Greetings, and welcome to the Titan Machinery Inc. Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Mills with ICR. Thank you. You may begin.

Thank you. Good morning ladies and gentlemen and welcome to the Titan Machinery third quarter fiscal 2021 earnings conference call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; Mark Kalvoda, Chief Financial Officer; and Bryan Knutson, Chief Operating Officer. By now, everyone should have access to the earnings release for the fiscal third quarter ended October 31, 2020, which went out this morning at approximately 6:45 am Eastern time. If you have not received the release, it is available on the Investor Relations page of Titan’s website at ir.titanmachinery.com. This call is being webcast and a replay will be available on the company’s website as well. In addition, we are providing a presentation to accompany today’s prepared remarks. You may access the presentation now by going to Titan’s website at ir.titanmachinery.com. The presentation is available directly below the webcast information in the middle of the page. You’ll see on Slide 2 of the presentation our Safe Harbor statement. We would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan’s most recently filed annual report on Form 10-K and as updated in subsequent filings and quarterly reports on Form 10-Q. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today’s release or call. Please note that during today’s call, we’ll discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan’s ongoing financial performance, particularly when comparing underlying results from period to period. We’ve included a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures in today’s release. The call will last approximately 45 minutes. And at the conclusion of our prepared remarks, we will open the call to take your questions. Now I’d like to introduce the company’s Chairman and CEO, Mr. David Meyer. Go ahead, David.

Thank you, John. Good morning, everyone. Welcome to our third quarter fiscal 2021 earnings conference call. On today’s call, I will provide a summary of our results, and then Bryan Knutson, our Chief Operating Officer, will give an overview for each of our business segments. Mark Kalvoda, our CFO, will then review financial results for the third quarter of fiscal 2021 and provide an update to our full-year modeling assumptions. If you turn to Slide 3, you will see an overview of our third quarter financial results. We generated third quarter revenue of $361 million, which exceeded our 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 our continued success in controlling operating expenses and driving down interest expense, resulted in a 24% improvement to our adjusted pre-tax income of $17.5 million and 21% growth in our adjusted earnings per diluted share of $0.58. Before I turn the call over to Bryan, I want to thank all our customers and employees who, in the face of a pandemic and weather challenges, demonstrated their resilient nature, which is fundamental to the industries we operate in. I will now turn the call over to Bryan to review our three segments in more detail.

Thank you, David, and good morning, everyone. I’m excited to cover our three business segments this morning and will be available for Q&A after our formal presentation. On Slide 4 is an overview of our domestic agriculture segment. Fall harvest conditions were ideal across most of our footprint. We experienced wide variability in crop yields, both within individual farming operations and across our entire footprint. However, overall yields were generally average to above average. Most of the variability was weather related; however, in some cases yields suffered due to lack of the previous year’s fall tillage, which resulted in less than ideal planting conditions. Nonetheless, the excellent weather in September and October provided for an extremely efficient harvest this year and allowed for the necessary time to complete proper fall tillage to get most fields in good to excellent condition for next year’s planting season. We believe these optimized conditions, coupled with increased commodity prices and USD support programs, have led to a substantial improvement in farmer sentiment. Our business is well positioned to support the aging fleet of equipment with our focused parts and service strategy. We continue to pursue consistent growth in parts and service revenue, which is supporting strong gross profit margins and driving pre-tax income. In addition to this critical parts and service contribution, we continue to see replacement demand, precision technology and connected machines as ongoing catalysts for new equipment purchases. As we look to the fourth quarter, we expect the momentum within our ag segment to continue. We believe that the combination of replacement and technology demand, favorable yields, high commodity prices, and the current Section 179 tax incentives should drive demand and make for a strong finish to our fiscal year. Turning to Slide 5, you will see an overview of our domestic construction segment. Although our construction equipment segment continues to feel the economic impact of COVID-19 and depressed oil prices, we are seeing improving industry trends due to low interest rates, economic stabilization, net farm income growth, and continued optimism for future infrastructure investments. The operational improvements that our team has implemented over the past couple of years produced improved third quarter pre-tax profits and we have confidence in achieving our fiscal 2021 modeling assumptions. On Slide 6, we have an overview of our International segment, which represents our business within the countries of Bulgaria, Germany, Romania, Serbia, and Ukraine. In addition to COVID-related disruptions, our international segment is being impacted by extremely dry weather in Romania and parts of Bulgaria and Ukraine, which negatively affected summer and fall crop yields. While European farmers are experiencing some support from improving commodity prices, we remain cautious and are monitoring weather patterns and the condition of the winter cereal grain crops. We continue to focus on the parts and services areas of our international business, as customers in these developing markets are looking for higher levels of product support as equipment becomes more sophisticated and technologically advanced. Before I turn the call over to Mark, I would like to thank all of our employees for their fortitude in managing through this challenging environment. Their commitment to our customers has never been more important and the results are demonstrated in our strong year-to-date financial performance. With that, I will turn the call over to Mark to review our financial results in more detail.

