Earnings Call Transcript - TWI Q1 2025

Operator, Operator

Good morning, all, and thank you for joining us for the Titan International Inc. First Quarter 2025 Earnings Call on Webcast. At this time, all participants have been placed on listen-only mode, and we will open the floor for questions and comments after the presentation. It is now my pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Investor Relations at Titan. Mr. Snyder, the floor is yours.

Alan Snyder, Vice President, Financial Planning and Investor Relations

Thank you, and good morning. I'd like to welcome everyone to Titan's first quarter 2025 earnings call. On the call with me today are Paul Reitz, Titan's President and CEO; and David Martin, Titan's Senior Vice President and CFO. I will begin with a reminder that the results we are about to review were presented in the earnings release issued yesterday, along with our Form 10-Q, which was also filed with the Securities and Exchange Commission yesterday. As a reminder, during this call, we will be discussing certain forward-looking information, including the company's plans and projections for the future that involve risks, uncertainties, and assumptions that could cause our actual results to differ materially from the forward-looking information. Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward-looking statements can be found within the Safe Harbor Statement included in the earnings release attached to the company's Form 8-K filed earlier, as well as our latest Form 10-K and Forms 10-Q, all of which have been filed with the SEC. In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement but not be a substitute for the most directly comparable GAAP measures. The earnings release which accompanies today's call contains financial and other quantitative information to be discussed today, as well as reconciliation of the non-GAAP measures to the most comparable GAAP measures. Q1 earnings release is available on the company's website. A replay of this presentation, a copy of today's transcript, and the company's latest quarterly investor presentation will all be available soon after the call on Titan's website. I would now like to turn the call over to Paul.

