Titan Machinery Inc 10-Q for FY2024 Q3

Titan Machinery Inc. (TITN)

10-Q 2023-12-07 For: 2023-10-31

Added on April 11, 2026

About this 10-Q

Titan Machinery Inc filed this 10-Q on December 7, 2023, covering the quarter ended October 31, 2023 (FY2024 Q3).

Headline figures

Quarter ended October 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $694.12M; up 3.8% from $668.77M a year earlier
Net income: $30.19M; down 26.8% from net income of $41.26M a year earlier
Diluted EPS: $1.32; down 27.5% from $1.82 a year earlier

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Delaware						45-0357838
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00001 par value per share	TITN	The Nasdaq Stock Market LLC


		Page No.
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Stockholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	23
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36
ITEM 4.	CONTROLS AND PROCEDURES	36
PART II.	OTHER INFORMATION	37
ITEM 1.	LEGAL PROCEEDINGS	37
ITEM 1A.	RISK FACTORS	37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES	37
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	37
ITEM 4.	MINE SAFETY DISCLOSURES	37
ITEM 5.	OTHER INFORMATION	37
ITEM 6.	EXHIBITS	37
Exhibit Index		38
Signatures		39


	October 31, 2023		January 31, 2023

Assets
Current Assets
Cash	$	69,981	$	43,913
Receivables, net of allowance for expected credit losses	129,399		95,844
Inventories, net	1,071,088		703,939
Prepaid expenses and other	15,080		25,554


Total current assets	1,285,548		869,250
Noncurrent Assets
Property and equipment, net of accumulated depreciation	267,155		217,782
Operating lease assets	40,835		50,206
Deferred income taxes	4,969		1,246
Goodwill	31,144		30,622
Intangible assets, net of accumulated amortization	18,266		18,411
Other	1,821		1,178
Total noncurrent assets	364,190		319,445
Total Assets	$	1,649,738	$	1,188,695

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	38,016	$	40,834
Floorplan payable	705,610		258,372

Current maturities of long-term debt	11,586		7,241
Current operating lease liabilities	9,395		9,855
Deferred revenue	43,964		119,845
Accrued expenses and other	71,211		58,159
Income taxes payable	5,622		3,845
Total current liabilities	885,404		498,151
Long-Term Liabilities
Long-term debt, less current maturities	87,591		89,950
Operating lease liabilities	38,688		48,513
Deferred income taxes	9,561		9,563
Other long-term liabilities	2,661		6,212
Total long-term liabilities	138,501		154,238
Commitments and Contingencies
Stockholders' Equity
Common stock, par value $.00001 per share, 45,000,000 shares authorized; 22,862,706 shares issued and outstanding at October 31, 2023; 22,697,761 shares issued and outstanding at January 31, 2023	—		—
Additional paid-in-capital	257,881		256,541
Retained earnings	373,263		284,784
Accumulated other comprehensive loss	(5,311)		(5,019)
Total stockholders' equity	625,833		536,306
Total Liabilities and Stockholders' Equity	$	1,649,738	$	1,188,695


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenue
Equipment	$	521,775	$	508,996	$	1,431,272	$	1,240,579
Parts	114,962		108,719		320,077		254,974
Service	44,767		38,960		122,178		101,847
Rental and other	12,611		12,098		32,785		28,923
Total Revenue	694,115		668,773		1,906,312		1,626,323
Cost of Revenue
Equipment	454,598		436,156		1,237,660		1,070,378
Parts	78,585		72,146		216,775		172,162
Service	14,393		13,456		41,010		35,288
Rental and other	8,198		7,435		20,549		17,522
Total Cost of Revenue	555,774		529,193		1,515,994		1,295,350
Gross Profit	138,341		139,580		390,318		330,973
Operating Expenses	92,115		84,861		262,182		217,841



Income from Operations	46,226		54,719		128,136		113,132
Other Income (Expense)
Interest and other income (expense)	(235)		1,804		1,129		3,169
Floorplan interest expense	(4,045)		(588)		(7,774)		(1,087)
Other interest expense	(1,494)		(1,257)		(4,008)		(3,802)
Income Before Income Taxes	40,452		54,678		117,483		111,412
Provision for Income Taxes	10,259		13,421		29,004		27,656
Net Income	$	30,193	$	41,257	$	88,479	$	83,756

