Earnings call transcript Q3 2022

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Operator

Good morning, ladies and gentlemen. And welcome to the Titan International Incorporated Third Quarter 2022 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for questions and comments after the presentation. [Operator Instructions].

It is now my pleasure to turn the floor over to Todd Shoot, Senior Vice President, Investor Relations and Treasurer for Titan. Mr. yours. is floor the Shoot,

Todd Shoot

Thank you, to to everyone I'd Good third quarter morning. Titan's like XXXX welcome Matt. earnings call.

with with was and the issued our Senior are about On Commission President earnings the reminder I release call me review also Exchange results Paul with XX-Q, the are yesterday. Form the we the Reitz, will and Securities begin CEO; with President were David yesterday, Vice Titan's to filed along that Martin, and which and CFO. today Titan's presented in

the As a uncertainties call, for we plans discussing differ could be forward-looking the including will from actual assumptions projections and information, the information. reminder, during our and risk, this certain t cause forward-looking involve that future that results company's materially

factors included in be Additional release the of actual Form all these that could cause materially or our XX-Q, as statement to can attached XX-K forward-looking filed which earlier, the statements Form either latest and been safe-harbor aggregate in SEC. individually results Forms the have the X-K the differ filed from company's with as earnings well to within information found concerning

In non-GAAP which within intended made a section accompanies Web to of available a discussed today's soon financial of reconciliation site, the transcript to supplement, presentation be of copy the today's replay and quantitative the refer be and is may financial available. call are of other this GAAP be also addition, earnings release today, most available on information the most substitute GAAP be a site, but earnings measures, the our on not directly Web non-GAAP QX will comparable copy measures. the release, Relations The will call Titan's as Investor which remarks to after for the as comparable today's The to measures measures. call well contains

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call the like over to Paul. to I turn would now

Paul Reitz

Thanks, the this the get pleasure where solid the determination operational the but satisfy starting Todd. I team produce importantly, most of by demonstrated Titan our call our of customers. Good quarter our to and results, financial saying another has morning. was needs resilience

of our continues of challenges throughout all level global they high execution team are as that to businesses our Our overcome was presented.

third quarter was top that supported by were quarter growth XX% results gains. Our to volume led healthy line million a with of $XXX solid

million performance free and Our that million of in puts margins $XX also to XX.X% that to compare cash the EBITDA strong gross [$X.XX] share. led good to translating cash year-over-year which and just where into years was strong whopping quarter flow, was increase year-to-date, generation strength million financial balance our free expanded see adjusted per this It's million $XX us EPS sheet $XX of to is truly impressive $XX It few it ago. a our a flow. today to that's of for at

we finishing expect of that, confidence flow period We to exceed as the end communicated customers business, overcome course, free serve see of as end really It's of the challenges have $XXX the well and, to been we cash the the our markets and have our few our top Along targets. previously Titan XXXX, million year. during good for years challenges. past our of this team of team, our our in at performance with

climate number I'm segment, switch going and our of to do at you has positive these products and ground, will, large company still to end foundation David that are the production especially continue the believe to our look right place we are on noisy when [Technical a market say landscape. Difficulty] a firm markets. our now, side. markets the with footprint. end is more indicators ag standing course, share that in people, It's place days, but over financial But solid our Our that the a reasonable there support of information on to really business

chain that recent very along used Let's low with balance income well report with income recent upgraded replacement disruption low OEMs, levels stocks XXXX technology farmers and ag will is pricing continuing pent soybean believe chain their levels and through ag the equipment demand good sector illustrates ahead. and is for years, position position, tires. strong picture a to start combined challenges With to good view we of minimum. future new that XXXX large corn large current that latest The in their work the a equipment bring invest for farmers this supply to are and levels. good with at factors in with solid The prices that expect labor from the financial sheets available the bodes -- will bigger into income, demand in large up with farmer a the a crop continue and and along supplies supply demand. USDA equipment good the We supply to in

that at normalize is it appears to small inventory starting Looking ag, levels. to pre-COVID

at small inventory levels watch in plan. norms a our as and there Titan historical below is need still is we'll maintain prepare order order levels have closely customer normalize XXXX dealer the ag a production to their overall and base However, we operations. to in strong current longer inventory We