Paul Reitz, President and CEO

Thanks, Alan, and good morning. We are pleased to report Q1 results that were at the higher end of our guidance ranges for revenue and adjusted EBITDA. Despite all the volatility floating around these days, the financial results for the quarter played out much as we had expected. This was a good solid quarter that highlights the strengths of our broad portfolio of market leading products, serving a diversified base of geographies and segments. As we noted in our earnings release, our leadership position in our markets, coupled with our customer centric mindset are the core of who we are. And by sticking to that focus, we're able to navigate turbulent times such as these. We are actively assessing the evolving tariff situation and will be utilizing data-driven analysis in our decision-making process. Our diversified global business model enables us to be flexible with production and then will also be patient evaluating our strategic business plans in light of the evolving trade scenarios. I do want to stress that we believe that tariffs applied consistently across the globe should benefit us in the longer term. Despite the short term uncertainty and confusion that nearly all businesses are facing, as we currently watch things getting negotiated and sorted out. I think this is a good time to also remind everyone that Titan has always been a proud US manufacturer with eight plants across the US. Over time, we have acquired manufacturing assets in other countries that allows us to better serve our global customers, but we've always maintained a strong US manufacturing presence. So moving over to our segments, I'm going to start with ag. We are leveraging our connection to end users by getting out to visit farmers and dealerships to really make sure we get an accurate picture of the current operating environment. On the whole, farmers appear to be guardedly optimistic that once the dust settles, they will be okay with solid farmer income. Crop prices remain in healthy ranges and they firmly believe that government stands behind them as retaliatory tariffs impact their ability to sell their harvests outside the US. The uncertainty that businesses are facing, which is no different for farmers, is putting a damper on equipment demand in the short run. This will eventually pass and the cycle will turn. And that's where Titan's broad product portfolio and our expansive production capabilities shine through. Our teams need to continue to manage costs effectively while also staying prepared to ramp up to meet demand when needed. While overall agriculture orders remain muted, we did see some positive OEM activity in the US as a key customer had extensive drop in orders in Q1. These orders came in prior to the tariff introduction, so we believe they were driven by demand, not pull forward buys. The experience of our One Titan team continues to manage cycles like this, which really makes an important asset for us and our customers when the cycle turns, because it typically turns fast. Our team and breadth of production capabilities are best suited to meet our customer’s needs in those moments. And that's what I was highlighting with talking about that key customer dropping in those Q1 orders. We have competitors that have offered buyouts to their entire labor force, while Titan is able to adjust to customers on the fly and meet their needs. And that, again, proves the expansive capabilities of Titan and our team. So moving over to Brazil, which historically is a good leading indicator for the broader global ag market. We have seen our business strengthening since Q4 of last year. The harvest season has gone well and it seems that farmers there will benefit from the U.S. trade standoff by stepping up their exports to China. As the largest manufacturer of ag tires and undercarriage in Brazil, Titan is well positioned to benefit in South America. So looking at Europe, the economic and military investment into that region has become a priority along with the establishment of trade accords without the U.S. In the near term, European activity has been somewhat slowed down and basically stuck as the region continues to feel the effects of the situation in Ukraine, while also working on the best path forward given the changes in global trade policy. While our European business is being impacted in the short run, I want to mention that I was recently at our plant in Turkey and was really excited to see our investments there to improve our overall European wheel capacity and lower our cost structure. And things are coming together nicely there. Our consumer segment continues to be our gross margin leader. As a reminder, customers in that segment include both OEMs and aftermarket, with a higher proportion of aftermarket sales than our other segments. End customers range from outdoor power sports equipment owners to businesses such as landscapers and golf courses. The latter group tends to use their equipment very regularly, which makes it a good source of aftermarket demand. That group also has a shorter replacement cycle for equipment since their businesses depend on operational uptime, which provides us good diversification to our other segments. Lastly, taking a look at our EMC segment, we are seeing the impact of sluggish OEM demand, particularly in Europe and the US. It's worth noting that the type of work our products are used in tends to be in large and long-term projects tied to mining and non-residential infrastructure. Companies and governments base those decisions on a type of work with long-term inputs and as such, the near-term trade negotiations have had an impact. To that extent, a region such as Europe sees a renewed emphasis on internal investment; changes in trade policy would be seen as a long-term positive. Similar volatility becomes a durable aspect of global trade. Precious metal prices would seem to have a long-term positive bias, supporting mining investment. These demand drivers are a good counterbalance to what I just mentioned in the consumer segment and the ag segment, which is our largest segment. The feedback we received recently from the Obama trade zone in Germany was similar to what I've been saying in my comments about our EMC capabilities in the last quarter. And I've noted that we're in a good position with our innovations and product development along with our strong service capabilities. So we are very poised when the market returns to growth in this segment. While we firmly believe that we are well positioned in all three of our segments, I want to make it clear that we are not sitting back waiting for the world to find its footing. We have a number of internal growth initiatives underway, including our continued investment in new product development across all of our businesses, driving revenue synergies amongst our segments and our product families, and then offering new third-party source products. I've been talking recently about the further penetration of our LSWs in market segments, where we really haven't marketed them as aggressively in the past. I got to tell you, we have some really strong, independent data from a group of farmers on LSW performance and the accompanying yield improvements that they bring when compared to dual tires and rougher tracks; it really amplifies the ROI in LSW to a payback of well under a year for a mid-size farm. Our teams are working on rolling out that promotional material around this information, and we are really excited about the prospects that it brings with it, as well as a couple of the dealers that we've mentioned this to. Wrapping up, we are off to a solid start in 2025. There's certainly a lot going on in the world today and our business will continue to move forward. Farmers are working their fields, precious metal prices are driving mining activity, and lawns are going to get mowed. At Titan, our investments and our domestic positioning, one-stop strategy, and our organic growth initiatives have us poised to provide products as a solution to our customer needs in times of complexity and dislocation that we're seeing today, therefore supporting a long-term growth trajectory. Further illustrating our long-term growth prospects is our recently announced expansion of the Goodyear licensing rights into new product segments. As most of you know and our customers know, we've had a nearly 20-year strong relationship with the Goodyear farm brand that we remain deeply committed to. And that couples really well with our excitement about the prospects of adding the Goodyear name into light construction, industrial, ATV, lawn and garden, and golf tires. So with that, I'm going to turn it over to David now.

