Titan Machinery Inc. (TITN) Q1 2024 Earnings Call Transcript

Thank you. Good morning, ladies and gentlemen, and welcome to the Titan Machinery first quarter fiscal 2024 earnings conference call. On the call today from the Company are David Meyer, Chairman and Chief Executive Officer; Bo Larsen, Chief Financial Officer; and Brian Knutson, President and Chief Operating Officer. By now, everyone should have access to the earnings release for the first quarter ended April 30, 2023, which went out this morning at approximately 6:45 a.m. Eastern Time. If you've not had a chance to find the release, it's available on the IR page of Titan's website at ir.titanmachinery.com. The call is being webcast, and a replay will be available on the Company's website as well. In addition, we're providing a presentation to accompany today's prepared remarks; you may access the presentation now by going to Titan's website again at ir.titanmachinery.com. The presentation is available directly below the webcast information in the middle of the page. You'll see on Slide two of the presentation our Safe Harbor statement. We'd 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 filed 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. The call will last approximately 45 minutes. At the conclusion of our prepared remarks, we will open the call to take your questions. With that, I'd now like to introduce the company's Chairman and CEO, Mr. David Meyer. David, please go ahead.

Thank you, Jeff. Good morning, everyone. Welcome to our first quarter fiscal 2024 earnings conference call. On today's call, I will provide a summary of our results. And then Brian Knutson, our President and Chief Operating Officer, will give an overview for each of our business segments. Bo Larsen, our CFO, will then review financial results for the first quarter of fiscal 2024 and conclude with some commentary around fiscal 2024 full year expectations. We're off to a solid start to fiscal 2024 with strong first quarter results consistent with our expectations going into the year. Revenue increased 23.6% to $569.6 million in the first quarter, which represents record first quarter revenues supplemented with significant contributions from our most recent acquisitions. The combination of Mark's Machinery, Heartland, and Pioneer acquisitions added $94 million of revenue in the first quarter, and we couldn't be happier with how integration has been going so far with each of these acquisitions. Notably, each of our operating segments achieved expansion in pretax margins versus the prior year period. This drove consolidated pretax margin of 6.2% and diluted earnings per share of $1.19, which was over 53% higher than last year's earnings performance. Our Agriculture segment revenue grew 33%, benefiting from our recent acquisitions and reflecting healthy underlying industry fundamentals and strong customer demand. Across all our segments, our equipment business remains very healthy, yet constrained due to insufficient inventory and delivery delays in key product categories. Our parts and service business also performed well despite a later start to the planting season in some of our northern U.S. markets and in our European footprint. We are poised for this momentum to carry into fiscal second quarter as our agriculture customers complete their spring field work and construction activity gets into full swing. We are well positioned to capitalize on the opportunities that lie ahead and are committed to providing world-class service to our customers and delivering strong results for our shareholders. With that, I'll turn the call over to Brian Knutson for his segment review.

