TITN - Earnings call transcript Q2 2020

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Operator

Greetings and welcome to the Titan Machinery Incorporated Second Quarter Fiscal 2020 Earnings Conference 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, Manager Partner of ICR. Mr. begin. may you Mills,

John Mills

Good quarter and call. fiscal you. Titan to Machinery second XXXX morning, thank welcome everyone the Great, earnings conference

the and the and from Officer. call David On Chairman Meyer, company Chief Kalvoda, Mark are Officer; Chief Financial Executive today

have at everyone the to Eastern approximately second X.XX should the which went earnings XX, ended a.m. July By XXXX, for out fiscal access now, release quarter this morning Time.

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

In are we today’s to accompany prepared remarks. addition, a providing presentation

You at in webcast may to information going presentation presentation middle below Titan’s by of the the ir.titanmachinery.com. the access page. website is the now The available directly

X response your Slide the everyone remind the management may forward-looking of like Safe make forward-looking and presentation that would We Harbor statements to on additional see questions. in You'll statement. to prepared contain remarks our statements

not Titan’s current be Annual on placed including in Factors These statements These and not reliance and inherent based them. on are of filed risks the guarantee undue therefore, do XX-K. identified involve statements section uncertainties, forward-looking of upon most should management expectations recently those and performance, Report Risk future Form

by made from call. obligation required that may risk contain be statements in discussion materially release These in to those statements. actual differ as update a today’s or of detailed may projected the more Titan cause forward-looking any factors law, to factors that be assumes any results could Except applicable forward-looking no

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

financial We today’s in directly their release. GAAP have these reconciliation most to of financial included measures non-GAAP comparable measures

remarks, we our will At questions. approximately to call take your the open XX last conclusion call minutes. will the prepared of The

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

David Meyer

you, earnings updated today’s Good our I and each for summary to for everyone. assumptions XXXX. then XXXX second then Thank call. review On segments. a our will will fiscal fiscal reviewing modeling of our Mark provide of the our for quarter overview business XXXX an morning, call, Welcome results of financial conclude John. quarter second results by and conference fiscal

our turn to of X, second you an you If financial will Slide results. see overview quarter

revenue with conditions earnings bottom-line quarter income the adjusted We was second and generated $X.XX. Our in our despite segments million adjusted solid of challenging per industry diluted the Construction topline share Agriculture growth achieving $XXX that healthy fiscal pretax quarter to $X.X and by and second million continue persist. of during results

parts digits continued particularly our segment businesses double and grew the margin our pleased were which which are quarter. with discuss higher in will at We offset These by International shortly. I results increases strong service slightly

domestic our operating segment. of Construction I provide segment. our X our our will International for and of additional Agriculture domestic Slide an agriculture is three segments segments On now consisting detail and overview

farmers our out the caused wet most As plating pointed spring. cold late Ag in across late we QX and on abnormally and This farmer Plan call, earnings some some our experience a of customers our cases Preventive Action. footprint elected

which heavy late some midseason the that the acres planted potential combined find than the and with would it For crops get less of reduced planted, didn’t conditions crops yield ideal lost corn of corn the better soybean western rains, perspective. The belt is eastern we from belt yields. spring news anticipate that lower planning overall corn than most the and fared a good

Titan Machinery's of most in favorable been have conditions growing Summer footprint.

frost at in are sentiment. on and dates the to along reach potential. dates the growing the soybeans yield maturity heavily corn planting, later than late are uncertainty grain issues the season farmers trade prices and freeze ongoing resulting and from growing with normal weighing The sunshine heat, end negative With of

the strong saw market crops. and sell year positive we of a current portions On to corn crops in farmers prices note, carryover June and the July opportunity allowed

is under round make farmers customers. to shot two announced Facilitation added payments our be in of arm which Market addition, USDA will of XXXX In most the to for an starting Program the in farmer

and grow. the hours new are to Replacement integral demand parts catalysts true to for of and aftermarket age are and and service as and business our sustainability macroeconomic cycles and parts to and through a the are interruptions customers' technology the creates the Margins sales equipment from the business. we're revenues service fleets businesses our model reporting continuing

equipment are We values. stability used in seeing continued are we equipment experiencing and demand for quality used

work an of oil smaller to subcontractors. demand contractors for continues overview industry. strong see municipal are and domestic for X, economy Slide oil equipment creating you infrastructure activity. state and The segment. prices construction the related Construction to construction spurred our for equipment projects large positively will Stable impact construction Federal, have Turning

are in commodity depressed we by areas, rural demand While metro farm negatively seeing continued construction has the market impacted be equipment stronger the prices. the to

target customers equipment. outlet We farmer an our as continue to construction for used

and by continues Our CE and improvements first the results. our improvements byline year-over-year we rental to support and operational construction line in are results implementing have our bottom our producing business as half second stores our top been to evidenced quarter