Thanks, Bryan. Turning to Slide 7, total revenue was flat with last year at $360.9 million in fiscal 2021 third quarter. Our parts and service business continued its strong momentum in the third quarter, increasing 8.5% and 11.4%, respectively. Growth was primarily driven by our Agriculture segment as we were well positioned to ensure our customers capitalized on an excellent harvest season this year. Additionally, we continue to benefit from an aging customer fleet and recent acquisitions that were not in our prior year numbers. Our equipment business decreased 2.1% versus prior year, which was driven by our International segment. Rental and other revenue decreased 24.8% versus prior year due to a smaller rental fleet and lower utilization compared to the prior year. This was driven by difficult construction industry conditions Bryan discussed earlier, such as lower oil prices impacting our energy markets and an overall slowdown in the economy due to the pandemic. The dollar utilization of our Construction segment rental fleet declined to 25.7% for the current quarter compared to 30.4% in the same period last year. On Slide 8, our gross profit for the quarter increased 1.1% to $72.6 million and our gross profit margin increased by 20 basis points. The gross profit margin improvement was primarily driven by an increased mix of higher margin parts and service business as compared to the third quarter of last year. We reduced operating expense by $4.1 million versus the prior year to $54.1 million for the third quarter of fiscal 2021, which drove a solid improvement of 110 basis points to 15% as a percentage of revenue. We achieved this operating expense leverage despite revenues that were flat with the prior year and the additional operational costs associated with our acquisitions. In the current quarter, we recognized $2.6 million of impairment costs compared to $100,000 in the prior year. Most of the current quarter impairment costs related to the impairment of goodwill and other intangible assets of our Germany reporting unit within our international segment. Floor plan and other interest expense decreased 29.4% to $1.7 million in the third quarter of fiscal 2021 compared to $2.4 million in the same quarter last year. The decrease was due to a lower interest rate environment, a lower interest rate spread under our new bank syndicate credit agreement that we finalized in April 2020, as well as lower borrowings on our line of credit. In the third quarter of fiscal 2021, our adjusted net income increased 21.3% to $13 million. The adjusted figure for third quarter of fiscal 2021 excludes $3.1 million of adjustments net of taxes related to impairment charges, ERP transition costs, Ukraine re-measurement losses, and an income tax valuation allowance. This compares to the prior year where we excluded $2.5 million of similar adjustments net of taxes. Our adjusted earnings per diluted share for the quarter was $0.58 compared to $0.48 in the third quarter of last year. For the third quarter of fiscal 2021, adjusted EBITDA increased 16% to $24.8 million compared to $21.4 million in the third quarter of last year. You can find a reconciliation of adjusted net income, adjusted income per diluted share, and adjusted EBITDA to their most comparable GAAP amounts in the appendix to the slide presentation. On Slide 9, you will see an overview of our segment results for the third quarter of fiscal year 2021. Our agriculture segment revenue increased 3.1% to $220.6 million, driven by ongoing momentum in parts and service as well as contribution from our HorizonWest acquisition. The higher level of parts and service combined with the relatively flat operating expenses and lower floor plan interest expense increased our adjusted pre-tax income by 34.7% to $13.8 million compared to $10.3 million in the prior year three-month period. Turning to our construction segment, revenue increased 1.3% to $79 million compared to the prior year period primarily due to increased equipment sales, partially offset by lower rental revenue. Lower operating expenses