			146,184			Cost of revenue	73,086			52,706			138,190			100,015
Gross profit	Gross profit	$	36,573		$	24,867		$	82,812		$	62,280		Gross profit	$	35,424		$	24,987		$	66,926		$	46,240
Gross profit margin	Gross profit margin	33.6		%	30.9		%	32.5		%	29.9		%	Gross profit margin	32.6		%	32.2		%	32.6		%	31.6		%
Service	Service													Service
Revenue	Revenue	$	38,960		$	32,026		$	101,847		$	89,405		Revenue	$	42,478		$	33,365		$	77,411		$	62,887
Cost of revenue	Cost of revenue	13,456			10,249			35,288			29,314			Cost of revenue	14,208			11,072			26,617			21,832
Gross profit	Gross profit	$	25,504		$	21,777		$	66,559		$	60,091		Gross profit	$	28,270		$	22,293		$	50,794		$	41,055
Gross profit margin	Gross profit margin	65.5		%	68.0		%	65.4		%	67.2		%	Gross profit margin	66.6		%	66.8		%	65.6		%	65.3		%
Rental and other	Rental and other													Rental and other
Revenue	Revenue	$	12,098		$	11,614		$	28,923		$	27,914		Revenue	$	11,458		$	10,269		$	20,174		$	16,825
Cost of revenue	Cost of revenue	7,435			7,016			17,522			17,754			Cost of revenue	7,075			6,078			12,351			10,087
Gross profit	Gross profit	$	4,663		$	4,598		$	11,401		$	10,160		Gross profit	$	4,383		$	4,191		$	7,823		$	6,738
Gross profit margin	Gross profit margin	38.5		%	39.6		%	39.4		%	36.4		%	Gross profit margin	38.3		%	40.8		%	38.8		%	40.0		%

2422

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The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods indicated:


		Three Months Ended October 31,				Nine Months Ended October 31,					Three Months Ended July 31,				Six Months Ended July 31,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenue	Revenue									Revenue
Equipment	Equipment	76.1	%	72.6	%	76.2	%	73.0	%	Equipment	74.7	%	75.6	%	75.0	%	76.4	%
Parts	Parts	16.3	%	17.7	%	15.7	%	17.3	%	Parts	16.9	%	15.6	%	16.9	%	15.3	%
Service	Service	5.8	%	7.1	%	6.3	%	7.4	%	Service	6.6	%	6.7	%	6.4	%	6.6	%
Rental and other	Rental and other	1.8	%	2.6	%	1.8	%	2.3	%	Rental and other	1.8	%	2.1	%	1.7	%	1.7	%
Total Revenue	Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%	Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Total Cost of Revenue	Total Cost of Revenue	79.1	%	79.6	%	79.6	%	80.2	%	Total Cost of Revenue	79.2	%	79.3	%	79.2	%	80.0	%
Gross Profit Margin	Gross Profit Margin	20.9	%	20.4	%	20.4	%	19.8	%	Gross Profit Margin	20.8	%	20.7	%	20.8	%	20.0	%
Operating Expenses	Operating Expenses	12.7	%	13.9	%	13.4	%	14.7	%	Operating Expenses	13.8	%	13.9	%	14.0	%	13.9	%

Income from Operations	Income from Operations	8.2	%	6.5	%	7.0	%	5.0	%	Income from Operations	6.9	%	6.8	%	6.8	%	6.1	%
Other Expense	Other Expense	—	%	(0.2)	%	(0.1)	%	(0.2)	%	Other Expense	(0.5)	%	(0.1)	%	(0.4)	%	(0.2)	%
Income Before Income Taxes	Income Before Income Taxes	8.2	%	6.3	%	6.9	%	4.8	%	Income Before Income Taxes	6.5	%	6.7	%	6.4	%	5.9	%
Provision for Income Taxes	Provision for Income Taxes	2.0	%	1.5	%	1.7	%	1.2	%	Provision for Income Taxes	1.6	%	1.6	%	1.5	%	1.5	%
Net Income	Net Income	6.2	%	4.8	%	5.2	%	3.6	%	Net Income	4.9	%	5.0	%	4.8	%	4.4	%

Three Months Ended ~~October~~July 31, ~~2022~~2023 Compared to Three Months Ended ~~October~~July 31, ~~2021~~2022

Consolidated Results

Revenue


		Three Months Ended October 31,				Increase/		Percent			Three Months Ended July 31,				Increase/		Percent
		2022		2021		(Decrease)		Change			2023		2022		(Decrease)		Change
		(dollars in thousands)									(dollars in thousands)
Equipment	Equipment	$	508,996	$	329,814	$	179,182	54.3	%	Equipment	$	480,122	$	375,216	$	104,906	28.0	%
Parts	Parts	108,719		80,521		28,198		35.0	%	Parts	108,510		77,693		30,817		39.7	%
Service	Service	38,960		32,026		6,934		21.7	%	Service	42,478		33,365		9,113		27.3	%
Rental and other	Rental and other	12,098		11,614		484		4.2	%	Rental and other	11,458		10,269		1,189		11.6	%
Total Revenue	Total Revenue	$	668,773	$	453,975	$	214,798	47.3	%	Total Revenue	$	642,568	$	496,543	$	146,025	29.4	%

Total revenue for the ~~third~~second quarter of fiscal 2024 was 29.4% or $146.0 million higher than the second quarter of fiscal 2023 ~~was 47.3% or $214.8 million higher than the third quarter of fiscal 2022~~ driven primarily by our recent acquisitions of the Heartland Companies and Pioneer Farm Equipment completed in August 2022 and February 2023, respectively, as well as an increase in Company-wide same-store sales of ~~34.0% and our acquistions of Jaycox Implement, Mark's Machinery, and the Heartland Companies, completed in December 2021, April 2022, and August 2022, respectively. The~~12.1%. Strong same-store sales ~~increase was~~were primarily driven by ~~favorable commodity prices, higher net farm income~~equipment sales, which benefited from improved availability of inventory in certain product categories and ~~increased~~the sustained high demand of both agriculture and construction ~~activity in our footprint.~~equipment.

