Noble Virtual Equity Conference

Good morning and welcome to the Noble Capital Markets Virtual Equity Conference. I'm Joe Gomes, Managing Director and Senior Analyst at Noble Capital. With us today for a fireside chat is Paul Reitz, President and CEO of Titan International. Good morning, Paul, and thanks for taking the time to sit down with us.

Hey, good morning, Joe. Good to be with you.

So let's start big broad. For those in the audience new to the Titan story, Can you provide a brief overview of the company, the products, the markets, the geographies, et cetera?

We manufacture the products that make off-road equipment move. So the wheels, the tires, the steel tracks that go on off-road equipment for agriculture, construction, earth moving, and then all the way down into utility vehicles, turf equipment. So, you know, we get to manufacture products that go on really cool equipment, and I look at what we do as being that important interface between that really cool equipment, doing important things, and what our product does is really brings that equipment into the ground and interfaces with the application. And so what we do goes beyond just a simple wheel tire or undercarriage. It's really what we're about is making the equipment perform better. And we manufacture those products from locations around the world, a little over 20 locations that touch, obviously here in the U.S. is a primary market, but have a number of locations into Latin America, throughout Europe, into China as well. So, you know, we touch just about all the global OEMs that you could think of in the spaces that I mentioned.

Great. Now, while you're a global company, you have a significant portion of the revenue here in the U.S. And most of that is manufactured in the U.S., whereas a lot of competitors in your space are foreign based. What are some benefits of the strong U.S. manufacturing base and kind of what are the challenges to having that?

yeah that's it's a great question and i i would come back to the u.s i'll start just on a bigger macro perspective with what we produce because it can be larger in size being able to manufacture close to our customers is is a strength of ours and so the geographies that i mentioned we operate in is really being close to where where our customers are at and that could be aftermarket but also obviously OEM where the equipment's manufactured. But as you asked, I mean, the U.S. is our primary manufacturing location. We have eight plants in the U.S. that we're, you know, very proud of, large in size. And, you know, the U.S. is a great place to be. I'll start there. But as you asked in your question, I mean, it does have its challenges. And we do operate in some locations where those challenges do become very evident because we we manufacture in some low cost manufacturing countries and we operate, you know, in some ones that have a higher cost base. And I would say Titan has a fairly unique perspective on that, not just from the standpoint that we manufacture different locations, but we've gone in front of the ITC, the International Trade Commission, three times in the US and won all three times, two of them being unanimous votes. When you go through that process and you win unanimously, that's a pretty strong indication. We've done that over a period of about 10 years. But that's a strong indication that the world is not a fair place to compete. There's really no other way to put it. And again, when a panel of extremely smart people agree with that comment after listening to testimony from not just us, but our competitors in those locations. So the world is not a fair and equitable place. And so I think what I would say about U.S. manufacturers, we have incredible plants supported by incredible people that make incredible products. But one of the challenges we face is that the world is not is not equal. And I know there's things that are being done to address that. We could sit here and debate that back and forth about how it's being addressed. But I don't think there's any argument to say that from a U.S. manufacturing perspective, if we want to continue to make great products and get great jobs for our great people that we have in this country, and I hate to use adjectives like that, but that's true, then we better do something different. And I think we're on that path. So, you know, we are going to continue to support U.S. manufacturing. It's all those reasons I just said our customers are here, but we believe really strongly in the plants and the people that we have here in the U.S. And I think we'll find a way politically to let the world's never going to have a perfectly level playing field, but I think we'll find a way politically that we can continue to make great products in the U.S. We need to.