Thank you, David, and good morning, everyone. I will now provide a recap of our fiscal first quarter segment drivers, and then review some of our high-level expectations for the balance of fiscal year 2024 across our respective segments. I'll begin with our domestic Agriculture segment, which produced organic growth on top of last year's strong performance, which was further bolstered by revenue contributions from our most recent acquisitions. This segment also realized another solid quarter of margin performance, with pretax profitability expanding by 50 basis points versus the prior year period to 5.7%, driven by improved equipment margins that benefited from a combination of strong demand and product mix. While planting progress is largely on track across the farm belt, we are experiencing some delays in our northern markets due to the late spring. Our same-store sales growth in the first quarter reflects the delayed start to spring field work, as well as the continued limitations on equipment availability and timing of deliveries for cash crop products. In terms of elements that we have control of, our team is doing an excellent job. We are focused on receiving and performing pre-delivery inspections, installing additional components, and then delivering presold equipment to customers as quickly as possible. However, as I previously noted, the timing for that process varies from several weeks to several months, and we continue to see higher levels of presold equipment and inventory at the end of the first quarter. In addition to having presold inventory, our sales team is excited about now having some stock inventory at hand that is available for sale, which puts us in a better position to serve customer demand on products like harvest equipment, small tractors, and certain tillage equipment than we were a year ago. We are also working hard to deliver best-in-class service and support through our parts and service business, and we remain very active in the evaluation of M&A opportunities. Fiscal 2023 was a big year for us in that regard, having acquired 22 store locations since December of 2021. I expect that we'll continue to see additional acquisitions as we move forward to complement our intense focus on organic growth. All of our current integrations are going well, and we are very pleased with how the businesses are coming together. Looking to the balance of fiscal 2024 for the Agriculture segment, we believe we are on track to meet the modeling assumptions that we laid out at the beginning of the year. Net farm income remains well above historical averages and continues to support demand for equipment purchases. We expect this to sustain demand throughout the fiscal year and for demand to continue to outpace supply in many cash crop products. While there are equipment shortages and long lead times, we have a solid order board and have incorporated all of these factors into our modeling assumptions that we are reiterating today. Shifting to our domestic Construction segment, we are benefiting from our diversified customer base as well as the less volatile Midwest construction market dynamics. Construction activity was strong throughout our footprint during our fiscal first quarter and we generated a great performance across the board, with same-store sales growth of 9.9% and excellent pretax margin expansion of 150 basis points to 6.3%. We also achieved rental fleet dollar utilization of 26.8% and absorption of 86.2%. Our expectations for fiscal 2024 remain high. General construction activity remains strong, and infrastructure projects are expected to support demand for construction equipment throughout the 2024 fiscal year. Not unlike our Ag segment, equipment availability is a limiting factor in the near term for certain types of equipment. However, we continue to feel good about our ability to achieve our full-year modeling assumptions for this segment. Now moving on to our overview of our International segment, which represents our businesses within the countries of Bulgaria, Germany, Romania, and Ukraine. The year-over-year decline in revenue was driven by the weakening of the euro. However, net of the effect of these foreign currency fluctuations, first-quarter sales grew by 2.8%. Overall, our business within the countries of Bulgaria, Germany, and Romania has been performing very well. While the region experienced a later start to the spring planting season, the recent rainfall has benefited early crop development, which is creating some optimism among producers. We are very pleased to see the continued operating leverage in our International segment, particularly during the quarter where we realized a slight decrease in our reported revenues. In the first quarter, we expanded our pretax margin by 290 basis points to an impressive 8.6%. Looking toward the balance of fiscal year 2024, European Ag fundamentals are expected to be more moderate in nature with flat industry volumes. And this segment is not immune to the equipment availability issues that we see across the other segments of our business. However, we expect to continue to trend in a favorable direction as we execute on our growth strategy. Before I turn the call over to Bo, I'd like to sincerely thank our employees for their ongoing dedication to our customers. This was another great quarter for our business and is the result of their individual contributions and ability to overcome challenges and find solutions. With that, I will turn the call over to Bo to review our financial results in more detail.