X% year in full construction will assumption XX% to line confident continued bottom revenue We our up be our expect in and performance. are improvement that

global markets the and overview we segment including within International in our Slide in We On Serbia Romania, markets impact farmer in the our weather Germany, Ukraine. experienced an segment have a pull back the commodity we to which issues economies, of International of Bulgaria, growing countries some quarter revenues concerns and X, due over second prices our issues supplies. trade the and in Brexit, volatility of softening European to attribute in

season moisture with North. season the are early especially the excessive drier experiencing experienced crops and weather While most record the Balkans, warm in favorable of to late crops in weather, Romania heat

but favorable last early their crops draught sunflower and season disappointed were from soybean year's Ukraine in carryover related some to poor has both weather aftermarket countries. experiencing segment grain season as The continued is corn, continue farm focus and in to with business Germany we service parts We in International our performance second quarter for with to yield. equipment Our look customers in these opportunities as our developing been invest crops. on harvest late connection the and modern business fall the in

Before I M&A over I Mark, to on want dealer America turn Ag increase in the call North to the activity. comment

quality second Ag to Ag executing in for consolidate. We our in all the engaged pursuit their are to ownership want efforts the opportunities of employees continues American dealership thank acquisition fully as North in quarter. a solid I

allows profitably under conditions industry leverage conditions to industry to business operate difficult well are and improve. our we model Our us operating positioned the as

our would like financial over in I to to results Mark call the Now review more detail. to turn

Mark Kalvoda

David. Thanks

Turning year. compared revenue of X, generated for to Slide an we $XXX the of million X% second last to fiscal total XXXX increase quarter,

an increase result of in and segments revenue the was Agriculture primarily Our Construction X.X% respectively. increased increase which our X.X% and

double-digit While each the of highlight equipment performance was revenue achieved the these our basis. which on the business growth segments, in a of service of grew quarter consolidated category XX.X% the

compared last revenue our year. X.X% rental were revenues slightly down was other up the period to parts and same and Our

a smaller continuing pleased the with in same dollar XX.X% We increase slightly other our businesses. and due quarter a revenue quarter focus service average of quarterly were last completed from to rental higher customer X% is was in the increased growth our compared age. for utilization of period year. Approximately third primarily offset down with of from that and in to acquisition XX.X% is the current our last fiscal resulting Rental in by increase revenue to fleet the year X% AGRAM revenue areas the which a balance parts these and the was of to the fleet

$XX X, increased XX.X% of to X.X% driven revenues. profit period higher was shift profit gross of toward profit by margin XX higher period in a compared last primarily business. points for year, versus million prior the quarter basis an Gross mix due our to margin by gross On service a the the year primarily same to Slide increase

XXXX. by the quarter transition quarter increased increased activity expenses in incurred operating resulting supporting our Agriculture The segments. operating result Construction million the second and from segment costs higher acquisition, primarily in with was increased the of for increase expenses AGRAM and levels million ERP Our $XX our associated International of to fiscal costs $X.X

transition our ability in quarter ERP fiscal affected that decrease the an leverage in with quarter to increase along expenses second of to the XX.X% costs equipment from The of in fixed second XX% costs negatively revenue International segment revenue within operating last in operating as our contributed our in to XXXX. the a percentage year our segment this

was our decrease in other of retirement X.X% to interest May of of compared convertible of net the quarter second the $X.X our quarter to notes. from fiscal compared last Most the the year. to and balance expense, in resulting decreased the quarter In interest XXXX XXXX, lower XXXX fiscal of million prior-year. in million XX.X% million income second $X.X same to adjusted income the $X.X $X.X Floorplan to adjusted X, million expense grew due remaining the of

