David Meyer, Titan Machinery's chairman and chief executive officer, stated, "Our momentum continued into fiscal first quarter 2023 with strong operating leverage across each of our segments, which combined for a 24% increase in revenue and a 66% increase in earnings per share. Our Agriculture segment benefited from robust demand, which was supported by an increase in equipment deliveries from our suppliers following a delay in fiscal fourth quarter 2022. Our Construction segment continued to demonstrate improved levels of pre-tax profitability as we achieve operating improvements across our optimized footprint. While revenue growth in our International segment was negatively affected by the conflict in Ukraine, it is impacting our operations less than originally anticipated as our Ukrainian customers continue to farm, requiring Titan's support for equipment, parts and service. Our business across our European footprint proved to be resilient to the conflict's indirect effects and was able to generate an improvement in pre-tax income margins despite a slight decrease in revenue. We remain positive on the broader environment, despite some of the recent market turbulence, and continue to expect another exceptional year at Titan Machinery."

Fiscal 2023 First Quarter Results

Consolidated Results

For the first quarter of fiscal 2023, revenue increased to $461 million compared to $372.7 million in the first quarter last year. Equipment sales were $356.4 million for the first quarter of fiscal 2023, compared to $276 million in the first quarter last year. Parts sales were $68.6 million for the first quarter of fiscal 2023, compared to $62.6 million in the first quarter last year. Revenue generated from service was $29.5 million for the first quarter of fiscal 2023, compared to $27.7 million in the first quarter last year. Revenue from rental and other was $6.6 million for the first quarter of fiscal 2023, compared to $6.4 million in the first quarter last year.

Gross profit for the first quarter of fiscal 2023 was $88.7 million, compared to $71 million in the first quarter last year. The Company's gross profit margin increased to 19.2% in the first quarter of fiscal 2023, compared to 19% in the first quarter last year. Gross profit margin primarily increased due to stronger equipment margins, which were partially offset by revenue mix, with a greater proportion of equipment revenue in the first quarter of fiscal 2023, versus higher margin parts and service revenue, as compared to the first quarter of the prior year.

Operating expenses increased by $7.7 million to $64.2 million for the first quarter of fiscal 2023, compared to $56.4 million in the first quarter last year, primarily due to higher variable expenses on increased revenues. Operating expenses as a percentage of revenue decreased 120 basis points to 13.9% for the first quarter of fiscal 2023, compared to 15.1% of revenue in the prior year period.

Floorplan and other interest expense of $1.5 million in the first quarter of fiscal 2023 was flat as compared to the same period last year.

In the first quarter of fiscal 2023, net income was $17.5 million, or earnings per diluted share of $0.78, compared to net income of $10.5 million, or earnings per diluted share of $0.47, for the first quarter of last year.

Segment Results

Agriculture Segment — Revenue for the first quarter of fiscal 2023 was $318.5 million, compared to $229.6 million in the first quarter last year. Pre-tax income for the first quarter of fiscal 2023 was $16.4 million, compared to $11.2 million of pre-tax income in the first quarter last year.

Construction Segment — Revenue for the first quarter of fiscal 2023 was $67 million, compared to $68.6 million in the first quarter last year. While revenue was slightly lower vs. the prior year period due to the lost sales contributions from the Company's fiscal 2022, fourth quarter divestiture of construction stores in Montana and Wyoming and our fiscal 2023, first quarter divestiture of our consumer products store in North Dakota, same-store sales increased 24.9% primarily due to increased equipment demand. Pre-tax income for the first quarter of fiscal 2023 was $3.2 million, which included a pre-tax gain of $1.4 million associated with the consumer products store sale, and compared to $0.1 million in the first quarter last year.

International Segment — Revenue for the first quarter of fiscal 2023 was $75.5 million, compared to $74.5 million in the first quarter last year. Pre-tax income for the first quarter of fiscal 2023 was $4.3 million, which included a $0.7 million estimated bad debt provision in our Ukraine business primarily as a result of the on-going conflict with Russia in that region. This compares to pre-tax income of $2.8 million in the first quarter last year. Adjusted pre-tax income for the first quarter of fiscal 2023 was $4.6 million, compared to $2.7 million in the first quarter last year.

Balance Sheet and Cash Flow

Cash at the end of the first quarter of fiscal 2023 was $147.1 million. Inventories increased to $494.2 million as of April 30, 2022, compared to $421.8 million as of January 31, 2022. This inventory increase includes increases in new equipment inventory of $65.6 million and parts inventory of $8 million, which is partially offset by a $2.1 million decrease in used equipment inventory. Outstanding floorplan payables were $188.9 million on $751 million total available floorplan lines of credit as of April 30, 2022, compared to $135.4 million outstanding floorplan payables as of January 31, 2022.

In the first three months of fiscal 2023, net cash provided by operating activities was $5.3 million, compared to net cash provided by operating activities of $27 million in the first three months of fiscal 2022.

Fiscal 2023 Modeling Assumptions

The following are the Company's current expectations for fiscal 2023 modeling assumptions.

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