2523

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		Three Months Ended October 31,						Increase/			Percent			Three Months Ended July 31,						Increase/			Percent
		2022			2021			(Decrease)			Change			2023			2022			(Decrease)			Change
		(dollars in thousands)												(dollars in thousands)
Gross Profit	Gross Profit												Gross Profit
Equipment	Equipment	$	72,840		$	41,238		$	31,602		76.6	%	Equipment	$	65,322		$	51,228		$	14,094		27.5	%
Parts	Parts	36,573			24,867			11,706			47.1	%	Parts	35,424			24,987			10,437			41.8	%
Service	Service	25,504			21,777			3,727			17.1	%	Service	28,270			22,293			5,977			26.8	%
Rental and other	Rental and other	4,663			4,598			65			1.4	%	Rental and other	4,383			4,191			192			4.6	%
Total Gross Profit	Total Gross Profit	$	139,580		$	92,480		$	47,100		50.9	%	Total Gross Profit	$	133,399		$	102,699		$	30,700		29.9	%
Gross Profit Margin	Gross Profit Margin												Gross Profit Margin
Equipment	Equipment	14.3		%	12.5		%	1.8		%	14.4	%	Equipment	13.6		%	13.7		%	(0.1)		%	(0.7)	%
Parts	Parts	33.6		%	30.9		%	2.7		%	8.7	%	Parts	32.6		%	32.2		%	0.4		%	1.2	%
Service	Service	65.5		%	68.0		%	(2.5)		%	(3.7)	%	Service	66.6		%	66.8		%	(0.2)		%	(0.3)	%
Rental and other	Rental and other	38.5		%	39.6		%	(1.1)		%	(2.8)	%	Rental and other	38.3		%	40.8		%	(2.5)		%	(6.1)	%
Total Gross Profit Margin	Total Gross Profit Margin	20.9		%	20.4		%	0.5		%	2.5	%	Total Gross Profit Margin	20.8		%	20.7		%	0.1		%	0.5	%
Gross Profit Mix	Gross Profit Mix												Gross Profit Mix
Equipment	Equipment	52.2		%	44.6		%	7.6		%	17.0	%	Equipment	49.0		%	49.9		%	(0.9)		%	(1.8)	%
Parts	Parts	26.2		%	26.9		%	(0.7)		%	(2.6)	%	Parts	26.6		%	24.3		%	2.3		%	9.5	%
Service	Service	18.3		%	23.5		%	(5.2)		%	(22.1)	%	Service	21.2		%	21.7		%	(0.5)		%	(2.3)	%
Rental and other	Rental and other	3.3		%	5.0		%	(1.7)		%	(34.0)	%	Rental and other	3.2		%	4.1		%	(0.9)		%	(22.0)	%
Total Gross Profit Mix	Total Gross Profit Mix	100.0		%	100.0		%						Total Gross Profit Mix	100.0		%	100.0		%

Gross profit for the ~~third~~second quarter of fiscal ~~2023~~2024 increased ~~50.9%~~29.9% or ~~$47.1~~$30.7 million, as compared to the same period last year. Gross profit margin also improved slightly to ~~20.9%~~20.8% in the current quarter from ~~20.4%~~20.7% in the prior year quarter. The increase in gross profit margin was primarily due to ~~stronger~~a shift to higher margin parts sales relative to equipment ~~margins which were positively~~sales. Equipment gross profit was impacted in the prior year by a ~~healthy inventory, favorable end market conditions, and a $2.0~~$2.6 million benefit recognized on the expected achievement of annual manufacturer incentive ~~programs. The increase~~programs, which is not included in ~~equipment margins was partially offset by~~ the ~~gross profit mix shift, to lower margin equipment sales relative to parts, service, and rental sales.~~results for the second quarter of fiscal 2024.

Our Company-wide absorption rate — which is calculated by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt — decreased to ~~95.9%~~88.9% for the ~~third~~second quarter of fiscal ~~2023~~2024 compared to ~~97.8%~~90.6% during the same period last year, ~~as the increase in gross profit from parts, rental fleet, and service~~due to increased floorplan interest expense in the ~~third~~second quarter of fiscal ~~2023 was more than offset by increased floorplan interest expenses and operating expenses less commission expense on equipment sales.~~2024 compared to the same period last year.

Operating Expenses


		Three Months Ended October 31,						Increase/			Percent			Three Months Ended July 31,						Increase/			Percent
		2022			2021			(Decrease)			Change			2023			2022			(Decrease)			Change
		(dollars in thousands)												(dollars in thousands)
Operating Expenses	Operating Expenses	$	84,861		$	62,943		$	21,918		34.8	%	Operating Expenses	$	88,751		$	68,828		$	19,923		28.9	%
Operating Expenses as a Percentage of Revenue	Operating Expenses as a Percentage of Revenue	12.7		%	13.9		%	(1.2)		%	(8.6)	%	Operating Expenses as a Percentage of Revenue	13.8		%	13.9		%	(0.1)		%	(0.7)	%

Our operating expenses in the ~~third~~second quarter of fiscal ~~2023~~2024 increased ~~34.8%~~28.9% as compared to the ~~third~~second quarter of fiscal ~~2022.~~2023. The increase in operating expenses was primarily the result of the additional operating expenses due to acquisitions that have taken place in the past year as well as an increase in variable expenses associated with increased ~~sales as well as additional operating expenses due to acquistions that have taken place in the past year.~~sales. Operating expenses as a percentage of revenue decreased to ~~12.7%~~13.8% in the ~~third~~second quarter of fiscal ~~2023~~2024 from 13.9% in the ~~third~~second quarter of fiscal ~~2022.~~2023. The decrease in operating expenses as a percentage of revenue was due to the increase in total revenue in the ~~third~~second quarter of fiscal ~~2023,~~2024, as compared to the ~~third~~second quarter of fiscal ~~2022,~~2023, which positively affected our ability to leverage our fixed operating costs.

2624

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		Three Months Ended October 31,				Increase/		Percent			Three Months Ended July 31,				Increase/		Percent
		2022		2021		(Decrease)		Change			2023		2022		(Decrease)		Change
		(dollars in thousands)									(dollars in thousands)
Interest and other income	Interest and other income	$	1,805	$	616	$	1,189	n/m		Interest and other income	$	641	$	873	$	(232)	(26.6)	%
Floorplan interest expense	Floorplan interest expense	(588)		(259)		329		127.0	%	Floorplan interest expense	(2,457)		(245)		2,212		n/m
Other interest expense	Other interest expense	(1,258)		(1,071)		187		17.5	%	Other interest expense	(1,241)		(1,349)		(108)		(8.0)	%

~~The increase in interest and other income compared to fiscal 2022 was primarily the result of a strengthening U.S. dollar relative to the Euro creating foreign currency gains in fiscal 2023.~~ The increase in floorplan interest expense ~~of 127.0% was due to drawing on our floorplan line to fund~~for the ~~acquisition of the Heartland Companies in the third~~second quarter of fiscal ~~2023. The increase in other interest expense~~2024 as compared to the second quarter of fiscal 2023 was primarily due to ~~increased fixed rate, long term debt from real estate purchases throughout~~a higher level of interest-bearing inventory in the second quarter of fiscal ~~2022.~~2024.

Provision for Income Taxes
Three Months Ended October 31, Increase/ Percent
2022 2021 (Decrease) Change
(dollars in thousands)
Provision for Income Taxes $ 13,421 $ 7,007 $ 6,414 91.5 %


	Three Months Ended July 31,				Increase/		Percent
	2023		2022		(Decrease)		Change
	(dollars in thousands)
Provision for Income Taxes	$	10,270	$	8,191	$	2,079	25.4	%

Our effective tax rate was ~~24.5%~~24.7% for each of the three months ended July 31, 2023 and ~~24.3%~~July 31, 2022. The effective tax rates for the three months ended ~~October~~July 31, 2023 and 2022 and October 31, 2021, respectively. In reviewing our foreign deferred tax assets as of October 31, 2022, it was concluded that based on recent income and sources of future income of our Bulgarian subsidiary, that the release of the remaining valuation allowance of our Bulgarian subsidiary was warranted. In the third quarter of fiscal 2023, the Company recorded a benefit of $0.3 million from the release of the valuation allowance related to the Company's Bulgarian subsidiary. The effective tax rate for the three months ended October 31, 2022 and 2021 were ~~also~~ subject to various ~~other~~ factors such as the impact of certain discrete items, mainly the vesting of share-based compensation and the mix of domestic and foreign income.