per diluted the quarter of year. for quarter Our $X.XX last $X.XX to compared share adjusted earnings in second was the

to adjusted $XX.X XXXX quarter quarter compared the $XX.X of EBITDA last of year. second million million the For in was fiscal second

slide directly income, to to the presentation. net the can this amounts most GAAP find EBITDA You reconciliation in comparable and their adjusted of EPS appendix

industry XXXX. results Agriculture equipment, and revenue to pretax for were of the despite million the we On for XX.X% a increased increases services the were in $XXX revenues increase Slide second X.X%. million, X year second quarter will quarter in income and generated of the across quarter overview We headwinds million see period. achieved fiscal compared segment The first quarter the sales. an uncertainties. $X.X of the to sales ongoing momentum year prior an $X.X carried through increase Revenue drove parts in our

Construction in to pretax equipment, quarter-over-quarter segment, $X.X in driven businesses. as to the second this bottom segment. X.X% of towards service period This in revenue The within adjusted results by year segment's the to million improved to by million increases million and segment and marks to quarter $X Turning quarter consecutive this parts, fiscal prior increased income top our continue profitability drive compared line $XX increased the XXXX. fourth we of our

revenue the taxes in the a before from the XXXX, XXXX fiscal sales was by the decrease year. in to last for which quarter $XX In fiscal second decrease quarter offset year. acquisition the same-store compared of second $XXX,XXX was third of partially of our same decreased a million contribution was the revenue quarter in last last second quarter International $X.X X.X% compared closed quarter segment of The Income year. to of XX.X% fiscal our million, income the result revenue AGRAM

increasing against revenues segment second in up a the with tough XX.X% prior were We in year quarterly this comp quarter.

the as discussed difficult of for customers' conditions quarter segment on However came that decisions. weighed in fiscal below David industry expectations purchase our the equipment revenues still second XXXX our earlier

As of previously we International business. compared our to mix have as parts highlighted and domestic revenue contains lower a business our service

result a the larger equipment will we have on a impact current equipment in profitability fluctuations in which down quarter on seeing revenues is are revenues. As what

X.X% results. period Slide months XX, six see Total year. first you revenue to Turning the last to our same increased compared

six and parts increased rental months equipment revenue and other service XX%, sales XX%, increased revenue X.X%, flat. First increased essentially was

our six for million Slide gross last XX.X% year. months same was XX, a to Turning the to $XXX increase first the period compared profit

with in service XX.X% Our of our primarily gross profit gross improvement due small XXXX. business. change profit higher fiscal our for from mix by to to a a year-over-year XX points gross coming months realized six revenue profit margin the increased percentage our of first in We the margin basis

Our $XX.X first the for by XXXX of six operating XX.X% $XXX to expenses or fiscal million million. increased months

in revenue for the XX.X% expenses period. quarter. of second were expense was percentage to The to this prior these increase XX.X% of I revenue discussed a similar drivers As year what of the compared

largely senior other inventory first and first decreased interest-bearing our to savings million or XXXX. average interest expense well interest as full our the of repayment a $X.X fiscal our decrease million repurchases the months, XX.X% months due in convertible to in notes, expense six and to resulting of the from compared Floorplan $X.X six as

six was year prior the share XXXX per $X.XX months in the earnings $X.XX diluted compared to for adjusted Our of first fiscal period.

the we other by first XX same as period. pretax last all our offset and $X higher improvement six-month were our gross with floorplan Agriculture higher in Slide On operating across fiscal the our well from months the and income and International of million revenues These This is segment margin overall segments, results reduced Construction result expense. contribution combined year. Overall segment. expenses improvement lower our million of interest for period XXXX overview primarily was compared provide as partially in the six for adjusted $X.X to

fiscal On $XX we the second of of our of of of XXXX. had end Slide XXXX. provide million highlights XX, overview XX quarter the as July cash sheet an We balance at

million, January more of equipment turns $XXX will in at little reflecting the increase increase slide. second equipment our inventory end an Our X.X. offset XX, year-over-year $XXX a color next the Equipment inventory inventory $XXX a million XXXX decrease in of used $XX was the on provide on partially flat quarter million at were new million I from by equipment.

