GlobeNewswire Inc | Aug 26, 2021 06:45AM EDT

August 26, 2021

- Revenue for Second Quarter of Fiscal 2022 Increased 24.4% to $377.6 million -

- GAAP EPS for Second Quarter of Fiscal 2022 was $0.50 and Adjusted EPS was $0.57 -

- Company Increases Fiscal 2022 Modeling Assumptions -

WEST FARGO, N.D., Aug. 26, 2021 (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, 2021.

David Meyer, Titan Machinerys Chairman and Chief Executive Officer, stated, "Equipment demand momentum continued through our second fiscal quarter with our equipment revenues increasing 35% versus prior year. The current environment is supported by our healthy inventory position and robust demand, along with continued strength in our parts and service business, driving strong consolidated pre-tax income growth of 89% during second quarter compared to prior year second quarter. From a segment perspective, our Agriculture business was well-positioned and produced exceptional growth as high commodity prices are offsetting drought conditions in areas of our footprint. However, we are especially pleased with the improved performance of both our Construction and International segments. Our construction segment pre-tax income grew 105% versus the prior year and our International segment pre-tax income increased by $0.9 million, and on an adjusted basis by $2.4 million, versus the prior year. Our operational improvements have enhanced the performance of each of our segments, as well as added value to our customers' businesses. Looking forward, our team is ready to support our customers through the upcoming busy harvest and end of year construction seasons, as we complete the second half of our fiscal year."

Fiscal 2022 Second Quarter Results

Consolidated ResultsFor the second quarter of fiscal 2022, revenue increased to $377.6 million compared to $303.5 million in the second quarter last year. Equipment sales were $272.7 million for the second quarter of fiscal 2022, compared to $202.7 million in the second quarter last year. Parts sales were $65.3 million for the second quarter of fiscal 2022, compared to $61.5 million in the second quarter last year. Revenue generated from service was $29.7 million for the second quarter of fiscal 2022, compared to $28.0 million in the second quarter last year. Revenue from rental and other was $9.9 million for the second quarter of fiscal 2022, compared to $11.4 million in the second quarter last year. Rental revenue was down due to a decrease in inventory rentals, a reduced rental fleet and the January 2021 divestiture of the company's construction stores in Arizona. While the fleet was smaller compared to the prior year, the dollar utilization of the fleet improved to 26.6% in the quarter compared to 22.2% in the same period last year.

Gross profit for the second quarter of fiscal 2022 was $75.0 million, compared to $62.7 million in the second quarter last year. The Company's gross profit margin decreased to 19.9% in the second quarter of fiscal 2022, compared to 20.7% in the second quarter last year. Gross profit margin decreased due to mix, with a greater proportion of equipment revenue this year versus higher margin parts and service revenue as compared to the second quarter of the prior year.

Operating expenses increased by $4.0 million to $57.1 million for the second quarter of fiscal 2022, compared to $53.1 million in the second quarter last year, primarily due to higher variable expenses on increased revenues. Operating expenses as a percentage of revenue decreased 240 basis points to 15.1% for the second quarter of fiscal 2022, compared to 17.5% of revenue in the prior year period. The Company also recognized impairments related to intangible and long-lived assets within our International segment of $1.5 million in the second quarter of fiscal 2022 compared to none in the prior year quarter.

Floorplan and other interest expense was $1.5 million in the second quarter of fiscal 2022, compared to $1.9million for the same period last year. The decrease was primarily due to lower borrowings.

In the second quarter of fiscal 2022, net income was $11.2 million, or earnings per diluted share of $0.50, compared to net income of $6.4 million, or earnings per diluted share of $0.28, for the second quarter of last year.

On an adjusted basis, net income for the second quarter of fiscal 2022 was $13.0 million, or adjusted earnings per diluted share of $0.57, compared to adjusted net income of $6.6 million, or adjusted earnings per diluted share of $0.29, for the second quarter of last year.

Adjusted EBITDA was $23.5 million in the second quarter of fiscal 2022, compared to $15.8 million in the second quarter of last year.

Segment ResultsAgriculture Segment - Revenue for the second quarter of fiscal 2022 was $219.4 million, compared to $169.1 million in the second quarter last year. The increase in revenue was primarily driven by strong demand for equipment. Pre-tax income for the second quarter of fiscal 2022 was $12.1 million, compared to $6.8 million in the second quarter last year.

Construction Segment - Revenue for the second quarter of fiscal 2022 was $80.9 million, compared to $77.7 million in the second quarter last year. The increase in revenue was driven by increased equipment sales partially offset by lower parts, service and rental revenue as a result of our previously announced divestment in Arizona. Pre-tax income for the second quarter of fiscal 2022 was $2.8 million, compared to $1.4 million in the second quarter last year.