combined with lower interest costs drove a $1 million improvement in segment adjusted pre-tax income to $1.4 million compared to $400,000 in the third quarter of the prior year. Our international segment revenue decreased 11.1% to $61.2 million. The softness in this business that began late in our first quarter continues to persist and impacted our third quarter as well. Lower equipment sales drove the overall decrease in this segment while parts and service were more stable, but still down slightly. The lower sales are the result of difficult end market conditions previously discussed, including the pandemic and lower crop yields in areas of our footprint. Adjusted pre-tax income declined to $200,000 in the third quarter versus $1.6 million in the prior year period despite operating expense reductions. Turning to Slide 10, you will see our first nine months results. Total revenue increased 2.1% compared to the same period last year. Year to date equipment sales increased 1.2%, parts increased 7.1%, service revenue increased 9.2%, and rental and other revenue decreased 18%. Strong agricultural segment performance drove the increases in the equipment, parts, and service categories of revenue while the soft conditions in our construction segment end markets drove the lower results in rental and other. Turning to Slide 11, our gross profit for the first nine months was $193.7 million, a 2.1% increase compared to the same period last year. Our gross profit margin was flat year-over-year at 19.9% for the first nine months of fiscal 2021. Our operating expenses decreased by $5.3 million or 3.2% for the first nine months of fiscal 2021 to $160.3 million. As a percentage of revenue, operating expenses decreased 100 basis points to 16.4% compared to 17.4% in the prior year. Impairment costs increased from $200,000 in the prior year to $2.8 million in the current nine-month period. Floor plan and other interest expense decreased $1.6 million or 21.8% to $5.7 million in the first nine months due to the interest expense savings resulting from our retirement of the remaining balance of the company’s convertible notes, overall lower interest rates on our floor plan payables, and lower borrowings on our line of credit. Our adjusted diluted earnings per share increased 25.9% to $1.02 for the first nine months of fiscal 2021 compared to $0.81 in the prior year period. On Slide 12, we provide our segment overview for the nine-month period. Overall, our adjusted pre-tax income was $31.3 million for the first nine months of fiscal 2021 compared to $23.7 million in the same period last year. This 31.9% increase was a result of strong performance in our agriculture segment that was further supported by improved construction segment results and partially offset by lower performance in international. On Slide 13, we provide an overview of our balance sheet highlights at the end of the third quarter of fiscal 2021. We had cash of $41.8 million as of October 31, 2020. Our equipment inventory at the end of the third quarter was $450 million, a decrease of $66 million from January 31, 2020, reflecting a $36 million decrease in new equipment and a $30 million decrease in used equipment. Equipment inventory turns were 1.6 versus 1.7 in the prior year period. I will provide a little more color on our inventory on the next slide. Our rental fleet assets at the end of the third quarter decreased to $94.2 million compared to $104.1 million at the end of fiscal 2020. We expect to remain around the current fleet levels for the balance of fiscal 2021. As of October 31, 2020, we had $287.8 million of outstanding floor plan payables on $765 million of total floor plan lines of credit. Our adjusted debt to tangible net worth ratio is a strong 1.0 compared to 1.3 in the prior year period and is well below 3.5, which is the leverage covenant requirement of our two largest floor plan facilities outside our bank syndicate. Turning to Slide 14, the amount of new and used equipment inventories are reflected in the size of the red and blue bars on this slide. We made