assets the end rental second of at compared to $XXX million at Our of fleet $XXX quarter end the million fiscal the increased XXXX. to

end fleet seasonal anticipate by million around $XXX still size but our fiscal our before the will period, year. We decrease busy size increased the fleet to of current

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

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

to worth accounting in a by of the year XXXX. ratio liabilities is quarter the adoption the continues the comparisons X.X. first to to net place which impacted went will for Our new balance lease continue healthy fiscal influence total of be this ratio the tangible into This standard and

of well X.X covenant the X.X is leverage bank required facilities. is which larger below our Importantly, of ratio the

this the We inventory year. as ratio equipment to half the in strengthen of occurs our normal expect destocking back

having convertible in we on on reminder, the hand principal them past our repay to replace generation cash without a instrument. borrowings few long-term X, full cash over existing us credit. note Significant these notes the under debt with to repaid lines balance As our allowed of XXXX another May years using on and outstanding

period us With cash and another year volatility uncertainty and behind expectation business. this the debt of in of of our the retirement good we a solid are this position segment of within of generation, liquidity largest our during

this we Consistent XX that Turning continual inventory. of provide seasonal information we with experienced will we our additional of the levels the new inventories provided size new some quarter. equipment second expectations are on and equipment to quarter, red Slide amount stocking The blue in on slide. sequentially the reflected equipment and last inventory flat used in inventory the used of bars and

total the percentage maximize from suppliers. to to our our line terms bearing non-interest of our equipment bearing our the inventory in is continue non-interest of We graph. black inventory The reflected

non-interest $XXX inventory. demonstrates increasing noninterest example, in an of had inventory fiscal or within XX% the bearing. the total quarter Since percentages As current million million we XXXX of which bearing equipment of equipment chart was $XXX our levels

our driver of - reduced primary our the our the non-interest has in this expense a more result few improvement This been cycle improvement our primary life the aging past free of reason management The as efforts, over reduction is under under from remains years. inventory, of of the our interest for suppliers. interest terms floorplan ongoing inventory as

seasonal we believe of point, have peak hit this level in our inventory. At equipment we our

year which inventory We throughout the expect in generation. fiscal cash significant of reduce two to will the next quarters result

the first $X.X for operating our GAAP cash flow provides period activities used activities million. for reported an six for from the fiscal XXXX. cash The of operating was months XX flows overview Slide of

As used for our we inventory include part flow all for first months for non-manufacturer $XX million fiscal of payables floorplan financing, equipment was adjusted including cash operating activities the activity, floorplan non-manufacturer six adjustments of XXXX. our

in changes We exclusive XXX.X% during use and operating enables in our cash. adjust a our six-month for evaluate a equity the $XX equipment in decisions. represents The inventory cash equipment July flows constant equity financing to of equity equipment inventory XX, our decreased to of flow adjustment reflect constant which the XXXX also us to equipment inventory ended period million in cash inventory

the activities for for used months first the to floorplan such inventories ended was in due occurred million stocking for seasonal inventory as year year. July in XXXX of lines of of flow our fiscal the May our as last repayment decrease the the convertible equipment $XX adjusted the on same to operating adjustments our outstanding XX, level half our million six all of more available in which period cash is higher notes connection borrowing our compared on new and financing in After with equity of $XX balance first primarily The floorplan well inventories, on X.

the in profitable cash be begin generation our As and I on begin to quarter destocking our inventory our just quarter previous of seasonal as most mentioned fiscal equipment of we we expect enter third the year. slide,

Slide XX fiscal shows updated our XXXX modeling annual assumptions.

our are XX%. are up updating for revenue our International We X% modeling at and Agriculture assumptions estimates for but Construction to segments, maintaining

of ongoing and year the the during of of for X% reflecting versus assumption strength the segment our despite is Agriculture experienced half we previous year. the for X% updated uncertainties the the growth first expectation to flat, rest of relative Our remaining primarily

Our our growth we to of segment assumption International in to for previously XX$ of XX% reflecting is growth X$ facing environment updated markets. also international X% are challenging the versus

segment, are our well segment disappointed in continued the is sustained within with profitability. growth our initiatives While Construction growth performing we growth Ag our towards and driving and deceleration International segment our improvement with business profitable in domestic

