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Titan Machinery Inc. Announces Results for Fiscal Fourth Quarter and Full Year Ended January 31, 2021

- Revenue for Fiscal 2021 Increased 8.1% to $1.4 billion -

- GAAP EPS for Fiscal 2021 was $0.86 and Adjusted EPS was $1.26, an increase of 36.5% and 50.0%, respectively -

WEST FARGO, N.D., March 18, 2021 (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 fourth quarter and full year ended January 31, 2021.

David Meyer, Titan Machinery's Chairman and Chief Executive Officer, stated, "We completed fiscal 2021 with a strong finish in fourth quarter, driven by our equipment business which grew 35% for the quarter. From a segment perspective, our Agriculture segment was the standout performer for the quarter and fiscal year, generating very strong top and bottom line performance. We are also pleased with the operating improvement in our Construction segment this fiscal year, which generated positive pre-tax income in fourth quarter and full year. While the pandemic and adverse weather conditions have created additional obstacles across our international store footprint, we experienced growth in our International segment parts and service business during the fourth quarter and full year, which has been a focus for us. Looking ahead to fiscal 2022, Titan Machinery is in a great position - we are benefiting from renewed strength in the commodities cycle, we've stayed close to our customers with exceptional service, and we've carefully managed our cost structure and balance sheet to ensure that we drive profitability and remain nimble to react to future opportunities."

Fiscal 2021 Fourth Quarter Results

Consolidated Results
For the fourth quarter of fiscal 2021, revenue was $436.7 million, compared to revenue of $351.0 million in the fourth quarter last year. Equipment revenue was $354.0 million for the fourth quarter of fiscal 2021, compared to $262.8 million in the fourth quarter last year. Parts revenue was $49.8 million for the fourth quarter of fiscal 2021, compared to $52.3 million in the fourth quarter last year. Revenue generated from service was $22.9 million for the fourth quarter of fiscal 2021, compared to $22.0 million in the fourth quarter last year. Revenue from rental and other was $9.9 million for the fourth quarter of fiscal 2021, compared to $13.9 million in the fourth quarter last year.

Gross profit for the fourth quarter of fiscal 2021 increased to $67.7 million compared to $61.1 million in the fourth quarter last year. The Company's gross profit margin decreased to 15.5% in the fourth quarter of fiscal 2021, compared to 17.4% in the fourth quarter last year. Gross profit margin decreased primarily due to mix, with a greater proportion of equipment revenue in the fourth quarter of fiscal 2021 compared to a greater proportion of higher margin parts and service revenue in the fourth quarter last year.

Operating expenses were essentially flat at $60.5 million for the fourth quarter of fiscal 2021, compared to $60.1 million in the fourth quarter last year. Operating expenses as a percentage of sales improved 320 basis points to 13.9% for the fourth quarter of fiscal 2021, compared to 17.1% of revenue in the prior year period. The Company recognized impairments related to intangible and long-lived assets of $0.4 million in the quarter compared to $3.6 million in the prior year quarter.

Floorplan and other interest expense was $1.5 million for the fourth quarter of fiscal 2021, compared to $2.5 million for the same period last year. The decrease was due to a lower interest rate environment, a lower interest rate spread under our new five-year Amended and Restated Credit Agreement that was finalized in April 2020, and lower borrowings on our lines of credit.

In the fourth quarter of fiscal 2021, net income was $0.8 million, or earnings per diluted share of $0.03, compared to $0.7 million, or earnings per diluted share of $0.03 for the fourth quarter of fiscal 2020.

On an adjusted basis, net income for the fourth quarter of fiscal 2021 was $5.3 million, or $0.23 per diluted share, compared to net income of $0.6 million, or $0.02 per diluted share for the fourth quarter of fiscal 2020. The adjusted fourth quarter fiscal 2021 net income of $5.3 million excludes a $3.3 million charge for Ukraine income tax valuation allowance adjustments, while the adjusted fourth quarter fiscal 2020 net income excludes a $4.6 million benefit for domestic income tax valuation adjustments.

