Greetings! Welcome to Titan Machinery's First Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note, today's conference is being recorded. I'll now turn the call over to Jeff Sonnek with ICR. Jeff, you may now begin. Thank you. Welcome to Titan Machinery's First Quarter Fiscal 2025 Earnings Conference Call. On the call today from the company are Bryan Knutson, President and Chief Executive Officer, and Bo Larsen, Chief Financial Officer. By now, everyone should have access to the earnings release for the fiscal first quarter, ended April 30, 2024. If you've not received the release, it's available on the Investor Relations tab of Titan's website at ir.titanmachinery.com. This call is being webcast, and a replay will be available, on the calls, on the company's website as well. In addition, we're providing a presentation to accompany today's prepared remarks, which can be found on Titan's website, as again, at ir.titanmachinery.com. The presentation is directly below the webcast information in the middle of the page. We'd like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The statements do not guarantee future performance, and therefore undue reliance should not be placed upon them. These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan's most recently filed annual report on Form 10-K. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. Please note that during today's call, we may discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly when comparing underlying results from period to period. We've included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures in today's release. At the conclusion of our prepared remarks, we will open the call to take your questions. With that, I'd now like to introduce the company's President and CEO, Mr. Bryan Knutson. Brian, please go ahead. Thank you, Jeff. Good morning, everyone. I'll begin today's call by providing a brief summary of the current market environment. Then I will offer some thoughts on our results and updated fiscal 2025 outlook before passing the call to Bo for his financial review and incremental thoughts on our modeling assumptions. Our first quarter results reflect an industry transition to a more challenging market environment. We have rapidly moved out of a period characterized by restricted supply and high demand into one that reflects lower demand and excess supply of inventory in many product categories. This shift is mainly a product of two influencing factors. First, manufacturer delivery times have rapidly returned to normal following multiple years of supply chain constraints that significantly limited their production volumes. Second, we are seeing a softening of demand across our geographic footprint as ag fundamentals weaken. The combination of suppressed net farm incomes, extended duration of higher interest rates, and broader macroeconomic uncertainty is impacting farmer sentiment and, in some cases, delaying equipment purchasing decisions. As a result of these incremental headwinds, we experienced a slower than expected start to fiscal 2025, which contrasts with the strong demand for equipment purchases that persisted throughout fiscal 2024. So while the normalization of supply chains and production schedules among our suppliers has enabled us to convert sales from our backlog, which in some cases have been delayed by more than a year, we are sensitive to the increase of new equipment inventory available for sale, as well as used equipment stemming from trade-ins. Therefore, we are adopting more aggressive tactics to manage our inventories down to healthier levels, more aligned with softening industry demand. Big picture and longer term, we are laser-focused on managing to healthy inventory levels, which correspond with whole good inventory turns in the 2.2-3.2x range and minimizing our floor plan interest expense. As we described on our Q4 FY 2024 earnings call, we believe the path to achieve targeted inventory levels will likely carry through into our fiscal year 2026. But we have a direct line of sight into what we need to do, and I will reiterate one more time, it is currently our highest priority and will remain so until we execute to these desired levels. Turning to some comments on our Q1 results. Although the first quarter performance was below our expectations, we were pleased to deliver positive same-store sales growth in our agriculture segment, and despite demand being incrementally softer than we anticipated heading into the year, we were able to generate first quarter revenue growth of over 10% to $629 million. A record number for the first quarter, even when excluding the contribution from the O'Connors acquisition.... We also experienced some margin compression due to our efforts to proactively manage inventory levels through this transition period. Although this was anticipated, when combined with higher operating expenses, higher floor plan interest expense, and lower sales demand, the combination resulted in an earnings and pre-tax margin performance below the levels we achieved over the last two years, albeit still significantly better than compared to the last down cycle. That said, I want to emphasize that we are very cognizant of the impact