additional progress on managing our inventories down in the third quarter with a $66 million reduction versus the beginning of the fiscal year. We continue to have confidence that we will end the year with inventory levels below that of fiscal 2020 despite our May acquisition. The lower inventory levels combined with our revenue expectations should improve our equipment inventory turns to 1.7 and possibly 1.8 for the full year of fiscal 2021, from 1.5 in fiscal 2020. The overall quality of our inventory remains healthy. Currently, 36.6% of our inventory is under non-interest bearing terms, which can be seen by the grey bar on the slide. Once procurement levels increase, we should see this non-interest bearing percentage rise as well. Slide 15 provides an overview of our cash flows from operating activities for the first nine months of fiscal 2021. The GAAP reported cash flow provided by operating activities for the period was $60.8 million compared to cash used for operating activities of $8.3 million in the fiscal 2020 year-to-date period. As part of our adjusted cash flow provided by operating activities, we include all our equipment inventory financing, including non-manufacturer floor plan activity, and adjust our cash flow to reflect the constant equity in our equipment inventory, allowing us to evaluate operating cash flows exclusive of changes in equipment inventory financing decisions. After applying these adjustments, our adjusted cash provided by operating activities was $56.5 million for the nine-month period ended October 31, 2020 compared to adjusted cash used for operating activities of $35 million for the same period last year. The substantial increase in adjusted cash flow of $91.5 million is due to improved operating income and inventory levels versus the prior year. Slide 16 shows our updated fiscal 2021 annual modeling assumptions, which we are raising across the board. While our business is performing well, we believe areas of our business will continue to be impacted by the challenging global economy due to COVID-19, creating a higher degree of uncertainty to these assumptions compared to a normal environment. For the agriculture segment, we are increasing our revenue growth assumption to up 5% to 10% from flat to up 5%. This compares to our year-to-date result, which was up 9.3%. We expect our fourth quarter equipment sales activity to be supported very well by the recent improvements in farmer sentiment, which are being driven by higher commodity prices and for the most part a completed harvest. However, parts and service are up against much more difficult fourth quarter comps with prior year growth for parts at 25.1% and service at 16.5%. It will be difficult to grow off of these high levels, particularly with much lower harvest activity in the current fiscal year fourth quarter relative to the prior year period. Additionally, please remember to account for a full year revenue contribution of approximately $25 million from our HorizonWest acquisition that closed in May 2020. For the construction segment, we are increasing our revenue assumption to flat to down 5% from down 5% to 10%. The updated assumption accounts for the better than expected third quarter performance, where this segment grew 1.3%, and assumes a similar small level of growth in our fourth quarter. Also, please consider the January 2020 divestiture of our Albuquerque, New Mexico store which generated approximately $8.5 million of revenue in fiscal 2020. For the international segment, we are increasing our revenue assumptions to down 5% to 10% from down 10% to 15%. International’s third quarter top line results did perform better than expected, but our outlook for the fourth quarter still includes lower revenues compared to that of the prior year. From an earnings per share perspective, we are increasing our adjusted diluted earnings per share assumption by $0.35 at the midpoint to a new range of $1.05 to $1.15 for fiscal 2021. This concludes our prepared remarks. Operator, we are now ready for the question-and-answer session of our call.