The Company generated $13.7 million in adjusted EBITDA in the fourth quarter of fiscal 2021, compared to $8.1 million for the fourth quarter of fiscal 2020.

Segment Results
Agriculture Segment - Revenue for the fourth quarter of fiscal 2021 was $303.2 million, compared to $215.5 million in the fourth quarter last year. Pre-tax income for the fourth quarter of fiscal 2021 was $7.9 million, compared to a pre-tax loss of $0.3 million in the fourth quarter last year. Adjusted pre-tax income for the fourth quarter of fiscal 2021 was $8.0 million, compared to $2.5 million in the fourth quarter last year.

Construction Segment - Revenue for the fourth quarter of fiscal 2021 was $88.9 million, compared to $87.2 million in the fourth quarter last year. Pre-tax income for the fourth quarter of fiscal 2021 was $0.2 million, compared to a pre-tax loss of $1.8 million in the fourth quarter last year. Adjusted pre-tax income for the fourth quarter of fiscal 2021 was $0.6 million, compared to a pre-tax loss of $1.0 million in the fourth quarter last year. At the end of fiscal 2021, the Company divested its Phoenix and Tucson, Arizona construction equipment store locations.

International Segment - Revenue for the fourth quarter of fiscal 2021 was $44.6 million, compared to $48.2 million in the fourth quarter last year. Pre-tax loss for the fourth quarter of fiscal 2021 was $2.9 million, compared to $2.3 million in the fourth quarter last year. Adjusted pre-tax loss for the fourth quarter of fiscal 2021 was $2.7 million, compared to $2.3 million in the fourth quarter last year.

Fiscal 2021 Full Year Results

Revenue increased 8.1% to $1.4 billion for fiscal 2021. Net income for fiscal 2021 was $19.4 million, or $0.86 per diluted share, compared to $14.0 million, or $0.63 per diluted share, for the prior year. Adjusted net income for fiscal 2021 was $28.2 million, or $1.26 per diluted share, compared to an adjusted net income of $18.6 million, or $0.84 per diluted share, for the prior year. The Company generated adjusted EBITDA of $65.4 million in fiscal 2021, representing an increase of 24.6% compared to adjusted EBITDA of $52.5 million in fiscal 2020.

Balance Sheet and Cash Flow

Cash at the end of the fourth quarter of fiscal 2021 was $79.0 million. Inventories decreased to $418.5 million as of January 31, 2021, compared to $597.4 million as of January 31, 2020. This inventory decrease includes a $177.8 million decrease in equipment inventory, which reflects a decrease in new equipment inventory of $151.7 million and a $26.1 million decrease in used equipment inventory. The lower year-end inventory also reflects the divestiture of the Company's two Arizona construction stores. Outstanding floorplan payables were $161.8 million on $773.0 million total available floorplan lines of credit as of January 31, 2021, compared to $371.8 million outstanding floorplan payables as of January 31, 2020.

For the fiscal year ended January 31, 2021, the Company's net cash provided by operating activities was $173.0 million, compared to $1.0 million for the fiscal year ended January 31, 2020. The Company evaluates its cash flow from operating activities net of all floorplan payable activity and maintaining a constant level of equity in its equipment inventory. Taking these adjustments into account, adjusted net cash provided by operating activities was $148.5 million for the fiscal year ended January 31, 2021, compared to $17.8 million for the fiscal year ended January 31, 2020.

Mr. Meyer concluded, "We expect another strong year of growth in fiscal 2022. While fiscal 2021 was a great success, especially in light of the unforeseen challenges brought about by the global pandemic, we believe there are additional areas of opportunity in this new fiscal year. Our entire organization has done an amazing job and we are ideally positioned to take advantage of the improving industry conditions with our healthy inventory position, which helped drive a record $148 million in adjusted operating cash flow during fiscal 2021 and is supporting our business in a variety of ways such as improved equipment margins and lowering our floorplan interest expense. These dynamics have improved our cash flow, reduced our debt, and put the business on a strong foundation to generate profitable growth across our segments in fiscal 2022."