to QX increases earthmoving construction. over solid XX% Moving with of in had with demand. We sales and strong growth a

strong we had our driven holidays. perform demand in demand, And stated companies this year a EMC well. next. make the quarter that We to major towards in geographies, and remains book segment other OEM results earthmoving is started business the and as healthy in our order this construction our last as really have heavily to that solid during growing aftermarket to customers' at all positive they quarter, as especially Our meeting well end true. comments good that look in high and quarter by this of growth August traditionally level were by is continues The impacted

group outlook met few a that still segment EMC XXXX. customers, the few a over dealers promising believe for and market when I have at quite the a I and say, for And look especially to primary in with looks weeks, healthy you for peer have markets, we the to construction, of our remains the some last place. overall landscape solid agriculture say CEOs. end So I've heavy industrial industrials,

the we to appropriate actions we the quality challenges I through navigate ability as to the that and cash So role our expect wrapping quarter performance confident, and for that the adjusted the EBITDA visibility our not to for team remainder confident of sales, And and in our am current our our in the Most and our every world users year, end in fourth evolving things strong with up, flow. we expectations year-to-date importantly, are remained equipment. the for is free confidence ability the timely these of to Titan team of confident, Obviously, customers previously finish day consistently has the year demonstrating needs adjust these build attention have that targets. needed. at of customers of the our climate has moving these require play products communicated products really, been around just and rapidly. pieces top of using but our days important meeting the end business a the lot take

moment Titan, couple believe appreciation Titan momentum to delivering over elements really to take quarter and continue years. our a to this We tremendous that team to want though the key the are place I in results and drive to past express at really for continued positive of

require that see team will demand and customers to us to hard taking very work we care is from healthy here. Our committed them of continue to our

over to With that, I call David. the would turn like to

David Martin

Thanks, Paul, to and of all morning you joining us good today.

continued said. year. the had third Our to as strong quarter thrive compared We results business to during the prior Paul

the a and strong quarter by that nice was also last Let's year result this we margin third not beat quarter. a forget,

business million X% strongest X%. that in sold another sales Let's the of in had the the key in this Australian the this a prior from also sales which mind, end the lowering [by] it's Net devaluation run to QX with a first of $XXX on sales even we and keep the through compared headwind XX% an from of our Also which the impact time last quarter's quarter. quarter net performance. grew We QX, and million QX history, represents dollar. third against exceeded stats year had currency was March, at year, in as $XXX

the QX grew divestiture, of Australian by sales the Excluding FX and XX%. impact

last $XX gross at month adjusted from now more quarter doubling million XX.X% year. year. profit for or by versus QX from last where million, trailing stands importantly, reached was EBITDA Our XX% grew year at our this our XX.X% than $XXX million, last EBITDA it more and XX And last XX% time was up $XX Adjusted margin the year.

On basis. was Our impressive QX. this earnings year share QX year it in an basis, from $X.XX growth reported adjusted $X.XX went also last both adjusted on to and in per

free million million. the were Our cash almost also and $XX cash million, cash $XXX $XX balances quarter flow stable for quarter to this year-to-date flow free bringing was at

further $XXX now quarter EBITDA trailing leverage As continued improved times from million management. net adjusted stands on million, from of our coming last this focus dramatically quarter, paydown and profitability X.X the to a net $XXX down our result our dropped debt XX capital debt debt and working at month

year. the same to we just to then exceptional saw get clarify top which pandemic time, plants, few the seasonality. we Before because first couple had had the in of into in it you by that our production patterns business I relative third that's line we to fewer about compare want and it's segment see what the bottom last The a return I year recovery. the results of been of the In this expansion continued ordering discussion, second for and plant have quarter, At important impressive market customers quarter what is things our our last and said. to and maintenance and QX, I a years you given hours see quarters traditional when of

