GlobeNewswire Inc | Aug 27, 2020 06:45AM EDT

August 27, 2020

- Revenue for Second Quarter of Fiscal 2021 was $303.5 million -

- GAAP EPS for Second Quarter of Fiscal 2021 was $0.28 and Adjusted EPS was $0.29 -

- Company Introduces Modeling Assumptions for Fiscal Full Year 2021 -

WEST FARGO, N.D., Aug. 27, 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 second quarter ended July31, 2020.

David Meyer, Titan Machinerys Chairman and Chief Executive Officer, stated, "We generated a solid second quarter top and bottom line performance amid an uncertain environment, which demonstrates the sustainability of our business due to our committed employees along with our strong equipment, parts and service offering. Our Agriculture segment produced 9.3% growth in pre-tax income driven primarily by continued strength in our parts and service businesses. Considering the challenging industry conditions created from the COVID-19 pandemic, we are also pleased with the performance of our Construction and International segments. These results wouldn't be possible without the resolve from our store operations teams that are delivering uninterrupted customer service, while maintaining the safety of their fellow co-workers and our customers."

Fiscal 2021 Second Quarter Results

Consolidated ResultsFor the second quarter of fiscal 2021, revenue was $303.5 million, compared to $315.0 million in the second quarter last year. Equipment sales were $202.7 million for the second quarter of fiscal 2021, compared to $214.4 million in the second quarter last year. Parts sales were $61.5 million for the second quarter of fiscal 2021, compared to $59.2 million in the second quarter last year. Revenue generated from service was $28.0 million for the second quarter of fiscal 2021, compared to $26.8 million in the second quarter last year. Revenue from rental and other was $11.4 million for the second quarter of fiscal 2021, compared to $14.5 million in the second quarter last year.

Gross profit for the second quarter of fiscal 2021 was $62.7 million, compared to $64.0 million in the second quarter last year. Gross profit margin increased 40 basis points to 20.7% 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 second quarter of last year.

Operating expenses decreased by $1.8 million to $53.1 million for the second quarter of fiscal 2021, compared to $54.9 million in the second quarter last year. Operating expenses as a percentage of sales increased slightly to 17.5% for the second quarter of fiscal 2021, compared to 17.4% of revenue in the prior year period due to lower revenue.

Floorplan and other interest expense was $1.9 million in the second quarter of fiscal 2021, compared to $2.4million for the same period last year. The decrease was due to a lower interest rate environment as well as a lower interest rate spread under our new five-year Amended and Restated Credit Agreement that was finalized in April 2020.

In the second quarter of fiscal 2021, net income was $6.4 million, or earnings per diluted share of $0.28, compared to net income of $5.5 million, or earnings per diluted share of $0.25, for the second quarter of last year.

On an adjusted basis, net income for the second quarter of fiscal 2021 was $6.6 million, or adjusted earnings per diluted share of $0.29, compared to adjusted net income of $6.9 million, or adjusted earnings per diluted share of $0.31, for the second quarter of last year.

Adjusted EBITDA was $15.8 million in the second quarter of fiscal 2021, compared to $15.4 million in the second quarter of last year.

Segment ResultsAgriculture Segment - Revenue for the second quarter of fiscal 2021 was $169.1 million, compared to $165.7 million in the second quarter last year. The increase in revenue was driven by on-going momentum in parts and service business. Pre-tax income for the second quarter of fiscal 2021 was $6.8 million, compared to $6.2 million of pre-tax income in the second quarter last year.

Construction Segment - Revenue for the second quarter of fiscal 2021 was $77.7 million, compared to $84.0 million in the second quarter last year. The decrease in revenue was primarily the result of lower equipment and rental demand due to COVID-19 related macroeconomic challenges and uncertainty. Pre-tax income for the second quarter of fiscal 2021 was $1.4 million, compared to a pre-tax income of $1.3 million in the second quarter last year.

InternationalSegment - Revenue for the second quarter of fiscal 2021 was $56.7 million, compared to $65.3 million in the second quarter last year. Lower revenue was driven by decreased customer demand due to below average small grain 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 second quarter of fiscal 2021 was $0.4 million, compared to income of $0.5 million in the second quarter last year. Adjusted pre-tax loss for the second quarter of fiscal 2021 was $0.6million, compared to adjusted pre-tax income of $0.4 million in the second quarter last year.

