TITN - Earnings call transcript Q4 2019

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Operator

Greetings, and welcome to Titan Machinery's Fourth Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, John Mills with ICR. Mr. begin. may you Mills,

John Mills

Good quarter and call. fiscal you. Titan welcome Machinery fourth XXXX morning, Thank gentlemen, ladies to Great. earnings conference

the time. fiscal Kalvoda, out approximately the and from access which to now, call went David release have ended On Chairman for X:XX January earnings Meyer, XXXX, the everyone company should at CEO; quarter Financial a.m. this Chief are Mark morning the Eastern Officer. fourth By and today XX,

it release, ir.titanmachinery.com. is on you being have website the If Titan be at received Relations as Investor website webcast will of company's This available tab on replay not the is the available well. and Machinery's a call

presentation we to in Titan's a presentation to are presentation remarks, website accompany at addition, ir.titanmachinery.com. we of directly middle providing information by access webcast now below the The going prepared In page. the the is the today's suggest you

call, of We remarks be particularly period. remind our statements not on presentation of safe not should underlying your these statements. management most to performance, We on required a to detailed Slide minutes. measures, Except see a the today's annual cause measures in today's could can prepared remarks, in financial differ adjusted report no law, in on note forward-looking call response on ongoing made discuss statements statement. statements upon adjusted contain and contain placed financial to facilitate to by current that of the and based those results These today's statements may when filed greater X everyone conclusion forward-looking them. make and recently that factors the obligation basis. analysis involve including of performance, Titan's statements non-GAAP those believe undue to will identified an risk as more uncertainties, more measures management Form that therefore, are included approximately including from materially in reconciliations into call expectations GAAP assumes to projected harbor additional comparable You'll factors and or during release of results guarantee update actual most XX do we'll risks inherent Today's These any These section Risk Please financial last period may will complete any in be results reliance At to Titan's comparing discussion Factors from that forward-looking forward-looking XX-K. the call. measure the may like questions. forward-looking Titan would directly we future transparency release. and financial open be these take of non-GAAP the your questions. our financial We've applicable the prepared

David CEO, Chairman I'd Mr. the to and Now introduce company's Go like David. ahead, Meyer.

David Meyer

morning, Welcome quarter Good John. fourth earnings everyone. to our you, fiscal XXXX Thank conference call.

of to which call, today's summary ir.titanmachinery.com. follow Relations mentioned, slide we you access of at prepared remarks, John I help As On Investor the of our quarter, each fiscal our overview you will financial the modeling our year for business results and XXXX for then results overview assumptions. fourth an of segments. XXXX and fiscal then a can tab website today's provide on an with conclude of will our provided Mark and presentation, full review

year overview financial our results. If of Slide you fourth and see you to quarter an turn will X, full

prior in period $XXX.X the the $X up compared million year fourth versus to improving same last loss pretax adjusted the to revenue quarter million $XXX,XXX X.X% to Our year. was the and loss

full to For of year, revenue generated up the $X.XX billion, fiscal XXXX. which compared we was X.X%

to difficult of year the increased America In dynamics, to with North to our income three and face overview strong and will line. XXXX, in This are million yields. majority operating markets segments. Construction was challenging off of finished harvest, of is profit adjusted of the America versus team, customers in segment. America for profitability prior performance bottom Despite detail operating an proud of Slide finished a X, improved number see North We impact more our all operating industry expense able it's pretax by positive revenues the of rewarding a was of unprecedented reduction we above our year provide million some quarter On our net activities International. three our the year. previous be to Agriculture, our it's and in $X.X testament post segments, our the solid efforts. and a to the dramatically fiscal North Agriculture successfully average adjusted around and Our provided late million the cash reflecting full with $XX.X our flow I $XX.X a now loss fourth

