TITAN INTERNATIONAL INC Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Paul Reitz notes Q1 results were at the higher end of guidance for revenue and adjusted EBITDA, highlighting strengths of broad product portfolio and customer-centric mindset. Assesses tariff situation and emphasizes diversified global business model.
• Discusses segments: Ag leveraging connections with farmers/dealers, Brazil's business strength, Europe's short-term impact but Turkey plant investments, Consumer's gross margin leadership, EMC's innovation and product development.
• David Martin reports Q1 revenues $491M, adjusted EBITDA $31M, gross margin 14% (up from 10.7% in Q4). SG&A expenses $49.9M (10% of sales), R&D $4.5M, operating income ~$12M. Mentions Carlstar acquisition impact on SG&A, working capital increase, net debt $411M, and Q2 guidance stability.

Segment Performance

• Ag: Q1 orders were muted, but saw positive OEM activity in the US; Brazil business strengthened since Q4 2024, benefiting from US trade standoff with increased exports to China.
• Brazil: Business has strengthened since Q4 2024, harvest season went well, and farmers there are benefiting from the US trade standoff by stepping up exports to China.
• Europe: Impacted short-term by Ukraine situation and global trade policy changes, but investments in Turkey plant to improve European wheel capacity and lower cost structure.
• Consumer: Gross margin leader, with over 65% of sales from aftermarket, end customers include outdoor power sports owners, landscapers, and golf courses.
• EMC: Impacted by sluggish OEM demand in Europe and US, but innovations and product development position the segment well for growth when market returns to growth.

Guidance

• Q2 guidance: Revenues $450M-$500M, adjusted EBITDA $25M-$35M. Expect cash flow to turn positive in second half, focus on paying down debt and key investments, with stability in business during Q2.

Risks

• Tariff uncertainties affecting sourcing and pricing.
• OEM demand volatility impacting EMC segment.
• Global trade policy changes affecting European business and EMC segment.

Question and Answer

Q: Good morning. Thanks for taking my question. I guess, I want to start by maybe asking about how you source things like rubber. There are pretty high intended tariffs for some of the major rubber exporting countries like Vietnam or Thailand, but you can also source rubber -- other big countries that have rubber are in West Africa where tariffs are being kept to a pretty low minimum, 10% or the least possible tariffs. So I guess I'm kind of wondering if you can clarify which one of those two is it for Titan? Which one do you use more or do you use most of? And can you comment also on your ability to contractually pass through along any higher rubber costs or steel costs through your OEM contracts with your customers?

A: Yes, great question, Mike. We have good sourcing of all of our rubber products, and they're primarily West Africa. And we have good solid contracts in place for those. And so, we feel very confident about our ability to get the materials and at a very cost competitive positioning. And we expect the year not to be impacted dramatically at all based on tariffs in that regard. But I think I want to add to that in that, our steel sourcing is primarily domestic and the other things such as fabric chemicals and so forth are either get domestic sources or sources from areas that have fairly low tariff impacts at this point in time. So we're in a really strong position relative to -- on all parts of our sourcing globally. And in reference to your question about pricing, we do have contracts and mechanisms in place for our OEM customers regarding raw material and other inflationary cost impacts. And they're adjusted typically either on a three or six month basis. So again, we're not going to be impacted dramatically by that. And we'll continue to really work closely with our sources to be strategic and mitigate cost impacts in any event. So I feel like we're in a good position there.

Q: Good morning. Thanks for taking my question. I guess, I want to start by maybe asking about how you source things like rubber. There are pretty high intended tariffs for some of the major rubber exporting countries like Vietnam or Thailand, but you can also source rubber -- other big countries that have rubber are in West Africa where tariffs are being kept to a pretty low minimum, 10% or the least possible tariffs. So I guess我想知道泰坦主要使用哪种橡胶来源？以及能否评论通过OEM合同传递橡胶或钢铁成本上涨的能力？ A: 保罗·里茨回答关于橡胶主要来自西非，有良好的采购合同，钢铁主要来自国内，有定价机制调整。 Q: Good morning. Thanks for taking my question. I guess, I want to start by maybe asking about how you source things like rubber. There are pretty high intended tariffs for some of the major rubber exporting countries like Vietnam or Thailand, but you can also source rubber -- other big countries that have rubber are in West Africa where tariffs are being kept to a pretty low minimum, 10% or the least possible tariffs. So I guess I'm kind of wondering if you can clarify which one of those two is it for Titan? Which one do you use more or do you use most of? And can you comment also on your ability to contractually pass through along any higher rubber costs or steel costs through your OEM contracts with your customers?