Segment Results


	Three Months Ended July 31,				Increase/		Percent
	2023		2022		(Decrease)		Change
	(dollars in thousands)
Revenue
Agriculture	$	469,069	$	348,956	$	120,113	34.4	%
Construction	82,863		70,022		12,841		18.3	%
International	90,636		77,565		13,071		16.9	%
Total	$	642,568	$	496,543	$	146,025	29.4	%

Income Before Income Taxes
Agriculture	$	33,029	$	24,895	$	8,134	32.7	%
Construction	5,156		3,923		1,233		31.4	%
International	5,568		5,870		(302)		(5.1)	%
Segment Income Before Income Taxes	43,753		34,688		9,065		26.1	%
Shared Resources	(2,162)		(1,538)		(624)		(40.6)	%
Total	$	41,591	$	33,150	$	8,441	25.5	%

Agriculture

Agriculture segment revenue for the second quarter of fiscal 2024 increased 34.4% compared to the second quarter of fiscal 2023. The higher revenue was driven primarily by the recent acquisitions of the Heartland Companies and Pioneer Farm Equipment, completed in August 2022 and February 2023, respectively, as well as an increase in same-store sales in our Agriculture segment of 10.0%. Strong same-store sales were primarily driven by equipment sales, which benefited from improved inventory availability of inventory in certain product categories and the sustained high demand of equipment.

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Agriculture segment income before income taxes for the second quarter of fiscal 2024 was $33.0 million compared to $24.9 million for the second quarter of fiscal 2023. The improvement in segment results was primarily the result of higher equipment revenue, led by the acquisitions stated above as well as higher same-store sales.

Construction

Construction segment revenue for the second quarter of fiscal 2024 increased 18.3% compared to the second quarter of fiscal 2023. Construction activity in our footprint has remained at high levels, which was the primary factor in the year-over-year growth.

Our Construction segment income before taxes was $5.2 million for the second quarter of fiscal 2024 compared to $3.9 million in the second quarter of fiscal 2023. The improvement in segment results was primarily due to an increase in revenue. The dollar utilization — which is calculated by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period — of our rental fleet decreased slightly from 31.9% in the second quarter of fiscal 2023 to 30.2% in the second quarter of fiscal 2024.

International

International segment revenue was $90.6 million for the second quarter of fiscal 2024 compared to $77.6 million in the second quarter of fiscal 2023. The increase in segment revenue benefited from improved availability of inventory in certain product categories and the sustained high demand of equipment, which more than offset a 16.0% decrease in total revenue from our Ukrainian subsidiary due to the Russia-Ukraine conflict, compared to the second quarter of fiscal 2023.

Our International segment income before income taxes was $5.6 million for the second quarter of fiscal 2024 compared to segment income before income taxes of $5.9 million for the same period last year. The decrease in segment pre-tax income was primarily the result of increased operating expenses.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, unallocated balances may occur. Shared Resources loss before income taxes was $2.2 million for the second quarter of fiscal 2024 compared to a loss before income taxes of $1.5 million for the same period last year. The lower shared resources results were led by $0.5 million of acquisition related expenses incurred for the pending O'Connors acquisition.

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Six Months Ended July 31, 2023 Compared to Six Months Ended July 31, 2022

Consolidated Results

Revenue


	Six Months Ended July 31,				Increase/		Percent
	2023		2022		(Decrease)		Change
	(dollars in thousands)
Equipment	$	909,498	$	731,582	$	177,916	24.3	%
Parts	205,116		146,255		58,861		40.2	%
Service	77,411		62,887		14,524		23.1	%
Rental and other	20,174		16,825		3,349		19.9	%
Total Revenue	$	1,212,199	$	957,549	$	254,650	26.6	%

Total revenue for the first six months of fiscal 2024 was up 26.6% or $254.7 million compared to the first six months of fiscal 2023, driven primarily by an increase in Company-wide same-store sales of 8.2% and our acquisitions of Mark's Machinery, the Heartland Companies, and Pioneer Farm Equipment completed in April 2022, August 2022, and February 2023, respectively. The same-store sales increase was primarily driven by equipment sales, which benefited from improved availability of inventory in certain product categories and the sustained high demand of both agriculture and construction equipment.

Gross Profit


	Six Months Ended July 31,						Increase/			Percent
	2023			2022			(Decrease)			Change
	(dollars in thousands)
Gross Profit
Equipment	$	126,436		$	97,360		$	29,076		29.9	%
Parts	66,926			46,240			20,686			44.7	%
Service	50,794			41,055			9,739			23.7	%
Rental and other	7,823			6,738			1,085			16.1	%
Total Gross Profit	$	251,979		$	191,393		$	60,586		31.7	%
Gross Profit Margin
Equipment	13.9		%	13.3		%	0.6		%	4.5	%
Parts	32.6		%	31.6		%	1.0		%	3.2	%
Service	65.6		%	65.3		%	0.3		%	0.5	%
Rental and other	38.8		%	40.0		%	(1.2)		%	(3.0)	%
Total Gross Profit Margin	20.8		%	20.0		%	0.8		%	4.0	%
Gross Profit Mix
Equipment	50.2		%	50.8		%	(0.6)		%	(1.2)	%
Parts	26.6		%	24.2		%	2.4		%	9.9	%
Service	20.2		%	21.5		%	(1.3)		%	(6.0)	%
Rental and other	3.0		%	3.5		%	(0.5)		%	(14.3)	%
Total Gross Profit Mix	100.0		%	100.0		%

Gross profit increased 31.7% or $60.6 million for the first six months of fiscal 2024, as compared to the same period last year. Gross profit margin also improved to 20.8% in the first six months of fiscal 2024 from 20.0% in the same period last year. The increase in gross profit margin was primarily due to gross profit mix shift, to higher margin parts sales relative to equipment sales.

Our Company-wide absorption rate for the first six months of fiscal 2024 increased to 86.3%, as compared to 85.6% during the same period last year, as the increase in gross profit from parts, rental, and service more than offset the increase in operating expenses and interest expense on floorplan payables, during the six-month period compared to that of the prior year six-month period.

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Operating Expenses


	Six Months Ended July 31,						Increase/			Percent
	2023			2022			(Decrease)			Change
	(dollars in thousands)
Operating Expenses	$	170,066		$	132,980		$	37,086		27.9	%
Operating Expenses as a Percentage of Revenue	14.0		%	13.9		%	0.1		%	0.7	%

Our operating expenses for the first six months of fiscal 2024 increased $37.1 million as compared to the first six months of fiscal 2023. The increase in operating expenses was a result of an increase in variable expenses associated with increased sales as well as acquisitions that have occurred in the last twelve months. Operating expenses as a percentage of revenue increased slightly to 14.0% in the first six months of fiscal 2024 from 13.9% in the first six months of fiscal 2023.

