GlobeNewswire Inc | Nov 24, 2020 06:45AM EST

November 24, 2020

- Revenue for Third Quarter of Fiscal 2021 was $360.9 million -

- GAAP EPS for Third Quarter of Fiscal 2021 was $0.44 and Adjusted EPS was $0.58 -

- Company Increases Fiscal 2021 Modeling Assumptions -

WEST FARGO, N.D., Nov. 24, 2020 (GLOBE NEWSWIRE) -- Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal third quarter ended October31, 2020.

David Meyer, Titan Machinerys Chairman and Chief Executive Officer, stated, "We exceeded our third quarter top-line expectations due to strong parts and service performance in our Agriculture segment and better than anticipated equipment sales in our Construction and International segments. The stronger revenue, combined with continued success controlling operating expenses and driving down interest expense, resulted in a significant improvement to our pre-tax income. Due to our strong third quarter results and solid agriculture market fundamentals that are supporting our fourth quarter, including improved corn and soybean prices, we are raising our earnings per share guidance for fiscal year 2021. COVID-19 continues to challenge our team and our customer's end markets, however, I'm proud of how our team has responded to the new operating environment as they continue to deliver the high level of support our customers have come to expect."

Fiscal 2021 Third Quarter Results

Consolidated ResultsFor the third quarter of fiscal 2021, revenue was flat versus prior year at $360.9 million. Equipment sales were $240.9 million for the third quarter of fiscal 2021, compared to $246.0 million in the third quarter last year. Parts sales were $76.8 million for the third quarter of fiscal 2021, compared to $70.8 million in the third quarter last year. Revenue generated from service was $30.7 million for the third quarter of fiscal 2021, compared to $27.6 million in the third quarter last year. Revenue from rental and other was $12.5 million for the third quarter of fiscal 2021, compared to $16.6 million in the third quarter last year.

Gross profit for the third quarter of fiscal 2021 was $72.6 million, compared to $71.8 million in the third quarter last year. Gross profit margin increased 20 basis points to 20.1% versus the comparable period last year. The increase in gross profit margin was primarily due to an increased mix of higher margin parts and service business, as compared to the third quarter of last year.

Operating expenses decreased by $4.1 million to $54.1 million for the third quarter of fiscal 2021, compared to $58.2 million in the third quarter last year due to managed expense reductions in our Construction and International segments and lower expenses caused by COVID-19, such as travel and fuel expenses. Operating expenses as a percentage of sales decreased 110 basis points to 15.0% for the third quarter of fiscal 2021, compared to 16.1% of revenue in the prior year period. The Company recognized $2.6 million in goodwill, intangibles and long-lived asset impairment in the quarter compared to $0.1 million in the prior year. Nearly all of the impairment in the current quarter related to certain goodwill and other intangible assets in our International segment.

Floorplan and other interest expense was $1.7 million in the third quarter of fiscal 2021, compared to $2.4million for the same period last year. The decrease was due to a lower interest rate environment, a lower interest rate spread under our new five-year Amended and Restated Credit Agreement that was finalized in April 2020, and lower borrowings on our line of credit.

In the third quarter of fiscal 2021, net income was $9.9 million, or earnings per diluted share of $0.44, compared to net income of $8.2 million, or earnings per diluted share of $0.37, for the third quarter of last year.

On an adjusted basis, net income for the third quarter of fiscal 2021 was $13.0 million, or adjusted earnings per diluted share of $0.58, compared to adjusted net income of $10.7 million, or adjusted earnings per diluted share of $0.48, for the third quarter of last year.

Adjusted EBITDA was $24.8 million in the third quarter of fiscal 2021, compared to $21.4 million in the third quarter of last year.

Segment ResultsAgriculture Segment - Revenue for the third quarter of fiscal 2021 was $220.6 million, compared to $214.1 million in the third quarter last year. The increase in revenue was driven by on-going strength in the parts and service business. Pre-tax income for the third quarter of fiscal 2021 was $13.6 million, compared to $10.3 million of pre-tax income in the third quarter last year.

Construction Segment - Revenue for the third quarter of fiscal 2021 was $79.0 million, compared to $78.0 million in the third quarter last year. The increase in revenue was driven by an increase in equipment sales that was partially offset by lower rental revenue. Pre-tax income for the third quarter of fiscal 2021 was $1.4 million, compared to a pre-tax income of $0.3 million in the third quarter last year.