Thank you. We will now begin the question-and-answer session. Our first question comes from Mig Dobre with Baird. Please go ahead with your question.

Good morning, guys, and congrats on really good execution this quarter.

Good morning, Mig.

Yes. Good morning. I guess where I’d like to start is with your comment on Slide 4 on the Agriculture segment. I’m curious how you think about the sustainability of these improved trends in demand as you look maybe even beyond the near quarter here. There are some moving pieces here, especially in terms of potential USDA support for farmers next year. Do you think that plays any part or role in dampening equipment demand? Or are you thinking that we’re on pretty firm footing and that’s sustainable going forward?

That’s a good question, Mig. I think the recent performance in soybeans has surprised many, including the growers. Corn prices are still below $4 in some markets, which is close to the break-even point. As we look ahead to next year, there is discussion about global dryness influenced by the La Nina weather patterns, which could impact this situation. We also need to consider the ethanol industry and any potential decreases in usage due to COVID. There are many variables at play. Farmers are currently pleased with soybean prices, which is a positive, and there’s also some upward movement in corn and wheat. However, there is still a sense of cautious optimism among them. The varying factors and weather conditions will significantly influence outcomes. As I observe field preparation, planted acreage in the U.S., and yield trends, I believe we have the capacity to produce a substantial amount of crops. The strength of the dollar will also play a role. Overall, while there are many moving parts, the trends look promising, and there is positive sentiment among farmers, but a cautious outlook remains.

I see. As it pertains to your modeling assumptions that you’ve updated here, I’m looking at the plus 5% to 10% in agriculture and what that implies for the fourth quarter at the pure midpoint of this assumption. It looks like the fourth quarter is implied flattish relative to the third in terms of revenue, even though seasonally, right, we should be seeing a sequential uptick based on what’s happening with equipment demand. So I guess I’m curious, is this sort of some conservatism that you’re baking in here? Should we be thinking something closer to the high-end of that range? Or is there enough headwind in parts and service to sort of generate this kind of like flattish revenue sequentially?

Yes, Mig, this is Mark. I mean, we definitely have some level of growth in our equipment sales on the ag side for the fourth quarter, so maybe that gets you to the higher end of that up 5% to 10% that’s there. But as we did discuss and you just mentioned again, parts and service will be a little bit more difficult with those extremely good comps, those extremely good numbers that we had in the fourth quarter of last year. But we are showing certainly some level of growth on the equipment sales side in our Ag segment.

Okay. Okay, so maybe closer to the high-end is how you shake out. Sort of a similar question on construction, right? I mean, the performance here better than I for one expected and what one would guess, given what’s happening with COVID. But if we’re again looking at your updated assumptions, down zero to 5% for the full-, again the midpoint using that as the anchor would imply that in the fourth quarter, this business picks up quite a bit sequentially and it’s up high single digits relative to the prior year. So I guess my question is what informs you to give you the level of confidence to have this modeling assumption? What are you hearing from customers? Because to me, this is a bit of a standout, if you would, in terms of your guidance.

Three months ago, our outlook on the Construction segment was less optimistic. However, we experienced a good level of activity with a growth rate of 1.3% during the quarter, which gave us confidence. We expect a similar or slightly higher growth rate in the fourth quarter for the Construction segment. There is some variability in this expectation, but we anticipate a modest level of growth in the fourth quarter, comparable to what we observed in the third.

But Mark, what generated this upside surprise relative to your expectations here? Like, what’s the culprit?

The growth was primarily due to equipment sales. Parts and service performed close to our expectations. I can't identify a specific sector of our business that particularly stood out; it was generally elevated across the board. However, the notable increase was mostly on the equipment sales side, rather than rental or parts and service.

Yes. Sorry to be pressing on this, but you obviously have exposure to the oil patch, and I’m presuming that that’s not where you generated upside. Can you give us a sense if it was some of your more urban dealerships that maybe benefit from housing, or anything else that there is to know here?

Yes. Hey Mig, this is Bryan. Yes, we’ve put a lot of focus on our core case product and a lot of focus on operational improvements internally to drive increased selling activity in a lot of areas in the Construction segment. So, we’ve been seeing good luck and good results with the increased focus and driving the case product, especially as you pointed out in a lot of our more rural to mid-level markets. Actually, some of our bigger markets were a little more impacted by the COVID, our high population areas as well as, like you mentioned, the oil and gas sector even at today’s prices is still down roughly 25% from a year ago, so that’s primarily where it’s coming from.