Given per continue to these in we adjusted fiscal XXXX. diluted be offsetting the factors, $X.XX earnings for of $X.XX range to expect to share

Operator, now for are question-and-answer our we ready call. the of session

Operator

first with Instructions] Dyer, Steve [Operator Craig-Hallum. is proceed Our from your question question. Please

Steve Dyer

guys. morning, Good you. Thank

How going forward, or a much So well curious, for the bushel benefit obviously quite above of the here strength kind your $X corn I'm Ag of was just earlier in outlook this awhile might feared more Ag? is bad you or, guys as from think due initially in more outlook what's flooding be optimistic so that it driving saw to yields that you just that not as year. or

Mark Kalvoda

these we’re half you really of know It's we dates, X%. prices, those first are just range back because that the that's The at that the uncertainties factors year. half results trade to this year in and the the commodity the the in that in half X% of mentioned, the with in we the is range flattish out all about change up is the had, implied implies just the the of - of for really just above, year. outlook, all in industry, of outlook because that those Hi Steve, It's there of war, frost Mark. X% back leaving variables the and flat that increases

Steve Dyer

year-over-year. it. you that in what Okay, strength there? strong seeing really What XX% quarter, the got are specifically, up was Service drove

David Meyer

Steve. Dave, it's Well,

been it [ph] out being on So conditions. was getting parts a long services conditions. not season dried Crops into harvest spring that – if tough for in some conditions wind good the you December we're we've com remember, fall and into putting These some lines. the combined role frozen and continuing last are demanding work muddy equipment working there on only equipment but harbors to were ready planting snowing also was we're

first service So as indicated been parts the by half our year, for good growth in the that's plus a that. and of

look plant and drowned-out, fleet and to as to continues going demand harvest, at, to little our less think in age because of some to be our in of of and this get hours more our the age we're service continues more lot I a equipments, just there's a seeing probably problem acres departments bit fleet that but it. hours on

Steve Dyer

Okay. balance and and that about has inventories And stoke desire a then way. up recently come sheet again, environment to M&A sort Dave, your talked more you've long the of

given spot. going good wars trade thought a and in everything? uncertainty with forward are all guys the What's You there the

David Meyer

acquisitions. are, some looking Owners or succession nice Well, deal for aged; think potential getting I they're solution. really there's

there's want good we some pick out now this we're think really I and opportunities opportunity take there to seeing I so that and think up. And right

to going with to able - I long-term. I industry be Titan, good be of that some and in markets for spend on is lot good going to get am potential time think to long-term large also that's So a

Steve Dyer

Got it.

thanks guys. Okay,

Operator

Please with Larry Our next Blair. William Maria, is proceed from your question question. De

Larry De Maria

morning, everybody. Thanks. Good

this a second to they're had sold that et Just also the half, made obviously payments cetera. going looking point year, MF-X surged payments, back going for point earlier of and you when to guys and the flattish some get farmers that markets

into or there outlook is off conservative end the allocate them to a the just - farmers have cash the are why half the uncertainties of second year? taxes not into So the expecting their we given

David Meyer

need money now really been level Well, I while, soybeans And these now. to think, say probably you losing current there at prices current prices. they're soybean I'd right with with right the and they've for look of Larry, a

be our So really really it's most high going soybeans of our customers that's It's a percentage crops in difficult. hurt. being markets, to of are so

carryover was by do somewhat a June that crop, crop [ph], late real some July able emptied been the be year's I lot contract soybean of of but this their our gradually that's think So that a or out I with bins think yes, growers their positive prices. to offset to early all

really think the right And going to on that's weather watch to make to biggest I now so thing is It's going income. first the so big really this September – year. wait-and-see, and going of make to that's weighing or is, month is I the farmer frost when and yield, going impact that's a need the we year a too a through to there's killing everybody and break big be hit of think kind

So there's big our the also with there. growers out I wait-and-see Ag a but with only lenders not think

Larry De Maria

orders look we and of Okay, maybe but take kind a understand. next wrong, And think next book year, to stuff order would you I correct I'm start about So year? the an already going to if what's build next for planters curious to me happen out? starting on shaping or how are that give I'm hint initial are an year of orders into seasonal into about guys guess, as