So so let's I think you're dancing around the T word, but I'm going to say it. So let's talk about terrorists for a second. You've mentioned in the past that terrorists could be a net benefit to the company. Can you explain how that's the case? and you know kind of what's the best case tariff outcome what's the worst case yeah uh and i do i

dance around that word because you know i i think we we all in the business community have to realize we have to adapt to what's going on in the world and so um but the reality is tariffs are now part of that world and uh you know from from our perspective at titan and i'll i'm going to echo really what our our management team and our employees have been saying to me versus just giving you what I think. They have strong conviction that the tariff, overall tariff policies that the path we're going down are good for Titan. And I didn't have to go out there and create a message that says, this is what you should be thinking, and this is how you should be approaching tariffs. They immediately came to me and said, look, we have conviction. We believe internally that these tariffs long-term, again, referencing what I just said about the ITC, These tariffs will bring it in a playing field that is a net positive for Titan long term. And we're starting to see it from our customers. They're asking questions that are different. And the big thing that it puts on the radar of our customers is risk mitigation. Supply chains, really one of the key elements of a supply chain is do you have a reliable supplier that can deliver the products when you need them, where you need them? And that drives into Titan's strength. again going about going back to what we started off with where we manufacture being close to our customers the depth of our product portfolio nobody can stand up to what we do if you look at the the investments we made into engineering tooling and they throw in the quality of our products but but you need to be able to support the manufacturing bases that are right where your customers are using and building that equipment and so I think we're seeing that from our employees we're also seeing our customers asking questions different because they're looking at it from the risk mitigation standpoint. Now, tariffs in the short term, it's chaotic. There's no doubt about it. Every company I've talked to, every company you've talked to is going to tell you that tariffs are chaotic. That's not good for any business that's trying to make decisions. So I think we got to get through the short-term noise. It's our job as business leaders to figure that out. I think we've redone our overall business strategy probably four times in the last 60 days. It's not enjoyable, obviously, but I think what I'm going to keep referencing, though, is what I said. Long term, our employees have conviction. Our management team has conviction with tariffs. In the short run, because of that, our approach to dealing with the tariffs has been excellent because our team is behind it. They're like, look, we're understanding what's going on. We got to do something about it. And so we go look at the data, we analyze our costs, we understand what's going on with the tariffs to the greatest extent we possible, and we make decisions from there. And, you know, I think the attitude and the approach that Titan's team has taken to it in the short run is going to be effective. Hopefully the chaos subsides at some point. Joe, snap your fingers and make that happen, okay?

I wish I could for you. Let's dive now into each of the business segments. So we got the agricultural construction, mining, consumer, you know, maybe you can kind of give us the audience, you know, what are the demand drivers for each one of those sectors? And what are some of the long-term trends that we believe, you know, will be a benefit to Titan?