Thanks, Bryan. Starting with our consolidated results for the fiscal 2024 first quarter, total revenue was $569.6 million, an increase of 23.6% compared to the prior year period. Our equipment revenue increased 20.5% versus the prior year period, led by incremental revenue from our recent acquisitions as well as positive same-store sales growth across our Agriculture and Construction segments. Our parts revenue grew 40.9%, service revenue grew 18.3%, and rental and other revenue increased 32.9% versus the prior year period. Gross profit for the first quarter increased 33.7% to $119 million. Reported gross profit margin increased by 160 basis points, driven primarily by improved equipment margins, which benefited from strong demand and favorable product mix. Consistent with the first quarter of the prior year, there was no recognition of manufacturer incentives as we will wait until we get further into the year to make these types of accruals for accounting purposes. Operating expenses were $81.3 million for the first quarter of fiscal 2024 compared to $64.2 million in the prior year. The year-over-year increase of 26.8% was primarily due to the inclusion of operating expenses related to our acquisitions over the past year, as well as higher variable expenses on increased revenues. Floor plan and other interest expense was $2.5 million as compared to $1.5 million for the first quarter of fiscal 2023, primarily due to higher interest-bearing floor plan borrowings. Net income for the first quarter of fiscal 2024 was $27 million, or $1.19 per diluted share, compared to last year's first quarter net income of $17.5 million or $0.78 per diluted share. Now turning to our segment results for the first quarter. In our Agriculture segment, sales increased 32.9% to $423.2 million. This growth was driven by our recent acquisitions of Mark's Machinery, Heartland Ag, and Pioneer, as well as organic growth of 3.8%. As has already been mentioned in our commentary, first-quarter revenues continued to be constrained by equipment availability of high-demand cash crop product categories, which limited our ability to drive higher same-store sales growth for the quarter. With these same equipment categories on allocation through at least the fourth quarter of this calendar year, this demand-supply imbalance is expected to carry over into fiscal year 2025. Agriculture segment pretax income was $24.2 million when compared to $16.4 million in the first quarter of the prior year, which implies a pretax margin increase of 50 basis points to 5.7%. In our Construction segment, sales increased to 7.5% to $72 million compared to the prior year period. Same-store sales growth of 9.9% drove the increase, which was slightly offset by the divestiture of the North Dakota consumer product store in the prior year. Pretax income was $4.5 million compared to $3.2 million in the first quarter of the prior year. As a reminder, in the prior year's first quarter, we recorded a $1.4 million gain associated with the aforementioned divestiture. Excluding that gain, our year-over-year pretax margin increased by approximately 370 basis points to 6.3%, just a solid overall performance by the Construction segment, as Bryan touched on in his comments. In our International segment, sales decreased by 1.4% to $74.4 million, which reflects a 4.6% currency headwind on a weakening euro. Net of the effect of these foreign currency fluctuations, the segment achieved sales growth of 2.8%, which included a modest year-over-year decline in Ukraine as it remains impacted by the ongoing conflict. Limited availability of cash crop products is a factor here, just like in our domestic Ag segment. Pretax income was $6.4 million and compares to $4.3 million in the first quarter of fiscal 2023, which implies a pretax margin increase of 290 basis points to 8.6%. Equipment margins for the International segment were very strong and benefited from some timing windfalls, which we do not expect to reoccur. As such, we expect those margins to moderate off of these unusually high levels as we progress through the rest of the year. Now on to our balance sheet and inventory position. We had cash of $38 million and an adjusted tangible net worth ratio of 1.0 as of April 30, 2023. Our total inventory balance at the end of the first quarter was $854.2 million, an increase of approximately $150.2 million during the quarter. This increase came via growth in equipment and parts inventories of $144.6 million and $4.1 million, respectively. Of the total increase, $22 million is attributable to the Pioneer acquisition, which was made during the first quarter. It might be helpful to talk through inventory changes, excluding acquisition-related balances. As you heard on recent OEM earnings calls and in our commentary today, much of the high horsepower cash crop products remain on allocation for the full year and depending on the product, we have minimal inventory that is available for sale as many units on hand are awaiting pre-delivery inspection activities and delivery to the customer. On the other hand, demand for items like low horsepower tractors has softened and the inventory has returned to more historical levels. Specifically, for harvest, hay, and tillage equipment, we have seen some normalization in inventory available for sale but not back to historical levels, and this increase should be helpful for our sales team as they look to fulfill customer demand before fall field activities commence. We foresee a little more build in new equipment inventory in the second quarter before leveling off and decreasing as we work through the rest of the fiscal year. Overall, inventory available for sale is below targeted levels, with timing and other constraints causing higher-than-normal levels of presold units sitting in inventory at a given point in time. Consistent with our comments from our last earnings call in March, we expect to continue to work through these timing issues as we progress throughout the year. With that, I'll share a few comments on our fiscal 2024 full-year guidance, which we are reiterating today for the company as a whole and for each of our segments. Our first quarter performance was consistent with the expectations that we had coming into the year. Market conditions remained positive, and demand remained high across our segments. Commodity prices have come down somewhat, but so have farm input costs, and it's expected to be another good year for net farm income and for it to be above the 10-year average. Preliminary visibility into fourth quarter allocation has been provided and aligns with previous expectations. These allocation levels confirm there is excess demand versus supply for several types of cash crop products, which will carry demand into fiscal 2025. These levels also suggest that the existing fleet will continue to age for products like high horsepower tractors. On the other hand, inventory levels are normalizing for other types of equipment and correspondingly, we expect equipment margins to moderate off of last year's all-time records as we progress throughout the year. OEM production and timing of deliveries are expected to continue to improve throughout the year. Our acquisitions are meeting our high expectations, and the labor market remains competitive, especially as it relates to scaled product support positions. Overall, we are off to a strong start to the year. And with our current level of presold inventory and continued strong demand, we are confident in our guidance range of $4.50 to $5.10 on a diluted earnings per share basis, which we are reiterating today. This concludes our prepared comments. We can now open up the line for Q&A.