David Martin, Senior Vice President and CFO

Hey, thank you, Paul. And good morning, and thanks to everyone listening in today. Paul talked about the tariffs earlier, and it is worth repeating that we are well positioned. We are among the only domestic manufacturers in our segments, and by virtue of that, we expect trade policy applied consistently around the globe to be a net positive for our business on a competitive basis. Like everyone, we hope that policy will be settled sooner than later, as that will benefit our OEM customers, along with everyone that buys their products, from farmers to landscapers. At the same time, we will continuously evaluate our production strategies to fit the situation, and we believe that we have strong plans to win the day. As Paul noted, our results for the first quarter were in line with our expectations and at the higher end of our guidance range. It marked a nice sequential improvement from the fourth quarter. Revenues in the first quarter were $491 million with adjusted EBITDA of $31 million. Our gross margin in the first quarter was 14%, which was up from the 10.7% in the fourth quarter. That demonstrates the positive leverage that comes with increasing sales. Looking at our margins by segment in the quarter, all three showed expansion versus the fourth quarter. Ag gross margins were 12.4%, EMC was 10.4%, and our consumer gross margins were 19.6%. Consumer continued to be our most profitable segment as the higher margin aftermarket business accounted for more than 65% of the sales in the segment. Our SG&A expense for the first quarter was $49.9 million or 10% of sales compared to $39 million in the prior year or 8% of sales. I want to remind everybody that we closed the acquisition of Carlstar in February of 2024, so the first quarter of last year only included one month of SG&A expense for Carlstar. Going forward, beginning with our second quarter results, our comparisons will be all on a like-for-like basis. Not including the inclusion of Carlstar, our SG&A expense for Legacy Titan was 2% lower than the first quarter of 2024. Our R&D expenses were $4.5 million in the first quarter compared to $3.7 million a year ago and relatively the same level with the $4.4 million we spent in the fourth quarter of last year. Our operating income in the first quarter was almost $12 million and reflected the combination of sales, margins, and operational expenses I just noted. Also as expected, we began to increase our working capital balances, particularly accounts receivable and unsold inventories to a lesser extent, concurrently with the $107 million sequential step up in sales, which resulted in a negative free cash flow for the quarter, and that includes our CapEx of $15 million. Reiterating our commentary from last quarter, that usage of cash was expected, and we fully expect to see improvements as the year goes on. Our net debt at the end of the quarter was $411 million, or 3.8 times trailing 12-month adjusted EBITDA. From a capital allocation standpoint, our primary focus in 2025 will continue to be paying down debt and our key investments in the business, as we noted last quarter. We will curtail our capital investments in 2025, reflecting our cash flow expectations and the more challenging market climate while we are still focused on the investments that drive our growth strategy. The first quarter income tax expense was $4.2 million within an effective rate of almost 100%. Our elevated tax rate continues to be a function of where our profits and losses are distributed geographically and the associated tax jurisdictions in each of those areas. Now moving on to our financial guidance for Q2 that we communicated yesterday. Our guidance range for the quarter are revenues of $450 million to $500 million, adjusted EBITDA of $25 million to $35 million, which all reflects stability in our business in the second quarter. So reiterating our prior comments on cash flow, we will continue to manage working capital tightly in the second quarter. And as we enter the second half of the year, we expect to see cash flow turn positive, allowing us to reduce our debt and continue our strategies. Our financial condition is solid. Let's just remember that. We have a really good balance sheet, and I'm fully confident that we're continuing to put ourselves in a really good position to accelerate our future performance. So thank you for your time this morning, and we would like to turn the call back over to Carly for the Q&A session.

Operator, Operator

Thank you very much. We're now going to open the line for Q&A. Our first question comes from Mike Shlisky of D.A. Davidson. Your line is now open, Mike.