Other Income (Expense)


	Six Months Ended July 31,				Increase/		Percent
	2023		2022		(Decrease)		Change
	(dollars in thousands)
Interest and other income	$	1,362	$	1,365	$	(3)	(0.2)	%
Floorplan interest expense	(3,729)		(499)		3,230		n/m
Other interest expense	(2,514)		(2,545)		(31)		(1.2)	%

Floorplan interest expense increased $3.2 million for the first six months of fiscal 2024, as compared to the same period last year, primarily due to increased interest bearing borrowings, resulting from higher inventory levels.

Provision for Income Taxes


	Six Months Ended July 31,				Increase/		Percent
	2023		2022		Decrease		Change
	(dollars in thousands)
Provision for Income Taxes	$	18,745	$	14,235	$	4,510	31.7	%

Our effective tax rate was 24.3% for the first six months of fiscal 2024 and 25.1% for the same period last year. The effective tax rate for the six months ended July 31, 2023 and 2022 was subject to variation due to factors such as the impact of certain discrete items, mainly the vesting of share-based compensation and the mix of domestic and foreign income.

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Segment Results


		Three Months Ended October 31,				Increase/		Percent			Six Months Ended July 31,				Increase/		Percent
		2022		2021		(Decrease)		Change			2023		2022		(Decrease)		Change
		(dollars in thousands)									(dollars in thousands)
Revenue	Revenue									Revenue
Agriculture	Agriculture	$	493,324	$	281,506	$	211,818	75.2	%	Agriculture	$	892,266	$	667,503	$	224,763	33.7	%
Construction	Construction	86,403		79,735		6,668		8.4	%	Construction	154,860		136,986		17,874		13.0	%
International	International	89,046		92,734		(3,688)		(4.0)	%	International	165,073		153,060		12,013		7.8	%
Total	Total	$	668,773	$	453,975	$	214,798	47.3	%	Total	$	1,212,199	$	957,549	$	254,650	26.6	%

Income Before Income Taxes	Income Before Income Taxes									Income Before Income Taxes
Agriculture	Agriculture	$	42,044	$	19,618	$	22,426	114.3	%	Agriculture	$	57,181	$	41,344	$	15,837	38.3	%
Construction	Construction	6,065		3,564		2,501		70.2	%	Construction	9,689		7,132		2,557		35.9	%
International	International	8,488		6,260		2,228		35.6	%	International	11,952		10,195		1,757		17.2	%
Segment Income Before Income Taxes	Segment Income Before Income Taxes	56,597		29,442		27,155		92.2	%	Segment Income Before Income Taxes	78,822		58,671		20,151		34.3	%
Shared Resources	Shared Resources	(1,919)		(619)		(1,300)		n/m		Shared Resources	(1,790)		(1,937)		147		7.6	%
Total	Total	$	54,678	$	28,823	$	25,855	89.7	%	Total	$	77,032	$	56,734	$	20,298	35.8	%

Agriculture

Agriculture segment revenue for the ~~third quarter~~first six months of fiscal ~~2023~~2024 increased ~~75.2%~~33.7% compared to the ~~third quarter of fiscal 2022.~~same period last year. The higher revenue was driven primarily by the acquisitions of Mark's Machinery, the Heartland Companies, and Pioneer Farm Equipment in April 2022, August 2022, and February 2023, respectively, as well as an increase in same-store sales of ~~46.4%~~7.2% for the first six months of fiscal 2024, as ~~well as our acquistions of Jaycox Implement, Mark's Machinery, and~~compared to the ~~Heartland Companies, completed in December 2021, April 2022, and August 2022, respectively.~~same period last year. The same-store sales increase was primarily driven by ~~favorable commodity prices~~equipment sales, which benefited from improved availability of inventory in certain product categories and ~~higher net farm income.~~the sustained high demand of new and used equipment.

Agriculture segment income before income taxes ~~for the third quarter of fiscal 2023~~ was ~~$42.0 million compared to $19.6~~$57.2 million for the ~~third quarter~~first six months of fiscal ~~2022.~~2024 compared to $41.3 million over the first six months of fiscal 2023. The improvement in segment results was primarily the result of ~~increased revenues and stronger~~higher equipment margins which were positively impacted by favorable end market conditions, healthy inventory, and a $2.0 million benefit recognized on the expected achievement of annual manufacturer incentive programs.revenue.

Construction

Construction segment revenue for the ~~third quarter~~first six months of fiscal ~~2023~~2024 increased ~~8.4%~~13.0% compared to the ~~third quarter of fiscal 2022. Same-store sales in our Construction segment increased 34.2%~~same period last year. When accounting for ~~the third quarter of fiscal 2023, as compared to the third quarter of fiscal 2022 which more than offset~~ the divestitures of the ~~Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming stores in the fourth quarter of fiscal 2022 and the first quarter of fiscal 2023 divestiture of our~~North Dakota consumer products store in ~~North Dakota.~~March 2022, same-store sales increased 14.3%. Construction activity in our footprint continued to be elevated, which was the primary factor in the ~~same store~~same-store sales growth.

Our Construction segment income before income taxes was ~~$6.1~~$9.7 million for the ~~third quarter~~first six months of fiscal ~~2023~~2024 compared to ~~$3.6~~$7.1 million infor the ~~third quarter~~first six months of fiscal ~~2022.~~2023. The ~~improvement~~increase in segment results was primarily due to an increase in ~~same store~~same-store sales, as described ~~above and an increase in rental fleet utilization, which led to an increase in rental gross profit margin.~~above. The dollar utilization ~~— which is calculated by dividing the rental revenue earned on our rental fleet by the average gross carrying value~~ of our rental fleet ~~(comprised of original equipment costs plus additional capitalized costs) for that period — of our rental fleet increased~~decreased slightly from ~~31.4%~~28.6% in the ~~third quarter~~first six months of fiscal ~~2022~~2023 to ~~34.3%~~28.5% in the ~~third quarter~~first six months of fiscal ~~2023.~~2024.

International

International segment revenue ~~was $89.0 million~~ for the ~~third quarter~~first six months of fiscal ~~2023~~2024 increased 7.8% compared to $92.7 million in the third quarter of fiscal 2022. The decrease in segment revenues was primarily due to a 40.7% decrease in total revenue from our Ukrainian subsidiary and a 14.4% devaluation from the prior year period of the Euro, the functional currency in much of our international footprint. On a constant currency basis, revenue was up $9.2 million or 9.9%

~~Table of Contents~~

~~Our International segment income before income taxes was $8.5 million for the third quarter of fiscal 2023 compared to segment income before income taxes of $6.3 million for~~ the same period last year. The increase in segment ~~pre-tax income was primarily~~revenues benefited from improved availability of inventory in certain product categories and the ~~result~~sustained high demand of ~~improved gross profit margin of the three main revenue streams,~~ equipment ~~parts, and service.~~

~~Shared Resources/Eliminations~~

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, unallocated balances may occur. Shared Resources loss before income taxes was $1.9 million for the third quarter of fiscal 2023 compared to a loss before income taxes of $0.6 million for the same period last year. The lower shared resources results were primarily driven by $0.6 million of acquisition related expenses incurred for the Heartland Companies acquisition.