Okay. Last question from me on the cost side, I’m curious if we can get some updated thoughts on SG&A. Once again, that line item was quite a bit better than what we expected. How do you think about this line item sequentially relative to the third quarter? Thank you.

I think regarding expenses, for the fourth quarter last year, we were at approximately $58 million. Due to some COVID-related expenses and reductions throughout the year, along with our acquisitions, I anticipate that this quarter will be lower than $58 million but higher than $53 million. A reasonable estimate for modeling would be around $55 million to $56 million for the fourth quarter. We expect increased commissions due to higher equipment sales in this quarter.

Yes, that makes sense. Thanks for the help, and happy Thanksgiving, guys.

Thanks, Mig.

Thank you. Our next question comes from the line of Rick Nelson with Stephens. Please proceed with your questions.

Thanks, good morning. I’d like to get insight on the acquisition environment, your appetite to acquire, where would you be fishing in the U.S., international or construction segments.

Well, we are a growth company and definitely we’re always interested in acquisitions, so I think there’s two phenomena going on right now, Rick. First of all, with COVID, I think a lot of the dealers and people have been moving around and wanting to talk. They visit us and they’re just in hunker down mode a little bit, and we’re in Mass and not a lot of traffic in their offices and dealerships and stuff, so there’s a little bit of a pause. Then I think, as I talked about on our last call, most of the dealer groups out there have got some fairly sizable PPP loans right now and they’re in that whole process of getting those loans forgiven, so not only it causes a timing issue but also that’s a pretty good shot in the arm for these dealer groups out there. The combination of the COVID, the PPP, going through that whole loan forgiveness process, I’d say it’s caused a little bit of a pause, but definitely we’re engaged with a number of potential sellers, looking at succession solutions, so yes, definitely we’ve spent a lot of time on that and it’s part of our model.

Great, thanks for that. The Northwood acquisition, you’ve got one year under your belt there. HorizonWest has six months under your belt. Can you talk about how those two acquisitions are performing relative to your expectations coming into them?

Hey Rick, this is Bryan. Northwood, right after we acquired, they had some tough crop conditions out there - back to back, very challenged weather patterns and so on, but integrating nicely. A lot of synergies, very similar product, customer type, contiguous right in the heart of our footprint, so integrating very well. I’d say coming right in line with our modeling assumptions, a little delayed there because of those challenging weather factors. Then as you mentioned, pretty early on with HorizonWest, but again we’re really excited about that acquisition. Great employees down there, great customers down there, a lot of high value variety of crops - sugar beets, potatoes, corn, soybeans, edible beans, and so on, and good access to water and so on. We’re excited as they continue to come on board, and again very similar customer type, equipment type, and contiguous and right there in our existing footprint. Again, pretty early on that one, but we’re optimistic as well on the integration of that one as well.

Great, thanks for the color. There’s a new CEO coming in now at CNH Industrial. Any preliminary thoughts on how that might impact dealerships? Have you met with this individual - he’s sort of local, I guess, and potential impacts to Titan?

Rick, I think he starts right after the first of the year, so I think he’s finishing up his stint with Polaris. But boy, what a great track record, and I know I’ve talked to a number of people in the financial community that work with him, and everything is really positive - strong leader, great track record, produces excellent results, so I’d say it’s a huge plus. I know within the CNH Industrial organization, they’ve been spending a lot of time really trying to find a quality individual, and I think they’ve done that, so I think there’s a little more bounce in everybody’s step. I know we’re excited. He’s Midwest, he understands product, he understands customers, he understands dealerships, so yes, I think we’re excited and a little more bounce in everybody’s step, that we’ve got a leader who’s going to be in place here very shortly.

Great. Then finally, if I could ask about inventories - you know, nice progress, three consecutive quarters of narrowing inventory levels, new and used, inventory turns 1.6 times. Is there a goal you have for inventory turns, and if you could comment also on industry supply, where you see that today?