InternationalSegment - Revenue for the third quarter of fiscal 2021 was $61.2 million, compared to $68.8 million in the third quarter last year. Lower revenue was driven by decreased customer demand due to below average yields in certain areas of our International footprint as well as overall challenging economic and business conditions due to COVID-19. Pre-tax loss for the third quarter of fiscal 2021 was $2.4 million, compared to pre-tax income of $2.1 million in the third quarter last year. The lower results were the result of decreased revenues and a $2.3 million impairment of goodwill and other intangibles in this segment. Adjusted pre-tax income for the third quarter of fiscal 2021 was $0.2million, compared to adjusted pre-tax income of $1.6 million in the third quarter last year.

Fiscal 2021 First Nine Months Results

Revenue was $974.5 million for the first nine months of fiscal 2021, compared to $954.2 million for the same period last year. Net income for the first nine months of fiscal 2021 was $18.6 million, or $0.83 per diluted share, compared to a net income of $13.3 million, or $0.60 per diluted share, for the same period last year. On an adjusted basis, net income for the first nine months of fiscal 2021 was $23.0 million, or $1.02 per diluted share, compared to an adjusted net income of $18.1 million, or $0.81 per diluted share, in the same period last year. Adjusted EBITDA was $51.7 million in the first nine months of fiscal 2021, compared to $44.4 million in the same period last year.

Balance Sheet and Cash Flow

Cash at the end of the third quarter of fiscal 2021 was $41.8 million. Inventories decreased to $532.7 million as of October31, 2020, compared to $597.4 million as of January31, 2020. This inventory decrease includes a $66.1 million decrease in equipment inventory, which reflects a decrease in new equipment inventory of $36.1 million and a $29.9 million decrease in used equipment inventory. Outstanding floorplan payables were $287.8 million on $765.0 million total available floorplan lines of credit as of October31, 2020, compared to $371.8 million outstanding floorplan payables as of January31, 2020.

In the first nine months of fiscal 2021, net cash provided by operating activities was $60.8 million, compared to net cash used for operating activities of $8.3 million in the first nine months of fiscal 2020. The Company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in its equipment inventory. Taking these adjustments into account, adjusted net cash provided by operating activities was $56.5 million in the first nine months of fiscal 2021, compared to adjusted net cash used for operating activities of $35.0 million in the first nine months of fiscal 2020.

Mr. Meyer concluded, "Our financial position continues to improve due to strong year-to-date performance and prudent management of our inventory position, which is driving significant increases in cash provided by operating activities. Due to the strong third quarter performance and our outlook for the remainder of fiscal 2021, we are increasing our revenue expectations for all three of our operating segments and raising our earnings per share guidance. We are actively monitoring the current environment and the associated impacts that it may have on our customers, the commodities markets, and our business. We remain focused on keeping our business in a sound condition while we pursue our long-term growth initiatives."

Fiscal 2021 Modeling Assumptions

The following are the Company's current expectations for fiscal 2021 modeling assumptions. We believe modeling assumptions will continue to be impacted by the challenging global economy due to the COVID-19 pandemic, creating a higher degree of uncertainty in these assumptions compared to a normal environment.

Current Assumptions Previous AssumptionsSegment Revenue Agriculture^(1) Up 5-10% Up 0-5%Construction^(2) Down 0-5% Down 5-10%International Down 5-10% Down 10-15% Diluted EPS $0.83 - $0.93 $0.55 - $0.75Adjusted Diluted EPS^(3) $1.05 - $1.15 $0.65 - $0.85

^(1)Includes the full year impact of the Northwood, ND acquisition completedin October 2019 and partial year impact of the HorizonWest acquisitioncompleted in May 2020.^(2)Includes the full year impact of the Albuquerque, NM store divestiture inJanuary 2020.^(3)Adjusted Diluted EPS excludes impacts related to: impairment expenses forcertain goodwill, intangible assets, and long-lived assets, primarily in theCompany's International segment; anticipated ERP-related expenses; and Ukraineremeasurement (gains) and losses.

Conference Call and Presentation InformationThe Company will host a conference call and audio webcast today at 7:30 a.m. Central time (8:30 a.m. Eastern time). Investors interested in participating in the live call can dial (877) 705-6003 from the U.S. International callers can dial (201) 493-6725. A telephone replay will be available approximately two hours after the call concludes and will be available through Tuesday, December 8, 2020, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13711574.

A copy of the presentation that will accompany the prepared remarks on the conference call is available on the Companys website under Investor Relations at www.titanmachinery.com. An archive of the audio webcast will be available on the Companys website under Investor Relations at www.titanmachinery.com for 30 days following the audio webcast.