counterbalance market which continue on soybeans, within depressed Our advantage some by taking market-driven response customers these were prices. to being tariff-induced season USDA and opportunities the facilitation Producers trade disputes. soybean prices, the face per of are program and payout soybean to in $X.XX corn through particularly the commodity of early able impacted bushel hedging pressure headwinds ongoing disproportionately capturing to

last However, challenges remain of flooding, season planting for due year, combined a followed the fieldwork spring the planting late to we of late as season the which by into move spring. uncompleted this likely harvest areas

believe as growing year to forecast we outlook trend income such precision to in equivalent replacement year-over-year, to farm given equipment approach near-term XXXX. uncertainty. Broader will net revenues appropriate market of be technology the fiscal slightly the and is a prudent that the and flat continue is adoption up demand While support to

the in seen we've the equipment. as existing extend the prior age to of tend customers business cycles, However,

more is we've service ideally turns cycle will Titan extended and and when demand. efficient that favorable. incremental are care manage positioned believe through will take operational this and these customers support we cycle network parts to Machinery more positioned repair put dealer at of place Our the We in we profitably, ensure the optimally framework

our Similar see fairly remains realizing is consistent nimble Slide a and backdrop by $XX North residential demand position, continuing inventory Agriculture supported and of efficient economy, and that X, position recovering overview are commercial more steady our to our rate interest with improved a to Turning a you'll platform profitability. our stable Construction business construction range, improved an major Construction outlook, within American oil in activity much to per metro rental equipment macro a markets barrel for the consistent The the with segment. footprint. across

the noted more market participate previously, store exposed in However, for a driving the as customers forces footprint who we our category. is profitability agriculture construction to rural also

have Slide prudently Romania, within managing segment, as result, overview So and are with improved X, on our focus territories International an European of Serbia, Ukraine countries we we business of the the driving including a profitability. a On Germany. Bulgaria,

the offset Winter growing [ph] crop cereal a for in experienced line during bottom our were XXXX our Germany Our insurance crops, a good strong payments, yield season. season. part, International Germany, drought yields, International experienced condition segment higher approach the the by The mostly average were of across in and fiscal crop partially government to crop XXXX contributor volume most conditions footprint exception year was prices. which the with footprint our for spring we the and locally as

machines in the modern We and in precision relative protective and technology. and Balkan countries are markets, stability seen to continues embracing Ukrainian have farmers our address

we International ahead, long-term growth to Looking opportunities see continue in markets. our

region, have has more global this seen see of great and trend, eager demand for parts is summary, over to rapidly years, we efficiency Balkan over the In anticipated aftermarket a of to invest we mobile-enabled America and European employee products. our it are new a line our fiscal availability and the In in horsepower fund converting with Dealer past have limited play Consistent is sales tight to engagement with April, [ph] we continue management support our we the build solvation select we system businesses the markets, improve as regional XX become in in Eastern investment in bottom the and to performance top first company. in fueling the which delivering footprint markets. to XXXX. high systems tools our service and in best-in-class customer footprint begin For improved will data-driven and progressed the experience. while North dealer latest half

our Mark, a year commitment United great the the thank Before customers. I in our turn to like continued to call and for I'd Europe over their and States to employees

like financials. Go to our call to over Mark. I ahead, turn would the Mark Now to discuss Officer, Financial Kalvoda, Chief our

Mark Kalvoda

Thanks, David.

each revenue revenue categories. per revenue transactions result be our percentages share January Before X% for work, the out Form balance quarter of had that for certain internal previously point of earnings total Further service reconditioning does I sent in on XXXX and our revenue today in parts fourth discuss individual or XXXX. which and earnings our net reviewing that an impact included release This in eliminated our of report instead revenue immaterial of full I and reported morning. these Adjusting against related change. profit, in previously XX-K fourth cost reported internal to no mix year primarily associated ended fiscal fiscal service service. of our The sheet matter and decreases eliminating this statements. and periods, I XX, of parts, will XXXX associated change year and predelivery and was other approximately with operating adjusted cost flow cost total quarter this the we period amounts incorrectly The out year revenue, parts of impact addressed equipment also margin want to had and amounts, of by cash of will and or which or correction and adjustment and revenue revenue the this inspections to been details reflect be correction, our on gross cost revenue with for prior and revenue annual were to this was income, results,

as presentation amounts. as modeling For 'XX an XXXX, fiscal amounts quarterly have materials, years as we included, year XXXX our 'XX and 'XX, and corrected to purposes, full well appendix for also

