Titan Machinery Inc. Q3 FY2026 earnings call

• Inventory optimization: Reduced total inventory by $98 million in first nine months, raising full-year target to $150 million. Quality of inventory improved. - Equipment margins: Beat expectations in quarter but expected to moderate in Q4. - Parts and service: Generates well over half of gross profit, stable in challenging equipment demand. - Footprint optimization: Divested stores in Germany, expanded dual-brand strategy in Australia, aligned with CNH in integration and market focus.

Domestic ag: Same-store sales decreased 12.3%, segment revenue $420.9 million, pretax income $6.1 million. Construction: Same-store sales decreased 10.1% to $76.7 million, pretax loss $1.7 million. Europe: Same-store sales increased 88% to $117 million (net of 6.1M foreign currency impact), pretax income $3.5 million. Australia: Same-store sales decreased 40% to $29.9 million (net of 1.3% foreign currency impact), pretax loss $3.8 million.

• Refined revenue expectations: Construction now expected down 5-10% vs prior 3-8%, Europe up 35-40% vs prior 30-40%. - Equipment margins: Anticipated to moderate to ~7% in Q4 due to less favorable sales mix and inventory optimization. - Operating expenses: Expected to decrease year over year, ~16% of sales full year. - Tax: Non-cash valuation allowance expected to increase tax expense by $0.35-$0.45 per share. - Adjusted diluted loss per share guidance: Reaffirmed range of $1.50 to $2.

• Market conditions impacting equipment demand. - Commodity price fluctuations affecting farmer profitability. - Government actions and policies, including shutdowns and potential stimulus. - Interest rate environment affecting borrowing and customer spending. - Inventory management challenges, including aged inventory levels.

Q: Why was service down 4%?

A: Some quarter-to-quarter noise; service impacted by new equipment delivery and PDI. Overall stable, working on extended warranties and maintenance agreements.

Q: Why is construction same-store sales not recovering?

A: Last year was a big year for catching up on wheel loader deliveries due to COVID supply chain constraints. Underlying market conditions show stability.

Q: What's the outlook for Europe post-Romania subsidy expiration?

A: Pullback expected in Romania, but Bulgaria and Ukraine have stable growth opportunities. Funds still in play in Romania for certain equipment categories.

Q: How does inventory reduction impact margins?

A: Reducing aged inventory and managing inventory mix has improved equipment margins, but Q4 expected to moderate due to sales mix and further optimization.

Q: Any impact of government payments on farmers and orders?

A: Farmers received some payments, but significant soybean assistance from China not yet seen. Impact on orders depends on commodity price trends and government actions.