agriculture. get year, third costs, quarter quarter by segment profit QX at up and million, Now segment for about Agricultural the in at prior XX% logistics with quarter sales performance up in for this relative $XX XX% devaluation the gross sales starting from the segment an total QX, up net were into let's ag improvement were increase margins Currency XX% were of $XXX of which in the volume was segment the from This and $XX and inflationary higher agricultural the pricing, million year-over-year balance year. XX% other sales a reflecting $XX XX% the of growth from energy. gross last or in third The year. healthy last of includes raw and million, last from X% materials impacted impact strong increases cost came year. QX to at of a representing level, million and

cost $XX $XX this $XX segment gross last represents in of profit or all negatively represents QX stock segment's consumer from significantly came our which EMC year. segment construction ITM segment segment our XX% segment's segment as profit as consumer XX% from to in XX% was most all to world XX%. gross largest segment occurred across rest slightly segment better the last increased of the achieved up we sales last off, US, growth the notably million third third majority our strong increases. Like third within margin notably million net Again, volume geographies an lower in sales the the raw custom The almost due of ag, some American relative the seasonality gross million. quarter. a very for year growth devaluation rubber on the we of or growth pricing the our the Gross had last grew the This and in specialty at X% grew this taking Similar the The a as our QX to in quarter, solid Latin utility profit and $X.X similar in quarter currency this in to earthmoving mixing at healthy last offset solid which year, quarter by XX% what other was improvement normal of sales. QX truck sales from last The year, for while relative most were million, within sales XX% profit XX% sales regions tire for sales year. were the relative the margins margins by XX% from Our and products the XX% in for driven while growth are of expanded year. and experienced segment improvement last well across of year. the mix million $XX to improvement impactful impacted primarily increased was year was QX. to materials businesses of compared by Gross or this are ITM, profitability year and inflation, reflective from quarter we net Overall, was approximately or the dollar the increase to sold. QX, versus a to in prior driver in dollars within of initiatives that positive QX year-over-year.

QX from well of prior SG&A the X.X% business as savings last Australian for and net variable the expenses other earlier and and wheel down sales represents were fees which some $XX the the XXXX. R&D for legal was as in quarter. of year, This spend in of reflecting quarter's effect million, the sale expenses

X.X% were year. of SG&A costs, excluding the our last sales at R&D For first royalties, nine and compared months, X.X% to net

a our operations, of that positive on to have strong continue had profitability. a more our focus effect within We on overall costs even and has managing operating very

we indirect Brazil. quarter, additional an the to related credits $X.X During third million in recorded tax

operation in legal and non-income similar with charged we Our taxes its Titan QX. action have regarding that our operations been prevailed Brazil in to ITM had previously what paid indirect Brazil

During basis, in have we other the related total taxes recorded recorded income tax in $XX the in to recognition taxes indirect credits. that income we for million million third a and taxes that On income $X.X $X.X with Brazil associated recognition. in year-to-date million of quarter,

the as the release. these ninw utilize was tax against in EBITDA credits majority QX expect in earnings of from reconciliation see XX the tax first We months. credit obligations the the adjusted The over to for next excluded recognition months, and you future

taxes income of the during income in credits million,as the the million stated, reported third were quarter $X.X the from tax provision I $XX.X related Our on to just indirect quarter. recorded

This expected full XX.X% effective third rate utilization As what a quarter, I impact the of percent are higher full be quarter million of in is and overall other positive we to Cash the Europe the year, pre-tax seen taxes the reflecting QX. we've of countries. credits. tax portion was was than in profitability around of the of $XX profits, saw expectations which guidance than a last increased slightly the as year Brazilian tax gave the in less for

Now continues this to be of year. a performance our part flow strong cash

$XXX Our million. cash held balances steady at this quarter

end our based was of percent the Our $XX as which in the operating earnings at most working stable prior third of capital up driven XX%, from XX and it was basis quarter, the At by slightly was cash flow quarter, strong at million the year capital. liquid quarter the sales QX, on a working while about recent points. from annualized improved

view our are We we track capital setting working well as a management I and out, strong an the continue while on expect from year XXXX perspective. us to inventory our with close of up maintaining improve expectations, to

of target for around million quarter original the Our million, capital same our was expectations $XX at full which capital year. spending guidance $XX the third also to is expenditure million the year the within to be $XX in as and continues