that this cycle shift is having on our business, and we are scrutinizing all expenses while prioritizing our growth initiatives. For example, in the near term, we are being vigilant in the hiring of non-revenue-generating positions, while making sure that we are supporting those areas of the business that are strategically important over the long term, such as our ongoing focus on bolstering our capacity of our service departments. Attracting and retaining skilled technicians is of critical importance, given the industry-wide shortages and our desire to grow this recurring revenue aspect of our business. Nonetheless, throughout the duration of the cycle, we will continue to look for ways we can maximize operating leverage against the realities of the lower gross profit levels. In response to the softer-than-anticipated market environment, we felt it was prudent to adjust our full-year modeling assumptions. Bo will cover this in greater detail, but in summary, we are lowering our revenue assumptions modestly while adopting a more aggressive stance than we previously had with respect to equipment margins to further ensure success in managing inventory levels. Our rationale here is straightforward. Staying ahead of the demand curve puts us in a position to be efficient regardless of what happens to industry volumes in FY 2026. Given the sluggishness in equipment, we continue to lean into our customer care strategy to fuel our recurring parts and service businesses, and this is an area where we believe we can continue to drive growth this year and create sustainable growth longer term. In terms of seasonal farming activity, at this stage in the year, planting progress among corn and soybeans is still in full swing. While some of our southern markets got off to a strong start with the early spring, recent precipitation slowed progress over the past few weeks. Within our European markets, both winter and row crops look very healthy due to optimal moisture levels. In Australia, while subsoil moisture levels are supportive of the growing season, recent precipitation has been sparse, and as such, rainfall is still needed in the near term to foster seed germination. Overall, on a global level, our farmer customers remain in pretty good shape, both in terms of growing conditions as well as from a balance sheet perspective. Although net farm income is expected to decline this year, farmers' financial health remains strong, with favorable land values further supporting grower balance sheets. In closing, as the cycle progresses, our entire team remains focused on advancing our customer care strategy to ensure we meet our customers' needs and continue to grow our more stable, recurring parts, service, and precision businesses while controlling the aspects of the business that we can, such as our fixed overhead and managing our inventory to align with demand. We believe that the combination of these levers will allow us to generate significantly improved financial results versus the prior down cycle, demonstrating the numerous strategic improvements we've made to our business over the past several years. Before turning the call over to Bo, I want to sincerely thank our entire team, who remain focused on serving our customers and operating the business with discipline as we face these shifting cycle dynamics. Additionally, our thoughts are with our employees and communities that we operate in that have recently been impacted by tornadoes and flooding. Safety and health for all of them and their families is our priority as they recover from these recent weather events. I ask that all of you keep them in your thoughts as well. With that, I will turn the call over to Bo for his financial review. Thanks, Brian. Good morning, everyone. Starting with our consolidated results for the fiscal 2025 first quarter, total revenue was $628.7 million, an increase of 10.4% compared to the prior year period. Growth was driven by contribution from our O'Connors and other acquisitions, with the balance reflecting a 1.1% increase in same-store sales, which was driven by our agriculture segment. Our equipment revenue increased 9%, parts revenue increased 12%, service revenue increased 29%, and rental and other revenue was down 16.1%, all versus the prior year period. Gross profit for the first quarter was $122 million, and as expected, gross profit margin contracted by 140 basis points year-over-year to 19.4%, driven primarily by lower equipment margins. Operating expenses were $99.2 million for the first quarter of fiscal 2025, compared to $81.3 million in the prior year period. The year-over-year increase of 21.9% was led by acquisitions that we've executed in the last twelve months, but also reflects an increase in areas like salaries and benefits due to merit increases in incremental headcount as we continue to focus on increasing service capacity in support of our customer care strategy. Floor plan and other interest expense was $9.5 million, as compared to $2.5 million for the first quarter of fiscal 2024, with the increase led by a higher level of interest-bearing inventory, including the usage of existing floor plan capacity to finance the O'Connors acquisition. Net income for the