Non-GAAP Financial Measures

Within this release, the Company refers to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. The Company believes that these non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP financial measures. Generally, the non-GAAP financial measures include adjustments for items such as valuation allowances for income tax, costs associated with impairment charges, Ukraine remeasurement gains/losses and charges associated with our Enterprise Resource Planning (ERP) system transition. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for the GAAP financial measures presented in this release and the Company's financial statements and other publicly filed reports. Non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies. Investors are encouraged to review the reconciliations of adjusted financial measures used in this release to their most directly comparable GAAP financial measures. These reconciliations are attached to this release. The tables included in the Non-GAAP Reconciliations section reconcile adjusted net income (loss), adjusted EBITDA, adjusted diluted earnings (loss) per share, adjusted income (loss) before income taxes, and adjusted net cash provided by (used for) operating activities (all non-GAAP financial measures) for the periods presented, to their respective most directly comparable GAAP financial measure.

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, owns and operates a network of full service agricultural and construction equipment dealer locations in North America and Europe. The network consists of US locations in Arizona, Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming and its European stores are located in Bulgaria, Germany, Romania, Serbia and Ukraine. The Titan Machinery locations represent one or more of the CNH Industrial Brands, including Case IH, New Holland Agriculture, Case Construction, New Holland Construction, and CNH Industrial Capital. Additional information about Titan Machinery Inc. can be found at www.titanmachinery.com.

Forward Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words potential, believe, estimate, expect, intend, may, could, will, plan, anticipate, and similar words and expressions are intended to identify forward-looking statements. These statements are based upon the current beliefs and expectations of our management. Forward-looking statements made in this release, which may include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, inventory expectations, leverage expectations, agricultural and construction equipment industry conditions and trends, and modeling assumptions and expected results of operations for the fiscal year ending January31, 2021, involve known and unknown risks and uncertainties that may cause Titan Machinerys actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Companys risks and uncertainties include, among other things, the duration, scope and impact of the COVID-19 pandemic on the Company's operations, a substantial dependence on a single distributor, the continued availability of organic growth and acquisition opportunities, potential difficulties integrating acquired stores, industry supply levels, fluctuating agriculture and construction industry economic conditions, the success of recently implemented initiatives within the Companys operating segments, the uncertainty and fluctuating conditions in the capital and credit markets, difficulties in conducting international operations, foreign currency risks, governmental agriculture policies, seasonal fluctuations, the ability of the Company to reduce inventory levels, weather conditions, disruption in receiving ample inventory financing, and increased competition in the geographic areas served. These and other risks are more fully described in Titan Machinerys filings with the Securities and Exchange Commission, including the Companys most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Titan Machinery conducts its business in a highly competitive and rapidly changing environment. Accordingly, new risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on Titan Machinerys business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Other than required by law, Titan Machinery disclaims any obligation to update such factors or to publicly announce results of revisions to any of the forward-looking statements contained in this release to reflect future events or developments.

Investor Relations Contact:ICR, Inc.John Mills, jmills@icrinc.comManaging Partner646-277-1254

TITAN MACHINERY INC.Consolidated Balance Sheets(in thousands, except per share data)(Unaudited) October 31, January 31, 2020 2020Assets Current Assets Cash $ 41,808 $ 43,721 Receivables, net of allowance for expected 73,531 72,776 credit lossesInventories 532,746 597,394 Prepaid expenses and other 8,737 13,655 Total current assets 656,822 727,546 Noncurrent Assets Property and equipment, net of accumulated 148,520 145,562 depreciationOperating lease assets 81,401 88,281 Deferred income taxes 3,787 2,147 Goodwill 1,433 2,327 Intangible assets, net of accumulated 7,764 8,367 amortizationOther 1,129 1,113 Total noncurrent assets 244,034 247,797 Total Assets $ 900,856 $ 975,343 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 23,433 $ 16,976 Floorplan payable 287,837 371,772 Current maturities of long-term debt 4,423 13,779 Current operating lease liabilities 12,373 12,259 Deferred revenue 14,708 40,968 Accrued expenses and other 38,433 38,409 Total current liabilities 381,207 494,163 Long-Term Liabilities Long-term debt, less current maturities 55,109 37,789 Operating lease liabilities 80,782 88,387 Deferred income taxes 5,814 2,055 Other long-term liabilities 10,376 7,845 Total long-term liabilities 152,081 136,076 Stockholders' Equity Common stock ? ? Additional paid-in-capital 252,270 250,607 Retained earnings 116,087 97,717 Accumulated other comprehensive loss (789 ) (3,220 )Total stockholders' equity 367,568 345,104 Total Liabilities and Stockholders' Equity $ 900,856 $ 975,343