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~~Nine Months Ended October 31, 2022 Compared to Nine Months Ended October 31, 2021~~

~~Consolidated Results~~

~~Revenue~~
Nine Months Ended October 31, Increase/ Percent
2022 2021 (Decrease) Change
(dollars in thousands)
Equipment $ 1,240,579 $ 878,528 $ 362,051 41.2 %
Parts 254,974 208,464 46,510 22.3 %
Service 101,847 89,405 12,442 13.9 %
Rental and other 28,923 27,914 1,009 3.6 %
Total Revenue $ 1,626,323 $ 1,204,311 $ 422,012 35.0 %

~~Total revenue for the~~ first ~~nine~~six months of fiscal 2023 was up 35.0% or $422.0 million compared to the first nine months of fiscal 2022, driven primarily by an increase in Company-wide same-store sales of 29.7% and our acquistions of Jaycox Implement, Mark's Machinery, and the Heartland Companies, completed in December 2021, April 2022, and August 2022, respectively. The same-store sales increase was primarily driven by favorable commodity prices, higher net farm income and increased construction activity in our footprint.

~~Gross Profit~~
Nine Months Ended October 31, Increase/ Percent
2022 2021 (Decrease) Change
(dollars in thousands)
Gross Profit
Equipment $ 170,201 $ 105,944 $ 64,257 60.7 %
Parts 82,812 62,280 20,532 33.0 %
Service 66,559 60,091 6,468 10.8 %
Rental and other 11,401 10,160 1,241 12.2 %
Total Gross Profit $ 330,973 $ 238,475 $ 92,498 38.8 %
Gross Profit Margin
Equipment 13.7 % 12.1 % 1.6 % 13.2 %
Parts 32.5 % 29.9 % 2.6 % 8.7 %
Service 65.4 % 67.2 % (1.8) % (2.7) %
Rental and other 39.4 % 36.4 % 3.0 % 8.2 %
Total Gross Profit Margin 20.4 % 19.8 % 0.6 % 3.0 %
Gross Profit Mix
Equipment 51.5 % 44.4 % 7.1 % 16.0 %
Parts 25.0 % 26.1 % (1.1) % (4.2) %
Service 20.1 % 25.2 % (5.1) % (20.2) %
Rental and other 3.4 % 4.3 % (0.9) % (20.9) %
Total Gross Profit Mix 100.0 % 100.0 %

Gross profit increased 38.8% or $92.5 million for the first nine months of fiscal 2023, as compared to the same period last year. Gross profit margin also improved to 20.4% in the current quarter from 19.8%, in the prior year quarter. The increase in gross profit margin was primarily due to stronger equipment margins2024, which was positively impacted by a healthy inventory, favorable end market conditions, and a $4.6 million benefit recognized on the expected achievement of annual manufacturer incentive programs. The increase in equipment margins, was partially offset by the gross profit mix shift, to lower margin equipment sales relative to parts, service, and rental sales.

Our Company-wide absorption rate for the first nine months of fiscal 2023 increased to 89.6%, as compared to 86.7% during the same period last year, as the increase in gross profit from parts, rental, and service more than offset ~~the increase in operating expenses during the nine month period compared to that of the prior year nine month period.~~

~~Table of Contents~~

~~Operating Expenses~~
Nine Months Ended October 31, Increase/ Percent
2022 2021 (Decrease) Change
(dollars in thousands)
Operating Expenses $ 217,841 $ 176,460 $ 41,381 23.5 %
Operating Expenses as a Percentage of Revenue 13.4 % 14.7 % (1.3) % (8.8) %

~~Our operating expenses for the first nine months of fiscal 2023 increased $41.4 million as compared to the first nine months of fiscal 2022. The increase in operating expenses was~~ a result of an increase in variable expenses associated with increased sales as well as acquistions that have occurred in the last twelve months. Operating expenses as a percentage of revenue decreased to 13.4% in the first nine months of fiscal 2023 from 14.7% in the first nine months of fiscal 2022. The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in the first nine months of fiscal 2023, as compared to the first nine months of fiscal 2022, which positively affected our ability to leverage our fixed operating costs.

~~Impairment Charges~~
Nine Months Ended October 31, Increase/ Percent
2022 2021 (Decrease) Change
(dollars in thousands)
Impairment of Intangible and Long-Lived Assets $ — $ 1,498 $ (1,498) 100.0 %

We did not recognize any impairment charges in the first nine months of fiscal 2023. In the first nine months of fiscal 2022, we recognized $1.5 million of impairment charges on certain intangible and long-lived assets in our International segment.

~~Other Income (Expense)~~
Nine Months Ended October 31, Increase/ Percent
2022 2021 (Decrease) Change
(dollars in thousands)
Interest and other income $ 3,170 $ 1,936 $ 1,234 63.7 %
Floorplan interest expense (1,087) (1,027) 60 5.8 %
Other interest expense (3,803) (3,292) 511 15.5 %

The increase in interest and other income compared to fiscal 2022 was primarily the result of a strengthening U.S. dollar relative to the Euro, creating foreign currency gains in fiscal 2023. Floorplan interest expense increased 5.8% for the first nine months of fiscal 2023, as compared to the same period last year, primarily due to increased interest bearing borrowings. The increase in other interest expense in the first nine months of fiscal 2023, as compared to the first nine months of fiscal 2022, is the result of increased fixed rate, long term debt on real estate purchased during fiscal 2022 and 2023.

~~Provision for Income Taxes~~
Nine Months Ended October 31, Increase/ Percent
2022 2021 Decrease Change
(dollars in thousands)
Provision for Income Taxes $ 27,656 $ 14,521 $ 13,135 90.5 %
Our effective tax rate was 24.8% for the first nine months of fiscal 2023 and 25.0% for the same period last year. In reviewing our foreign deferred tax assets as of October 31, 2022, it was concluded that based on recent income and sources of future income of our Bulgarian subsidiary, that the release of the remaining valuation allowance of our Bulgarian subsidiary was warranted. In the third quarter of fiscal 2023, the Company recorded a benefit of $0.3 million from the release of the valuation allowance related to the Company's Bulgarian subsidiary. The effective tax rate for the nine months ended October 31, 2022 and 2021 is also subject to variation due to factors such as the impact of certain discrete items, mainly the vesting of share-based compensation and the mix of domestic and foreign income.