David Meyer

I and going see But maturity. to be of to growers their going of yields year, before and reaches going things some there's the there Yes, the on, combines, stuff. pre-sold business delayed next [ph] pull some to all on lot Yes, want a is not only but - also this they're they year there the even definitely trigger that interest, really little high horsepower are activity this think the all into porting that again, if bit what there's that, a are of tractors year. planters going for crop

Larry De Maria

Okay.

point? [indiscernible] you what's really to stuff tell going the fairly it's but on, directionally the and whatnot not is So to is enough

David Meyer

some replacement the band now, big The productivity coming and with there. the a and real the there's some the equipment of that's out customers, is in the technology of of interest right out

So, on hours bars. planter some and got and you need precision is with a the the if it, of people fleet more planter getting are And excited. to stuff big great They we've aged all get and just want to they're know notes this to make yields bankers fits their their, big their and what pay they doing and basically off on sure equipment their that are abilities it those the with hand-in-hand purchases.

Larry De Maria

if question. Got for for one now could I is giving large Ag weak is you. link And JD ask [ph] with the final DO the Farm years and equipment. free five progress way all [ph] new next

have Are data So right things now? offering are uptake that. uptake are guys some you or is just are out and there the hedge now how climate to seen the that you that that seeing about of it management you curious farmers with wait-and-see engagement and the that of kind real guys from reacting farmers

David Meyer

out farming, became there growers Well, no, now. precision those all with mainstream our

there's of So combine involve tractor or precision or connectivity, all about either conversation a doesn't planter that the subjects. technology digital, or a

[ph] have technology is AFS real AIMS self-propelled even Command, and sprayers. industry the hawk such there combines, harvest the edge as our a the seabed. feature. precision systems tractors eye speed provided now, case are [ph], it's planters with Soil variable technology big with which leading There's the leading combined (ph) So out high the sensors capabilities, speed unique and right [ph] for raven at prescription and command combine guidance

offering, then of edge, current the edge, and can and attractive their all bus Connect, all the know is fleet that that'll connectivity. them AFS digital you the got about platform you've exciting legacy that really farmers you talked in providing mixed work. as if have an And that's that's both units, equipment, really that farmers for functionality telematic Our make integrated legacy

technology too, that saw AFS all crop definitely that's And for tractor that yes progress fact you have excitement Magnum so Case the probably world this flagship case you the Connect cited. the introduction tractor if know, all on you IH, and farm that

- So the our demand and now. that's of right the fact that's definitely the all technology this tied driving replacement really together, interests customers

Larry De Maria

thank guys. Good Okay, you. luck,

Operator

Baird. question with question. is Please Mig your next Our proceed from Dobre,

Mig Dobre

Good is your from for perspective little you purchase you're it more morning, here many cross currents what really large on, like from because sentiment technology? wondering from kind guys. driving of programs it I'm David, commodity farm else a decisions just the there's here? looking customers. and it that Like focused hearing – these so are and USDA, facilitation is is something prices it Is what's that I'm they

WASDE And about in obviously, I'm asking with dramatically that situation because, that you're I earlier commodity changed summer, the the prices pretty talking higher mean recent report.

demand? understand to ourselves going need trying factors I'm if that supporting So we other or there environment if of might a forward be essentially different to prepare for Thanks. here sort are

David Meyer

equipment, they going that Well, look I probably think main the in the they are basically a if And at their find to their years three five-year to up-to-date cycles, cost the factor is of cycle. trade they it’s moderate customer’s equipment needs need reliable equipment maybe right?

environment. continue interest low a We in rate to be

yield commodities or June And earlier believe going it about early little to late continue. it. significant of was aspect pretty think tax potentially could that's that's trigger talked bit some some from amounts I in of also good I trends, seeing them. lead We've to the we tax a been there July sold going volumes but

that and think all to So and need combination a their machinery the job on that it's get done. of the they taxes farm I

in whole it’s these but a big of not at So be is Facilitation to that think the arm, I scheme shot things. Market going the Programs

we’re range. in a the corn in commodity was what going back little do prices growers to more productivity taxes, them all bounce going June/July that's that I probably So, our is in put there are for and going and its all of it’s yield guess, order, there increases and when $X to the out in steps technology to in that and weigh