Fiscal 2021 First Six Months Results

Revenue was $613.7 million for the first six months of fiscal 2021, compared to $593.3 million for the same period last year. Net income for the first six months of fiscal 2021 was $8.7 million, or $0.39 per diluted share, compared to a net income of $5.1 million, or $0.23 per diluted share, for the same period last year. On an adjusted basis, net income for the first six months of fiscal 2021 was $10.0 million, or $0.44 per diluted share, compared to an adjusted net income of $7.3 million, or $0.33 per diluted share, in the same period last year. Adjusted EBITDA was $26.9 million in the first six months of fiscal 2021, compared to $22.6 million in the same period last year.

Balance Sheet and Cash Flow

Cash at the end of the second quarter of fiscal 2021 was $44.5 million. Inventories decreased to $570.7 million as of July31, 2020, compared to $597.4 million as of January31, 2020. This inventory decrease includes a $33.2 million decrease in equipment inventory, which reflects a decrease in new equipment inventory of $23.9 million and a $9.3 million decrease in used equipment inventory. Outstanding floorplan payables were $352.2 million on $763.0 million total available floorplan lines of credit as of July31, 2020, compared to $371.8 million outstanding floorplan payables as of January31, 2020.

In the first six months of fiscal 2021, net cash provided by operating activities was $13.0 million, compared to net cash used for $6.3 million in the first six 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 $16.1 million in the first six months of fiscal 2021, compared to adjusted net cash used for operating activities of $49.3 million in the first six months of fiscal 2020.

Mr. Meyer concluded, "Our business remains in a strong financial position, bolstered by an improving inventory position and the additional flexibility and favorable terms of our recently amended credit agreement. Our team has met the recent challenges by successfully reducing expenses and strengthening our balance sheet. Due to the solid first half of fiscal 2021 and our belief in a stabilizing Agriculture business, we are introducing our modeling assumptions for full year fiscal 2021 for the first time since the COVID-19 pandemic began. We continue to maintain our focus on long-term growth initiatives and are grateful to our employees who help us execute these strategies every day."

Fiscal 2021 Modeling Assumptions

The Company is introducing annual modeling assumptions for fiscal year 2021. The Company will provide additional statements regarding expectations for the remainder of fiscal year 2021 on its conference call hosted today. 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 AssumptionsSegment Revenue Agriculture^(1) Up 0-5%Construction^(2) Down 5-10%International Down 10-15% Diluted EPS $0.55 - $0.75Adjusted Diluted EPS^(3) $0.65 - $0.85 ^(1)Includes the full year impact of the Northwood, ND acquisition completed inOctober 2019 and partial year impact of the HorizonWest acquisition completedin May 2020.^(2)Includes the full year impact of the Albuquerque, NM store divestiture inJanuary 2020.^(3)Excludes approximately $0.10 per diluted share impact of anticipatedERP-related expenses. The new ERP system is anticipated to be implemented inthe first half of fiscal 2022.

Conference Call and Presentation Information

The 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 Thursday, September 10, 2020, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13705793.

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 costs associated with impairment charges, Ukraine remeasurement and some of the 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, including from the newly acquired HorizonWest dealership complex, 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, climate 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) July 31, 2020 January 31, 2020Assets Current Assets Cash $ 44,484 $ 43,721 Receivables, net of allowance for expected 75,782 72,776 credit lossesInventories 570,680 597,394 Prepaid expenses and other 7,144 13,655 Total current assets 698,090 727,546 Noncurrent Assets Property and equipment, net of accumulated 150,496 145,562 depreciationOperating lease assets 83,586 88,281 Deferred income taxes 3,337 2,147 Goodwill 2,818 2,327 Intangible assets, net of accumulated 8,568 8,367 amortizationOther 1,130 1,113 Total noncurrent assets 249,935 247,797 Total Assets $ 948,025 $ 975,343 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 20,734 $ 16,976 Floorplan payable 352,215 371,772 Current maturities of long-term debt 3,921 13,779 Current operating lease liabilities 12,158 12,259 Deferred revenue 22,716 40,968 Accrued expenses and other 38,122 38,409 Total current liabilities 449,866 494,163 Long-Term Liabilities Long-term debt, less current maturities 48,665 37,789 Operating lease liabilities 83,341 88,387 Deferred income taxes 2,301 2,055 Other long-term liabilities 9,060 7,845 Total long-term liabilities 143,367 136,076 Stockholders' Equity Common stock ? ? Additional paid-in-capital 251,587 250,607 Retained earnings 106,175 97,717 Accumulated other comprehensive loss (2,970 ) (3,220 ) Total stockholders' equity 354,792 345,104 Total Liabilities and Stockholders' Equity $ 948,025 $ 975,343