Earnings per Share:
Basic	$	1.32	$	1.82	$	3.88	$	3.70
Diluted	$	1.32	$	1.82	$	3.88	$	3.70

Weighted Average Common Shares:
Basic	22,512		22,393		22,487		22,365
Diluted	22,517		22,399		22,493		22,372


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
	Shares Outstanding	Amount
Balance at January 31, 2023	22,698	$	—	$	256,541	$	284,784	$	(5,019)	$	536,306
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(29)	—		(993)		—		—		(993)
Stock-based compensation expense	—	—		659		—		—		659
Net income	—	—		—		26,965		—		26,965
Other comprehensive income	—	—		—		—		1,096		1,096
Balance at April 30, 2023	22,669	$	—	$	256,207	$	311,749	$	(3,923)	$	564,033
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	195	—		(7)		—		—		(7)
Stock-based compensation expense	—	—		784		—		—		784
Net income	—	—		—		31,321		—		31,321
Other comprehensive income	—	—		—		—		550		550
Balance at July 31, 2023	22,864	$	—	$	256,984	$	343,070	$	(3,373)	$	596,681
Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax	(1)	—		1		—		—		1
Stock-based compensation expense	—	—		896		—		—		896
Net income	—	—		—		30,193		—		30,193
Other comprehensive loss	—	—		—		—		(1,938)		(1,938)
Balance at October 31, 2023	22,863	$	—	$	257,881	$	373,263	$	(5,311)	$	625,833


	Three Months Ended October 31, 2023								Nine Months Ended October 31, 2023
	Agriculture		Construction		Europe		Total		Agriculture		Construction		Europe		Total
	(in thousands)								(in thousands)
Equipment	$	408,648	$	47,364	$	65,763	$	521,775	$	1,086,840	$	146,519	$	197,913	$	1,431,272
Parts	86,173		12,943		15,846		114,962		237,966		39,144		42,967		320,077
Service	34,718		7,084		2,965		44,767		93,510		20,767		7,901		122,178
Other	1,333		547		318		2,198		3,735		1,496		869		6,100
Revenue from contracts with customers	530,872		67,938		84,892		683,702		1,422,051		207,926		249,650		1,879,627
Rental	532		9,570		311		10,413		1,618		24,442		625		26,685
Total revenue	$	531,404	$	77,508	$	85,203	$	694,115	$	1,423,669	$	232,368	$	250,275	$	1,906,312


	Three Months Ended October 31, 2022								Nine Months Ended October 31, 2022
	Agriculture		Construction		Europe		Total		Agriculture		Construction		Europe		Total
	(in thousands)								(in thousands)
Equipment	$	380,007	$	56,534	$	72,455	$	508,996	$	901,574	$	143,536	$	195,469	$	1,240,579
Parts	81,420		13,350		13,949		108,719		178,474		37,229		39,271		254,974
Service	29,831		6,807		2,322		38,960		76,514		18,932		6,401		101,847
Other	1,201		639		89		1,929		2,881		1,441		540		4,862
Revenue from contracts with customers	492,459		77,330		88,815		658,604		1,159,443		201,138		241,681		1,602,262
Rental	865		9,073		231		10,169		1,386		22,251		424		24,061
Total revenue	$	493,324	$	86,403	$	89,046	$	668,773	$	1,160,829	$	223,389	$	242,105	$	1,626,323


	October 31, 2023						January 31, 2023
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
	(in thousands)						(in thousands)
Customer relationships	$	538	$	(261)	$	277	$	538	$	(180)	$	358
Covenants not to compete	1,131		(392)		739		1,025		(222)		803
	$	1,669	$	(653)	$	1,016	$	1,563	$	(402)	$	1,161


	Amount
	(in thousands)
2024 (remainder)	$	86
2025	325
2026	282
2027	232
2028	91
Thereafter	—
	$	1,016


Description	Maturity Dates	Interest Rates	October 31, 2023		January 31, 2023
			(in thousands)
Mortgage loans, secured	Various through May 2039	2.1% to 7.3%	$	70,221	$	68,689
Sale-leaseback financing obligations	Various through December 2030	3.4% to 10.3%	10,353		11,252