InternationalSegment - Revenue for the second quarter of fiscal 2022 was $77.3 million, compared to $56.7 million in the second quarter last year. The increase in revenue was driven by strong equipment sales. Pre-tax income for the second quarter of fiscal 2022 was $0.4 million, compared to a pre-tax loss of $0.4 million in the second quarter last year. Adjusted pre-tax income for the second quarter of fiscal 2022 was $1.9million, compared to an adjusted pre-tax loss of $0.6 million in the second quarter last year.

Fiscal 2022 First Six Months Results

Revenue was $750.3 million for the first six months of fiscal 2022, compared to $613.7 million for the same period last year. Net income for the first six months of fiscal 2022 was $21.8 million, or $0.97 per diluted share, compared to a net income of $8.7 million, or $0.39 per diluted share, for the same period last year. On an adjusted basis, net income for the first six months of fiscal 2022 was $23.4 million, or $1.04 per diluted share, compared to an adjusted net income of $10.0 million, or $0.44 per diluted share, in the same period last year. Adjusted EBITDA was $43.3 million in the first six months of fiscal 2022, compared to $26.9 million in the same period last year.

Balance Sheet and Cash Flow

Cash at the end of the second quarter of fiscal 2022 was $65.6 million. Inventories increased to $427.1 million as of July31, 2021, compared to $418.5 million as of January31, 2021. This inventory increase includes a $10.6 million increase in parts inventory and a $2.5 million decrease in equipment inventory, which reflects an increase in new equipment inventory of $31.4 million and a $34.0 million decrease in used equipment inventory. Outstanding floorplan payables were $185.5 million on $771.0 million total available floorplan lines of credit as of July31, 2021, compared to $161.8 million outstanding floorplan payables as of January31, 2021.

In the first six months of fiscal 2022, net cash provided by operating activities was $28.6 million, compared to net cash provided by operating activities of $13.0 million in the first six months of fiscal 2021. 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 used for operating activities was $19.0 million in the first six months of fiscal 2022, compared to adjusted net cash provided by operating activities of $16.1 million in the first six months of fiscal 2021.

Mr. Meyer concluded, "The current environment is providing us the opportunity to showcase the improvements we've made to our business over the past several years. Our inventory turns are continuing to trend upward and we are receiving inventory shipments that are allowing us to surpass our revenue targets. While supply chains remain tight, we are confident in our ability to drive growth through the second half of our fiscal year and, as a result, we are raising our modeling assumptions accordingly."

Fiscal 2022 Modeling Assumptions

The following are the Company's current expectations for fiscal 2022 modeling assumptions.

Current Assumptions Previous AssumptionsSegment Revenue Agriculture^(1) Up 18-23% Up 15-20%Construction^(2) Up 2-7% Up 2-7%International Up 27-32% Up 17-22% Diluted EPS^(3) $2.00 - $2.20 $1.65 - $1.85 ^(1) Includes the full year impact of the HorizonWest acquisition completed inMay 2020.^(2) Includes the full year impact of the Phoenix and Tucson, AZ storedivestitures in January 2021. Adjusting full year fiscal 2021 net sales by $27million, representing the 2021 net sales of these divested stores, results in asame-store sales assumption of up approximately 10-15%.^(3) Includes expenses related to ERP implementation.

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 9, 2021, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13722439.

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, impairment charges, Ukraine remeasurement gains/losses and charges associated with our Enterprise Resource Planning (ERP) system transition during fiscal 2021. 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 financial 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 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, 2022, 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 Condensed Balance Sheets(in thousands, except per share data)(Unaudited) July 31, January 31, 2021 2021Assets Current Assets Cash $ 65,584 $ 78,990 Receivables, net of allowance for expected credit 82,068 69,109 lossesInventories 427,109 418,458 Prepaid expenses and other 20,684 13,677 Total current assets 595,445 580,234 Noncurrent Assets Property and equipment, net of accumulated 162,657 147,165 depreciationOperating lease assets 66,934 74,445 Deferred income taxes 5,265 3,637 Goodwill 1,433 1,433 Intangible assets, net of accumulated 6,558 7,785 amortizationOther 1,079 1,090 Total noncurrent assets 243,926 235,555 Total Assets $ 839,371 $ 815,789 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 20,649 $ 20,045 Floorplan payable 185,549 161,835 Current maturities of long-term debt 5,455 4,591 Current operating lease liabilities 10,755 11,772 Deferred revenue 37,977 59,418 Accrued expenses and other 47,751 48,791 Income taxes payable 2,335 11,048 Total current liabilities 310,471 317,500 Long-Term Liabilities Long-term debt, less current maturities 63,624 44,906 Operating lease liabilities 66,678 73,567 Other long-term liabilities 6,746 8,535 Total long-term liabilities 137,048 127,008 Stockholders' Equity Common stock ? ? Additional paid-in-capital 253,129 252,913 Retained earnings 138,665 116,869 Accumulated other comprehensive income 58 1,499 Total stockholders' equity 391,852 371,281 Total Liabilities and Stockholders' Equity $ 839,371 $ 815,789