Fiscal 2022 Modeling Assumptions

The following are the Company's current expectations for fiscal 2022 modeling assumptions. We believe modeling assumptions will continue to be impacted by the challenging global economy due to the COVID-19 pandemic, creating a higher degree of uncertainty in these assumptions compared to a normal environment.

 Current Assumptions
Segment Revenue 
Agriculture(1)Up 10-15%
Construction(2)Down 0-5%
InternationalUp 12-17%
  
Diluted EPS(3)$1.25 - $1.45
  
(1) Includes the full year impact of the HorizonWest acquisition completed in May 2020.
(2) Includes the full year impact of the Phoenix and Tucson, AZ store divestitures in January 2021. Adjusting full year fiscal 2021 net sales by $27 million, representing the 2021 net sales of these divested stores, results in a same-store sales assumption of up 3-8%.
(3) Includes expenses related to ERP implementation.

Conference Call Information

The Company will host a conference call and audio webcast today at 7:30 a.m. Central time (8:30 a.m. Eastern time). Investors interested in participating in the live call can dial (877) 705-6003 from the U.S. International callers can dial (201) 493-6725. A telephone replay will be available approximately two hours after the call concludes and will be available through Thursday, April 1, 2021, by dialing (844) 512-2921 from the U.S., or (412) 317-6671 from international locations, and entering confirmation code 13716797.

A copy of the presentation that will accompany the prepared remarks from the conference call is available on the Company's website under Investor Relations at www.titanmachinery.com. An archive of the audio webcast will be available on the Company's website under Investor Relations at www.titanmachinery.com for 30 days following the audio webcast.

Non-GAAP Financial Measures

Within this release, the Company refers to certain adjusted financial measures, which have directly comparable GAAP financial measures as identified in this release. The Company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP measures. Generally, the non-GAAP measures include adjustments for items such as valuation allowances for income tax, impairment charges, Ukraine remeasurement gains/losses and costs associated with our Enterprise Resource Planning (ERP) system transition. The non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for the GAAP financial measures presented in this release and the Company's financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies. Investors are encouraged to review the reconciliations of adjusted financial measures used in this release to their most directly comparable GAAP financial measures. These reconciliations are attached to this release. The tables included in the Non-GAAP Reconciliations section reconcile net income, diluted earnings per share, income (loss) before income taxes, and net cash provided by operating activities (all GAAP financial measures) for the periods presented to adjusted net income, adjusted EBITDA, adjusted diluted earnings per share, adjusted income (loss) before income taxes, and adjusted net cash provided by operating activities (all non-GAAP financial measures) for the periods presented.

About Titan Machinery Inc.

Titan Machinery Inc., founded in 1980 and headquartered in West Fargo, North Dakota, owns and operates a network of full service agricultural and construction equipment dealer locations in North America and Europe. The network consists of US locations in Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin and Wyoming and its European stores are located in Bulgaria, Germany, Romania, Serbia and Ukraine. The Titan Machinery locations represent one or more of the CNH Industrial Brands, including Case IH, New Holland Agriculture, Case Construction, New Holland Construction, and CNH Industrial Capital. Additional information about Titan Machinery Inc. can be found at www.titanmachinery.com.