Now our to results.

to X. Turning Slide

X.X% an last Our total revenue fiscal compared XXXX year. increase million, for quarter fourth to of was $XXX the

across all equipment driven business Agriculture primarily segments, was our increase revenue within by Our segment. sales

increased also X.X% was of revenue prior parts growth revenue compared the Our year. to supported by

was slightly revenue to service the Our compared year. down prior

Our trended Ag increased in service, customer the to quarter. events, over-the-counter at which our stronger by stores occurred activity, than due sales business appreciation parts part fourth driven

on year Slide fleet quarter. utilization our fleet dollar segment. and quarter On in the rates. focus fourth to to decrease primarily our experienced the is XX.X% rental rental in rentals the current Our revenue decreased of fourth modest the inventory our we in to rental last fleet our rental rental Construction our rentals, rightsizing and X.X% a decrease XX.X% X. improve quarter-over-quarter in result from improvement of assets Despite in utilization fleet other in quarter, This in the improvement due

equipment profit margin points gross the by Our our higher for to margins of year. profit year a benefit margin this quarter XX last the higher was the gross gross which million profit XX.X% as basis compared largely of improved in equipment revenue The mix, portion change to X.X% offset to by $XX and increased and by revenue. parts of service from result higher was

$X.X the of XXXX, $XX.X to result Our quarter of million third costs impact largely operating of was by in of fiscal sales million increased with for acquisition the levels of XXXX. which higher quarter the fiscal our associated AGRAM the expenses fourth equipment and variable

of year. to expense to a interest-bearing million same to resulting In decreased $X.X year. for our margin XXXX other our from compared adjusted debt adjusted Restructuring XXXX, on in the XX%. year. costs inventory expense and fiscal reduction compared decrease $XXX,XXX $XXX,XXX Floorplan notes, net this last the level fourth of compared of flat loss fiscal to the the last remained in million quarter interest $X.X repurchase to earlier lower senior at the were of a the period million operating year. convertible prior and net quarter was for and due Our relatively expense interest million impairment loss $XX was This $X.X fourth of $XXX,XXX an

diluted compared per the an diluted last $X.XX Our fourth share quarter $X.XX was in loss adjusted XXXX fiscal of per year. adjusted to share fourth of quarter loss for the

adjusted XXXX, to fiscal in year. was For $X.X million the compared the prior fourth of $X.X EBITDA quarter million

difficult had quarter. fourth We to sales customer million. Ag This XXXX, to of of a segment loss presentation. adjusted appendix can a almost was see you $XXX net the reconciliation XX% adjusted continued to slide an despite were quarter. adjusted comparable fiscal by for XX, results the the find amounts EBITDA increase to will equipment diluted overview Slide the demand, finish strong You Agriculture in revenue per share our loss, in the driven X.X% On for conditions. up most and GAAP the replacement industry visible in