A: 保罗·里茨回答关于橡胶主要来自西非，有良好的采购合同，钢铁主要来自国内，有定价机制调整。 Q: Got it. Thanks for that. And then I just want to get maybe take a step back and ask about the broader global ag market. You had mentioned there were potentially some challenges with the U.S. farmer because of tariffs or other things that are happening. But do you feel like globally, everyone has to eat, do you feel like globally other regions may pick up the slack? We just heard from one of the major tractor audience this morning that South America was actually up in the quarter. Curious, have you seen something similar? I just kind of want to get a sense as to the net global read on ag which you serve most of those markets, are things getting dramatically better or worse on a net basis?

A: 保罗·里茨回答巴西业务加强，美国定位良好，全球农业市场因人们需求持续存在，泰坦定位良好。 Q: Thanks, Paul. I also wanted to get a chance to touch on the expanded Goodyear licensing agreement. That seems pretty substantial now that it's going to cover some of the former Carlstar products. I know those agreements don't happen overnight, so you've had some time on this. Can you talk about how important or useful it will be to apply the Goodyear brand to some of the former Carlstar products and what that means towards realizing those synergies you had talked about a year ago when you made that acquisition?

A: 保罗·里茨回答Goodyear品牌应用对前Carlstar产品的重要性，结合泰坦优势加速业务。 Q: Yes. Hey guys, thanks for taking the questions. David, wanted to start with you. So you guys mentioned minimal impact due to tariffs this quarter. About 10% of revenue having exposure, it sounds like that's going to be the case in 2Q. But we're going to have a full quarter of impact in 2Q on that 10% of revenue, right? So first, am I thinking about that right? And then looking at EBITDA guidance to 2Q flat quarter-over-quarter roughly. So wondering if you could talk about some of the puts and takes going on in EBITDA for 2Q, specifically what might be making up for, if I'm correct, greater dollar impact from that tariff cost in 2Q, again, just looking for some of the puts and takes. Thanks.

A: 大卫·马丁回答Q2相对稳定，关税影响可控，材料采购稳定。 Q: Hey guys, thanks for taking the questions. David, wanted to start with you. So you guys mentioned minimal impact due to tariffs this quarter. About 10% of revenue having exposure, it sounds like that's going to be the case in 2Q. But we're going to have a full quarter of impact in 2Q on that 10% of revenue, right? So first, am I thinking about that right? And then looking at EBITDA guidance to 2Q flat quarter-over-quarter roughly. So wondering if you could talk about some of the puts and takes going on in EBITDA for 2Q, specifically what might be making up for, if I'm correct, greater dollar impact from that tariff cost in 2Q, again, just looking for some of the puts and takes. Thanks.

A: 大卫·马丁回答Q2稳定，关税影响可控。 Q: Good morning, guys. Just a little more color on the farmer's sentiment from your perspective. You see the news stories out there. Farmers are in crisis. They use the word crisis. What word would you use or how would you describe your outlook of farmer sentiment?

A: 保罗·里茨回答农民 sentiment 是夸张说法，实际农民收入有支撑，状态良好。 Q: Good morning, guys. Just a little more color on the farmer's sentiment from your perspective. You see the news stories out there. Farmers are in crisis. They use the word crisis. What word would you use or how would you describe your outlook of farmer sentiment?

A: 保罗·里茨回答农民 sentiment 是夸张，实际收入有支撑。 Q: On the increase in working capital, the increase in accounts receivables. Is there anything else in there besides the large increase in sales? Change in terms to customers, customers not paying or anything like that?

A: 大卫·马丁回答工作资本增加主要是销售增长，无其他明显变化。 Q: On the increase in working capital, the increase in accounts receivables. Is there anything else in there besides the large increase in sales? Change in terms to customers, customers not paying or anything like that?

A: 大卫·马丁回答工作资本增加主要是销售增长。 Q: Last question, just the industry or big picture question, what other verticals or industries are out there for you guys to explore? I know you talk about military. Could you guys make aircraft, wheels and tires? What else is out there?

A: 保罗·里茨回答军事是方向，飞机受限于监管，倾向于高复杂度、小批量生产的非监管领域。