Forward Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "potential," "believe," "estimate," "expect," "intend," "may," "could," "will," "plan," "anticipate," and similar words and expressions are intended to identify forward-looking statements. Such statements are based upon the current beliefs and expectations of our management. Forward-looking statements made herein, which include statements regarding Agriculture, Construction, and International segment initiatives and improvements, segment revenue realization, growth and profitability expectations, inventory expectations, leverage expectations, agricultural and construction equipment industry conditions and trends, and modeling assumptions and expected results of operations for the fiscal year ending January 31, 2022, involve known and unknown risks and uncertainties that may cause Titan Machinery's actual results in current or future periods to differ materially from the forecasted assumptions and expected results. The Company's risks and uncertainties include, among other things, the duration, scope and impact of the COVID-19 pandemic on the Company's operations, a substantial dependence on a single distributor, the continued availability of organic growth and acquisition opportunities, potential difficulties integrating acquired stores, industry supply levels, fluctuating agriculture and construction industry economic conditions, the success of recently implemented initiatives within the Company's operating segments, the uncertainty and fluctuating conditions in the capital and credit markets, difficulties in conducting international operations, foreign currency risks, governmental agriculture policies, seasonal fluctuations, the ability of the Company to reduce inventory levels, weather conditions, disruption in receiving ample inventory financing, and increased competition in the geographic areas served. These and other risks are more fully described in Titan Machinery's filings with the Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 10-K, as updated in subsequently filed Quarterly Reports on Form 10-Q, as applicable. Titan Machinery conducts its business in a highly competitive and rapidly changing environment. Accordingly, new risk factors may arise. It is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on Titan Machinery's business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Other than as required by law, Titan Machinery disclaims any obligation to update such factors or to publicly announce results of revisions to any of the forward-looking statements contained herein to reflect future events or developments.

Investor Relations Contact:
ICR, Inc.
John Mills, jmills@icrinc.com
Managing Partner
646-277-1254

 
TITAN MACHINERY INC.
Consolidated Balance Sheets
(in thousands)
(Unaudited)
    
 January 31, 2021 January 31, 2020
Assets   
Current Assets   
Cash$78,990  $43,721 
Receivables, net of allowance for expected credit losses69,109  72,776 
Inventories418,458  597,394 
Prepaid expenses and other13,677  13,655 
Total current assets580,234  727,546 
Noncurrent Assets   
Property and equipment, net of accumulated depreciation147,165  145,562 
Operating lease assets74,445  88,281 
Deferred income taxes3,637  2,147 
Goodwill1,433  2,327 
Intangible assets, net of accumulated amortization7,785  8,367 
Other1,090  1,113 
Total noncurrent assets235,555  247,797 
Total Assets$815,789  $975,343 
    
Liabilities and Stockholders' Equity   
Current Liabilities   
Accounts payable$20,045  $16,976 
Floorplan payable161,835  371,772 
Current maturities of long-term debt4,591  13,779 
Current maturities of operating leases11,772  12,259 
Deferred revenue59,418  40,968 
Accrued expenses and other48,791  38,360 
Income taxes payable11,048  49 
Total current liabilities317,500  494,163 
Long-Term Liabilities   
Long-term debt, less current maturities44,906  37,789 
Operating lease liabilities73,567  88,387 
Deferred income taxes-  2,055 
Other long-term liabilities8,535  7,845 
Total long-term liabilities127,008  136,076 
Stockholders' Equity   
Common stock-  - 
Additional paid-in-capital252,913  250,607 
Retained earnings116,869  97,717 
Accumulated other comprehensive income (loss)1,499  (3,220)
Total stockholders' equity371,281  345,104 
Total Liabilities and Stockholders' Equity$815,789  $975,343 


 
 
TITAN MACHINERY INC.
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
        
 Three Months Ended January 31, Twelve Months Ended January 31,
 2021 2020 2021 2020
Revenue       
Equipment$354,011  $262,826  $1,016,071  $917,202 
Parts49,830  52,289  244,676  234,217 
Service22,947  21,950  107,229  99,165 
Rental and other9,890  13,899  43,246  54,587 
Total Revenue436,678  350,964  1,411,222  1,305,171 
Cost of Revenue       
Equipment318,122  235,362  911,170  818,707 
Parts35,668  36,810  171,873  165,190 
Service8,429  8,276  36,692  33,446 
Rental and other6,745  9,398  30,125  37,010 
Total Cost of Revenue368,964  289,846  1,149,860  1,054,353 
Gross Profit67,714  61,118  261,362  250,818 
Operating Expenses60,523  60,128  220,774  225,722 
Impairment of Goodwill-  -  1,453  - 
Impairment of Intangible and Long-Lived Assets409  3,578  1,727  3,764 
Income (Loss) from Operations6,782  (2,588) 37,408  21,332 
Other Income (Expense)       
Interest and other income (expense)194  439  527  3,126 
Floorplan interest expense(528) (1,630) (3,339) (5,354)
Other interest expense(959) (890) (3,843) (4,452)
Income (Loss) Before Income Taxes5,489  (4,669) 30,753  14,652 
Provision for (Benefit from) Income Taxes4,707  (5,342) 11,397  699 
Net Income782  673  19,356  13,953 
        