year this with the are free together, flow to continued $XXX of more, efficiencies spot various the our all cash or customers. the in expectations, spending we put our It with ongoing for we near tooling we quality the next history. year's manufacture We highest is investing When note investments with in are innovations to maintenance the you in for at bring review the along cash focus strongest are about sweet and technology our products million our flow selective for important I products, yearly necessary expect be expansion. our capital believe plants, on that also to and with already for capacity to increased underway

performance volatility ongoing basis, dealing from an we team. is our this tremendous with on the are With that

we net million I debt cash months to QX as We at times at the leverage that flow free paid the improved the September the our times mentioned end another our EBITDA, X.X debt X.X nice times generation. of year $XX trailing end. quarter last outset this down improvement at from XX and made by at adjusted of X.X using down end

put company options allocation We our strong very on have to a as in ourselves a of capital. position have

manage previously, a the position basis. a the debt we to our appropriate discussed at intend business first put we the us across position grow to then business As investments globally in look sustained on profitably when in and to we

the opportunities on also continue acquisitions company the to will for deliver returns We shareholders. a best to term best to evaluate basis from cash return the long to

market manage our Our through and evolving financial environment. performance ability exceptional that quarter and was we're this of the has is strong to an been reflective again well what in once it ever

this to outlook and throughout has the improve growth relative fourth full expanded expect to in prior deliver year margins Our to year, year. we and continued the quarter

our at high expectations. discussed targets that days today, we Nothing but discussed performance strong end in it and and are beginning cash simple together and history. is flow quarter That's teams getting we of now, and all management keeps last in just the very better. Paul story operating the the profit it towards are As these driving for sales, our the our bringing best to deliver

Now over that for Matt to I'd any turn to you questions the today. have back call like

Operator

We will question-and-answer now Instructions]. the begin [Operator session

The with comes Sidoti. Steve first from question Ferazani

Steve Ferazani

sort we've a all the some what thinking you little on to wanted bit on maybe everyone. about heavy it would very, ‘XX? concerns. but hearing be know those Good to after customers, to order -- and which growing heard a counterintuitive match entering I to this not this in through at I address point recessionary up walk given whereas morning, them us is of construction healthy the later how year, ask with two appears of commentary, seem global you're we're you're Paul's which be as Can remains we're segments seem customers, reporting strong, Appreciate strong ag and to which -- closing lot the call. early very from seems from quarter, on books detail your so a very

Paul Reitz

earthmoving I'll start with construction.

for towards segment, and That ‘XX we and the out order in books us, continue close remain to quarter, move the really outperformed third as right. You're healthy that ‘XX. seeing we're

might and little we're So bit results certainly would months the QX a what be six back to point, feel ago, but support looking your that. in that counterintuitive position that's to thinking one our be

six thought continue looks where good ag, calendar. at looking roll I pace. fundamentals and three right we look would they ago, the be that EMC specifically at months the ago we they as on When large ag, So think you are months

little supply a noise labor as get on going indications But perspective, You they of fundamentals the the bit production. farmer's the OEMs and on for with levels balance up at look from with chains from 'XX, but get at the ‘XX all caught their just out for economics think future. the the good inventory sheet I into the supply marketplace, look in not demand the reports coming income, the of crops

ag feel been about large year. have saying at good really really comments things I most consistent with So throughout are this of look and positioned, those the and been where we've

certainly as ‘XX. is that in again move something continuing see trends into that calendar we we the So the

keep eye ag on. something is an Small we'll

that's I and for land it they ag everybody drive that way think you been it's just bought spend it's don't a around take small and the because some at the now, case. gets pandemic grandkids and induced misperceived out toy look I through think heavily in just rides a and where as ran

the look a at that perspective also small and small definitely the from that is you for see some large ag. element got commercial to fundamental small you really understand closely commercial in there ag to of are strong drivers think ag, applicable ag I and

perception induced create So pandemic really want that. that than again, going different here that spending we to it much sit and hobbyist see toy is just something I don't a was on, that,

a going is things see with Our other their ag And small demand. of inventory business. very strong. unmet lot They where marketplace have where of it in parts of on do levels. they need on going understanding the than spent the of some retail small time customer early kind a bigger base they inflation We've dealers to would their of continue to with them, and do have parts clearly, ag 'XX a build is impact impact see the to

