TWI

Overall Business Model & Positioning

• Titan's diversified business model, with three balanced segments and further geographic, product, and end-market diversification within each segment, allows the company to navigate challenging market conditions for individual end markets.
• Approximately 45% of aggregate company sales are aftermarket products, which drive consistent replacement demand even during economic downturns, as worn equipment parts require replacement regardless of new equipment investment cycles.
• The company maintains a customer-centric one-stop product and distribution strategy, executed by an experienced global team.

Transformation & Digital Initiatives

• Newly created Chief Transformation Officer role (filled by former long-tenured CFO David Martin) is focused on practical, results-driven transformation leveraging AI and automation to improve performance, reduce manual work, and deliver better decision-making data.
• Key focus areas:
  • Plant Operations: Connect production, machine, quality, and operator data to identify issues earlier, resolve root causes faster, and improve throughput, downtime, scrap, yield, and quality.
  • Supply Chain & Enterprise Visibility: Use analytics and automation to simplify forecasting, inventory, and freight management, lowering costs and improving working capital efficiency.
  • Connected End-to-End Workflows: Unify siloed knowledge across design, testing, production, quality, and commercial functions, and standardize repeatable processes across finance, legal, compliance, HR, and reporting to reduce manual work.
• Early initiatives include plant industrial analytics pilots, improved contract lifecycle management, supply chain analytics upgrades, an AI-powered sales enablement tool, product development cycle improvements, and a new Workday human capital management system.
• Transformation initiatives are expected to generate up to $15 million in operating improvements over three years, with initial $3 million in benefits targeted for the end of 2027. All investments are funded within existing capital expenditure budgets, with no incremental CapEx required.

Financial Operational Highlights

• Total Q2 sales increased 5.2% year-over-year, with revenues near the top of the prior guidance range and adjusted EBITDA ($34 million) above the top of the prior guidance range. Gross margin for the company was 15.5%.
• Free cash flow of $26 million was generated in the quarter, and operating cash flow improved to $39 million from $14 million year-over-year, driven by focused working capital optimization.
• Net debt reduced to $413 million from $441 million at the end of Q1, progressing toward the company's 2026 priority of strengthening the balance sheet and reducing leverage.
• SG&A as a percentage of sales improved to 12% from 12.3% year-over-year, reflecting benefits from cost reduction initiatives.

• Third quarter 2026 guidance calls for $440 million to $460 million in revenue and adjusted EBITDA of $27 million to $33 million. Third quarter 2026 tax expense is expected to be $4 million to $5 million.
• Full fiscal year 2026 financial guidance is maintained at $1.85 billion to $1.95 billion in total revenue and $105 million to $150 million in adjusted EBITDA. However, management now expects full-year sales to trend toward the lower half of the guidance range, representing modest year-over-year growth, as the expected acceleration in agricultural customer activity in Q4 2026 ahead of a 2027 recovery is now less likely to materialize.
• An additional $7 million to $9 million in incremental net tariff refunds is expected over the remainder of 2026, with approximately $6 million expected in Q3 and the remaining balance in Q4. All proceeds will be reinvested into product and customer-focused initiatives.

Titan has three reporting segments, each contributing between 30% and 40% of total Q2 2026 revenues (total company revenues: $485 million):

1. Consumer Segment: Sales increased 27% year-over-year, leading all segment growth. Reported segment gross margin improved to 23.7% from 20.4% in the prior year quarter. The quarter included $4.6 million of net tariff reforms that reduced cost of goods sold. The Titan specialty line saw a notable rebound in demand driven by new product launches and OEM wins.
2. EMC Segment: Sales increased 1.4% year-over-year; foreign currency translation added 3.2% to segment revenue growth. Gross margin improved to 12.5% from 11.5% in the prior year. While North America construction OEM demand softened modestly from Q1, margins benefited from company-wide cost reduction and productivity initiatives.
3. Agricultural Segment: Sales declined 5% year-over-year, pressured by low farm income, elevated financing costs, and weak end-market activity. Segment gross margin fell to 11.4% from 14.6% a year ago, due to lower fixed cost leverage from reduced activity and ongoing higher input costs. Brazil agricultural operations remain particularly challenged, with low activity levels driven by local market headwinds.

• The agricultural segment faces ongoing pressure from low commodity prices, elevated fertilizer input costs (exacerbated by ongoing geopolitical conflicts), and high borrowing costs, which are making farmers hesitant to invest in new equipment, dragging on OEM demand. Brazil's agricultural operations face additional headwinds from very high interest rates, political uncertainty ahead of upcoming presidential elections, and elevated dealer and OEM inventory levels, which have created significant near-term demand pressure.
• U.S. steel tariffs under Section 232 have created a sustained negative impact on Titan's results, as the company is a large purchaser of raw steel, and tariffs have driven persistent raw material inflation that has depressed margins over the past two years.
• Prolonged geopolitical conflict in the Middle East could sustain elevated fertilizer prices, which may lead to reduced fertilizer application by farmers, potentially impacting crop yields, while creating additional short-term pressure on farm profitability.

Q: With recent improvements in corn commodity prices, is an uptick in agricultural demand expected in 2027 if these prices hold? / A: Management confirms that recent commodity price improvements are building a strong foundation for an agricultural recovery. While market conditions have improved enough to support an uptick next year, there are not yet clear indicators that demand will accelerate enough in late 2026 to meet prior expectations for this year. Equipment is aging, used inventory is well-positioned, so all conditions for a 2027 recovery are falling into place.

Q: What is driving the strong 27% sales growth in the consumer segment, and is growth related to the Goodyear brand rollout? / A: Strong growth is driven by extensive new product launches over the past two and a half years following the segment's acquisition, which has led to multiple new OEM wins that are just starting to deliver results. The Goodyear brand rollout is part of this strategy, adding a premium brand that supports margin and long-term growth. One recently launched new product has already seen strong organic market traction on social media. The strong Q2 2026 growth also compares against a weak performance in Q2 2025, which will create a tougher year-over-year comparable for Q3 2026.

Q: Is the current ag inventory drawdown cycle normal, or has replacement demand become structurally longer? / A: Management views the current slow ag market as an exceptional cyclical situation, not a structural shift. OEM and dealers have been working to reduce inventory for an extended period, and have already made significant progress, leaving most in a good position to benefit from an upcoming recovery. Government support has strengthened farmer balance sheets, supporting steady aftermarket replacement demand even while it does not drive large new equipment purchases.

Q: How large is the impact of elevated fertilizer costs on farmer profitability, and what could be the impact of a prolonged Middle East conflict on fertilizer prices? / A: Brazil is most impacted, as local farmers did not pre-purchase fertilizer at lower prices ahead of 2026, unlike most U.S. farmers who bought fertilizer late last year before price increases. If fertilizer prices stay high, farmers will likely reduce application, which could lower crop yields. Lower yields would reduce overall grain supply, ultimately supporting higher long-term crop prices, creating a counterbalancing effect that benefits future farm income.