first quarter of fiscal 2025 was $9.4 million, or $0.41 per diluted share, and compared to last year's first quarter net income of $27 million, or $1.19 per diluted share. Now turning to our segment results for the first quarter. In our agriculture segment, sales increased 5.8% to $447.7 million. Growth was driven by same-store sales increase of 4.3%, which was further supported by contributions from the acquisition of Scott Supply in January 2024. Growth was constrained by softening of demand for equipment purchases due to the expected decline of net farm income this growing season, as well as the influence of other macroeconomic variables, including higher interest rates, which are weighing on farmer sentiment. However, underlying fundamentals remain sound, including efficiency gains from precision technology, elevated fleet age, and strong farmer balance sheets. Agriculture segment pretax income was $13 million and compared to $24.2 million in the first quarter of the prior year. In our construction segment, same-store sales declined 0.7% to $71.5 million. The slight decrease was a product of modest growth in equipment sales, offset by lower parts sales. With lower snowfall this past winter, we saw a decrease in seasonal demand for snow removal equipment and parts. However, underlying industry fundamentals remain stable, and as we look to the rest of the year, construction activity is expected to remain at healthy levels, supported by infrastructure projects, energy, livestock, and commercial construction. Pretax income for the segment was $0.3 million, which compares to $4.5 million in the first quarter of the prior year. In our Europe segment, sales decreased 12.5% to $65.1 million, which reflects a 1.3% favorable foreign currency impact. Net of the effect of these foreign currency fluctuations, revenue decreased 13.4%, reflecting a softening of new equipment demand, which was partially offset by growth in parts and service revenue. Year-over-year comparables are expected to be more favorable in the back half of the year, as last year's second half saw a slowdown in demand, which was driven by drought conditions in Romania and Bulgaria. Pretax income for the segment was $1.4 million, which compares to $6.4 million in the first quarter of fiscal 2024. In our Australia segment, sales were $44.4 million and a pretax loss of $0.5 million. This revenue was in line with expectations and represents year-over-year growth versus the same period in the prior year, which was pre-acquisition. As a reminder, our Australia business seasonal trends are fairly similar to our domestic ag business, with about 45% of revenue coming in the first half of the fiscal year and 55% coming in the second half of our fiscal year. Now on to our balance sheet and inventory position. We had cash of $36 million and an adjusted debt to tangible net worth ratio of 1.6 times as of April 30th, 2024, which is well below our bank covenant of 3.5x. Equipment inventory increased $132.5 million to $1.2 billion in the first quarter. In line with expectations we set on our last earnings call. Going into the year, we forecasted that the rapid normalization of lead times from our OEM partners would result in a significant portion of our outstanding orders to arrive in the first half of the fiscal year. While our seasonality generally has the back half of our fiscal year being our highest sales quarters, we continue to expect inventory levels to peak around the end of the second quarter, with modest decreases through the back half of the year and more substantial decreases as we work through fiscal year 2026. With that, I'll finish by reviewing our fiscal 2025 full year guidance, which we are updating today to account for our year-to-date performance, as well as the industry's latest expectations of demand. In consideration of the incrementally softer demand than we initially anticipated when we provided our fiscal 2025 outlook, we are modestly reducing our revenue assumptions across each of our segments and modifying our underlying assumptions for equipment margin, variable operating expenses, and floor plan interest expense. For agriculture, we have updated our revenue assumption to be in the range of down 2.5% to up 2.5%, which also includes the full year contribution from our Scott Supply acquisition, which closed in January of 2024. As we've discussed, we remain focused on those areas that we can control while investing in our parts, service, and precision businesses, which all remain key priorities. For the full year, we expect this will translate to growth in the mid to high single digit range for this portion of our business. For the construction segment, our updated assumption is for revenue to be flat to up 5%, in line with the expectation of sustained demand levels in my previous comments. For the Europe segment, our updated assumption is for revenue to be down 5% to flat. This revision is due to the softening of industry demand we have been discussing today. For the Australia segment, we now expect fiscal 2025 revenue to be in the range of $240 million-$260 million, with the change in assumption also incorporating the shifting farmer sentiment. Now for some broader commentary. From