Titan Machinery (TITN) Q4 2026 Earnings Transcript

Image source: The Motley Fool.
DATE
Thursday, Mar. 19, 2026 at 8:30 a.m. ET
CALL PARTICIPANTS
-
President and Chief Executive Officer — Bryan J. Knutson
-
Chief Financial Officer — Bo Larsen
Need a quote from a Motley Fool analyst? Email [email protected]
Full Conference Call Transcript
Operator: Greetings, and welcome to the Titan Machinery Inc. fourth quarter fiscal 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, Jeff Sonnek of ICR. Thank you. You may begin.
Jeff Sonnek: Thank you. Welcome to the Titan Machinery Inc. fourth quarter fiscal 2026 earnings conference call. On the call today from the company are Bryan J. 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 fourth quarter and full year ended 01/31/2026. If you have not received the release, it is available on the investor relations tab of Titan Machinery Inc.’s website at ir.titanmachinery.com. This call is being webcast, and a replay will be available on the company’s website as well. In addition, we are providing a presentation to accompany today’s prepared remarks, which can be found on Titan Machinery Inc.’s website at ir.titanmachinery.com.
The presentation is directly below the webcast information in the middle of the page. We would 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. These 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 today’s earnings release and presentation, and in the Risk Factors section and other of Titan Machinery Inc.’s reports filed with the SEC.
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 Machinery Inc. 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 insight into Titan Machinery Inc.’s ongoing financial performance, particularly when comparing underlying results from period to period.
We have included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures in today’s release. At the conclusion of our prepared remarks, we will open the call to take your questions. I will now turn the call over to the company’s President and CEO, Bryan J. Knutson. Please go ahead, Bryan.
Bryan J. Knutson: Thank you, Jeff, and good morning to everyone on the call. I will start today with an update on our inventory optimization progress and operational focus areas, and then discuss the current environment across our segments before turning the call over to Bo for his financial review and comments on our fiscal 2027 modeling assumptions. Fiscal 2026 was a year where our team executed at a high level in a difficult environment. For the full fiscal year, we reduced total inventory more than $200 million, surpassing our $100 million target that we announced at the beginning of our fiscal year and our updated $150 million target we revised last quarter.
Our inventory peaked in 2025 due to the heavy influx of equipment shipments as some supply chains normalized post-pandemic, and since that time, we have reduced total inventory by $625 million over this eighteen-month period. I am extremely proud of the disciplined work our team has done across all of our locations to make that happen in what continues to be a very challenging demand environment. This progress illustrates our intense focus on creating a more resilient enterprise and positions us well for strong results when market conditions improve. Importantly, the quality of our inventory has improved meaningfully. It is leaner, it is fresher, and it has a better mix of in-demand categories. But we are not done.
We still have work to do across certain used equipment categories and some of our slower-moving seasonal new equipment categories. As we head into fiscal 2027, our focus shifts from inventory reduction toward product mix optimization as we look to continue to improve inventory turns through minimizing aged inventory and thus decreasing interest expense. Our customer care initiative remains central to our operating strategy and continues to demonstrate its value while at the bottom of the equipment cycle. Our parts and service businesses are currently generating over half of our gross profit dollars, providing critical stability in these tough times our industry is currently facing.
Our customer care initiative keeps us closely engaged with our customers, allowing us to add value to their operations and positioning us well for when equipment demand eventually recovers. With our hard work and dedication to superior customer service, we expect stability in our parts and service business in fiscal 2027 despite another expected decline in equipment industry volume in North America. With that, I will turn to our segments. In domestic ag, the environment continues to be very challenging for our grower customers ahead of the upcoming planting season. Our OEM partners are calling this year the trough of the cycle, and the guidance we are providing today reflects that.
Commodity prices remain well below breakeven for most growers, which continues to be the fundamental issue facing the industry. When you add in persistently high interest expense, increased input costs, and limited government support, we expect many growers to remain conservative in 2027 in terms of their equipment purchasing decisions. With respect to potential government support, seeing E15 passed into law is currently our customers’ biggest priority, followed by further adoption of biodiesel and sustainable aviation fuel, or SAF. Allowing E15 usage year-round would help alleviate the ongoing oversupply of corn and assist with energy independence. Furthermore, recent spikes in diesel prices highlight the need for increased production of domestic biodiesel.
In construction, infrastructure and data center work continues to provide a solid baseline of activity, but residential demand remains softer. Many of our customers are cautiously optimistic as they look at their schedules for the year ahead. Despite the mixed outlook in the end markets we serve, we remain optimistic about the long-term fundamentals of this business, which is underpinned by ongoing housing shortages, infrastructure spending, and continued data center construction. In Australia, the market conditions have been similar to what we are seeing domestically but exacerbated by elevated input costs for diesel fuel and urea.
However, after two years of historically low industry volumes, we are starting to see some more encouraging signs, and recent rainfall has helped improve soil conditions and farmer sentiment after an extended period of dry weather. Overall, our expectations are for modest industry volume growth in fiscal 2027. We continue to like our position in Australia. It is a major agricultural export market with strong fundamentals, and our dual brand strategy with Case IH and New Holland, which is now available in six of our fifteen rooftops, gives us more reach and more ways to serve our customers across our footprint.