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~~Segment Results~~

Certain financial information for our Agriculture, Construction and International business segments is presented below. “Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level. Revenue between segments is immaterial.
Nine Months Ended October 31, Increase/ Percent
2022 2021 (Decrease) Change
(dollars in thousands)
Revenue
Agriculture $ 1,160,829 $ 730,422 $ 430,407 58.9 %
Construction 223,389 229,286 (5,897) (2.6) %
International 242,105 244,603 (2,498) (1.0) %
Total $ 1,626,323 $ 1,204,311 $ 422,012 35.0 %
Income Before Income Taxes
Agriculture $ 83,387 $ 42,910 $ 40,477 94.3 %
Construction 13,197 6,518 6,679 102.5 %
International 18,683 9,498 9,185 96.7 %
Segment Income Before Income Taxes 115,267 58,926 56,341 95.6 %
Shared Resources (3,855) (793) (3,062) n/m
Total $ 111,412 $ 58,133 $ 53,279 91.7 %

~~Agriculture~~

Agriculture segment revenue for the first nine months of fiscal 2023 increased 58.9% compared to the same period last year. The higher revenue was driven primarily by an increase in same-store sales of 39.9% for the first nine months of fiscal 2023, as compared to the same period last year as well as the acquisitions of Jaycox Implement, Mark's Machinery, and the Heartland Companies in December 2021, April 2022, and August 2022, respectively. The same-store sales increase was driven by increased equipment demand due to higher commodity prices and higher net farm income.

Agriculture segment income before income taxes was $83.4 million for the first nine months of fiscal 2023 compared to $42.9 million over the first nine months of fiscal 2022. The improvement in segment results was primarily the result of higher equipment revenue along with higher gross profit margin on equipment driven by increased demand, healthy inventory, and a $4.6 million benefit recognized on the expected achievement of annual manufacturer incentive programs.

~~Construction~~

Construction segment revenue for the first nine months of fiscal 2023 decreased 2.6% compared to the same period last year. However, when accounting for the divestitures of the Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming stores in January 2022, and the North Dakota consumer products store in March 2022, same-store sales increased 24.9%. Higher same-store sales were driven by increased construction activity throughout the footprint.

Our Construction segment income before income taxes was $13.2 million for the first nine months of fiscal 2023 compared to $6.5 million for the first nine months of fiscal 2022. The increase in segment results was primarily due to increased construction activity within our footprint and an increase in rental fleet utilization. The dollar utilization of our rental fleet increased from 25.8% in the first nine months of fiscal 2022 to 30.7% in the first nine months of fiscal 2023.

~~International~~

International segment revenue for the first nine months of fiscal 2023 decreased 1.0% compared to the same period last year. The decrease in revenue was primarily due to a 10.9% devaluation of the Euro, the functional currency in much of our international footprint, but was partially offset by high commodity prices which drove demand for equipment sales, in the first nine months of fiscal 2023. On a constant currency basis, revenue was up 9.9% or $24.2 million compared to the prior year period. The segment was also negatively impacted by a 38.8%13.6% decrease in revenues from our Ukrainian subsidiary due to the Russia-Ukraine conflict compared to the first ~~nine~~six months of fiscal ~~2022.~~2023.

Our International segment income before income taxes was ~~$18.7~~$12.0 million for the first ~~nine~~six months of fiscal ~~2023~~2024 compared to ~~$9.5~~$10.2 million for the same period last year. The higher segment results were primarily the result of increased equipment sales and improved equipment gross profit margin.

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profit margin of the three main revenue streams, equipment, parts, and service. There were no fixed or intangible asset impairment charges recognized in the first nine months of fiscal 2023 while $1.5 million was recognized in the first nine months of fiscal 2022, related to the impairment of certain intangible and long-lived assets of our German subsidiary.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resources loss before income taxes was ~~$3.9~~$1.8 million for the first ~~nine~~six months of fiscal ~~2023~~2024, which included $0.5 million of acquisition related expenses incurred for the O'Connors acquisition, compared to a loss before income taxes of ~~$0.8~~$1.9 million for the same period last year. ~~The lower shared resources results were driven by $1.1 million of acquisition related expenses incurred for the Heartland Companies acquisition.~~

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~~Non-GAAP Financial Measures~~

To supplement net income and diluted earnings per share ("Diluted EPS"), both GAAP measures, we present adjusted net income and adjusted Diluted EPS, both non-GAAP measures, which include adjustments for items such as foreign currency remeasurement gains/losses in Ukraine and impairment charges. We believe that the presentation of adjusted net income and adjusted Diluted EPS is relevant and useful to our management and investors because it provides a measurement of earnings on activities that we consider to occur in the ordinary course of our business. Adjusted net income and adjusted Diluted EPS should be evaluated in addition to, and not considered a substitute for, or superior to, the most comparable GAAP measure. In addition, other companies may calculate these non-GAAP measures in a different manner, which may hinder comparability of our adjusted results with those of other companies.

~~The following tables reconcile (i) net income, a GAAP measure, to adjusted net income and (ii) Diluted EPS, a GAAP measure, to adjusted Diluted EPS:~~

Three Months Ended October 31, Nine Months Ended October 31,
2022 2021 2022 2021
(dollars in thousands, except per share data)
Adjusted Net Income
Net Income $ 41,257 $ 21,816 $ 83,756 $ 43,612
Adjustments
Impairment charges — — — 1,498
Ukraine remeasurement (gain) / loss (1) 234 (113) 549 (296)
Total Pre-Tax Adjustments 234 (113) 549 1,202
Adjusted Net Income $ 41,491 $ 21,703 $ 84,305 $ 44,814
Adjusted Diluted EPS
Diluted EPS $ 1.82 $ 0.97 $ 3.70 $ 1.93
Adjustments (2)
Impairment charges — — — 0.07
Ukraine remeasurement (gain) / loss (1) 0.01 (0.01) 0.02 (0.02)
Total Pre-Tax Adjustments 0.01 (0.01) 0.02 0.05
Adjusted Diluted EPS $ 1.83 $ 0.96 $ 3.72 $ 1.98
(1) Due to the income tax valuation allowance on the Ukrainian and German subsidiaries, there are no tax adjustments of the Ukraine remeasurement (gain)/loss for the periods ended October 31, 2022 and 2021 or the impairment charge for the period ended October 31, 2021.
(2) Adjustments are net of amounts allocated to participating securities where applicable.

Liquidity and Capital Resources

Sources of Liquidity

Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan and other credit facilities. We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided that our borrowing capacity under our credit agreements is dependent on compliance with various covenants as further described in the "Risk Factors" section of our Annual Report on Form 10-K.

Equipment Inventory and Floorplan Payable Credit Facilities

As of ~~October~~July 31, ~~2022,~~2023, the Company had floorplan payable lines of credit for equipment purchases totaling ~~$777.0~~$781.0 million, which is primarily comprised of a $500.0 million credit facility with CNH Industrial, a $185.0 million floorplan payable line under the Bank Syndicate Agreement, and a $50.0 million credit facility with DLL Finance.

Our equipment inventory turnover ~~increased~~decreased from ~~3.1 times for the rolling 12 month period ended October 31, 2021 to~~ 3.6 times for the rolling 12 month period ended ~~October~~July 31, ~~2022.~~2022 to 2.7 times for the rolling 12 month period ended July 31, 2023. The ~~increase~~decrease in equipment turnover was attributable to an increase in equipment ~~sales~~inventory over the rolling 12 month period ended ~~October~~July 31, ~~2022~~2023 as compared to the same period ended

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~~October~~ July 31, ~~2021.~~2022. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to ~~42.4%~~24.9% as of ~~October~~July 31, ~~2022~~2023 from ~~58.2%~~51.7% as of January 31, ~~2022.~~2023. The decrease ~~was~~in our equity in equipment inventory is primarily due to ~~drawing on our floorplan loan with~~ the ~~Bank Syndicate in conjunction with the Heartland acquisition.~~stocking of new equipment inventories.