Michael Shlisky, Analyst

Good morning. Thank you for addressing my question. I'd like to begin by asking how you source rubber. There are significant tariffs for major rubber exporting countries like Vietnam and Thailand, but there are also options to source rubber from West Africa, where tariffs are much lower, at around 10% or the minimum required. I'm curious if you could clarify which sourcing strategy Titan prefers. Which source is predominantly used? Additionally, could you comment on your ability to pass on any increased costs of rubber or steel through your OEM contracts with your customers?

Paul Reitz, President and CEO

Yes, great question, Mike. We have good sourcing of all of our rubber products, and they're primarily from West Africa. We have good solid contracts in place for those. And so, we feel very confident about our ability to get the materials and at a very cost-competitive positioning. And we expect the year not to be impacted dramatically at all based on tariffs in that regard. But I think I want to add to that in that our steel sourcing is primarily domestic and the other things such as fabric, chemicals, and so forth are either sourced domestically or from areas that have fairly low tariff impacts at this point in time. So we're in a really strong position relative to our sourcing globally. And in reference to your question about pricing, we do have contracts and mechanisms in place for our OEM customers regarding raw material and other inflationary cost impacts. And they're adjusted typically either on a three or six month basis. So again, we're not going to be impacted dramatically by that. And we'll continue to work closely with our sources to be strategic and mitigate cost impacts in any event. So I feel like we're in a good position there.

Michael Shlisky, Analyst

Got it. Thanks for that. And then I just want to get maybe take a step back and ask about the broader global ag market. You had mentioned there were potentially some challenges with the U.S. farmer because of tariffs or other things that are happening. But do you feel like globally, everyone has to eat, do you feel like globally other regions may pick up the slack? We just heard from one of the major tractor audience this morning that South America was actually up in the quarter. Curious, have you seen something similar? I just kind of want to get a sense as to the net global read on ag which you serve most of those markets? Are things getting dramatically better or worse on a net basis?

Paul Reitz, President and CEO

Yes, Mike, I believe that this aligns perfectly with our strengths at Titan. Our ability to serve all market segments, from large to small, is crucial. In response to your question about agriculture, our manufacturing presence in key agricultural regions such as Brazil and the U.S. is vital, especially as we're starting to see growth in Brazil, a trend we've highlighted since Q4 of last year. Brazilian buyers are purchasing more grains from Brazil than the U.S., which is driving demand and growth there. We are performing exceptionally well in Brazil, showcasing our diversification. As the farming economy adapts to meet global demand for protein-based diets, we are positioned to address customer needs regardless of their location and prevailing market trends. Regarding agriculture, Brazil continues to show improvement, consistent with the strong performance we observed in Q4, and we expect this positive trend to carry into Q1 and Q2. The U.S. market has its complexities, but we are emphasizing that in times when farmer income is tight, they are seeking to reduce costs wherever possible. Our products, such as LSW, are supported by data showing their ROI, providing solutions to enhance farm income. We are active in the U.S. market despite some stagnation as we await developments in global trade. Titan is well-positioned on a global scale. Additionally, our presence in Europe, particularly with our wheel business, is robust. Ultimately, the agriculture market is clear: people will continue to eat, and we are equipped to fulfill those needs.

Michael Shlisky, Analyst

Great. I also wanted to ask about something, sorry, what was it...

Paul Reitz, President and CEO

I would like to add one more comment. As the US gradually comes out of this cycle, which it will, we are approaching two years of economic downturn in the US. We have strategically positioned our plans for both wheels and tires to address that demand, which is not an easy task. First, you need the right tooling and production capabilities to adapt to changing demands, and secondly, you must be prepared. We've observed our competitors implementing mass layoffs and buyouts, while Titan has maintained its capabilities. When a significant customer approaches with large orders, as we are increasingly seeing, being able to respond effectively is challenging. Fortunately, Titan is well positioned in the US, equipped with the necessary plants and tooling, as well as a team ready to tackle shifts in demand. We all recognize that a change is on the horizon, and while predicting the exact timing involves uncertainty, it will occur. I want to emphasize that we experienced a significant drop in orders in Q1, which has been an ongoing trend, but we have managed to meet that demand.