Our first question is from Alex Rygiel with B. Riley. Please proceed with your question. Alex, is your line on mute?

Good morning. And sorry about that. If we come back to inventory as a topic, you mentioned that insufficient inventory and product delays in certain key product lines. I know you went through that a little bit. But can you expand upon that a little bit more?

Yes. Good morning, Alex, this is Bryan. Yes, I think it's important, as Bo and I both tried to do in the prepared remarks, to delineate within the different inventory or product categories. So as we mentioned, certainly, lower horsepower tractors have been normalizing. We have been getting in some stock inventory for those, which is great. That's traditionally a product that does sell more out of stock than presale and it's the type of thing you like to have on hand. So we're optimistic about that improving. So that's leading definitely to some of the increase again, still feel really good about that level. And then as Bo mentioned, other areas, harvest equipment, certain tillage, hay, and forage, not quite back to historical levels yet. But we have seen some improvement in those levels. Also, there's some timing things with those products as well. We feel good about that as well with the way our cattle prices are right now, looking for a great season here in hay and forage. And then as you get into a lot of the cash crop products, Alex, you look at things like four-wheel drive tractors, magnum, sprayers, a lot of that critical cash crop equipment that's critical to our business as well. It's still an extremely short supply on allocation and continues to be really short of demand. And as Bo mentioned, that really, at this point, will carry into FY '25 now for us. And I guess just to maybe delineate between the sales WIP that we talked about as well as the on-hand inventory. And so again, sales WIP, like we talked about last quarter, there's just an increase in the number of things. We need to do to units right now that are arriving from our manufacturers over historical levels. And then also the components that we put on are also impacted by the supply chain. So we are seeing longer turnover times to get those out to our customers and get the revenue recognized as well. But important to point out, the available for-sale inventory in many of those key cash crop categories is extremely low and much lower than we'd like.

And then just so we could maybe sort of understand, how long do you think lead times for high horsepower equipment are still going to be sort of extended?

So right now, we have visibility into our fiscal '25. And so definitely through then, Alex.

Our next question is from Daniel Imbro with Stephens. Please proceed with your question.

Hey guys, this is Joe Enderlin on for Daniel. Thanks for taking the questions. I wanted to start out on revenue growth. You saw around 25% growth this quarter. Could you maybe break out how much of that would be from the demand aligned with the first quarter? And then how much was driven by the delay in shipments last quarter? Do you expect the revenue from that delay in shipments to be relatively evenly spaced over this year? Or is there any change in how you're thinking about the cadence?

Yes, I appreciate the question. As we discussed at the end of last year regarding the $100 million initiative, we are confident that we will continue to see improvements in our production and delivery pace as the year progresses. It should get better each quarter. Specifically regarding the $100 million, the units accounted for were delivered in this quarter, and there is a carryover from the first quarter to the second quarter. We anticipate having a larger opportunity as we move through the year.

That makes sense. Thank you. As a follow-up, in the slides, you noted you're still actively looking for acquisitions in the ag sector. Could you maybe provide some color on how seller multiples are trending in this market? And then are you seeing more sellers come to market?

Well, I'd say there are definitely some motivated sellers out there, Joe, as you see the interest rates increasing and increased cost of equipment and all the capital needs with that, increased OEM demands, this complexity and sophistication of these equipment and the shortage of the skilled product support people out there to support that equipment. We're getting into a new round of regulations, employer mandates. There are challenges out there, especially on the HR side from the recruiting and retaining of employees. So definitely, we're seeing that continued consolidation ownership. And yes, I think there's a good pipeline out there and we continue to focus on integrating the acquisition we did. But at the same time, we're actively looking for quality and strategic acquisitions going ahead. And there is the pipeline that's consistent with what we've seen in the last couple of years.

And maybe just a little bit more from a multiples perspective, right? I mean we maintained discipline. The company has been in acquisitions for a long time. And so that's not necessarily something that's changing. Clearly, the average dealer is doing more revenue and more EBITDA today than they were a few years ago. So that's there. But from a multiple perspective, that's not something that we're seeing evolve, at least not the way we approach acquisitions.