Well, we think these turns, we can get those between that 2 and 3 number, especially when we start driving more presale. I’d say right now, we feel good about current inventory levels, enough to meet demand through our fourth quarter. I think it’s going to come about right. We’re having a combination of farmers that want to buy equipment this year for tax reasons and they want delivery in December, and we feel we’ve got the inventory to do that, and there are other growers out there that are taking advantage of presale programs and signing their name to units that will be delivered in calendar 2021, and right now there are available slots and that’s good. I think on both fronts, we feel good about our inventory and, like I say, long term we want to continue to improve these turns and we’ve got certain stores in certain markets and stuff where we’re seeing these kinds of numbers, as they keep improving between the 2 and 3 level, and it’s definitely attainable.

Thanks a lot, David, Bryan, and Mark. Good luck as we push forward.

Thanks Rick.

Thank you. Our next question comes from the line of Larry De Maria with William Blair. Please proceed with your questions.

Thank you, good morning everyone. I wanted to discuss the agricultural outlook. We are entering a phase where we might need to ration beans, and there could be a favorable export market to China. I'm interested in how you've observed customer behavior changing over the past six weeks with these developments, and whether you can relate that to the year-over-year order numbers and the visibility you have for periods beyond your fiscal fourth quarter.

Hey Larry, this is Bryan. As both Mark and I mentioned, we’re seeing significantly improved customer sentiment out there, almost with each week that goes by. As they’ve gotten through the harvest here, they’ve done a lot of ground work which really sets them up nice for next year, gets them optimistic about the improved chances, then, of better yields next year as well. I think just keeping in mind that a lot of our farmers are not making a lot of money at these commodity prices right now, some of them have some healing up to do from previous years, so this will really help with that, help shore up their balance sheets, allow them to pay off some debt, so that’s all good as well. But definitely in the near term, we’re quite positive about the near-term outlook and that’s the reason we’ve raised our revenue and modeling assumptions and guidance.

Okay. Is there a year-over-year order number you could point towards, or maybe even looking into the spring based on early order programs and things? Just frame it a bit for us. I would assume orders are up year over year - maybe that’s a good way to do it?

Our presale efforts are improving, which is helping with inventory turns. The order volume is up compared to last year. While I won’t delve into specifics, we are seeing positive trends. Several customers are currently addressing tax matters with their accounts and are looking to purchase equipment we have available. Additionally, there are customers interested in deliveries for spring or summer, and we’re committed to enhancing our presale activities with them. Overall, we’re observing promising activity and feel optimistic about these trends.

Just to comment a little bit on what happened with these growers regarding their beans, if I go back to August 7 at the elevator, I think they were getting a little over $8, around $8.02 at the Aberdeen, South Dakota elevator for their soybeans. Then they gradually started to move up, but as they increased, based on recommendations from their marketing advisers, many farmers began selling 10% to 15% of their crop the whole way up. So even though beans closed yesterday at $11.41, a lot of beans were sold along the way, and I don't believe there will be much inventory left. Most growers will likely sell their soybeans if they still have some available, especially since they forward contracted some of last year's, as beans have been down for a while. When they started seeing prices around $9.50 and $10, many of them contracted their beans, so not all of these beans were sold at the $11 mark. However, I do think a significant portion of the inventory will be gone, and as exports and demand remain high, there are positive signs. I believe farmers are looking forward to next year's farming season.

Yes, okay. Thank you for that. Now obviously you had a good parts quarter and now we’re talking about, I guess, a flattening out maybe of parts or something into the fourth quarter based on the comp. I just want to think about the comp into next year based on what you’ve done already this year; in other words, how big was the impact from the derecho and these other things? In other words, are we going to have a tough comp next year because of the derecho and other factors on the parts side, or should it still be fairly normal?