Our a along service to due lower with the $X.X year was with gross business profit slightly in the which in to product income primary not associated the $X the parts of quarter, reason, lower for revenue adjusted pretax and for with higher equipment million did mix, last margin sales fourth keep pace pretax million. income expenses variable Ag-adjusted equipment of quarter compared resulting

was result million year. the $XX performance to acquisition, XXXX, year prior the third prior in compared Revenue improved fourth an of to XXXX, The XXXX. fourth revenue the improved quarter X.X% of in nearly X.X% XX%. driven to was quarter last equipment fiscal European to in the fiscal The by Turning increase compared segment revenues primarily equipment parts by International faced prior $XX comparison of difficult loss our markets, loss completed $X.X year segment. in of offsetting which increased pretax to our our of up against compared loss of Construction million period. results year-over-year fourth increase margin quarter which adjusted million, the the along a the pretax this period. with fiscal of versus quarter segment an XXXX, of growth adjusted fiscal contributions same the stronger in Partially revenue $X.X period from was in segment's revenue adjusted were other year. The million improvement our certain the the which an was was million of revenue AGRAM $X.X lower to In

relatively prior at the year unchanged loss pretax the versus was in $X.X million. fourth quarter adjusted Our

XX. to Turning Slide

Fiscal from business. year, You will contribution to results. of revenue last our increased growth XXXX X.X% our an solid overview year revenue of equipment full by compared and see driven parts steady revenue

$XXX rental revenue our other compared saw year. XX, and was full decline increase X.X% to service prior million, gross Our profit year for a On a modest Slide year. the and the

changing to margin a partially offset of with revenues, equipment basis profit higher a percentage XX by percentage by revenue margins higher increased gross lower Our driven a points equipment our of XX.X%, on service full prior parts, the X.X% and revenue XXXX $X.X year rental to fiscal our and expenses compared for in last margin million year to by period. Operating higher fiscal or businesses XXXX compared year. declined as the mix

led floorplan Our with operating AGRAM acquisition. revenue by to of level points from level as with expenses of charges to million and the the higher growing levels interest-bearing a impairment revenue offset $X.X compared points a decreased restructuring expense percentage year. benefited and margin decrease overall the interest expenses company-wide the of in absorption XXX equipment increase to expense last of along expense the Floorplan Restructuring decreased of by year's benefits as the fiscal million fiscal XXXX. plan, our percentage mentioned improved variable as fiscal levels as an inventory revenue reflecting operating improved were XXXX and full and operating of lower but reduced or base year. prior expense compared operating in compared X.X associated average were an impact the $X.X previously our year debt same last interest rate $XX.X convertible for other basis expenses XXXX. in partially XX.X%, million XX% well in period XX% year Lower to our in to of This for

in years the the our presentation. You past absorption slide the appendix of for can X trending see rate the to

adjusted income XXXX. an million the loss year For year of of full the our million $X.X fiscal compared net full XXXX, net of adjusted to for $XX.X was fiscal

for year. the per share earnings loss share diluted 'XX prior adjusted an fiscal diluted to $X.XX of $X.XX Our compared adjusted in per was

XXXX, $XX.X million $XX.X to fiscal fiscal in XXXX. million compared EBITDA was adjusted For

XXXX were inventory, full improvement the largely year well expense, in for efforts. impact results reduced leading structural expansion equipment financial the the to by driven fiscal margin floorplan improved restructuring of year interest and Our as as cost the

Slide to XX. Turning

and for Here, the our the the to fiscal segments line improvement in of we XXXX our Construction segments compared We year provide our with Agriculture three primarily year year, on of operating income volumes all segments. million of last $XX.X for the combined equipment results in our year. full full our for was three margins pretax adjusted pretax loss higher million fiscal segment business adjusted all bottom an growth XXXX. all across of lower result sales strengthening and floorplan expenses and and top This $X.X in was achieved segments,

Turning to Slide XX.