a gross margin perspective, we remain committed to improving our inventory position, and as such, we are building in additional equipment margin compression of about 80 basis points compared to our prior expectation. We believe this is prudent, given the excess supply of dealer inventory in the channel, coupled with the industry's latest expectations for softer equipment demand. The number one objective here is to manage the targeted inventory levels to match industry demand and achieve targeted KPIs that Bryan talked through earlier on the call. Looking at operating expenses, we are focused on implementing cost controls where we can, optimizing resources, and being vigilant with any new headcount. Taking into account the full year operating expense contribution from acquisition activity that has occurred over the last year, our guidance implies operating expenses as a percentage of sales to be about 40 basis points higher than was realized in fiscal 2024 across the company as a whole, consistent with our initial modeling assumptions that we laid out in March. Moving to interest expense, we are factoring in the reduced likelihood for interest rate cuts in the back half of the year to align with the market's latest expectations. However, we do continue to expect improvement of interest-free terms, which should benefit interest expense in the back half of the year relative to the first half. Taken together with our revised revenue expectations and the resulting impact on inventory that we are working to improve, we anticipate higher floor plan interest expense this year versus what was in our previous guidance. So rolling all this up, we are updating our fiscal 2025 EPS range to $2.25-$2.75, which reflects the more aggressive strategy we are employing to improve our inventory levels as efficiently as possible to ensure we are well-positioned moving forward. This concludes our prepared comments. Operator, we are now ready for the question and answer session of our call. Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question at this time, please press star one from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull for questions. Once again, that is star one. Thank you. Now, our first question is from the line of Ben Klieve with Lake Street Capital. Please proceed with your questions. All right, thanks for taking my questions. Plenty to talk about. I'll just leave it with a couple here. First of all, Bo, you laid out expectations for inventory decreases starting in the second half of this year, with more substantial decreases, I think is how you framed it in fiscal 2026. I'm wondering if you can, first of all, help us frame your expectations for inventory levels ending this fiscal year, and maybe more notably, ending fiscal 2026. Yeah. So in terms of how we see inventory continuing to progress and probably not inconsistent with what we talked about on our earnings call in March, we see inventory levels exiting the year similar to where we started the year. So again, it will climb in the first two quarters, as we saw in Q1, and then kind of take back some of those increases, get back to about where we started. And then in terms of FY 26, you know, the reason for the more substantial decreases, right, is just the timing of inventory ordering and then when things are coming in. So going back to, you know, a year ago now, even before that, kind of anticipating and turning down the dial in terms of order activity, and then it was a matter of playing it out, right? So orders are coming in through the first half of this year pretty rapidly as lead times have compressed. Then we start to see that slow down in the back half of the year. And then based on our order activity from here forward, that really dictates how much is coming in next year. And with really good visibility to where we think demand is and where we wanna see targeted inventory levels go, we're gonna be able to see those levels decreasing faster again through FY 2026. In terms of the exact dollar figure, that's gonna be dependent right on our view on where industry demand is going, because ultimately, the targets that we're looking for are exactly what Bryan laid out a little bit earlier, right? So, you know, one of the number one things is you want to make sure that you're not incurring floor plan interest expenses. That's not a value-added activity. But from an inventory turns perspective, that range of 2.2-3.2, you know, clearly we want to be in the middle to the higher end of the range. But certainly the lower end of the range is reflecting transitionary periods that are slower, in which you need to adjust inventory levels. As we work through 2026, get a good feel on what industry demand is at that point, that's the kind of target that we're looking to hit, exiting that year. ... Okay, that's helpful. And then, one other one for me, and I'll get back in line, regarding Australia. You know, understood, you know, all the various macro dynamics, you know, facing the entire industry broadly, and Australia specifically. But can you comment on the performance of Australia in this quarter versus your expectations, and in particular, if seasonality in this business is maybe more pronounced than