It’s certainly noteworthy. The derecho was a rare event, likely occurring once in a hundred years, resulting in extensive crop damage across a third of Iowa, particularly to corn. As you pointed out, Larry, this led to significant equipment damage, prompting farmers to purchase parts for their machinery, including headliners, cab components, hoppers, combines, and hoods. While this spike in parts sales is unlikely to repeat, farmers may not have logged as many hours on some equipment, potentially resulting in fewer field repairs and hours, which could balance out the sales impact. Looking ahead to next year, we expect a return to a more typical parts market. However, it's important to note that Iowa boasts some of the finest farmland globally, with high yield potential. Farmers will likely return to the fields, and that supply should become available in the market again. In response to your question, the comparisons for next year will be somewhat more challenging. Additionally, the duty cycle going into the winter freeze will be less demanding compared to last year, which included difficult conditions during the corn harvest such as snow and mud. Our parts business in the first quarter was bolstered by those tough conditions from last year's harvest.

Yes, I think a couple of the big drivers here too for our parts and service, there’s some between quarters that happens, like what we’re talking about here between third and fourth. But just that aging fleet that’s out there certainly is still happening, and we’ve got a lot of internal initiatives pointed in the direction of growing that parts and service and really impressing the customer on that side of what we do. That will certainly pay dividends and help us continue to grow into next year as well.

Okay, thank you. Last question from me, you discussed your M&A outlook a little bit already but not in, let’s say, great detail. What is your appetite at this point for larger stuff? I think we all know that there’s at least one potentially large deal out there. Just trying to gauge your interest in thinking about doing something a little bit more transformative than the usual one or two.

Well Larry, it’s difficult. We can’t really comment on specific M&A opportunities, especially in reference to what you just talked about. That active go shop period is in place until December 6 or something, so really from that perspective it’s really difficult to comment on that. But again, we continue to look at all acquisitions, both the one, two, three sort of tuck-ins, and some of these larger dealer groups that have been put together over the years, so we continue to look at both. We have the balance sheet that can continue to look at those opportunities.

Okay, fair enough. Thanks and good luck.

Thank you. Ladies and gentlemen, as a reminder, if you’d like to join the question queue, please press star, one on your telephone keypad. Our next question comes from the line of Steve Dyer of Craig Hallum Capital Group. Please proceed with your questions.

Thanks, good morning guys. Most of mine have been answered already. Just real briefly as it relates to inventory, I know you’re managing towards those turns in the 2 to 3 area, but just trying to get some sense as to whether you feel like as you manage for turns, you lose any business. You know, your inventory’s down fairly significantly year over year, even as the backdrop in ag especially continues to improve and looks like will be another fairly decent year next year.

This is Bryan, I’ll take that. There’s a number of activities we do to ensure that we’re not sacrificing the business at the expense of turns. We do keep a minimum level of inventory on hand at all times to try to account for that unplanned purchase; however as Dave mentioned, so much of it is shifting to presale in our industry. You think about these tractors and combines nowadays and on the construction side the excavators, wheel loaders above the price of your average house, and so typically a lot of planning our equipment sales consultants do with the customers and preplan those purchases, you’ve got some fairly long lead times. A lot of the equipment is spec specific to the customer as well, which are some other advantages of presale. Typically, we can plan the business pretty well that way through presales, again combined with keeping some level of inventory on hand as well with dealer-to-dealer transfers and then also some level of company inventory. Between those four pools, we can keep it covered pretty well.

Got it, so you’re not seeing necessarily any scarcity or disruption with COVID and manufacturing and things like that? Everything is sort of as you’d like it to be at this point?

Yes, definitely there were some delays with the COVID, but I think it allowed the manufacturers and the dealers to do some destocking and has created some good demand out there as well. It’s helping our turns as well, and positions us well for healthy year inventories. Yes, generally we get the iron or find the iron.

Got it, okay. Thanks guys.

Thanks Steve.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I’ll turn the floor back to Mr. Meyer for any final comments.

Okay, well thank you for your interest in Titan Machinery, and we look forward to updating you on our progress on our next call. Have a good day, everyone.

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