Titan Machinery Inc. Q4 FY2025 earnings call

• Inventory reduction: Significantly accelerated inventory reduction in Q4, achieving a $304 million sequential decrease, totaling $419 million since inventories peaked in fiscal second quarter. This was due to decisive actions on incoming inventory, pricing, and finance programs.
• Domestic ag performance: Service business grew 8.2% full year, but equipment demand was subdued due to industry headwinds. Expected lower new equipment demand in 2025, with farm cash receipts projected to decline again, but potential government assistance could offset some impact.
• European operations: Impacted by lower commodity prices and high interest rates, but expected modest revenue growth in FY 2026 due to potential stabilization in Romania.
• Australia performance: Impacted by challenging weather, expecting restricted demand in FY 2026 due to lower profitability for customers.
• Construction segment: Finished flat, made progress in reducing inventory, optimistic about multi-year outlook but expecting softening demand in 2026 due to economic uncertainty.

Agriculture segment: Sales decreased 13.8% to $534.7 million, driven by a 15.5% same-store sales decline, with an adjusted pre-tax loss of $56.3 million. Construction segment: Same-store sales decreased 5.5% to $94.6 million, with an adjusted pre-tax loss of $1.7 million. European segment: Sales increased 6.1% to $65.4 million, with a same-store sales increase of 5.7% and a pre-tax loss of $1.8 million. Australia segment: Sales were $65.3 million compared to $69.8 million in the prior year, with a 6.5% same-store sales decline and pre-tax income of $2.3 million.

• Domestic ag: Revenue expected down 20%-25%, with whole good revenue down 40%-45% in Q1 and 20% in Q4. Parts and service expected flat to modest growth.
• Construction: Revenue expected down 5%-10% due to economic uncertainty.
• European: Expected flat to up 5% due to potential stabilization in Romania.
• Australia: Revenue expected down 15%-20% due to similar market dynamics to domestic ag.
• Margin: Consolidated full year equipment margin expected ~7.7% in 2026 vs 6.7% in 2025, with ag segment equipment margins anticipated to improve gradually.

• Market headwinds persisting in the near-term.
• Uncertainty in timing and magnitude of government assistance.
• Potential impacts of new administration's tariff policies.
• Economic uncertainty impacting construction activity.

Q: Service margin and future expectations A: Bo Larsen mentioned equipment margin expected to increase year-over-year, with some inefficiencies from ERP system transition working out Q: Inventory reduction method A: Bryan Knutson stated almost all inventory reduction was through their own network, keeping equipment local for parts and service Q: Tariffs and government assistance impact A: Bryan Knutson said they're monitoring tariffs closely, and government assistance may offset some demand impact Q: Government assistance and equipment purchases A: Bryan Knutson said it's similar to 2020, could positively impact if commodity prices rise Q: Inventory turns and optimization A: Bo Larsen mentioned aiming for inventory turns ~2 in 2026, working towards optimal levels Q: SG&A guidance A: Bo Larsen said ~$380 million in 2026, lower in first half Q: Floor plan payable A: Bo Larsen said interest-bearing debt ~$385 million, expecting reduction with execution Q: Parts and service traffic A: Bo Larsen said flattish in Q1, slower start but long-term trajectory positive