Here, our as million we balance the January the provide had of cash XX, year. overview of sheet XXXX. at We $XX an highlights end of of

the end XXXX. fiscal XXXX was from $XXX of at million, equipment million Our XX, inventory an of increase January $XX

to was Our flat new level equipment last year. inventory

due at seasonal Our took in to as is level a amount that January XXXX. trades equipment XXXX, of than activity in we used year-end the the XX, equipment inventory higher during fiscal higher used sales

equipment consistent and inventory inventory is AGRAM slightly down presentation. year. Excluding our the Equipment prior our with included year. within appendix are at levels These equipment prior compared turns to slide January XXXX, in to the XX, inventory remain a inventory historical of chart this business, turns the

rental assets quarter the decreased $XXX flat fiscal to relatively in the Our at remain We million to of $XXX million fiscal right the end at at XXXX. to million our anticipate fleet level. fleet end around fourth of XXXX, compared $XXX size

January of on floorplan million $XXX XXXX, lines had million of credit. outstanding XX, of floorplan $XXX of payables we As

all We have financing in continue our capacity equipment to our ample lines handle needs. credit to

a have worth minor adoption, liabilities liability anticipate net ratio. tangible sheet. lease of rule of quarter to lease accounting for total and XXXX, million. X.X. total $XXX accounting liabilities fiscal healthy In will new liabilities balance require to which the Upon our impact the adopting lease approximately of on recognizing rules, - net recognizing will we asset new Our be assets a lease and a the tangible this leases, worth first a is most we Adoption on

have remains financial banking and with partners million. have account balance outstanding senior this $XX for our worked our proactively leverage We covenants modified notes our of The to change. at ratio convertible current

$XXX operating various due XXXX retired reported to are notes our under maturity approximately for to million compared total existing million GAAP provides of notes operating available credit. an cash at or The for our adjusted $XXX including an cash. and $XX the million Slide provided and have flow million of balance on We May was face $XX view convertible these year. The cash years fiscal million X, of including floorplan in intend of activities by original notes XXXX, equipment using adjustment measure. our our XXXX cash senior a of flows $XX We our 'XX. with convertible overview XX% capacity value and of we fiscal from of flows our satisfy XX fully last lines operating financing, cash inventory an on in activities adjusted include basis, cash to our non-manufacturer all activity remaining

our modeling also XXXX in million to year for all full comparable inventory, by to year provided period million our of and fiscal equipment decisions. equity $XX the our XX for XXXX We cash fiscal operating the flow evaluate million XXXX our - After decreased represents inventory from equipment constant enables assumptions. was cash the adjust Slide end a flow, compared prior equipment to prior flow to of cash. year our annual the period. $XX adjusted for operating fiscal activities shows use $XX adjustments, in exclusive X.X% of the XX.X% changes The our which XX.X% equity cash of reflect in financing as us in inventory

providing forecast for We the following fiscal year XXXX. are initial

We to revenues flat, up range of year International our contribution segment that revenue our expect International XX% Including to up AGRAM be segments to acquisition Construction X% completed our in the segment to within to our XX%. and revenue July. flat is full the of segment range in be sales last of was our the be Ag

points now earlier, margins. equipment basis modeling that are We spoke are margins equipment remember a reported. our providing to I to approximately no XXX are higher equipment assumption elimination margins change with back the range important longer in for normal than as our we the previously historical of It's

now So we the XX%. of approximately about X.X% margin is that the historical in past referenced

ERP the expect This fiscal for is vary loss cost range full earlier. fiscal and XXXX. This diluted range in of a anticipated of incremental excludes diluted our to $X.XX ERP per rate increase quarter, adjusted year fluctuates jurisdictions. and amortization approximately approximately platform may $X.XX in per be for results current our earnings share an by to profit The implementing share to spoke of to be We our to midpoint platform due as tax various that our in a compared incurred new external estimated $X.XX within adjusted guidance seasonality XX% David This to EPS XX%. guidance includes XXXX. mix of effective EPS tax rate incremental

the comments will ready through as We income you on prepared our question-and-answer now expectations tax the we of call. are our future the our for This call. update on we Operator, session for progress year calls. concludes

Operator

is Thank Steve you. question from Dyer with Craig-Hallum [Operator Instructions] Our first proceed. Capital. Please