TITAN MACHINERY INC.Consolidated Condensed Statements of Operations(in thousands, except per share data)(Unaudited) Three Months Ended July 31, Six Months Ended July 31, 2020 2019 2020 2019Revenue Equipment $ 202,654 $ 214,435 $ 421,159 $ 408,390 Parts 61,454 59,202 118,068 111,140 Service 27,986 26,832 53,586 49,662 Rental and other 11,371 14,512 20,860 24,079 Total Revenue 303,465 314,981 613,673 593,271 Cost of Revenue Equipment 180,231 190,707 377,278 363,861 Parts 43,032 41,732 82,649 78,546 Service 9,665 8,737 18,010 16,219 Rental and other 7,849 9,778 14,636 16,719 Total Cost of 240,777 250,954 492,573 475,345 RevenueGross Profit 62,688 64,027 121,100 117,926 Operating 53,079 54,855 106,137 107,410 ExpensesImpairment of ? ? 216 135 Long-Lived AssetsIncome from 9,609 9,172 14,747 10,381 OperationsOther Income (Expense)Interest and 562 620 692 1,414 other incomeFloorplan (901 ) (1,399 ) (2,054 ) (2,276 ) interest expenseOther interest (978 ) (966 ) (1,944 ) (2,607 ) expenseIncome Before 8,292 7,427 11,441 6,912 Income TaxesProvision for 1,892 1,916 2,779 1,846 Income TaxesNet Income 6,400 5,511 8,662 5,066 Diluted Earnings $ 0.28 $ 0.25 $ 0.39 $ 0.23 per ShareDiluted WeightedAverage Common 22,119 21,964 22,068 21,922 Shares

TITAN MACHINERY INC.Consolidated Condensed Statements of Cash Flows(in thousands)(Unaudited) Six Months Ended July 31, 2020 2019Operating Activities Net income $ 8,662 $ 5,066 Adjustments to reconcile net income to net cash provided by (used for) operating activitiesDepreciation and amortization 11,286 13,264 Impairment 216 135 Other, net 5,661 7,643 Changes in assets and liabilities Inventories 31,885 (140,149 ) Manufacturer floorplan payable (26,726 ) 128,635 Other working capital (17,949 ) (20,897 ) Net Cash Provided by (Used for) Operating 13,035 (6,303 ) ActivitiesInvesting Activities Property and equipment purchases (10,473 ) (12,350 ) Proceeds from sale of property and equipment 489 670 Acquisition consideration, net of cash acquired (6,790 ) (2,972 ) Other, net (20 ) 14 Net Cash Used for Investing Activities (16,794 ) (14,638 ) Financing Activities Net change in non-manufacturer floorplan payable 7,229 49,937 Principal payments on senior convertible notes ? (45,644 ) Net proceeds from (payments on) long-term debt and (1,840 ) 9,846 finance leasesOther, net (870 ) (492 ) Net Cash Provided by Financing Activities 4,519 13,647 Effect of Exchange Rate Changes on Cash 3 66 Net Change in Cash 763 (7,228 ) Cash at Beginning of Period 43,721 56,745 Cash at End of Period $ 44,484 $ 49,517

TITAN MACHINERY INC.Segment Results(in thousands)(Unaudited) Three Months Ended July 31, Six Months Ended July 31, 2020 2019 % Change 2020 2019 % ChangeRevenue Agriculture $ 169,072 $ 165,692 2.0 % $ 362,700 $ 319,464 13.5 %Construction 77,719 84,039 (7.5 ) % 137,833 154,782 (11.0 ) %International 56,674 65,250 (13.1 ) % 113,140 119,025 (4.9 ) %Total $ 303,465 $ 314,981 (3.7 ) % $ 613,673 $ 593,271 3.4 % Income (Loss)Before Income TaxesAgriculture $ 6,752 $ 6,177 9.3 % $ 12,914 $ 8,053 60.4 %Construction 1,375 1,334 3.1 % (1,498 ) (888 ) (68.7 ) %International (432 ) 505 n/m (711 ) 722 n/mSegmentincome (loss) 7,695 8,016 (4.0 ) % 10,705 7,887 35.7 %before incometaxesShared 597 (589 ) n/m 735 (975 ) n/mResourcesTotal $ 8,292 $ 7,427 11.7 % $ 11,440 $ 6,912 65.5 %