Michael Shlisky, Analyst

Great. I also wanted to ask about visibility. You mentioned in prior conversations, it got very tough during 2024 with OEMs, who typically give you a quarter or a little over a quarter of visibility of what they're looking for coming ahead. It was tough to predict. You really had a really rough third and fourth quarter of last year. Things changed pretty rapidly. Sounds like things seem more stable now, first quarter versus now coming up to your second quarter from an EBITDA perspective. I am curious whether you feel like the visibility has improved greatly from the second half of 2024, so you can plan ahead a lot better than you could just six months ago.

Paul Reitz, President and CEO

It's still not where it used to be. And you've got to adjust to the world; the world's not going to adjust to you. And so that's really what we've been doing. Our team has to be prepared to handle whatever the market conditions are and however our customers' needs need to be met. And we do envision a world where after you get through this inventory cycle, which is most comments are, it's getting really close to the inventory being at a level they feel more comfortable, then you start getting that visibility back because the market demand is going to tie more into their production needs. I think really what distorted us last year was the dislocation with inventory levels and the production cycles. And so that part will really get the visibility back. And that's going to happen. Is it happening right now? Not quite, but that doesn't mean we can't be prepared to handle the world that we're in. And I think that's what we're saying is, it's a good solid Q1. Clearly we've adapted to these market conditions. As David highlighted, our guidance for Q2 is illustrating the same thing, good financial performance. And then we'll go from there. But we've adapted well to these market conditions. But I do think the visibility will get better. And as Dave has talked a lot about in his comments, our pull-through will improve. I mean, we are in a trough market and still putting out good financial results. And so that pull-through of efficiency through to our margins when that visibility comes into place and our plants are operating at a better utilization level in the U.S. is the day we're looking forward to and we know it will come.

Michael Shlisky, Analyst

Okay. I appreciate the discussion. I'll leave it there. Thank you.

Paul Reitz, President and CEO

All right. Thanks, Mike.

Operator, Operator

Thank you very much. Our next question comes from Steve Ferazani of Sidoti. Steve, your line is not open.

Steve Ferazani, Analyst

Good morning, Paul. Good morning, David. Appreciate all the color on the call so far this morning. Paul, you and Titan, unfortunately, have been through this trade war before and not that long ago. Can you touch on maybe what you learned the last time around, how you can apply at this time, and how well your aftermarket may be positioned, which may be more important over the next three or four quarters on the ag side?

Paul Reitz, President and CEO

We are focused on meeting our customers' needs by remaining flexible with our production capabilities. We have multiple facilities to produce our products and a solid manufacturing base in the U.S. Recently, we've noticed that some U.S. customers are asking if we can source or produce items domestically, even if it means a higher price. This shift helps mitigate risks and plays to Titan's strengths. In previous periods of disruption, such as the tariff trade war and COVID, our production capabilities and tooling have come into play. We possess a significant range of tooling to satisfy our customers' requirements, and during such disruptions, we excel. While navigating these challenges isn't easy, we rely on the expertise of the Titan team. Our flexibility in production allows us to work effectively with a robust network of third-party suppliers, which we have been enhancing, especially after our acquisition last year. These additional capabilities make us attractive to third-party suppliers. We can adapt our production within our facilities and other channels. Our team has confidence during these challenging times and communicates that assurance to our customers. We believe these circumstances will ultimately benefit us in the long run. In the short term, however, it requires hard work and dedication to overcome these challenges, and our experience supports that belief.

Steve Ferazani, Analyst

Thanks, Paul. I also wanted to get a chance to touch on the expanded Goodyear licensing agreement. That seems pretty substantial now that it's going to cover some of the former Carlstar products. I know those agreements don't happen overnight, so you've had some time on this. Can you talk about how important or useful it will be to apply the Goodyear brand to some of the former Carlstar products and what that means towards realizing those synergies you had talked about a year ago when you made that acquisition?