Diluted Earnings per Share$0.03  $0.03  $0.86  $0.63 
Diluted Weighted Average Common Shares22,143  21,977  22,104  21,953 


 
 
TITAN MACHINERY INC.
Consolidated Condensed Statements of Cash Flows
(in thousands)
(Unaudited)
    
 Year Ended January 31,
 2021 2020
Operating Activities   
Net income$19,356  $13,953 
Adjustments to reconcile net income to net cash provided by operating activities   
Depreciation and amortization23,701  28,067 
Impairment3,180  3,764 
Other, net9,313  13,284 
Changes in assets and liabilities   
Inventories199,245  (99,469)
Manufacturer floorplan payable(110,084) 49,601 
Other working capital28,285  (8,245)
Net Cash Provided by Operating Activities172,996  955 
Investing Activities   
Property and equipment purchases(20,089) (25,016)
Proceeds from sale of property and equipment6,592  2,415 
Acquisition consideration, net of cash acquired(6,790) (13,887)
Other, net(10) 19 
Net Cash Used for Investing Activities(20,297) (36,469)
Financing Activities   
Net change in non-manufacturer floorplan payable(106,414) 50,158 
Repurchase of senior convertible notes-  (45,644)
Net proceeds from (payments on) long-term debt(10,616) 18,864 
Other, net(909) (509)
Net Cash Provided by (Used for) Financing Activities(117,939) 22,869 
Effect of Exchange Rate Changes on Cash509  (379)
Net Change in Cash35,269  (13,024)
Cash at Beginning of Period43,721  56,745 
Cash at End of Period$78,990  $43,721 


 
 
TITAN MACHINERY INC.
Segment Results
(in thousands)
(Unaudited)
            
 Three Months Ended January 31, Twelve Months Ended January 31,
 2021 2020 Change 2021 2020 Change
Revenue           
Agriculture$303,161  $215,508  40.7% $886,485  $749,042  18.3%
Construction88,883  87,220  1.9% 305,745  320,034  (4.5)%
International44,634  48,236  (7.5)% 218,992  236,095  (7.2)%
Total$436,678  $350,964  24.4% $1,411,222  $1,305,171  8.1%
            
Income (Loss) Before Income Taxes           
Agriculture$7,933  $(275) n/m $34,422  $18,036  90.9%
Construction236  (1,750) n/m 186  (2,290) n/m
International(2,890) (2,279) (26.8)% (6,025) 504  n/m
Segment income before income taxes5,279  (4,304) n/m 28,583  16,250  75.9%
Shared Resources210  (365) n/m 2,170  (1,598) n/m
Total$5,489  $(4,669) n/m $30,753  $14,652  109.9%
            


 
 
TITAN MACHINERY INC.
Non-GAAP Reconciliations
(in thousands, except per share data)
(Unaudited)
        
 Three Months Ended January 31, Twelve Months Ended January 31,
 2021 2020 2021 2020
Adjusted Net Income       
Net Income$782  $673  $19,356  $13,953 
Adjustments       
ERP transition costs740  2,397  2,990  7,175 
Impairment charges409  3,578  3,180  3,764 
Ukraine remeasurement (gain) / loss201  (28) 1,174  (616)
Total Pre-Tax Adjustments1,350  5,947  7,344  10,323 
Tax Effect of Adjustments (1)386  (1,452) (2,227) (1,036)
Adjustment for Tax Valuation Allowance2,741  (4,611) 3,759  (4,611)
Total Adjustments4,477  (116) 8,876  4,676 
Adjusted Net Income$5,259  $557  $28,232  $18,629 
        
