Titan Machinery Inc., a leading network of full-service agricultural and construction equipment stores, today reported financial results for the fiscal third quarter ended October 31, 2024.

"Our third quarter results reflect a market cycle that is largely playing out as we anticipated within our domestic Agriculture segment," commented Bryan Knutson, Titan Machinery's President and Chief Executive Officer.

"While we continue to face headwinds impacting the broader agricultural equipment sector, we are seeing positive results from our inventory reduction initiatives with a third quarter reduction of approximately $115 million. We remain focused on executing our strategy to accelerate inventory reductions and to achieve targeted inventory levels as we work through next fiscal year. We remain confident that this strategic approach will support our broader goal of enhancing our profitability through the market cycle. In the meantime, our unwavering commitment to our customer care strategy continues to generate meaningful growth in our recurring service business."

Fiscal 2025 Third Quarter Results

For Q3 of fiscal 2025, revenue was $679.8 million, down from $694.1 million in the same period last year. Equipment revenue decreased to $495.1 million from $521.8 million, while parts revenue rose to $121.1 million from $115.0 million.

Service revenue grew to $51.1 million from $44.8 million, and rental/other revenue was $12.5 million, nearly flat with $12.6 million last year.

Gross profit for the quarter was $110.5 million, down from $138.3 million, with a gross margin of 16.3%, compared to 19.9% last year. The margin decline was driven by lower equipment margins and efforts to reduce inventory levels.

Operating expenses increased to $98.8 million from $92.1 million, primarily due to recent acquisitions. Operating expenses as a percentage of revenue rose to 14.5% from 13.3%.

Interest expenses totaled $14.3 million, up from $5.5 million, largely due to increased interest-bearing inventory and the O'Connors acquisition.

Net income for Q3 was $1.7 million, or $0.07 per diluted share, down from $30.2 million, or $1.32 per diluted share, last year. EBITDA for the quarter was $14.7 million, compared to $50.1 million in the prior year.

Segment Results

Agriculture: Revenue for the third quarter of fiscal 2025 was $482.0 million, compared to $531.4 million in the third quarter last year. The decrease was primarily due to a same-store sales decrease of 10.8%, partially offset by contributions from the acquisition of Scott Supply in January 2024.

The revenue decrease resulted from a softening demand for equipment being driven by the decline of net farm income and sustained high interest rates. Pre-tax income for the third quarter of fiscal 2025 was $1.9 million, compared to $35.1 million in the third quarter last year.

Construction: Revenue for the third quarter of fiscal 2025 was $85.3 million, compared to $77.5 million in the third quarter last year, which was due to a same-store sales increase of 10.0%, which benefited from timing of equipment deliveries as compared to the second half of the previous fiscal year. Pre-tax loss for the third quarter of fiscal 2025 was $0.9 million, compared to pre-tax income of $4.1 million in the third quarter last year.

Europe: Revenue for the third quarter of fiscal 2025 was $62.4 million, compared to $85.2 million in the third quarter last year, which includes a $0.3 million increase in revenue from foreign currency fluctuations. Net of the effect of these foreign currency fluctuations, revenue decreased $23.1 million, or 27.2%.

The year-over-year decrease in revenue resulted from the softening of equipment demand, which is being driven by a decrease in global soft commodity prices, sustained high interest rates, and severe drought conditions in Eastern Europe. Pre-tax loss for the third quarter of fiscal 2025 was $1.2 million, compared to pre-tax income of $5.1 million in the third quarter last year.

Australia: Revenue was $50.1 million, with a pre-tax loss of $0.3 million.

Cash at the end of the third quarter of fiscal 2025 was $23.4 million. Inventories were $1.4 billion as of October 31, 2024, down approximately $115 million as compared to fiscal second quarter inventories of $1.5 billion as of July 31, 2024. This reflects the Company's progress in executing its equipment inventory strategy.

Outstanding floorplan payables were $1.0 billion on $1.5 billion total available floorplan and working capital lines of credit as of October 31, 2024, compared to $1.2 billion outstanding floorplan payables as of July 31, 2024.

Additional Management Commentary

Mr. Knutson continued, "Although our expectations for our domestic Agriculture and Construction segments remain intact, we are seeing incremental weakening of demand within both our Europe and Australia businesses due in part to unusually dry conditions during the critical growing period which is reducing yields and grower profitability. As a result, we are lowering our revenue assumptions for our international segments and taking into account the corresponding impacts on consolidated earnings per share. Looking ahead, our base assumptions for ongoing equipment margin compression remain unchanged, and consistent with our near-term outlook, we expect this compression will persist throughout the next fiscal year while we actively work to reduce inventory levels."

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