But thing production and So inventory down got go there's inflation closely I demand to one and you think be good next some ag will move into needs costs that's slow to 'XX. replenished up, interest as still year. for again, parts at this as small got that of levels that we healthy unmet they and point, look at retail

Steve Ferazani

last When seemed six you of over and we might pricing impact look that at margins to months next aftermarket Can down talk how be steel the and that rubber about prices the plus, quarters? your substantially. pretty couple over

David Martin

that I a over just down about this fluctuate Well, think with versus is maintaining way of dollars pricing We've up managing those the and expectations things it's job with through that to cycles. so cost, our really terms those and managing think time. alignment good of customers protect when in we as of done it kinds

had And maintained that regard. OEM comfortably, continue the on volatility we're a has that and with feel we've to aftermarket very you're good And both that very pretty more carefully managing to that going so we and specifically job forward. But steel up Yes, alignment, lot doing aligned we've it down. a done cycle. aftermarket, again, and we'll still that right, strongly,

Steve Ferazani

of terms the your year. And for maintaining last in me flow guidance cash for one

some out and hopefully priority? still would a here but it's number significant little cash down exceed after very -- I focus What's be debt still balance it’s So now? down number, turn, of I it remain strong more the for mean, a mean, pay eventually, bit, to still can if two quarters. it cycle were debt you flow that like sheet the free reduction the seems years get still prepared would comfortably you two

David Martin

priority, still our of debt a down. we’ve paid remains that lot Yes, but a

and particularly quarter. facility US during make for higher us that which zero priority debt, we now, is third respect taken to on at in opportunities We've the the happen. the ABL cost interest a did variable rates Our was some that with to

very we're a with of And cash QX everything during We everything advance careful We'll need be to more little build to that we stable align so bit production on those side in to. respect year a may inventory protect for position. we next working aside, very well making that the load and sure to level XXXX. in have capital put things as

us. options. I there fluctuations be overall, and towards towards that. think there in we're the some, healthy opportunities in that's when front always So any future we come will very and Quarter-to-quarter, do some long as with continued do even to priorities have see we're sheet business acquisitions cycle maybe And to the also to But those also, will well. a be managing obviously balance some in communicate larger investments we'll position term, in fruition. those building of And strong

the story. So really I think that's

Steve Ferazani

Would increase but announcements, of how done? CapEx, anything next major I budgetary there early get CapEx in be to thinking you're you’d year? terms start any want to know it's in making about

David Martin

to Well, our some we it cash we of we're over I a that, those earlier, have in approach ongoing to have programs a range comments and expect we said perspective, Certainly, investments, a there that my multi-year continue. we'll to reasonable we're from a in of too. perspective. from a think position be spend larger and carrying in kind of I’ve comfortable flow beyond capital where XXXX

So dramatically different. to wouldn't I be it expect

Operator

Ludtke Capital. next the The line question Imperial from Kirk with of is

Kirk Ludtke

congratulations and call, another for Thank you the great quarter. on

are weighted revenue sharing large of but split I towards One between pretty to large ag, split Just -- wanted wise? you're the a just and couple My small is you impression heavily the follow-ups. ag. is

Paul Reitz

both heavy ag, servicing prices capabilities publicly. of got the lead an portfolio talk shared we When I with the that obviously, our going wheels think presses, But production we've and something strong the large are market, and ag. ag capable excellent we that's and fit to not we about large that large it's for large ag large feel on market towards certainly you a meaning split No, are attribute. have towards a tires is the the obviously, ag, LSW

who've to So on going their development, certainly, invested own But internally the seen I some us that. for through with the And the at job footprints large Titan, proud have they space their good of and are around heavily a we've really to their market very ag. in ag that is ag lead dynamic and small we've resources built small They've with customers think values building in infrastructure more product we're done it own obviously dealer portfolio excellent focus years. networks. the the built

and my we so our that base do portion who have are job in fact really market. great driven comments the small excellent the about And customer servicing ag some a space towards of customers that

but horsepower less. have get small ag, we that the XXX off, where tendency ag customers it they horsepower, on XX differently be they focus because and so their or And kind look those is to really at up XXX, as into don't go a large to majority cut they that's the space of of much, portfolio going to

just naturally customers. our it's kind happens of again, bifurcation within that some of so a And

small helping within And we comments. done market job years a for great been the and that's strong of really tear that So again, on base ag a where our customers direct the a have clearly, it. expand building and has number

for as well. Titan really, have large and believe positive very in portfolio both stop what's ag. But strongly really anyway our in a our your question? let trends I'll those question. think capabilities, been We you small ask talking I and