Adequacy of Capital Resources

Our primary uses of cash have been to fund our operating activities, including the purchase of inventories and providing for other working capital needs, meeting our debt service requirements, making payments due under our various leasing arrangements, and funding capital expenditures, including rental fleet assets, and funding acquisitions. Based on our current operational performance, we believe our cash flow from operations, available cash and available borrowing capacity under our existing credit facilities will adequately provide for our liquidity needs for, at a minimum, the next 12 months.

As of ~~October~~July 31, ~~2022,~~2023, we were in compliance with the financial covenants under our CNH Industrial and DLL Finance credit agreements and we were not subject to the fixed charge coverage ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the lesser of (i) aggregate borrowing base and (ii) maximum credit amount as of ~~October~~July 31, ~~2022.~~2023. While not expected to occur, if anticipated operating results were to create the likelihood of a future covenant violation, we would expect to work with our lenders on an appropriate modification or amendment to our financing arrangements.

Cash Flow

Cash Flow ~~Provided by (Used for)~~Used for Operating Activities

Net cash used for operating activities was ~~$7.1~~$122.7 million for the first ~~nine~~six months of fiscal ~~2023,~~2024, compared to net cash ~~provided by~~used for operating activities of ~~$72.3~~$21.0 million for the first ~~nine~~six months of fiscal ~~2022.~~2023. The change in net cash ~~provided by (used for)~~used for operating activities is primarily the result of an increase in inventories and a decrease in deferred revenue, which were partially offset by an increase in non-interest bearing floorplan lines of credit from manufacturers and higher net income for the first ~~nine~~six months of fiscal ~~2023.~~2024.

Cash Flow Used for Investing Activities

Net cash used for investing activities was ~~$124.0~~$50.7 million for the first ~~nine~~six months of fiscal ~~2023,~~2024, compared to ~~$29.0~~$20.7 million for the first ~~nine~~six months of fiscal ~~2022.~~2023. The increase in cash used for investing activities was primarily the result of the ~~business~~ acquisitions of ~~Mark's Machinery~~Pioneer Farm Equipment, MAREP, and ~~the Heartland Companies~~Midwest Truck in the first ~~nine~~six months of fiscal 2024, compared to the acquisition of Mark's Machinery in the first six months of fiscal 2023.

Cash Flow Provided by ~~(Used for)~~ Financing Activities

Net cash provided by financing activities was ~~$34.3~~$181.8 million for the first ~~nine~~six months of fiscal ~~2023~~2024 compared to ~~cash used for financing activities of $31.3~~$39.6 million for the first ~~nine~~six months of fiscal ~~2022~~2023. The increase in cash provided by financing activities was primarily the result of increased ~~non-manufactured~~non-manufacture floorplan payables in the first ~~nine~~six months of fiscal ~~2023,~~2024, as the Company drew on its Bank Syndicate floorplan loan in fiscal ~~2023,~~2024, to ~~fund the Heartland Companies acquisition.~~finance higher inventory levels.

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Information Concerning Off-Balance Sheet Arrangements

As of ~~October~~July 31, ~~2022,~~2023, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Therefore, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Forward-looking statements are contained in this Quarterly Report on Form 10-Q, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, ~~2022,~~2023, and in other materials filed by the Company with the Securities and Exchange Commission (and included in oral statements or other written statements made by the Company).

Forward-looking statements are statements based on future expectations and specifically may include, among other things, ~~statements relating to our expectations regarding the performance of our Ukrainian subsidiary within our International segment,~~ the impact of farm income levels on customer demand for agricultural equipment and services, the ~~impact of the COVID-19 pandemic on our business, the~~ effectiveness and expected benefits of our new ERP system and the timing of the phased roll-out of the ERP system to the Company's domestic locations, the general market conditions of the agricultural and construction industries, equipment inventory levels, and our primary liquidity sources, and the adequacy of our capital ~~resources.~~resources and sources of liquidity. Any statements that are not based upon historical facts, including the outcome of events that have not yet occurred and our expectations for future

~~Table of Contents~~

performance, are forward-looking statements. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “will,” “plan,” “anticipate,” and similar words and expressions are intended to identify forward-looking statements. These statements are based upon the current beliefs and expectations of our management. These forward-looking statements involve important risks and uncertainties that could significantly affect anticipated results or outcomes in the future and, accordingly, actual results or outcomes may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, the impact of the Russia -Ukraine conflict on our Ukrainian subsidiary, our ability to successfully consummate, integrate and realize growth opportunities and synergies in connection with the ~~Heartland~~pending O'Connors acquisition, the risk that we assume unforeseen or other liabilities in connection with the ~~Heartland~~pending O'Connors acquisition and the impact of those conditions and obligations imposed on us under the ~~new~~ CaseIH dealer agreements entered into in connection with the Heartland Companies acquisition for the commercial application equipment business, our substantial dependence on CNH Industrial, including CNH Industrial's ability to design, manufacture and allocate inventory to our stores in quantities necessary to satisfy our customer's demands, ~~the duration, scope and impact of the COVID-19 pandemic on the Company's operations and business, including the disruption~~disruptions of supply chains and associated impacts on the Company's supply vendors and their ability to provide the Company with sufficient and timely inventory to meet customer demand, adverse market conditions in the agricultural and construction equipment industries, and those matters identified and discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K. In addition to those matters, there may exist additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that may materially adversely affect our business, financial condition or results of operations.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including changes in interest rates and foreign currency exchange rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates.

Interest Rate Risk

Exposure to changes in interest rates results from borrowing activities used to fund operations. For fixed rate debt, interest rate changes affect the fair value of financial instruments but do not impact earnings or cash flows. Conversely, for floating rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant. We have both fixed and floating rate financing. Some of our floating rate credit facilities contain minimum rates of interest to be charged. Based upon our interest-bearing balances and interest rates as of ~~October~~July 31, ~~2022,~~2023, holding other variables constant, a one percentage point increase in interest rates for the next 12-month period would decrease pre-tax earnings and cash flow by approximately ~~$0.6~~$2.4 million. Conversely, a one percentage point decrease in interest rates for the next 12-month period would result in an increase to pre-tax earnings and cash flow of approximately ~~$0.6~~$2.4 million. At ~~October~~July 31, ~~2022,~~2023, we had floorplan payables of ~~$273.1~~$595.7 million, of which approximately ~~$61.7~~$235.3 million was variable-rate floorplan payable and ~~$211.4~~$360.5 million was non-interest bearing. In addition, at ~~October~~July 31, ~~2022,~~2023, we had total long-term debt, including finance lease obligations, of ~~$99.0~~$100.0 million, primarily all of which was fixed rate debt.