TITAN MACHINERY INC.Consolidated Condensed Statements of Operations(in thousands, except per share data)(Unaudited) Three Months Ended Nine Months Ended October October 31, 31, 2020 2019 2020 2019Revenue Equipment $ 240,901 $ 245,986 $ 662,060 $ 654,376 Parts 76,778 70,788 194,846 181,928 Service 30,696 27,553 84,282 77,215 Rental and other 12,497 16,609 33,357 40,688 Total Revenue 360,872 360,936 974,545 954,207 Cost of Revenue Equipment 215,770 219,484 593,048 583,345 Parts 53,556 49,834 136,205 128,380 Service 10,254 8,950 28,263 25,170 Rental and other 8,741 10,894 23,379 27,612 Total Cost of Revenue 288,321 289,162 780,895 764,507 Gross Profit 72,551 71,774 193,650 189,700 Operating Expenses 54,115 58,184 160,252 165,594 Impairment of Goodwill 1,453 ? 1,453 ? Impairment of Intangible 1,102 51 1,318 186 and Long-Lived AssetsIncome from Operations 15,881 13,539 30,627 23,920 Other Income (Expense) Interest and other income (360 ) 1,273 333 2,687 (expense)Floorplan interest (757 ) (1,448 ) (2,811 ) (3,724 )expenseOther interest expense (940 ) (955 ) (2,884 ) (3,562 )Income Before Income 13,824 12,409 25,265 19,321 TaxesProvision for Income 3,912 4,195 6,691 6,041 TaxesNet Income 9,912 8,214 18,574 13,280 Diluted Earnings per $ 0.44 $ 0.37 $ 0.83 $ 0.60 ShareDiluted Weighted Average 22,137 21,976 22,091 21,942 Common Shares

TITAN MACHINERY INC.Consolidated Condensed Statements of Cash Flows(in thousands)(Unaudited) Nine Months Ended October 31, 2020 2019Operating Activities Net income $ 18,574 $ 13,280 Adjustments to reconcile net income to net cash provided by (used for) operating activitiesDepreciation and amortization 17,731 21,061 Impairment 2,771 186 Other, net 12,033 12,281 Changes in assets and liabilities Inventories 76,495 (133,929 )Manufacturer floorplan payable (46,466 ) 113,632 Other working capital (20,324 ) (34,800 )Net Cash Provided by (Used for) Operating Activities 60,814 (8,289 )Investing Activities Property and equipment purchases (16,205 ) (20,402 )Proceeds from sale of property and equipment 795 1,386 Acquisition consideration, net of cash acquired (6,790 ) (11,752 )Other, net (16 ) 13 Net Cash Used for Investing Activities (22,216 ) (30,755 )Financing Activities Net change in non-manufacturer floorplan payable (40,779 ) 62,387 Principal payments on senior convertible notes ? (45,644 )Net proceeds from (payments on) long-term debt and 909 18,668 finance leasesOther, net (909 ) (509 )Net Cash Provided by (Used for) Financing Activities (40,779 ) 34,902 Effect of Exchange Rate Changes on Cash 268 (183 )Net Change in Cash (1,913 ) (4,325 )Cash at Beginning of Period 43,721 56,745 Cash at End of Period $ 41,808 $ 52,420

TITAN MACHINERY INC.Segment Results(in thousands)(Unaudited) Three Months Ended October 31, Nine Months Ended October 31, 2020 2019 % 2020 2019 % Change ChangeRevenue Agriculture $ 220,625 $ 214,073 3.1% $ 583,326 $ 533,538 9.3%Construction 79,030 78,031 1.3% 216,862 232,813 (6.9)%International 61,217 68,832 (11.1) 174,357 187,856 (7.2)% %Total $ 360,872 $ 360,936 ?% $ 974,545 $ 954,207 2.1% Income (Loss)Before Income TaxesAgriculture $ 13,575 $ 10,259 32.3% $ 26,490 $ 18,312 44.7%Construction 1,448 347 n/m (50 ) (541 ) 90.8%International (2,424 ) 2,061 n/m (3,136 ) 2,783 n/mSegmentincome before 12,599 12,667 (0.5)% 23,304 20,554 13.4%income taxesShared 1,225 (258 ) n/m 1,961 (1,233 ) n/mResourcesTotal $ 13,824 $ 12,409 11.4% $ 25,265 $ 19,321 30.8%