Ryan Sigdahl

Good Sigdahl Ryan on morning, Steve guys. Dyer. for

David Meyer

morning, Ryan. Good

Ryan Sigdahl

changed In up Ag give replacement recently in 'XX? puts the are sentiment by equipment you outlook you Has fiscal flat mentioned what finishing your QX for more remarks, to Ag caution farmer strong, or demand XX% primarily. prepared in driven

David Meyer

the Well, going the the only tariffs disputes fair, of of impacted today, all you say environment really and I to input be the soybeans. that think look has now, trade which same. on The the most about if changes, probably stay thing year-over-year I'd right

that's really of continue the out we that our a positive it soybean seeing I'd a I is prices. So lot growers across there, weighing board. and say on yield But it was the [ph] we're trends, think

change the So be the would to that major settlement.

Ryan Sigdahl

flat, just there bridge gap. it But growth change or QX Because maybe just a pull was some was now trying maybe - to something there that forward or to XX% Or in from to now? QX? QX so

David Meyer

that was pretty the of the end the at year, lot a that program that - market I know, facilitation think you for I to was growers. that $X.XX of talked our USDA big So came

there's and demand snow. kicked winter. was a lot There now, you So that a in. was replacement But country Again, right all, of real really if there. the look in around positive tough also

River footprint and seeing right corridor. wet River corridor, the the We're You're Minnesota - like usually River corridor much our flooding Mississippi is anticipating of Missouri now.

there. You're the some seeing out of some livestock issues of

think you've floods. about read of the with some all dams already these I in and of Nebraska breaking the disasters some and

you're lot year's contract to hedge of is forward ability the going this seeing now, be and - in not important. a or So crop prices their commodity really movement right to and

And have in so we - the we're season. early

see, have to and We - wait same basically a of dynamic going other the all just so than there's the one that's - on that changes the right but whole there's lot this trade discussion now.

Ryan Sigdahl

Okay.

margins, opportunity of Moving that realized bit the giving rate? on XX.X% you're to guidance about think in fiscal is I few edge equipment the is fiscal incremental we little right achieved improvement But there? Or a mean - not anymore. I there 'XX, out as run to a 'XX, you that

Mark Kalvoda

right at old little of a call. give of year, bit reported - the kind put range looking would on here that at for color fiscal more that kind I've try XX.X% in X.X%. to a that to us way the that in Yes, the about we have

always under margin So about X.X% guess, right old we about that talk around Historically, a I basis different. point equipment XXX the way. for it's historical

is It's going forward that of there. right kind XX% what talking range about. kind of we're around So normalized

So year. XX.X% for of improvement experienced little over that would that bit a this signify we that

Ryan Sigdahl

Mark. color for Great. Thanks that

timing the through? of $X kind questions. secondly, of when will to? the impairment was the flow What million ERP-related long-lived Thanks. costs could related elaborate two those asset on And Lastly, housekeeping you then

Mark Kalvoda

Yeah.

we to as so asset go quarter, impairment, by long-lived every store. far have as the through So

all of We our long-lived have for to asset impairment. analyze

pass have. and that's them for expense test, there from quarter, through we time, So we $X.X And why analysis to some not time underperforming quarter. few this that particular million stores had going the the a that that are impairment for quarter, of the we did that took for here

of I the on as other As the the timing far question the ERP. was ERP, think

with not the the the expecting fiscal until So we're cutover first of beginning ERP, year XXXX. but implementation the of timing like we're the to half be now,

to of of do lot one you a involved these So know there's successfully. as work

So month, begin expected on we're next to cutover be the year. almost next here the - going within those month next in efforts and to

have. associated of carve that consulting that's on mentioned will amortization those some the going that accelerated $X.XX have regular outside out nonrecurring we - some internal as expense that on part As and difference be There as separately $X.XX existing the on fees, part number. that consulting adjusted then other expenses call or items. far items, but between just GAAP there EPS, that, as as adjusted the I EPS and like some depreciation guidance to operating with system our where fees that will in well, of are to we'll And regular expenses just we're those numbers well

Ryan Sigdahl

Thanks, back in I’ll the Great. guys. queue. hop

Operator

Our Instructions] with next with [Operator question. question Please Dobre Mig proceed is from Baird. your

Mig Dobre

morning, guys. Good

the would on discussion versus this How of with sticking much ERP. Just this be expense cash component? the non-cash

Mark Kalvoda

that think, be equivalent it of would the third cash, I so cash related. is about that, one about, about $X of of $X.XX it's it one is third million, About of one

Mig Dobre

Okay.