I'll start with agriculture. All of our segments have something in common and they are cyclical. And I'll start with agriculture. You know, we're in what I would call the tail end of a down cycle. And with ag, it never goes up or down 5%. It moves in much larger swings than that, as everybody knows. And, you know, we're getting close to that two-year mark of this existing ag downturn. You can look at farmer sentiment and different psychological polls, and I think those have been better now because of the political regime. But really, I mean, ag is going to be driven by farmer income and the age of the equipment and the technology that's coming into the space. And so what this cycle has been about probably more than any, a little bit more than other cycles is just the dealing with inventory. Because the cycle was expected to start to break already, there's been this longer lag on getting the inventory levels to the right place, whether it's used or new, you know, getting the late model used moving so you can clear the room for the new. I mean, it's just been it's been a longer cycle because of of dealing with inventory. And I think that's been driven by forecasting has been difficult, you know, and again, I'm not just referencing ag when I say that a lot of industrial companies have had a challenge forecasting in this environment. You know, not obviously COVID was one type of forecasting challenge, but even post COVID, it's been challenging. And and now you get into the the political cycle we've been in now, the tariff cycle. So I think that the lack of good forecasting has made the cycle more challenging, and it's created this inventory overhang in ag. But I think if you look at the basics of ag, the equipment is going to need updated. There's good technology that goes along with newer equipment. You want to stay within your warranty period. Farmer incomes are stabilizing and getting to a pretty decent point. watch crop prices obviously stocks to use ratios are getting better so a lot of fundamental things along with some psychological farmer incentive index that are they're saying okay the the turn is around the corner and plus again we're kind of near the end of year two of this cycle um it's just get this inventory cleared you get the inventory in a better place kind of get mute the mute the noise around tariffs and i think farmers are going to be fine land values are holding up so So U.S. and Europe are still pretty quiet in ag. Not much is going on. We are seeing Brazil start to pick up already. Part of that could be driven by the Chinese purchases of grains. But that's really been ongoing for a while. But we're starting to see Brazil pick up already. And our business is usually a good leading indicator of that. You think about it, you've got to have your wheels and tires in place in order to sell that equipment. So we usually get out in front of the cycle as far as the preparations go to get the products that we produce in place for our customers. And so, again, I think the ag cycle will be turning, just hasn't really started to hit that inflection point yet. So I would point towards 26 with that. You know, the other segments we serve, you know, the construction market didn't go up or down quite as bad as ag has. But, you know, it's at that point right now where I think everybody's trying to figure out what what's going to happen, you know, and that's that's both politically geopolitics, tariffs, all that rolled into a basket. So we're seeing the construction markets go into kind of a pause, but I would, one of the things that we always look back at in both these businesses, whether it's ag or construction, is the reality is farmers still got to farm and construction and roads still got to continue to be developed and maintained. and so after markets become a bigger part of our business and and that's where we see the activity the activity is not slowing down from that perspective equipment is being used the world's population is going to continue to grow the needs of society from an infrastructure standpoint we're growing along with with feeding people so the macro trends are still there our aftermarket business has become a bigger part of what titan does and that is that is holding up you know better than the cycle we're seeing with oems and so um you know i i don't i don't think there's anything that's that's uh earth shattering changing in the last three months as far as our our end markets go but at the same time you know i think once that catalyst and those drivers start to to peak their head up into the into the sunset into the sun a little bit i think we'll we'll see

those markets uh move in a positive direction thanks for that i'm gonna piggyback two questions here is one maybe you could talk a little bit about your customer base i'm sure it's a lot of well-known names on that you know kind of like who are some of the key oems across your segments and then the second part you touched a little bit about the aftermarket so you're selling into oems for new then you're selling also aftermarket kind of what's the split there you know and how are you kind of drive more into that aftermarket it's uh uh it's a good question we we we do work with a

broad spectrum of global oem so you know john deere is our our largest customer um you know that we disclose annually the level of sale we have with them but you know we have a number of tremendous customers that we work with in in the ag space the cnhs the the kubotas the agcos Coyotes. So we, we touched there. We, we, we have great customers in the construction side, road building with LaBeer at Vertgen. I mean, so it, because we, we, we go from wheels and tires to, to steel track that goes into a lot of different, different applications. I mean, we, we have a really strong subset of, of customers that we can rely on for good intelligence, market intelligence. And like I was saying earlier, what we produce, you got to get out in front of because you needed to move the equipment. And so, you know, we're really proud of our OEM customer base. But yeah, you know, going back to the going to the second part of your question and going back to what I've been alluding to. I mean, we also realize that it's great to sell a wheel and tire assembled to an OEM. But at the same time, we got to we got to make sure we're taking care of the products as they continue to go through their entire life cycle. And we really worked hard to improve and establish a stronger aftermarket connection. And we've done that by, you know, the basics of servicing those dealers. If you're going to be in the market saying you can do things, you need a good, strong dealer network and you got to take care of those dealers. And so we've put a tremendous amount of effort into that, but also having the right products available for them. One of the strengths that Titan has compared to our competitors, and I mentioned it earlier, but our product portfolio, what is different about our space is that there are so many SKUs that go into our business. It's not like on-road tires, and that's why we've been around for 35 years and three decades as a public company is because there's so many skews in the complexity of what we produce that goes on to different equipment, goes into different applications that you got to make, you got to have the right products available. So the way Titan approaches the market is we want to fully serve our customers. We're not going to come in there and say, Joe, I got five great products for you. buy these five and then you have to go buy your other 50 products from a multitude of other suppliers we approach it we're going to come in there and take care of all your needs and that's that helps us obviously with the oems but we've really done that as well with the aftermarket and with the the recent acquisition we did uh last year you know not our product portfolio just continues to expand and so we we're becoming a one-stop shop for the aftermarket uh so have the right products available and build great products um innovation has been a key thing for titan and uh we've done some really impressive uh innovation into the into the space that makes equipment perform better and uh be honest with you aftermarket moves quicker in oems when it comes to innovation if the end users know a product's going to make their equipment perform better uh they'll jump on it and so that innovation it's it's it leads towards oems but it really moves quicker through the aftermarket channels and that's been a nice plus for titan