Adjusted Diluted EPS       
Diluted EPS$0.03  $0.03  $0.86  $0.63 
Adjustments (2)       
ERP transition costs0.03  0.11  0.13  0.32 
Impairment charges0.02  0.16  0.14  0.17 
Ukraine remeasurement (gain) / loss0.01  (0.01) 0.05  (0.02)
Total Pre-Tax Adjustments0.06  0.26  0.32  0.47 
Tax Effect of Adjustments (1)0.02  (0.06) (0.10) (0.05)
Adjustment for Tax Valuation Allowance0.12  (0.21) 0.18  (0.21)
Total Adjustments0.20  (0.01) 0.40  0.21 
Adjusted Diluted EPS$0.23  $0.02  $1.26  $0.84 
        
Adjusted Income Before Income Taxes       
Income (Loss) Before Income Taxes$5,489  $(4,669) $30,753  $14,652 
Adjustments       
ERP transition costs740  2,397  2,990  7,175 
Impairment charges409  3,578  3,180  3,764 
Ukraine remeasurement (gain) / loss201  (28) 1,174  (616)
Total Adjustments1,350  5,947  7,344  10,323 
Adjusted Income Before Income Taxes$6,839  $1,278  $38,097  $24,975 
        
Adjusted Income Before Income Taxes - Agriculture       
Income (Loss) Before Income Taxes$7,933  $(275) $34,422  $18,036 
Impairment charges28  2,807  272  2,807 
Adjusted Income Before Income Taxes$7,961  $2,532  $34,694  $20,843 
        
Adjusted Income (Loss) Before Income Taxes - Construction       
Income (Loss) Before Income Taxes$236  $(1,750) $186  $(2,290)
Impairment charges381  771  597  957 
Adjusted Income (Loss) Before Income Taxes$617  $(979) $783  $(1,333)
        
Adjusted Loss Before Income Taxes - International       
Income (Loss) Before Income Taxes$(2,890) $(2,279) $(6,025) $504 
Adjustments       
Impairment charges-  -  2,311  - 
Ukraine remeasurement (gain) / loss201  (28) 1,174  (616)
Total Adjustments201  (28) 3,485  (616)
Adjusted Loss Before Income Taxes$(2,689) $(2,307) $(2,540) $(112)
        
Adjusted EBITDA       
Net Income$782  $673  $19,356  $13,953 
Adjustments       
Interest expense, net of interest income884  815  3,574  4,121 
Provision for income taxes4,707  (5,342) 11,397  699 
Depreciation and amortization5,970  7,006  23,701  28,067 
EBITDA12,343  3,152  58,028  46,840 
Adjustments       
ERP transition costs740  1,384  2,990  2,497 
Impairment charges409  3,578  3,180  3,764 
Ukraine remeasurement (gain) / loss201  (28) 1,174  (616)
Total Adjustments1,350  4,934  7,344  5,645 
Adjusted EBITDA$13,693  $8,086  $65,372  $52,485 
        
Adjusted Net Cash Provided by Operating Activities       
Net Cash Provided by Operating Activities    $172,996  $955 
Net Change in Non-Manufacturer Floorplan Payable    (106,414) 50,158 
Adjustment for Constant Equity in Inventory    81,900  (33,359)
Adjusted Net Cash Provided by Operating Activities    $148,482  $17,754 
        
 
(1) The tax effect of U.S. related adjustments was calculated using a 26% tax rate, determined based on a 21% federal statutory rate and a 5% blended state income tax rate. The tax effect of the Germany related adjustments was calculated using a 29% tax rate. Included in the tax effect of the adjustments is the tax impact of foreign currency changes in Ukraine of ($0.1 million) for the three months ended January 31, 2021 and $1.2 million for the fiscal year ended January 31, 2021.
(2) Adjustments are net of amounts allocated to participating securities where applicable.


Mar 18, 2021

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