Our next question is from Larry De Maria with William Blair. Please proceed with your question.

Thanks and good morning. First question regarding allocations. Obviously, you had some comments on those, but in your discussion with Scott and the final outcome here, kind of curious magnitude of what you got versus what you asked for. Can you kind of talk about how that played out for you? And maybe, let's say, how short you are versus where you want to be? And related to that, is the current full allocation, is it complete? Is that fully embedded into your guide? And do you think you can go out and get more of that stuff that you're reasonably short of this year, kind of like you've done in the last couple of years, sort of more in the open market?

Thank you, Larry. I'll begin with the allocation, which really varies by product category. It's important to distinguish between what we wanted and what we received, as well as what we received compared to what we expected. Overall, what we're getting aligns with the information we've received while working closely with them since the allocation started about a year ago. It truly depends on the product category, but there are certain categories where we would like at least 50% more than what we currently have. As Bo mentioned, this extends the cycle in those specific categories. We're also seeing older fleets in these categories, which is driving our parts and service business positively. However, it may be next year before we see any signs of catching up. Depending on how the supply chain recovers and the production constraints, we might still not reach our desired levels by the end of next year in some of those categories.

Thank you for the information. Staying on that topic, we know that crop prices are lower, and you've mentioned this in your responses. Can you provide a real-time update on what you're observing? You're discussing strong demand, but have the lower prices started to affect your conversations and real-time ordering? Additionally, is there any significant impact from the late planting season in North Dakota, or will that situation resolve itself?

Many of our customers are actively engaged in planning with their advisers and tax consultants, which has resulted in a significant amount of income being deferred from last year to this year. We expect to see similar trends moving forward. Additionally, many customers are collaborating with skilled marketers for grain sales, leading to a substantial portion of the crop being sold now to hedge against potential declines in commodity prices. The level of professionalism in marketing has improved significantly compared to a couple of decades ago, and there is considerable optimism among our growers, with this year remaining quite profitable overall. The decline in input costs will also contribute positively. In terms of how this affects North Dakota and Minnesota, the late spring may have influenced the timing of some of our numbers and the flow of parts and service business revenue. The additional work we have undertaken for manufacturers has created delays, which we expect to normalize next year. Component delays are also an issue. As Dave mentioned, there are labor shortages in our industry, necessitating prioritization of critical equipment for spring planting. We will shift focus to summer and fall equipment later. Despite these challenges, many growers in North Dakota and Minnesota are on track to plant their crops around the same time as last year, which yielded above-average results. At this stage, we do not anticipate significant issues beyond timing.

That's great. Thank you for that color. If I could just sneak one more quick question. Sales were light on, especially on the ag side, obviously, good bottom line performance overall. How did the ag sales in the quarter differ from your expectations? And was that more delivery delays and kind of spillover from the prior quarter? Or is there something else that caused the ag sales to miss?

Yes, I'll let Bo comment mostly here. But generally, from my end was timing and the constraints that we had on equipment and equipment shipments. And again, getting the stuff out the door and onto our customers' hands to recognize the revenue. But yes, just anything you have to add, Bo?

Yes. And I would just say so, I mean, largely overall, things came in as expected. If there was any softness, it would be on the ag side. And I'd say still pretty well aligned with what we expected. Now what we want to do for our customers and deliver for them, we would have loved to fulfill more of that demand. And yes, it was largely what we've been talking about here today, and it's really the cadence of receiving those higher demand cash crop units in and being able to turn them around. That would be the area we want to continue to see improved and that we have confidence will continue to improve through the year.

Our next question is from Mig Dobre with Baird. Please proceed with your question.

Hey. Good morning, guys. It's Joe Grabowski on for Mig this morning. I thought I'd ask a question on equipment gross margin. It was quite strong for a first quarter. I was wondering if Heartland maybe impacted it favorably? And you also mentioned product mix aided margin in the quarter. I was wondering if maybe you could provide a little more color there?

