WEST FARGO, N.D., Nov. 30, 2022 (GLOBE NEWSWIRE) -- Titan Machinery Inc. (Nasdaq: TITN), a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal third quarter ended October 31, 2022.
David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "We delivered another consecutive quarter of record financial results, with third quarter earnings per share of $1.82. The ongoing strength of the agriculture sector combined with our customer-centric focus drove consolidated revenue growth of 47%, which was supported by strong contribution across each of our revenue streams - equipment, parts and service. Our business continues to operate with great efficiency, allowing us to drive significant operating leverage on the higher levels of revenue that we have achieved. This is demonstrated in our record consolidated pre-tax margin of 8.2% that we delivered in the fiscal third quarter, with each of our operating segments experiencing pre-tax margin expansion. Given these strong third quarter results, coupled with our expectations for the solid market fundamentals continuing through the fourth quarter, we are increasing our earnings per share modeling assumption for fiscal year 2023 to a midpoint of $4.70 per share."
Fiscal 2023 Third Quarter Results
Consolidated Results
For the third quarter of fiscal 2023, revenue increased to $668.8 million compared to $454.0 million in the third quarter last year. Equipment sales were $509.0 million for the third quarter of fiscal 2023, compared to $329.8 million in the third quarter last year. Parts sales were $108.7 million for the third quarter of fiscal 2023, compared to $80.5 million in the third quarter last year. Revenue generated from service was $39.0 million for the third quarter of fiscal 2023, compared to $32.0 million in the third quarter last year. Revenue from rental and other was $12.1 million for the third quarter of fiscal 2023, compared to $11.6 million in the third quarter last year.
Gross profit for the third quarter of fiscal 2023 was $139.6 million, compared to $92.5 million in the third quarter last year. The Company's gross profit margin increased to 20.9% in the third quarter of fiscal 2023, compared to 20.4% in the third quarter last year. Gross profit margin increased primarily due to stronger equipment margins, which were partially offset by revenue mix, with a greater proportion of equipment revenue in the third quarter of fiscal 2023, as compared to the third quarter of the prior year.
Operating expenses increased by $21.9 million, but at a lower rate than revenue growth, to $84.9 million for the third quarter of fiscal 2023, compared to $62.9 million in the third quarter last year, primarily due to the inclusion of operating expenses related to acquisitions that have occurred in the past year, as well as higher variable expenses on increased revenues. Operating expenses as a percentage of revenue decreased 120 basis points to 12.7% for the third quarter of fiscal 2023, compared to 13.9% of revenue in the prior year period.
Floorplan and other interest expense was $1.8 million in the third quarter of fiscal 2023, compared to $1.3 million for the same period last year.
In the third quarter of fiscal 2023, net income was $41.3 million, or earnings per diluted share of $1.82, compared to net income of $21.8 million, or earnings per diluted share of $0.97, for the third quarter of last year.
On an adjusted basis, net income for the third quarter of fiscal 2023 was $41.5 million, or adjusted earnings per diluted share of $1.83, compared to adjusted net income of $21.7 million, or adjusted earnings per diluted share of $0.96, for the third quarter of last year.
The Company generated $63.5 million in adjusted EBITDA in the third quarter of fiscal 2023, reflecting an increase of 80% versus the $35.3 million generated in the third quarter of last year.
Segment Results
Agriculture Segment - Revenue for the third quarter of fiscal 2023 was $493.3 million, compared to $281.5 million in the third quarter last year. The sales increase was positively impacted by organic growth as well as the acquisitions of Jaycox Implement in December 2021, Mark's Machinery in April 2022, and Heartland Ag Systems in August 2022. Pre-tax income for the third quarter of fiscal 2023 was $42.0 million, and included a $2.0 million benefit recognized on the expected achievement of annual manufacturer incentives. This compared to $19.6 million of pre-tax income in the third quarter last year.
Construction Segment - Revenue for the third quarter of fiscal 2023 was $86.4 million, compared to $79.7 million in the third quarter last year. Growth was driven by a same-store sales increase of 34.2%, primarily due to increased equipment demand, and partially offset by lost sales contributions from the Company's fiscal 2022 fourth quarter divestiture of construction stores in Montana and Wyoming and the fiscal 2023 first quarter divestiture of its consumer products store in North Dakota. Pre-tax income for the third quarter of fiscal 2023 was $6.1 million, and compared to $3.6 million in the third quarter last year.
International Segment - Revenue for the third quarter of fiscal 2023 was $89.0 million, compared to $92.7 million in the third quarter last year, while on a constant currency basis revenue was up $9.2 million or 9.9%. Pre-tax income for the third quarter of fiscal 2023 was $8.5 million. This compares to pre-tax income of $6.3 million in the third quarter last year. Adjusted pre-tax income, which excludes negligible adjustments, was $8.7 million for the third quarter of fiscal 2023 and $6.1 million in the third quarter last year.
Balance Sheet and Cash Flow
Cash at the end of the third quarter of fiscal 2023 was $45.9 million. Inventories increased to $630.4 million as of October 31, 2022, compared to $421.8 million as of January 31, 2022. This inventory increase includes increases in new equipment inventory of $149.9 million, parts inventory of $54.4 million, and used equipment inventory of $0.5 million. Outstanding floorplan payables were $273.1 million on $777.0 million total available floorplan lines of credit as of October 31, 2022, compared to $135.4 million outstanding floorplan payables as of January 31, 2022.
In the first nine months of fiscal 2023, net cash used for operating activities was $7.1 million, compared to net cash provided by operating activities of $72.3 million in the first nine months of fiscal 2022. The decrease in cash provided by operating activities was primarily due to increasing inventory in fiscal 2023 compared to fiscal 2022.
Additional Management Commentary
Mr. Meyer added, "Our orderly transition of the Chief Financial Officer position continues to progress well. Bo Larsen joined our team at the beginning of November and has been working with departing Chief Financial Officer Mark Kalvoda to integrate into the business ahead of his appointment on December 1, 2022. We look forward to his future contributions."
"The momentum in our business continues to be visible across all aspects of Titan Machinery, as favorable industry conditions combine with several years of operational improvements and solid growth through accretive and strategic acquisitions. With respect to our acquisition of Heartland Ag, which closed in August 2022, we are pleased with the integration process and their financial performance in their first quarter with Titan Machinery. Looking ahead, we are very well positioned to serve the strong industries that we operate in with our robust balance sheet and powerful operational performance."