Foreign Currency Exchange Rate Risk

Our foreign currency exposures arise as the result of our foreign operations. We are exposed to transactional foreign currency exchange rate risk through our foreign entities’ holding assets and liabilities denominated in currencies other than their functional currency. In addition, the Company is exposed to foreign currency transaction risk as a result of certain intercompany financing transactions. The Company attempts to manage its transactional foreign currency exchange rate risk through the use of derivative financial instruments, primarily foreign exchange forward contracts, or through natural hedging instruments. Based upon balances and exchange rates as of ~~October~~July 31, ~~2022,~~2023, holding other variables constant, we believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates would not have a material impact on our results of operations or cash flows. As of ~~October~~July 31, ~~2022,~~2023, our Ukrainian subsidiary had ~~$0.4~~$0.5 million of net monetary assets denominated in Ukrainian hryvnia ("UAH"). We have attempted to minimize our net monetary asset position in Ukraine through reducing overall asset levels in Ukraine and at times through borrowing in UAH which serves as a natural hedging instrument offsetting our net UAH denominated assets. Many of the currency and payment controls the National Bank of Ukraine imposed in February 2022, have been relaxed, making it more practicable to manage our UAH exposure. However, the continuation of the Russia/Ukraine conflict could lead to more significant UAH devaluations, similar to the 24% devaluation that occurred in July 2022, or more stringent payment controls in the future. The inability to fully manage our net monetary asset position and continued UAH devaluations for an extended period of time, could have a significant adverse impact on our results of operations and cash flows.

In addition to transactional foreign currency exchange rate risk, we are also exposed to translational foreign currency exchange rate risk as we translate the results of operations and assets and liabilities of our foreign operations from their functional currency to the U.S. dollar. As a result, our results of operations, cash flows and net investment in our foreign operations may be adversely impacted by fluctuating foreign currency exchange rates. We believe that a hypothetical 10% increase or decrease in all applicable foreign exchange rates, holding all other variables constant, would not have a material impact on our results of operations or cash flows.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. After evaluating the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer, with the participation of the Company’s management, have concluded that the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are effective.

(b) Changes in internal controls. During the quarter ended October 31, 2022, we completed the acquisition of the Heartland Companies. As part of our ongoing integration activities associated with the Heartland Companies acquisition, we have augmented and will continue to review the internal controls and procedures of the Heartland Companies and continue to augment our company-wide controls to reflect the risks inherentThere has not been any change in the ~~acquisition. There were no other changes in our~~Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during its most recently completed fiscal quarter that ~~occurred during the quarter ended October 31, 2022, that have~~has materially affected, or ~~are~~is reasonably likely to materially affect, ~~our~~the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, subject to claims and suits arising in the ordinary course of business. Such claims have, in the past, generally been covered by insurance. There can be no assurance that our insurance will be adequate to cover all liabilities that may arise out of claims brought against us, or that our insurance will cover all claims. We are not currently a party to any material litigation.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report, including the important information in “Forward-Looking Statements,” you should carefully consider the “Risk Factors” discussed in our Form 10-K for the fiscal year ended January 31, ~~2022,~~2023, as filed with the Securities and Exchange Commission. Among other things, those factors, if they were to occur, could cause our actual results to differ materially from those expressed in our forward-looking statements in this report, and may materially adversely affect our business, financial condition, or results of operations. In addition to those factors, additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None.~~(a) On September 1, 2023, the Company entered into Amendment No. 3 (“Amendment No. 3”) to the Third Amended and Restated Credit Agreement with the Bank Syndicate (the “Bank Syndicate Agreement”). Among other items, Amendment No. 3 (i) increased the Bank Syndicate Agreement lenders’ aggregate floorplan loan commitments under the Bank Syndicate Agreement from $185.0 million to $250.0 million and the Bank Syndicate Agreement lenders’ aggregate revolving loan commitments under the Bank Syndicate Agreement from $65.0 million to $75.0 million and (ii) amended the terms of the Bank Syndicate Agreement to permit the Company’s pending acquisition of O’Connors. The description of Amendment No. 3 is qualified in its entirety by reference to the complete text of Amendment No. 3, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

(c) During the fiscal quarter ended July 31, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS

Exhibits - See “Exhibit Index” on page immediately prior to signatures.

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EXHIBIT INDEX

TITAN MACHINERY INC.

FORM 10-Q


No.						Description

10.1						Amendment No. 23 to Third Amended and Restated Credit Agreement, dated ~~October 31, 2022,~~September 1, 2023, by and among Titan Machinery Inc., Heartland Agriculture, LLC, Heartland Ag Kansas, LLC, ~~and~~ Bank of America, N.A., as administrative agent, and the lenders party there to.

31.1						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1						Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2						Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101						Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended ~~October~~July 31, ~~2022,~~2023, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


Dated:	~~December 8, 2022~~September 7, 2023
		TITAN MACHINERY INC.


		By	/s/ Robert Larsen
			Robert Larsen
			Chief Financial Officer
			(Principal Financial Officer)

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	Three Months Ended October 31, 2022								Nine Months Ended October 31, 2022
	Agriculture		Construction		International		Total		Agriculture		Construction		International		Total
	(in thousands)								(in thousands)
Equipment	$	380,007	$	56,534	$	72,455	$	508,996	$	901,574	$	143,536	$	195,469	$	1,240,579
Parts	81,420		13,350		13,949		108,719		178,474		37,229		39,271		254,974
Service	29,831		6,807		2,322		38,960		76,514		18,932		6,401		101,847
Other	1,201		639		89		1,929		2,881		1,441		540		4,862
Revenue from contracts with customers	492,459		77,330		88,815		658,604		1,159,443		201,138		241,681		1,602,262
Rental	865		9,073		231		10,169		1,386		22,251		424		24,061
Total revenues	$	493,324	$	86,403	$	89,046	$	668,773	$	1,160,829	$	223,389	$	242,105	$	1,626,323


		Three Months Ended October 31,				Nine Months Ended October 31,
	Classification	2022		2021		2022		2021
		(in thousands)				(in thousands)
Finance lease cost:
Amortization of leased assets	Operating expenses	$	231	$	227	$	645	$	915
Interest on lease liabilities	Other interest expense	48		49		137		201
Operating lease cost	Operating expenses and rental and other cost of revenue	3,424		3,632		10,062		11,132
Short-term lease cost	Operating expenses	—		66		71		198
Variable lease cost	Operating expenses	501		502		1,519		1,755
Sublease income	Interest and other income	(358)		(226)		(1,087)		(643)
		$	3,846	$	4,250	$	11,347	$	13,558


	Operating		Finance
	Leases		Leases		Total
Fiscal Year Ended January 31,	(in thousands)
2023 (remainder)	$	3,285	$	214	$	3,499
2024	12,760		776		13,536
2025	12,393		727		13,120
2026	11,881		589		12,470
2027	11,220		458		11,678
2028	9,697		317		10,014
Thereafter	10,781		343		11,124
Total lease payments	72,017		3,424		75,441
Less: Interest	11,609		657		12,266
Present value of lease liabilities	$	60,408	$	2,767	$	63,175