so let's stick with that for a second the innovation and you know one of the big innovations recently has been your lsw product i think a more recent one has been the vpo technology um you know maybe you can talk a little bit more about these innovations and how they are helping benefit your end customers which obviously ends up benefiting titan in the long run

one of our strengths is uh you know it could be viewed as a weakness because we only serve cyclical markets but from a a customer standpoint as a strength this is all we do uh so we better be damn good at it uh some of our competitors that we compete against will have uh the off-road segment will be a smaller part of their bigger portfolio of other products which obviously get more attention from the engineering and the innovation perspective and so for us we need to drive innovation because this is all we do and and so we really put an emphasis on how do we make that equipment perform better uh we we do that by putting investments into the obvious you got to have a good quality team of engineers got to be able to get it on the front end but really what separates us is on the back end working with the end users understanding their products how they how their equipment interfaces with the applications they're operating in and how the products we manufacture can be an important part of that interface and so we develop the technology that makes equipment perform better and and that's what we're you know that's exactly what lsw has done uh does the obvious things which is a more comfortable ride All those things that you look for when you buy an SUV or a car, those are obvious. Quite frankly, that's not what makes our innovation go. Our innovation makes the farmer more money. It improves the yields of their fields. It improves the biggest investment they have, which is the land, because it protects the soil compaction. It does things that drive ROI and value to our customers. And so that's, that's the innovation that, you know, we, we look towards LSW does that. You mentioned VPO. What that does is it's, it's a safety, you know, it's a safety type product where if you're operating a piece of equipment and you have a tire issue, which is going to happen, you go over a nail or something in an outdoor piece of equipment, the VPO will keep running. um so you're not breaking down having to tow it whatever it may be you look at our r14 technology used to have a multitude of tires you needed if you're operating smaller tractors smaller tractors are not just hobby tractor toys a lot of them go into municipalities they do utility work on construction the utility work in different operations and so you needed a different tire for turf for construction for ag um and and we developed a tire you know what it does all that you don't need to buy two or three sets of tires you can buy one r14 and it'll take care of all that for you and so um you know our innovation again it's about making equipment perform better we got great technology going on with uh our trust technology with itm where it's it's taking interfaces from you know rfid and real-time information and presenting it to the customer to let them know how the track is performing and quite frankly, when they, what they need to do to maintain it. And so those are the things that drives us. And we're going to continue to have the biggest portfolio in our business, but we also want to make sure we're developing the newest products that make equipment perform better. And it's, we invest in it. It's a key part of us. I mean, but again, it's not just a bunch of engineers sitting in a room thinking up ideas. I mean, we're out there with the customers. It's not, again, I'm going one step beyond the customers. We're out there with the end users, figuring out how that equipment works for them and what we can do to make it perform better. Excellent. You mentioned you completed

an acquisition last year, it was Carl Starr. Can you tell us a little bit about that business, how it diversified Titan's offerings and kind of how that acquisition, the integration of that is