you were maybe expecting? Well, I would say that from a seasonality perspective, it is, the expectation is, and historically it has been, the 45%-55% split. Perhaps a bit more pronounced in terms of the difference between Q1 and Q2, and then the difference between Q3 and Q4. So Q2 and Q4, being kind of outsized quarters, and Q1 and Q3, being a little bit slower quarters there. But overall, the first quarter came very much in line with expectations. You know, entering the year, they had a significant amount of backlog and pre-sold equipment that was either on the ground or continuing to be delivered. So there's some good comfort in terms of a level of revenue that's gonna be progressing through the year, and that's a matter of, you know, PDI-ing that equipment and getting it in customers' hands. So thus far, in line with expectations, loving the leadership team, excited about the branding launch this summer and just, you know, moving forward to beyond that, talking about longer synergies with 24/7 service, call centers and, and the like. Yeah, and Ben- Very good. Bo covered it well. I would just add to, you know, we talked last call here and the call before about very recently in the back half of last year, and especially in the final quarter of last year, is when deliveries finally started catching up and really started rapidly increasing. And we've talked about how we'll see that continue through the, especially the first half of this year. Well, in Australia, there are still a couple product categories that have been, you know, the slowest to recover, and then you add in the transportation time as well. So as Bo pointed out, we do have some, a good amount of order backlog there and good pre-sales that have just been delayed a little bit. And then also the time to get those through the shop, as you know, they're coming a bit delayed. But so that'll all bode well for us for our Australia segment the rest of the year. Very good. I appreciate that context. All right, very good. I'll get back in line. Best of luck here, in coming quarters. Thanks. Our next question is from the line of Mig Dobre with Baird. Please proceed with your questions. Yes, good morning. I got a couple of questions on ag and some on construction as well. I guess, I'm looking to clarify, first and foremost, your comments around equipment gross margin. Can you be maybe a little more specific in terms of how you're estimating what's embedded in the guidance for the full year? Yeah, absolutely. Specific to ag, our equipment gross margins embedded in the guidance are about 9%, which is a step back year-over-year of about 320 basis points. If you look at that historically, in the broader context, taking the past decade into consideration, that's really moving our assumed margins to the low end of what we've experienced over the last decade, with the exception of FY 2016 and FY 2017. But, you know, those particular years, we were in a significantly different inventory health position. Specifically at that point in time, we had inventory that was aged greater than 12 months at 50%. So half of our inventory was sitting on the lot for more than 12 months, whereas today, that's 9%, right? So a significantly different health of inventory, and that's why those two are a bit more of an outlier. But taking that into context, and again, looking at the past decade, we're really moving our margins to the low end of the range of what we've experienced, all in the name of driving the top line and getting to a healthier inventory position. I mean, could you theoretically maintain higher equipment margins and a little bit lower sales and perhaps end up in the same spot from an earnings perspective? Probably. But in terms of what's best for the, for the company going forward, that's really getting that inventory level to targeted levels as quickly as possible. That's why we're embedding this in the guidance. That's why we're wanting to get a bit more aggressive. One more data point for the first quarter, and this is for the company as a whole, equipment margins were down about 230 basis points, while our guidance implies for the rest of the year that equipment margins will be down 330 basis points. So incrementally, about 100 basis points the rest of the year. And again, that's reflective of the incremental softness on what we've seen on demand, but even more specifically, the actions that we want to drive to achieve our inventory outcomes. Understood. I guess what I'm personally struggling with a little bit, though, is if we're taking the gross margin on ag down to near decade lows. This is happening though, as you're still not fully destocking in fiscal 2025. I mean, you're basically saying that the destock is gonna be a fiscal 2026 event. So the margins are coming down while inventories are still gonna be relatively elevated. I guess, how do you think about that, right? Like, what's the incremental risk here to margin going forward, as you truly go into destock mode? Should we maybe expect another move lower as we contemplate fiscal 2026, or not? Well, the difference here, I think that maybe you didn't quite articulate there, right, is the order volume coming in year-over-year. So the significant amount