Paul Reitz, President and CEO

Yes, Steve, you're exactly right. Those things don't happen overnight. So it's pretty cool today to be able to talk about it. It's been in the works for quite a while, ever since we did the acquisition. And so, we love and respect and cherish the Goodyear brand. It's been great for us and I think we've been really good for them. And so, almost immediately once we got the acquisitions done, our sales team at Carlstar was excited to potentially get their hands on the Goodyear name and what they could do with it. And like you highlighted, it took a while to get that negotiated and work through with Goodyear. And now that it's in place, we think there are a lot of good things we can do. Carlstar, the brands they have with the Carlstar name and the ITP brand, it's already well respected in the marketplace, but what we can do now with Goodyear and our product development and our designs that we can bring and just having that brand behind it, it just accelerates the path. When you have a brand name that stands out, you're using it with LSW, you don't have to knock down the doors quite as hard; they open up for you. So if you combine that with the Titan strength and recognition that we have in the marketplace with our customers and you throw their Goodyear brand with it, it just makes it so much easier for our sales group when they're when they're going through that door. So yes, we're really excited and yes it's been a while working on it, but great to get it released and look forward to what we can do with it.

Steve Ferazani, Analyst

Great, thanks, Paul. Thanks, David.

Paul Reitz, President and CEO

Thanks, Steve.

Operator, Operator

Thank you very much. Our next question comes from Derek Soderberg of Cantor Fitzgerald. Derek, your line is not open.

Derek Soderberg, Analyst

Yes. Hey guys, thanks for taking the questions. David, wanted to start with you. So you guys mentioned minimal impact due to tariffs this quarter. About 10% of revenue has exposure, it sounds like that's going to be the case in 2Q. But we're going to have a full quarter of impact in 2Q on that 10% of revenue, right? So first, am I thinking about that right? And then looking at EBITDA guidance to 2Q flat quarter-over-quarter roughly, so wondering if you could talk about some of the puts and takes going on in EBITDA for 2Q, specifically what might be making up for, if I'm correct, greater dollar impact from that tariff cost in 2Q, again, just looking for some of the puts and takes.

David Martin, Senior Vice President and CFO

Thank you, Derek, for the great question. The second quarter tends to be relatively stable compared to Q1, which is positive. Demand can see some changes in mix during Q2, not to mention production in agriculture. Overall, we have a stable order backlog and consistent production levels. Additionally, we are seeing continued strength in Brazil. It is important to note that we anticipate a minimal impact of around 10% on sales, which is likely less than what was previously expected. We believe this is manageable and is a small part of our overall business, specifically within the Carlstar segment. The key to Q2's stability lies in our strategic sourcing of materials, which has led to minimal effects on our cost structure regarding raw materials and shipping. We are not experiencing any major disruptions or fluctuations in material costs. Therefore, we believe we are well-positioned to maintain stability in Q2.

Derek Soderberg, Analyst

That's helpful. And then Paul, you mentioned a couple of times your position versus your peers. Your peers are offering employee buyouts. Is there a scenario here in the short term, say over the next two quarters, where Titan actually benefits from this environment? I don't know if it'd be through better pricing or market share gains, just simply because of that position. I'm just wondering if there's any potential upside here in the short term.

Paul Reitz, President and CEO

Yes, I believe there is potential. The inquiries are evolving. For instance, customers in the U.S. who typically rely on foreign supply chains for smaller products are now asking about our capabilities in the U.S. We are the only company in the U.S. that offers those capabilities for certain small tire and wheeled products. If these customers are looking to reduce risk, they will likely turn to us. Although we may not always be the lowest priced option, that's acceptable. During times of uncertainty and when risk mitigation is paramount, our high-quality products and strong relationships with customers and end users become evident. To answer your question, we are indeed seeing a shift in the types of inquiries. There is a period where many businesses, not just ours, are pausing to ask questions and prepare for their next steps. This situation ultimately benefits us, as we are very well positioned to help them manage their risks and fulfill their needs.