TITAN MACHINERY INC.Consolidated Condensed Statements of Operations(in thousands, except per share data)(Unaudited) Three Months Ended July Six Months Ended July 31, 31, 2021 2020 2021 2020Revenue Equipment $ 272,733 $ 202,654 $ 548,713 $ 421,159 Parts 65,317 61,454 127,942 118,068 Service 29,676 27,986 57,379 53,586 Rental and other 9,904 11,371 16,300 20,860 Total Revenue 377,630 303,465 750,334 613,673 Cost of Revenue Equipment 240,332 180,231 484,008 377,278 Parts 46,089 43,032 90,529 82,649 Service 9,771 9,665 19,065 18,010 Rental and other 6,420 7,849 10,737 14,636 Total Cost of Revenue 302,612 240,777 604,339 492,573 Gross Profit 75,018 62,688 145,995 121,100 Operating Expenses 57,074 53,079 113,516 106,137 Impairment of Intangible 1,498 ? 1,498 216 and Long-Lived AssetsIncome from Operations 16,446 9,609 30,981 14,747 Other Income (Expense) Interest and other income 654 562 1,320 692 Floorplan interest (350 ) (901 ) (768 ) (2,054 )expenseOther interest expense (1,118 ) (978 ) (2,222 ) (1,944 )Income Before Income 15,632 8,292 29,311 11,441 TaxesProvision for Income 4,383 1,892 7,515 2,779 TaxesNet Income 11,249 6,400 21,796 8,662 Diluted Earnings per $ 0.50 $ 0.28 $ 0.97 $ 0.39 ShareDiluted Weighted Average 22,276 22,119 22,220 22,068 Common Shares

TITAN MACHINERY INC.Consolidated Condensed Statements of Cash Flows(in thousands)(Unaudited) Six Months Ended July 31, 2021 2020Operating Activities Net income $ 21,796 $ 8,662 Adjustments to reconcile net income to net cash provided by operating activitiesDepreciation and amortization 10,602 11,286 Impairment 1,498 216 Other, net 4,893 5,661 Changes in assets and liabilities Inventories (17,166 ) 31,885 Manufacturer floorplan payable 56,436 (26,726 )Other working capital (49,498 ) (17,949 )Net Cash Provided by Operating Activities 28,561 13,035 Investing Activities Property and equipment purchases (19,834 ) (10,473 )Proceeds from sale of property and equipment 420 489 Acquisition consideration, net of cash acquired ? (6,790 )Other, net 12 (20 )Net Cash Used for Investing Activities (19,402 ) (16,794 )Financing Activities Net change in non-manufacturer floorplan payable (22,731 ) 7,229 Net proceeds from (payments on) long-term debt and 1,334 (1,840 )finance leasesOther, net (976 ) (870 )Net Cash Provided by (Used for) Financing Activities (22,373 ) 4,519 Effect of Exchange Rate Changes on Cash (192 ) 3 Net Change in Cash (13,406 ) 763 Cash at Beginning of Period 78,990 43,721 Cash at End of Period $ 65,584 $ 44,484

TITAN MACHINERY INC.Segment Results(in thousands)(Unaudited) Three Months Ended July 31, Six Months Ended July 31, 2021 2020 % Change 2021 2020 % ChangeRevenue Agriculture $ 219,364 $ 169,072 29.8 % $ 448,915 $ 362,700 23.8 %Construction 80,943 77,719 4.1 % 149,550 137,833 8.5 %International 77,323 56,674 36.4 % 151,869 113,140 34.2 %Total $ 377,630 $ 303,465 24.4 % $ 750,334 $ 613,673 22.3 % Income (Loss)Before Income TaxesAgriculture $ 12,067 $ 6,752 78.7 % $ 23,292 $ 12,914 80.4 %Construction 2,815 1,375 104.7 % 2,953 (1,498 ) n/mInternational 430 (432 ) n/m 3,238 (711 ) n/mSegmentincome before 15,312 7,695 99.0 % 29,483 10,705 n/mincome taxesShared 320 597 (46.4 ) % (172 ) 736 n/mResourcesTotal $ 15,632 $ 8,292 88.5 % $ 29,311 $ 11,441 n/m