TITAN MACHINERY INC.Non-GAAP Reconciliations(in thousands, except per share data)(Unaudited) Three Months Ended July 31, Six Months Ended July 31, 2020 2019 2020 2019Adjusted Net IncomeNet Income (Loss) $ 6,400 $ 5,511 $ 8,662 $ 5,066 Adjustments ERP transition 763 1,701 1,484 2,716 costsImpairment charges ? ? 216 135 Ukraineremeasurement (130 ) (141 ) 635 (153 ) (gain) / lossTotal Pre-Tax 633 1,560 2,335 2,698 AdjustmentsLess: Tax Effect 466 186 1,047 429 of Adjustments (1)Total Adjustments 167 1,374 1,288 2,269 Adjusted Net $ 6,567 $ 6,885 $ 9,950 $ 7,335 Income Adjusted Diluted EPSDiluted EPS $ 0.28 $ 0.25 $ 0.39 $ 0.23 Adjustments (2) ERP transition 0.03 0.08 0.07 0.13 costsImpairment charges ? ? 0.01 ? Ukraineremeasurement ? (0.01 ) 0.02 (0.01 ) (gain) / lossTotal Pre-Tax 0.03 0.07 0.10 0.12 AdjustmentsLess: Tax Effect 0.02 0.01 0.05 0.02 of Adjustments (1)Total Adjustments 0.01 0.06 0.05 0.10 Adjusted Diluted $ 0.29 $ 0.31 0.44 0.33 EPS Adjusted IncomeBefore Income TaxesIncome (Loss)Before Income $ 8,292 $ 7,427 $ 11,440 $ 6,912 TaxesAdjustments ERP transition 763 1,701 1,484 2,716 costsImpairment charges ? ? 216 135 Ukraineremeasurement (130 ) (141 ) 635 (153 ) (gain) / lossTotal Adjustments 633 1,560 2,335 2,698 Adjusted IncomeBefore Income $ 8,925 $ 8,987 $ 13,775 $ 9,610 Taxes Adjusted LossBefore Income Taxes -ConstructionIncome (Loss)Before Income $ 1,375 $ 1,334 $ (1,498 ) $ (888 ) TaxesImpairment charges ? ? 216 135 Adjusted LossBefore Income $ 1,375 $ 1,334 $ (1,282 ) $ (753 ) Taxes Adjusted IncomeBefore Income Taxes -InternationalIncome (Loss)Before Income $ (432 ) $ 505 $ (711 ) $ 722 TaxesUkraineremeasurement (130 ) (141 ) 635 (153 ) (gain) / lossAdjusted IncomeBefore Income $ (562 ) $ 364 $ (76 ) $ 569 Taxes Adjusted EBITDA Net Income $ 6,400 $ 5,511 $ 8,662 $ 5,066 Adjustments Interest expense,net of interest 938 885 1,792 2,419 incomeProvision for 1,892 1,916 2,779 1,846 income taxesDepreciation and 5,911 7,200 11,286 13,264 amortizationEBITDA 15,141 15,512 24,519 22,595 Adjustments ERP transition 763 ? 1,484 ? costsImpairment charges ? ? 216 135 Ukraineremeasurement (130 ) (141 ) 635 (153 ) (gain) / lossTotal Adjustments 633 (141 ) 2,335 (18 ) Adjusted EBITDA $ 15,774 $ 15,371 $ 26,854 $ 22,577 Adjusted Net CashProvided By (Used for) OperatingActivitiesNet Cash Used forOperating $ 13,035 $ (6,303 ) ActivitiesNet Change inNon-Manufacturer 7,229 49,937 Floorplan PayableAdjustment forConstant Equity in (4,191 ) (92,977 ) InventoryAdjusted Net CashUsed for Operating $ 16,073 $ (49,343 ) Activities (1) The tax effect of U.S. related adjustments was calculatedusing a 26% tax rate, determined based on a 21% federalstatutory rate and a 5% blended state income tax rate. Includedin the tax effect of the adjustments is the tax impact of foreign currency changes in Ukraine of $0.3 million for thethree months ended July 31, 2020 and $0.6 million for the sixmonths ended July 31, 2020.(2) Adjustments are net of amounts allocated to participating securities where applicable.