Vehicle loans, secured	Various through September 2029	2.1% to 6.8%	14,012		12,659
Other	Various through July 2039	3.6%	4,591		4,591
Total debt			99,177		97,191
Less: current maturities			11,586		7,241
Long-term debt, net			$	87,591	$	89,950


	Foreign Currency Translation Adjustment		Net Investment Hedging Gain		Total Accumulated Other Comprehensive Income (Loss)
	(in thousands)
Balance, January 31, 2023	$	(7,730)	$	2,711	$	(5,019)
Other comprehensive income (loss)	1,096		—		1,096
Balance, April 30, 2023	(6,634)		2,711		(3,923)
Other comprehensive income (loss)	550		—		550
Balance, July 31, 2023	(6,084)		2,711		(3,373)
Other comprehensive income (loss)	(1,938)		—		(1,938)
Balance, October 31, 2023	$	(8,022)	$	2,711	$	(5,311)


(in thousands)
Assets acquired:
Cash	$	4,333
Receivables	5,741
Inventories	97,832
Prepaid expenses and other	296
Property and equipment	11,063
Operating lease assets	14,496

Intangible assets	48,520


Other assets	7
	$	182,288
Liabilities assumed:
Accounts payable	$	4,191
Floorplan payable	74,843
Current maturities of long-term debt	294
Current operating lease liabilities	1,039
Deferred revenue	12,066
Accrued expenses and other	7,204
Long-term debt, less current maturities	2,077
Operating lease liabilities	13,457

Deferred income taxes	965
	$	116,136
Net assets acquired	$	66,152


	Three Months Ended October 31,				Increase/		Percent
	2023		2022		(Decrease)		Change
	(dollars in thousands)
Equipment	$	521,775	$	508,996	$	12,779	2.5	%
Parts	114,962		108,719		6,243		5.7	%
Service	44,767		38,960		5,807		14.9	%
Rental and other	12,611		12,098		513		4.2	%
Total Revenue	$	694,115	$	668,773	$	25,342	3.8	%


No.						Description

10.1						Amendment dated October 17, 2023, to the Amended and Restated Employment Agreement, between David Meyer and the Company.

10.2						Executive Employment Agreement, dated October 17, 2023, by and between Bryan J. Knutson and the Company.

10.3						Inventory Finance Agreement, dated December 17, 2018, between CNH Industrial Capital Australia Pty Limited and J.J. O'Connor & Sons Pty Ltd.

10.4						Letter Agreement regarding Wholesale Floor Plan Credit Facilities, dated December 6, 2023, between CNH Industrial Capital America LLC and the Company.

31.1						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1						Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2						Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101						Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended October 31, 2023, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Stockholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


	Nine Months Ended October 31,
	2023		2022
Operating Activities
Net income	$	88,479	$	83,756
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	22,871		18,356

Deferred income taxes	(3,731)		(1,835)
Stock-based compensation expense	2,339		2,308
Noncash interest expense	206		182


Other, net	5,628		7,072
Changes in assets and liabilities, net of effects of acquisitions
Receivables	(31,947)		(10,507)
Prepaid expenses and other assets	5,774		10,675
Inventories	(358,837)		(115,734)
Manufacturer floorplan payable	274,968		78,972
Deferred revenue	(77,425)		(83,029)
Accounts payable, accrued expenses and other and other long-term liabilities	(10,386)		2,650


Net Cash Used for Operating Activities	(82,061)		(7,134)
Investing Activities
Rental fleet purchases	(5,154)		(8,601)
Property and equipment purchases (excluding rental fleet)	(36,770)		(16,829)
Proceeds from sale of property and equipment	6,451		2,110
Acquisition consideration, net of cash acquired	(27,935)		(100,471)
Other, net	(643)		(176)
Net Cash Used for Investing Activities	(64,051)		(123,967)
Financing Activities
Net change in non-manufacturer floorplan payable	174,353		32,212

Proceeds from long-term debt borrowings	7,721		8,415
Principal payments on long-term debt and finance leases	(10,685)		(5,596)