then definitely and technology demand. it’s new a The replacement

the preventive I there's the XXth anticipation growers impact not July that because a drowned of and report early many the the lot think to the acres, to Not of USDA potential August planting So of yield frost from there not difficulty of did plant forecasting or acres the our and date. yields normal crops. potential loss with think mention I reflect maturity for of reaching the out thought of out the WASDE report late total crops

that if South their reported Pro So and Illinois, their Annual Nebraska, Ohio, of I states Friday, Farmer finished toured Dakota. and Tour aware are and of Indiana, last that of but the Iowa, they you they week Minnesota tour Mig, last Farm the results don’t

million corn at it all it So to in and analysis that USDA production the XXX.X bushels was XXth And got on picked acre that all USA August an XX.X that XX.XX to issued per that compared report. when average the did that’s current reflects and their of said – done did. of U.S. national that they like in average back compared that XXX bushels bushels

will big out get question once guys prices So difference pretty that's big a and into but the impact or there. that's a that harvest, I will think not

growers better. October So there's for a but ideally of no has a and our lot X, of to in here looking think October, lot of of – XXth and time frost are Xst XXth be between October will it until now up I heat between

that's watch So weather doing. really going growers those and lot our of we're need are to dates what to a

a a like production actual and ethanol to lot profit going the So, so on use, by really supplies out of to their our and moving to export numbers pieces, there. it's about make the out of these are ability a going just there, so variables there of and global driven pricing ability lot and to variables say, that's farm some be you of lot but be

them So hope you. for I of most covered

Mig Dobre

had as that in to with you concerned with is WASDE to far we or need in recovery and have enough you point that be embed of the would prices year prices or done, No as that and outlook what this half visibility farmers kind to of? your does aware marketing earlier flattish other might in the happened this skepticism that ought that great what’s factors outlook do commodity have at on your back some do feel be I I'm healthy outlook recent here understand report. given was that But is, color, agree trying you

David Meyer

higher drive I going anything that think mean. that’s we’re near-term thinking or in least really at I prices the soybean lot now to don’t we right a see

in. So that factoring we’re not

for I only we arm period when of there this corn pretty a shot they carryover above good $X the a they that locked crop also little some hey got pretty did crop. a time bit in factor – plus of allowed was the not good in year's think job selling

We take that into did consideration.

numbers. to have some is going remember really – low We out to industry we’re

years, mean and has So this at is there. wonderful been the out like look last four I it

numbers been to, have industry not lot. going to those could that’s So to take mean use hit I they a

think numbers continued if we happened the the that trends. those some So yield industry the year, all based activities on earlier in of marketing

normal is did So and guess I we in of but which some barring, not figure been type the the early frost few later getting in –really frost we’ve years. last

years in last we’re and about the from. we say out feel low our two, I kind all basing some that's industry good three numbers out what numbers, really but like think I it really of of coming we’re

Mig Dobre

Okay, be more a mentioning came talk guys little than relatively questions in think I I thinking me. would sequentially flattish and it we little a SG&A about want bit a QX. expected were SG&A, Mark you versus QX I higher from that couple remember

were ERP be and the aware or So if inefficiencies SG&A were else to year? you need about of how we moving a in anything pieces I'm do the wondering full related quarter think for what there any to

Mark Kalvoda

it's items million $X.X mentioned nothing quarter, number. Yes, up. about the affected ramping that than in of higher the kind the the there. There new expected for reasons I of the this There so of was ERP quarter but just of is is some last kind some or quarter

AGRAM year again reminder year as this a - the was in Last we quarter. quarter was seeing in. not in apples-to-apples For in that third that second started

first say quarter, million so look in did XX second did XX far if we ERP about adjusted or you so just the As the relatively QX/QX the here was at the million million XX quarter in flat the mention over expenses, It excluding just in second that's as, and I quarter. flat costs.

bit, bad. up little to did it I So guess come a but not terribly

that will higher of activity third, the of quarters just we those forward, sequentially a I indicated quarter there see. be in fourth As before this seasonality and because the level here and of some rise where look is

look then look in you now have prior items. ERP because you quarters. won't see those as year won't year excluding million couple, and much expense you back on the if higher But Call basis as it those you – an a back to quarters, am talking last of $X it AGRAM be to in of growth much $X adjusted and if million I a