of order volume as lead times collapsed from, you know, 18 to 24 months down to the normal four-six-month time frame, is bringing in more than a year's worth of orders in, you know, a two or three quarter period of time. So now as we drastically change, you know, the order flow next year is more about playing that through and seeing a significantly less inflow, and then the outflow will be what it is based on demand to get you to your objectives. This year, what we're saying is that we wanna take those more aggressive actions at the expense of margin to get to the best endpoint that we possibly can, right? So more of that hit is this year to absorb all of those orders. That again, is more than a year's worth of order activity in a shorter period of time. Okay. Then I guess moving on to construction, you know, there's on a slide where you're kind of talking about market conditions in the outlook. You know, you mention in there that you're taking an aggressive stance to lower inventories. Maybe you can comment a little bit on that. I also thought it was quite interesting that the rental fleet utilization has been down, has been lower, significantly lower, actually, 500 basis points. So maybe a little bit of context as to what's going on there as well. Yep. So certainly there's different extents across our segments. But from a CE perspective and then the industry in general, right, I mean, we are at the similar thematics in terms of moving past supply chain constraints and then equipment availability increasing significantly and the compression of lead time. So the same story applies, you know, a different extent. So that's where we're just saying similarly, we wanna make sure that we get to the targeted inventory levels that we want for CE, in similar fashion. From a rental utilization perspective, maybe, Bryan, you want to add some comments? Yeah, I mean, just, you know, up in our footprint, combination of as Bo talked about, the lack of snow, obviously up here in the upper Midwest, snow is a big part of what we do. And so that impacted the utilization. The lack of snow cover created some deep frost and cold temperatures we had throughout the winter, which caused a delay to a lot of the spring's spring start to the construction season. That's now well underway in full swing. And then just add in there, you know, some of the things around uncertainty around residential interest rates, some of the softening in commercial and the like. And so a little bit of softening there is also impacting. So a combination of a late start. So we expect a good uptick here in our rental as we go forward now. But also, you know, it is overall a little softer environment than the last two years. Understood. Final question. Maybe another clarification on the action that you're taking here. When we're seeing the impact on margin reflecting in the guidance, the discussion, so I understand that, but I'm sort of curious as to what the actions per se are. I mean, does that mean that you're essentially cutting price, or are there some incentives that are being offered in both construction and ag? How does that dynamic work on your end? What do you have to do to get this equipment moving off the lot? Thank you. Yeah, I mean, all the above. You know, that, that's what's embedded in a lot of different tools. You know, as you know, I've been doing this a long time and, and been through downturns before, and I've personally sold a lot of iron. We've got extremely good team that we've put together now, our, our leadership team and our entire team that's experienced and been through this. It, it's a very scripted approach. You're gonna pull different levers depending on what product category, what customer is, what their needs are. But yeah, some of those examples would be some things you mentioned, you know, whether it's an interest buydown, interest waiver, a split rate program, whether it's an extended warranty, or just sometimes just straight up price. But every one of those is gonna ultimately map back in the accounting to the margins. And so that's what we've got embedded in, and it's just what is it that for that grower or contractor, you know, works for them and their banker and, and, and makes their operation better by updating that piece of equipment? And again, a simple example can be moving from a current rate contract of a 4% fixed or something into an interest-free contract, or being out of warranty and moving into a machine that now has warranty, or technology advancements making them more efficient, et cetera, et cetera. So we're very cognizant of arming our team with those tools, communicating those tools, and being very aggressive here, and as I mentioned in my prepared remarks, it is our single biggest initiative right now. Thank you. Thank you. Our next question is from the line of Ted Jackson with Northland Securities. Please proceed with your questions. All my questions have been asked and answered. Thanks very much. Thank you. At this time, I will now turn the floor back to management for closing remarks. Okay. Thank you for your time today, everyone, and we look forward to talking to you all again on our Q2 call. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.