TITAN MACHINERY INC.Non-GAAP Reconciliations(in thousands, except per share data)(Unaudited) Three Months Ended Nine Months Ended October 31, October 31, 2020 2019 2020 2019Adjusted Net Income Net Income $ 9,912 $ 8,214 $ 18,574 $ 13,280 Adjustments ERP transition costs 765 2,062 2,250 4,778 Impairment charges 2,555 51 2,771 186 Ukraine remeasurement (gain) / 339 (435 ) 974 (588 )lossTotal Pre-Tax Adjustments 3,659 1,678 5,995 4,376 Less: Tax Effect of Adjustments 1,566 (846 ) 2,613 (417 )(1)Plus: Income Tax Valuation 1,018 ? 1,018 ? AllowanceTotal Adjustments 3,111 2,524 4,400 4,793 Adjusted Net Income $ 13,023 $ 10,738 $ 22,974 $ 18,073 Adjusted Diluted EPS Diluted EPS $ 0.44 $ 0.37 $ 0.83 $ 0.60 Adjustments (2) ERP transition costs 0.03 0.09 0.10 0.21 Impairment charges 0.11 ? 0.12 0.01 Ukraine remeasurement (gain) / 0.02 (0.02 ) 0.04 (0.03 )lossTotal Pre-Tax Adjustments 0.16 0.07 0.26 0.19 Less: Tax Effect of Adjustments 0.07 (0.04 ) 0.12 (0.02 )(1)Plus: Income Tax Valuation 0.05 ? 0.05 ? AllowanceTotal Adjustments 0.14 0.11 0.19 0.21 Adjusted Diluted EPS $ 0.58 $ 0.48 $ 1.02 $ 0.81 Adjusted Income Before Income TaxesIncome Before Income Taxes $ 13,824 $ 12,409 $ 25,264 $ 19,321 Adjustments ERP transition costs 766 2,061 2,250 4,778 Impairment charges 2,555 51 2,771 186 Ukraine remeasurement (gain) / 338 (435 ) 973 (588 )lossTotal Adjustments 3,659 1,677 5,994 4,376 Adjusted Income Before Income $ 17,483 $ 14,086 $ 31,258 $ 23,697 Taxes Adjusted Income (Loss) Before Income Taxes - AgricultureIncome Before Income Taxes $ 13,575 $ 10,259 $ 26,490 $ 18,311 Impairment charges 244 ? 244 ? Adjusted Income Before Income $ 13,819 $ 10,259 $ 26,734 $ 18,311 Taxes Adjusted Loss Before Income Taxes - ConstructionIncome (Loss) Before Income $ 1,448 $ 347 $ (50 ) $ (541 )TaxesImpairment charges ? 51 216 186 Adjusted Income (Loss) Before $ 1,448 $ 398 $ 166 $ (355 )Income Taxes Adjusted Income Before Income Taxes - InternationalIncome (Loss) Before Income $ (2,424 ) $ 2,061 $ (3,136 ) $ 2,783 TaxesAdjustments Impairment charges 2,311 ? 2,311 ? Ukraine remeasurement (gain) / 338 (435 ) 973 (588 )lossAdjusted Income Before Income $ 225 $ 1,626 $ 148 $ 2,195 Taxes Adjusted EBITDA Net Income $ 9,912 $ 8,214 $ 18,574 $ 13,280 Adjustments Interest expense, net of 898 887 2,690 3,305 interest incomeProvision for income taxes 3,912 4,195 6,691 6,041 Depreciation and amortization 6,445 7,797 17,731 21,061 EBITDA 21,167 21,093 45,686 43,687 Adjustments ERP transition costs 765 687 2,250 1,113 Impairment charges 2,555 51 2,771 186 Ukraine remeasurement (gain) / 339 (435 ) 974 (588 )lossTotal Adjustments 3,659 303 5,995 711 Adjusted EBITDA $ 24,826 $ 21,396 $ 51,681 $ 44,398 Adjusted Net Cash Provided By (Used for) Operating ActivitiesNet Cash Used for Operating $ 60,814 $ (8,289 )ActivitiesNet Change in Non-Manufacturer (40,779 ) 62,387 Floorplan PayableAdjustment for Constant Equity 36,477 (89,076 )in InventoryAdjusted Net Cash Provided by $ 56,512 $ (34,978 )(Used) for Operating Activities (1) The tax effect of U.S. related adjustments was calculated using a 26% taxrate, determined based on a 21% federal statutory rate and a 5% blended stateincome tax rate. The tax effect of the Germany related adjustments wascalculated using a 29% tax rate. Included in the tax effect of the adjustmentsis the tax impact of foreign currency changes in Ukraine of $0.7 million forthe three months ended October 31, 2020 and $1.3 million for the nine monthsended October 31, 2020.(2) Adjustments are net of amounts allocated to participating securities where applicable.