TITAN MACHINERY INC.Non-GAAP Reconciliations(in thousands, except per share data)(Unaudited) Three Months Ended July Six Months Ended July 31, 31, 2021 2020 2021 2020Adjusted Net Income Net Income $ 11,249 $ 6,400 $ 21,796 $ 8,662 Adjustments ERP transition costs ? 763 ? 1,484 Impairment charges 1,498 ? 1,498 216 Ukraine remeasurement (53 ) (130 ) (183 ) 635 (gain) / lossTotal Pre-Tax Adjustments 1,445 633 1,315 2,335 Less: Tax Effect of ? 466 ? 1,047 Adjustments (1)Plus: Income Tax Valuation 278 ? 278 ? AllowanceTotal Adjustments 1,723 167 1,593 1,288 Adjusted Net Income $ 12,972 $ 6,567 $ 23,389 $ 9,950 Adjusted Diluted EPS Diluted EPS $ 0.50 $ 0.28 $ 0.97 $ 0.39 Adjustments (2) ERP transition costs ? 0.03 ? 0.07 Impairment charges 0.07 ? 0.07 0.01 Ukraine remeasurement (0.01 ) ? (0.01 ) 0.02 (gain) / lossTotal Pre-Tax Adjustments 0.06 0.03 0.06 0.10 Less: Tax Effect of ? 0.02 ? 0.05 Adjustments (1)Plus: Income Tax Valuation 0.01 ? 0.01 ? AllowanceTotal Adjustments 0.07 0.01 0.07 0.05 Adjusted Diluted EPS $ 0.57 $ 0.29 $ 1.04 $ 0.44 Adjusted Income Before Income TaxesIncome Before Income Taxes $ 15,632 $ 8,292 $ 29,311 $ 11,440 Adjustments ERP transition costs ? 763 ? 1,484 Impairment charges 1,498 ? 1,498 216 Ukraine remeasurement (53 ) (130 ) (183 ) 635 (gain) / lossTotal Adjustments 1,445 633 1,315 2,335 Adjusted Income Before $ 17,077 $ 8,925 $ 30,626 $ 13,775 Income Taxes Adjusted Loss BeforeIncome Taxes - ConstructionIncome (Loss) Before $ 2,815 $ 1,375 $ 2,953 $ (1,498 )Income TaxesImpairment charges ? ? ? 216 Adjusted Income (Loss) $ 2,815 $ 1,375 $ 2,953 $ (1,282 )Before Income Taxes Adjusted Income BeforeIncome Taxes - InternationalIncome (Loss) Before $ 430 $ (432 ) $ 3,238 $ (711 )Income TaxesAdjustments Impairment charges 1,498 ? 1,498 ? Ukraine remeasurement (53 ) (130 ) (183 ) 635 (gain) / lossTotal Adjustments 1,445 (130 ) 1,315 635 Adjusted Income (Loss) $ 1,875 $ (562 ) $ 4,553 $ (76 )Before Income Taxes Adjusted EBITDA Net Income $ 11,249 $ 6,400 $ 21,796 $ 8,662 Adjustments Interest expense, net of 1,049 938 2,100 1,792 interest incomeProvision for income taxes 4,383 1,892 7,515 2,779 Depreciation and 5,395 5,911 10,602 11,286 amortizationEBITDA 22,076 15,141 42,013 24,519 Adjustments ERP transition costs ? 763 ? 1,484 Impairment charges 1,498 ? 1,498 216 Ukraine remeasurement (53 ) (130 ) (183 ) 635 (gain) / lossTotal Adjustments 1,445 633 1,315 2,335 Adjusted EBITDA $ 23,521 $ 15,774 $ 43,328 $ 26,854 Adjusted Net Cash Providedby (Used for) Operating ActivitiesNet Cash Provided by $ 28,561 $ 13,035 Operating ActivitiesNet Change inNon-Manufacturer Floorplan (22,731 ) 7,229 PayableAdjustment for Constant (24,842 ) (4,191 )Equity in InventoryAdjusted Net Cash Providedby (Used for) Operating $ (19,012 ) $ 16,073 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. Included in the tax effect of the adjustments is the taximpact of foreign currency changes in Ukraine of $0.3 million for the threemonths ended July 31, 2020 and $0.6 million for the six months ended July 31,2020.(2) Adjustments are net of amounts allocated to participating securities where applicable.