Mark Kalvoda

The balance or accelerated mentioned. that is pretty of much that I amortization depreciation the old accelerated system

Mig Dobre

That's right. helpful. All Okay.

equipment to back margin. Going

bit for are what guess Maybe I'm points in what you of So is I maybe there. fiscal color of if I about the on are understand used your comment properly, Construction? equipment Ag little what about us hoping a to margin 'XX. and progressing gets prices expansion as front. in XX you're seeing wondering those How basis

Mark Kalvoda

Yeah.

year-over-year, the our progression years lease inventory, to well. think and I returns where there prior where last coming the as of that year, condition that versus to of another less see so just of The probably basis here. of think where our part there quality is we the for that improved the kind point But supply think side on on the to be helpful continues side is that's aging back move the that larger and be the the continue I couple the as that's of on side, both seen we margins. Ag Construction expect even inventory inventory, on that's our equipment way we've system more imbalanced out out into overall is I continues Ag the - improvement

Mig Dobre

equipment the in to On that your How on Or price the there 'XX? you is play pass have side, is fiscal new you flown did impact that Are into to sometime been that an increases through. potentially margin? wholly? obviously, able there customer

David Meyer

this Mig, is Dave.

So to historically, price increase have passed the users. on end

these times, built price many performance, productivity, comfort, that operator So are increases. there's into year-over-year technology

there, that's on, fairly with the typically level here and We consistent or of need stay happens that what sale. those margins. to pass So on

Mig Dobre

Okay.

impact you that no So regard? real on in

David Meyer

impact no Well, ours. on

Mig Dobre

Okay…

David Meyer

been is competitiveness, assuming - is That's else what you we're that has consistent what of on everything know, why historically. the the selling it which marketplace,

Mig Dobre

see. I

wondering we a and little model, both we can service, than versus maybe at too. an quarter, only expected happened talk know categories the 'XX, how guess, the not I my do Then comments I your mean, the but Ag side. for these of don't bit you I'm Okay. out think weaker into particularly service least on for but given fiscal parts you, older about and were I earlier in parts there about about what quarter. fleet

Mark Kalvoda

Yeah.

We I it for I pretty was think good but think anticipated. lower hard just so quarter had service about to quarter. a quarter, It by lower was one the it's than we had parts came in anticipated, us. last judge what

historically service do customers you that can that know, to our commentary past we us as the of of and to off themselves on in around as continue the provided the do. they we of see think the trying side, had where that some perhaps they work the some I tightening that belt, of some are hold much

did in measures what to that good with case proactive the and get these was that some that bit parts of against So of and quarter. so something did customer but for over-the-counter the of that watching I we're being we some something appreciation them a example business that a and aggressive. the A We we're that's help of have think we're the environment ensure will, it service helped to But that's events, bit there. that the guarding think service attached revenues, taking where little didn't disconnect, higher those and sales. to down have customer little have parts I in you this if that out those is we in service provide parts service

think big and relatively that I as far as with commodity with this can will It's going EPS - to optimistic going that provided. growth parts I older service area anticipating we're we think this but growth we're and business. in here, some So stable we the those level that in of fleet do grow we not be not prices be forward, of expect numbers still the

Mig Dobre

Great. Thank you.

Operator

Please Our next Stephens. is with from proceed. question Nelson Rick

Rick Nelson

morning. Good Thanks.