is uh proceeding i mean it's a it's a company that we've known well and they've known us well for many years um we operated uh in in tangent spaces with with just a little bit of overlap so it's a good candidate for a an acquisition or a marriage and um you know we always had visions of getting into some of what they're doing and they always had visions of getting into what we're doing. As I said to them, as we're going through due diligence, the reality is we're never going to be good at what you do. And you don't have a snowball's chance of being good at what we do. And there's some nodding to the heads. Obviously, I was doing it to kind of get under their skin a little bit and see what their reaction was. But we've seen that play out exactly like that. Very little product portfolio overlap. They're strong in what they do. They get tightened into the places in the market where we weren't it's the high-speed trailers it's the outdoor power equipment it's the turf they have a great brands they have great products and they're great people the same things Titan has in the segments that we were serving with very little overlap and so we've been able to bring the two companies together the key thing is whenever you do an acquisition how do the people respond and you know going back to us earlier about it looked like a good marriage on paper we've seen that play out over the last 15 months is that it does it works the our team realizes it works it fits and you know the excitement is one it came together the puzzle pieces fit but the excitement really is is driven by okay now what do we do you know clearly titan has some resources that can make them accelerate what they're doing as far as the engineering and and some of the stuff we already touched on joe but we've been able to learn from them um because they had a great distribution channel in place and they were touching parts of the market that we weren't necessarily getting to and so now you bring that together let's go accelerate the innovation with their products we we just signed our goodyear deal again so we can bring the goodyear brand into some of these off-road segments that uh that that they were service servicing and so we got that that can add a fuel growth and then really kind of looking beyond just the traditional markets when are operating going okay now we have this full product portfolio let's go start filling in some cracks geographically where you know we weren't necessarily touching because either tightened them enough volume or they didn't have enough volume but now together you know we can have a different type of presence in those markets so uh really really good stuff it's it's you know again looking back 15 months later uh it's come together very nicely and and now we're just let's just accelerate it for the future

so recently you you did a acquisition uh last year you bought back a big uh slug of stock um you know kind of what what's the capital allocation strategy here going forward it's still focused on buybacks m&a debt pay down um what what are your thoughts

the stock buyback um the big chunk that we did was was a very positive transaction uh it was a is it an investor that had been in our stock for about 10 years still on our board uh but it was a you know a smooth exiting process um but wasn't necessarily in our capital forecast for for that that that year um and so i think for us it's it's one continuing to fund the business and innovation that that i've been highlighting um that that is an absolute must um but two is is focus on let's pay down a little bit of debt you know we did an acquisition we did that large chunk of a buyback um let's let's fuel the capex let's focus on the balance sheet to to make sure we pay down a little bit of that debt and then just be prepared for some opportunities opportunities in M&A. Is there anything imminent? Now, we're still biting off the one that we just did last year, and that's going very well. I would say the one thing that we are always looking at, and it doesn't take as much capital, is good formations of JVs and ways to bring in either geographical or product portfolio expansions from a financial perspective, a less capital-intensive way where you're buying a part of their capabilities and kind of taking some of our strengths and mirroring it with their strengths and then going to market together. And you can do that through some formation of JVs that, again, are less capital intensive. So that's something we are always looking at. But we're in good shape on the balance sheet. But yeah, after those two events last year, we do want to continue to focus on paying down some debt.

great let's let's finish up with this one paul what what are you most excited about for the

future of titan products i mean i think that's that's what drives our culture uh is is let's continue to innovate and make great products and and and we do that in a different way i keep referencing um being connected to the end users but that's truly our culture you know we we kind of let the culture build from that uh you don't need to put a hundred slogans up on a wall and build a culture when the energy comes from the products we produce and the way those products operate out in the field. I mean, the equipment our products go on is cool. I mean, pull up some videos at LSW, you're going to go, wow, that's pretty awesome. And I never really thought about it that way. You think about large ag equipment going through the difficult conditions they have to operate in. And you go look at an excavator going in operation and to think that what we build is that key interface between the equipment and the and the application it's uh you know what we do is cool it's and it creates a great energized uh workforce and so we got to keep that momentum going that's that's what gets me excited and we got to continue to be excited and move forward in

that way great well paul we covered a lot of ground today you got significant insight into what titan does its markets and opportunities we appreciate you taking the time to do this fireside chat and we wish you and the company the best in the future. Thanks again.