Yes, I'll help you out with that a little bit, and two things. I would say that there was a bit of a timing on the international side, which was exceptionally strong, and I'll talk about that, and then the product mix. So from an international perspective, what we were really alluding to on the timing side of things is kind of the timing of when we ordered products and what price increases had or hadn't come through yet. By the time we received products and were able to sell them in the market, prices had gone up, and there was an opportunity to sell at the current value, so expect a little bit more profitability there. And then that will kind of have wrapped up in the first quarter here. We don't foresee that continuing the rest of the year. More broadly speaking, and we did see strong margins across our segments. But specifically with Ag because we know that drives a lot of what goes on here. The understanding, the dynamics of the cash crop units and those kind of being slower to go out the door and foreseeing more of that happening as we progress throughout the year. Those big-ticket items with high price tags tend to have lower margins than some of the hay and forage and other, and tillage and other areas. So what we really saw from a mix perspective, what we're talking about there is some of the equipment that we sell from short lines and some of these smaller ticket items, they carry a higher margin, and they were more of that mix. And again, for expectations for the rest of the year, as we drive sequential growth in volume and get more of this cash crop equipment sent out to customers, that comes at a little lower margin, and that's one of the reasons we talk about the margin changing sequentially as we progress throughout the year.

Got it. Okay, that makes sense. Thank you for that. And then maybe just a couple of questions on the construction business. Maybe talk about some of the demand trends you're seeing there. Is the infrastructure bill starting to lift demand? And maybe are there any headwinds from some of the commercial lending issues we've seen? And then maybe secondarily, you mentioned some equipment availability issues in construction. Maybe expand on that.

Yes, Joe, I'll discuss the situation here in the upper Midwest. The economy has been strong overall, and many of our customers had a great year last year. Their demand, and consequently our equipment demand, is carrying into this year. The construction fleet is becoming significantly outdated due to limited availability over the past two years, which continues to drive demand. Additionally, many of the small independent rental houses we partner with also have aging fleets because of the construction constraints of the last two years, and they are looking to replenish their equipment. We haven't managed to achieve much of that yet. Regarding key product categories, as you mentioned, many of our core legacy products, particularly some big-ticket items, are currently on allocation. We are eager to secure every unit we can and push for more availability to meet demand. However, similar to the high horsepower tractors and other items we've discussed on the Ag side, that fulfillment will take time.

Okay, great. I'd leave it there. Thank you.

Our final question is from Steve Dyer with Craig Hallum. Please proceed with your question.

Good morning, Ryan on for Steve. I want to start with parts supports growth. It was effectively double service growth on the revenue side this quarter. I guess, what caused that outsized strength in parts, vis-a-vis service? And then secondly to that, are you having any supply constraints getting core parts inventory?

From a growth perspective, the growth in parts was closely aligned with overall agricultural growth, aided in part by acquisitions. The busy spring season also contributed as we prepared people for field work. You inquired about the reason service growth isn't matching parts growth. A significant portion of our service efforts is dedicated to preparing new units, including pre-delivery inspections and the installation of products, which are not reflected in service revenue as they are part of a broader process. We would like to increase our service technicians to meet all demands simultaneously, but due to some of the congestion we've previously discussed and the focus on delivering new goods, this has resulted in softer service growth. However, I believe parts growth aligns well with what we're observing in other areas of the business.

I would just like to add regarding your question about parts availability. We've seen some improvement in that area recently, but it's still not at the level we desire. Lead times are longer than we would prefer, and we are still having difficulty obtaining some parts. For example, our backorder lines remain significantly above our desired levels. On a positive note, there has been substantial improvement in some key cash crop equipment categories, where we previously noticed no progress.

And then just for my second question, are any customers willing or even able to shift down to lower horsepower equipment or some of the inventory that you have better supply of? Or are they effectively forced to wait and thus building that almost two-year type pipeline of demand for those high horsepower and in-demand tractors and combines?

Yes, there'd be a few rare exceptions. But in almost every case, they're forced to have to wait.

Yes. Additionally, we have some really nice late model used equipment available. As a result, some customers may consider switching from a new purchase to a late model used purchase. We also need to process the inventory we have on hand, which will help in moving the used equipment.

Yes. And then also just adding, that does really help with the future pipeline and the presell is, I guess, the positive is it gives those customers and their tax accounts and advisers plenty of time to plan their business and helps us plan our business, helps them lock in and get the specs that they want and so on. But yes, again, on the specific product category, still dealing with longer lead times than we would like and then our customers would like.

All right. Thank you, everyone, for taking time for our call, and thanks for your interest in Titan Machinery, and we look forward to updating you on our progress on our next call. So have a great day.

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