David Meyer

Morning, Rick.

Rick Nelson

guiding to and Ag assumes of equipment sort industry are what that for down All curious I'm industry sales backdrop sideways? in revenues segment. up, flat the

David Meyer

OEMs the up think X. a couple, especially zero there's have in seeing so hear what to the know, equipment, Well, slightly just flat you reported you big for I you're if to

So we're range. I same think in that

a that for industry the So off in January drive - - model, the fairly February. and some actually and and and February. from up is what, industry year forward That X.X% started they're an little the January standpoint, they're consistent, of combines down, XXX-horsepower-plus

So lines you're kind - on. of seeing that those going for trend that

a this a there lot aren't challenging out very say, there. - So environment of like I

it's low to it go in going to and assumptions. do to a think appropriate with shotgun get I year, as on be little too prudent our up think the trade this, industry what the working prudent into really discussions But industry. say, wouldn't of start take that's off to visibility more know, I happens numbers, what you'll we're like bit. we so some a we get I much off being fairly have But to so the those you So

Rick Nelson

Got you.

got but line the growth, not growth you're at midpoint. top EPS overall, on to So guiding XX% that much you've

If drivers could insurance the discuss the to you group? there

Mark Kalvoda

Sure.

we of are there. that expecting growth Rick, on mentioned business some and service have we - couple we level out that there think, parts a with I

bottom that to line drive expansion. going margin there, improvement [ph] equipment that's additional up around We essentially about that talked some rate. XX% XX.X% help historical So moving to

also the off be going like to months a that month. in here, We a of couple is actually have convert just paid

to as way pay save assigned that that there we use So lines to cash our the use be - some works there's off. that, the on able is accounting of that and to rate floorplan interest lower higher rate we'll and

area continued just then full blocking on with a business, that's in some of again, that there from done year and think overall, another CE contribution is improvement and being area, improvement of I AGRAM. tackling the some the

so And year. this last accretive AGRAM was

through so more be and even this next drought under they growing past work to year. expect that a We this can hopefully conditions them year favorable more

some affect So don't much, but necessarily as I of that through the think line pull those are drivers top bigger bottom. the to the

Rick Nelson

Okay. Great, for you thank that. thanks. And

If uses cash. you free generate? you think if can hit flow these EPS targets, And of can you any what planned do the sort of you'll free discuss cash

your in acquisitions that pay down interested this mentioned at point? appetite for You

Mark Kalvoda

Yeah.

We've expect right have be than consistent a X flat perspective, little from would last years from a flow so think relatively the I - lift maybe call P&L. cash it higher million that, adjusted to with it the relatively levels. inventory operating been just given that, the to in I around cash the $XX cash activities. been

are the doing of business use capital think after capacity it's that more investing it, looking talked current use a we paying of CapEx, of I there capital, some get have and so it's the Dave that. We'll more - the capital American our I Some are we at as you as and - we the we [ph] off some convert, into little acquisitions. then bit be feel past, that's of with And think, acquisitions Ag And something mentioned, some we're good a for here. seriously of that, beyond in North allocation.

David Meyer

we're I'm about Rick, currently Yes, talking principal multiple to domestically. that, owners. with to on engaged succession is add the solutions too,

as - moving we're I in think ahead in awkward I we're pretty So this opportunities, environment. pretty current good a think,

Rick Nelson

Great. luck. Thanks for color. the And good

David Meyer

Thanks, Rick.

Operator

like Meyer our back session. question-and-answer to the have David over remarks. call reached turn would for to I We the of closing end

David Meyer

to look your here you, our or listen everyone, Thank and forward Okay. next today to we next seeing - you for you quarter. on call time

thank you. Bye. So

Operator

today's concludes you. conference. This Thank

You may disconnect your lines at your this participation. time. you And thank for

Titan Machinery (TITN) 27 Mar 192019 Q4 Earnings call transcript