Derek Soderberg, Analyst

Perfect. Thanks guys.

Operator, Operator

Thank you very much. Our next question comes from Tom Kerr of Zacks Small Capital Research. Tom, your line is now open.

Tom Kerr, Analyst

Good morning, guys. Just a little more color on the farmer's sentiment from your perspective. You see the news stories out there. Farmers are in crisis. They use the word crisis. What word would you use or how would you describe your outlook of farmer sentiment?

Paul Reitz, President and CEO

Farmers are always in crisis if you ask them. So yes, the farmer sentiment has decreased and there's not always a direct correlation between farmer sentiment and equipment purchases. So what we really rely on in times like this is we just got to get out and talk to people. And that's where being connected to our dealers, the end users, and our overall customer base gives us the knowledge that we really rely on. Last week, I had dinner with a very large OEM equipment dealer, and I used that as a source of information. We talked to large farmers and so I would not definitely would not use this data crisis. I think what we're hearing is, and we all see it in the commodity prices, the commodity prices are fine. They're not good. They're not bad. They're sort of fine. But what we're hearing is that, look, our government's going to have to stand behind our farmers and our food production. And so there seems like there's a good floor to what farmer income is going to be. And again, it's at a respectable fine level. And so I think the state of crisis is more hyperbole than it is reality. But that's okay. If they use that hyperbole to help improve farmer income and get the government's attention, there's nothing wrong with that. So, I think in the end we're in a pretty good place with farmer income and, just watch it play out. I think it'll be fine.

Tom Kerr, Analyst

Thanks. And on the increase in working capital, the increase in accounts receivables. Is there anything else in there besides the large increase in sales? Change in terms to customers, customers not paying or anything like that?

David Martin, Senior Vice President and CFO

No discernible change. It's been fairly stable in that regard. So again, it was a fairly quick ramp up in sales. And so, you'll start to see the natural progression in Q2 and beyond more stable.

Tom Kerr, Analyst

Got it. Yes. Last question, just the industry or big picture question, what other verticals or industries are out there for you guys to explore? I know you talk about military. Could you guys make aircraft wheels and tires? What else is out there?

Paul Reitz, President and CEO

Military is a good one for us because it's something that is not a big part of our overall revenue right now. So as Europe makes more investments into military, our undercarriage business is well positioned to benefit from that. We've talked about the US exploring military options as they look to have a US supply chain instead of a foreign-based supply chain for the military. Aircraft, we really have seen one of our plants produce that as an off-take when we acquired it from Goodyear, and I don't think that's an area we would get into because it's highly regulated. So I think where Titan goes is more the off-road, non-regulated types of businesses. So anything that requires DOT regulation or those type of requirements just quite isn't suited for us. What we like, what we're good at is high complexity. So smaller production runs, lots of SKUs, different tough applications that the products go into. And so, I would say our verticals would be more filling in where we already are. And that's why product development is such a big part of what we do. Because we can keep filling in those cracks in the verticals that we're already in, along with again, pursuing broader verticals like military. But yes, I would think that our product development pipeline is pretty good as it sits just in the verticals we're currently in because they're complicated. There's a lot of places we keep going in.

Tom Kerr, Analyst

Got it. Thanks. That's all I have for today. Thank you.

Paul Reitz, President and CEO

Thank you.

Operator, Operator

Thank you very much. We currently have no further questions so I'd like to hand back to Mr. Reitz for any further remarks.

Paul Reitz, President and CEO

Now look, I appreciate everybody's time and attention today with our Q1 results and look forward to talking to you again in a few months with the second quarter. Have a good day. Thank you.

Operator, Operator

As we conclude today's call, we'd like to thank everyone for joining. You may disconnect your lines.