Mig Dobre

lastly XXXX Got inventory exiting contemplate in that how about an are do plan exiting fiscal perspective inventory, Maybe fiscal XXXX from that fiscal it, will say you that I you year-over-year half in back you. number Thank the us seasonally, be really can XXXX sense. give makes you exiting understood, versus helpful? your talking down bringing on standpoint? guess

Mark Kalvoda

around I mentioned seasonal best was our so here have it hit seasonal believe $XXX Yeah we though yeah we peak million. peak at the

around and last million, us bit that pulling take it and $XXX year down down would year. think we could that a a take I million million above little $XXX $XXX good last probably

of acquisitions any may this excluding is So that happen. course

very little So year, a especially And a just good a domestically million, from the but is here I think last inventory again maybe maybe from good. million $XXX up down comment, here. bit $XXX

that see some a lower sales that bearing on percentages non-interest the expectations can of from standpoint. inventory You with international –

probably of with will sitting lower closely but going more come expected the year last fine little We’re most those where but we’re as and part bit yes revenue, be monitoring the year. to to adjust ended a overall of to down levels we inventories course we for those inventory it than

Mig Dobre

guys you thank Excellent,

Operator

your from Stephens. Rick is proceed with Please with question Nelson question. final Our

Unidentified Analyst

any through segment [indiscernible] and about headwinds how you of Nick you a on this few listed just first half comp from guys know second. tailwind focus talk a half International fluctuates typically an the on International of know the here. – up for we going but might segment. year followed Hey with talk in quarter persist the the had strong I you the Rick you back to quite see through you back and I’ll year? negative the perspective, can can you those But quarter-to-quarter expect the positive in I comp the

Mark Kalvoda

that and But expect I you as half year had drove are do crop. those some was this. Dave maybe year moderate the But just from there we small half of little particular. the of standpoint growth back tough two year that some a going first to look to weather and both so forward about that’s had think market in – higher comps, grains a the growth we Romania that the Romania bit in those last in some of mentioned what sales that sales same-store comps Yes, some of talking QX the that the Ukraine referred to markets tough some was of impacting very

The the will But that the some some don’t results over subvention funds fall we no the so and of see of conducive harvesting. be headwind there. changing low there weather the was crops of to that more

and is year. improvement it do those the we So we its there year and slow we had to as do starting Germany be kind to yet. out not of it’s accretive a of to but half as year move back just Ukraine some the the And expect we somewhat some hitting expect last in – stride start accretive was this headwinds of alleviate Romania. well slower expected year, into

get it of year of further the year. away drought that think or we some get and just on. had ability of them integration this desire little affecting I conditions longer. our those Germany, some equipment end that customers we passed still the a is poor We at bringing last of better to The purchase the from

predict that from is us there. that over some think weather there will I that. reasonable So it's the help get That further for market we said difficult a to away it have over being for anybody

X% have at a And there the the same-store that this point is year. out half from relatively X% we with back for that to it with the standpoint flat sales of assumptions

we we to to saw And that. good some some match, year uptick of some third hit seasonal in last be will Given do quarter these in expect here upticks expect particular what we we QX just here that but versus have hard QX. did

that some. helps So hopefully

Unidentified Analyst

that you and Sure I I guess still positioning consolidated hitting from attainable into think year an potentially full on target? a then inventory the that Do XX% is margins from understand basis. any or international mentioned consideration taking fluctuations we that perspective and that equipment

Mark Kalvoda

softer I quarter. opportunity we where so be Yes, in I at is is tough that that quarter going far year-to-date the this to I is think have XX% we’re XX.X do and given point fourth a end about think up XX.X between last to the QX year-to-date at quarter kind than long-term, where generally that that better in we’ll think all you But done do said that XX% and last end year. somewhere at probably know longer-term will. if and you of we I up think target of year

between more year that hit where it's won't up in XX%. but we So likely in we XX% somewhere last ended

Unidentified Analyst

Great thank guys. you very much helpful very

Operator

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

David Meyer

Machinery Okay, call. being and in update interest progress on for next your our for we thank on call everybody on today look thanks Titan you our and you the forward to

have everyone. day So a good

Operator

you your participation. your you conference at this disconnect lines today's concludes for Thank may This time.

Titan Machinery (TITN) 29 Aug 192020 Q2 Earnings call transcript