Other, net	(1,121)		(698)
Net Cash Provided by Financing Activities	170,268		34,333
Effect of Exchange Rate Changes on Cash	1,912		(3,529)


	October 31, 2023		January 31, 2023
	(in thousands)
Trade and unbilled receivables from contracts with customers
Trade receivables due from customers	$	60,385	$	47,298
Unbilled receivables	32,985		19,764
Less allowance for expected credit losses	3,515		3,080
	89,855		63,982

Short-term receivables due from finance companies	22,513		11,212

Trade and unbilled receivables from rental contracts
Trade receivables	3,614		3,629
Unbilled receivables	1,060		776
Less allowance for expected credit losses	399		360
	4,275		4,045
Other receivables
Due from manufacturers	11,781		15,007
Other	975		1,598
	12,756		16,605
Receivables, net of allowance for expected credit losses	$	129,399	$	95,844


	October 31, 2023		January 31, 2023
	(in thousands)
Rental fleet equipment	$	77,231	$	75,386
Machinery and equipment	31,601		27,220
Vehicles	89,870		80,122
Furniture and fixtures	57,062		53,937
Land, buildings, and leasehold improvements	185,991		140,773
	441,755		377,438
Less accumulated depreciation	174,600		159,656
	$	267,155	$	217,782


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenue
Equipment	75.2	%	76.1	%	75.1	%	76.2	%
Parts	16.6	%	16.3	%	16.8	%	15.7	%
Service	6.4	%	5.8	%	6.4	%	6.3	%
Rental and other	1.8	%	1.8	%	1.7	%	1.8	%
Total Revenue	100.0	%	100.0	%	100.0	%	100.0	%
Total Cost of Revenue	80.1	%	79.1	%	79.5	%	79.6	%
Gross Profit Margin	19.9	%	20.9	%	20.5	%	20.4	%
Operating Expenses	13.3	%	12.7	%	13.8	%	13.4	%


Income from Operations	6.7	%	8.2	%	6.7	%	7.0	%
Other Expense	(0.8)	%	—	%	(0.6)	%	(0.1)	%
Income Before Income Taxes	5.8	%	8.2	%	6.2	%	6.9	%
Provision for Income Taxes	1.5	%	2.0	%	1.5	%	1.7	%
Net Income	4.3	%	6.2	%	4.6	%	5.2	%


Dated:	December 7, 2023
		TITAN MACHINERY INC.


		By	/s/ Robert Larsen
			Robert Larsen
			Chief Financial Officer
			(Principal Financial Officer)


Title:			You will serve as the Executive Chairman of the Company (“Executive Chairman”).
Term:			Unless terminated by either party as provided in the Employment Letter, the term of your employment as Executive Chairman shall be for a twelve-month period (the “Term”) commencing on February 1, 2024 (“Effective Date”) and ending on January 31, 2025.
Responsibilities:			During your employment with the Company as Executive Chairman, you will report to the Board of Directors of the Company (the “Board”) and will be responsible for such executive duties as reasonably assigned to you by the Board including consultation with and transition assistance to the Company’s Chief Executive Officer. You agree to serve the Company faithfully and to the best of your ability, and to devote your attention and efforts to the business of the Company. You further agree to make yourself available as needed, in a timely manner, to address business issues that may arise. You may, to a reasonable extent, participate in charitable activities, personal investment activities and outside businesses that are not competitive with the business of the Company and serve on boards of directors, so long as such activities and directorships do not interfere with the performance of your duties and responsibilities to the Company; provided, that you shall report on all such activities and directorships to the Board at least annually.
Representations:			By signing below, you represent and confirm that you are under no contractual or legal commitments that would prevent you from fulfilling your duties and responsibilities to the Company as Executive Chairman.


By:			/s/ Jody Horner
			Jody Horner, Chair of the Compensation Committee


			By:
			/s/ Jody Horner
			Jody Horner
			Chair of the Compensation Committee

			EXECUTIVE:
			/s/ Bryan J. Knutson
			Bryan J. Knutson


/s/ Bo Larsen
Bo Larsen
Chief Financial Officer, Titan Machinery Inc.
Director, J.J. O’Connor & Sons Pty Ltd


			/s/ David J. Meyer
			David J. Meyer
			Board Chair and Chief Executive Officer