Kirk Ludtke

attention getting landscape noticed there would-be changes, moves potentially? competitors any have just I'm think wondering of I was And share are that could there fine, that by the on got you curious, they're impressive the I put out I'm any it. and then others. competitors, returns the I've competitive split. up or anything a here just was you've sure would sense the good shift I That's appreciate you if there.

David Martin

our think that's that, support of to ahead just care the a how the doing I one you keep the Well, doing race. our to you needs. of that. results mean, competition stay I the really can clearly team great in last if job been, And is done few that, goal step customers’ has win continuing years, And our take through has

marketplace. the the We've to needs users build we meet products end a customers. our so And better done job end through great users' in any the connecting that than

strength continue doing things is I we and this our I competitive going we're to change competitive is landscape we're so doing. just we we Any see the No. a the on And in dramatic at really, what our is through But really different foot to and you're -- keeping our advantage seeing are doing. have need go change to periods. doing marketplace point? And pedal and continue think mean, anything focus what

Kirk Ludtke

caught I'm does for eye. into me, leverage one that that allocation? a front? impact the clarity you about any more And your just then or optimism last curious XXXX, capital my on comment have net fundamentals -- market target strong Do how

Paul Reitz

I'll mean is front come really supply look where David I of on the months. the part jump I optimism would the that improved, grain side. income I'm say, at down demand economics When really take the let in expressing they've that levels, stock the and has you really space the in farmer and few last in. so

are prices to upon strong 'XX farmer think I is crop based the be really, income very indications strong through going So that healthy.

our with with they're that, technology, obviously but new in invest equipment. also that, that to well. capital the along equipment our sales new so that there's And have And the on as technology impact new we going will offer with the to to products, continue

question. the rest. So the that's David, take you don’t the front of part why

David Martin

to the cash, right looking strong next going we're us. further thing same in of at we it position right continue or times have capital. going those we We'll the the in looking in alternatives so planning. with in year this right sitting through in sheet we've for we us and with opportunities Board through that's in the era long, how middle all we're year, this And at a be the whatever front either from to reduction that debt a both at into haven't discussions right regard. we sitting the and that landscape the with but as XXXX this them, just front of are very We're discussions perspective, As respect allocate -- been We'll as at of look now. mean very balance been the progress times at year, increased

shareholders right options those investors. to that constituents, So make sure multitude we return have take things we'll we for believe the all deliver all and we'll advantage of of and all

this those at So made point. decisions been haven't

middle do We But plan. now, continue we're communicate and the in appropriately the time. and those those all still all evaluate of things we'll right to that right things at

Kirk Ludtke

And all capital notes. floating structure, then respect to the the just is with of of rate? I'm debt it most the curious, is fixed rest the rate

David Martin

is America We of have are but of fixed, a that couple of debt in that most yes… Latin it pieces floating, are

Kirk Ludtke

some You floating pretty still payable? that's that's rate have debt

David Martin

now, off. right Brazil at that Yes, opportunities pretty we quarter, But not a paid did pieces various it of rate bit are there were is points, in little exactly there. everything some some this we debt but payable there higher

Operator

question-and-answer your over would conference Reitz Mr. back concludes closing turn for our to Thank questions. you the for any This to session. I like remarks.

Paul Reitz

I appreciate the to XXXX. Titan's everybody's in QX in and results call end forward year today, participation look you bringing to

So again, I appreciate participation. everybody's you. Thank

Operator

now call has attending Thank presentation. you today's you. concluded. The Thank conference for

Titan International (TWI) 8 Nov 222022 Q3 Earnings call transcript