In Europe, we are pleased to have the majority of our German divestiture behind us, with some remaining wind-down activities carrying into the first quarter. As we head into the spring planting season in our Eastern European markets, we are cautiously optimistic that we will see modest improvement in industry volumes coming off of trough levels but expect them to remain well below historical averages in Romania and Bulgaria. The modest overall industry volume growth should partially offset an expected year-over-year decline given the normalization of our Romanian business, which had an exceptionally strong prior year driven by the EU subvention programs. In closing, I want to express my sincere appreciation to our entire team.
We dramatically surpassed our inventory reduction goals and made meaningful improvements to our operations, and we did it while maintaining the exceptional customer service that differentiates us in the market. Our team’s focus and dedication throughout this year is what made our successes possible. We are executing on our initiatives, managing what we can control, and positioning the business to perform well as market conditions improve. With the actions we have taken thus far, we will emerge from this period a stronger company. I will now turn the call over to Bo for his financial review.
Bo Larsen: Thanks, Bryan, and good morning, everyone. Starting with our consolidated results for the fiscal 2026 fourth quarter, total revenue was $641,800,000 compared to $759,900,000 in the prior-year period, reflecting a 14.6% decrease in same-store sales driven by weaker demand in our domestic ag, construction, and Europe segments, partially offset by growth in our Australia segment. Gross profit for the fourth quarter was $87,000,000 compared to $51,000,000 in the prior-year period, and gross profit margin was 13.5%, approximately double last year’s rate. The year-over-year improvement primarily reflects the lapsing of inventory impairments and other inventory reduction efforts in the fourth quarter of the prior year that significantly compressed equipment margins.
Equipment margins in the fiscal 2026 fourth quarter continued to face pressure from softer retail demand and remaining aged inventory; however, margins have improved as inventory has returned toward healthier levels. This equipment margin improvement is expected to continue in fiscal 2027. Operating expenses were $95,700,000 for the fourth quarter of 2026, down slightly from the prior-year period. Our headcount and discretionary spending continue to be down year over year as a result of disciplined expense management. Floorplan and other interest expense was $9,600,000, representing a decrease of approximately 27% on a year-over-year basis and a decrease of 13% on a sequential basis. This progress reflects the significant reduction in interest-bearing inventory levels over the past year.
In the fourth quarter, net loss was $36,200,000 with loss per diluted share of $1.59, which includes the recognition of a $0.78 non-cash valuation allowance that resulted in an increase in income tax expense. Importantly, I would note that this allowance was greater than our initial expectation, which called for a $0.35 to $0.45 headwind that was built into our adjusted EPS guidance on the third quarter call. Big picture, it is non-cash and does not impact our operating performance or our cash flows. However, it is an important variable influencing our reported results versus the expectations we set; hence, my emphasis to ensure the linkage is clear.
Adjusted net loss, which excludes charges related to our German divestiture and related wind-down activities but includes recognition of the $17,800,000 non-cash valuation allowance I just mentioned, was $32,500,000, or a loss of $1.43 per diluted share. This compares to last year’s fourth quarter adjusted net loss of $44,900,000, or $1.98 per diluted share. To summarize, our underlying revenue and profitability was in line with what we had expected, as evidenced by looking at our pretax loss, which, in addition to being consistent with our expectations, has improved significantly versus the prior-year period. Now turning to a brief overview of our segment results for the fourth quarter.
Our Domestic Agriculture segment realized sales of $406,700,000, reflecting a same-store sales decline of 22.8%, driven by continued softening in equipment demand as a result of weak grower profitability. Segment pretax loss improved to $9,900,000 compared to adjusted pretax loss of $56,300,000 in the fourth quarter of the prior year, reflecting the actions we have taken to accelerate inventory reductions and the resulting improvement that we have achieved over the past twelve months. In our Construction segment, same-store sales decreased 4.6% to $90,200,000, driven by lower equipment sales. Our inventory reduction initiatives have weighed on equipment margins in this segment as well. Adjusted pretax loss was $1,000,000 compared to a $1,100,000 loss in the fourth quarter of the prior year.
In our Europe segment, sales increased 5.2% to $68,800,000, which included a $4,300,000 net benefit related to foreign currency fluctuations. On a constant currency basis, revenue was more or less flat year over year, reflecting the normalization of demand following the EU Subvention Fund-driven strength, which ended in the third quarter of this year. Pretax income for the segment was $1,800,000 compared to a pretax loss of $1,800,000 in the fourth quarter of the prior year. Excluding restructuring and impairment charges associated with the Germany divestiture, adjusted pretax income was $5,400,000 in this year’s fourth quarter. In our Australia segment, sales increased 16.7% to $76,100,000 compared to $65,300,000 in the fourth quarter last year, including a negligible foreign currency impact.
Pretax income for the fourth quarter of 2026 was $2,500,000 compared to $2,300,000 last year. Now briefly summarizing our full-year fiscal 2026 results, total revenue was $2,400,000,000 for fiscal 2026 compared to $2,700,000,000 for fiscal 2025. Adjusted net loss for fiscal 2026 was $50,600,000, or a $2.22 loss per diluted share, which includes the non-cash valuation allowance but excludes the charges related to the Germany divestiture I discussed earlier. This compares to an adjusted prior-year net loss of $29,700,000, or a $1.31 loss per diluted share. Now on to our balance sheet and inventory position.
We had cash of $28,000,000 and an adjusted debt to tangible net worth ratio of 1.7 times as of 01/31/2026, which remains well below our bank covenant of 3.5 times. For the full fiscal year, total equipment inventory decreased by $201,000,000 to $725,000,000. As Bryan described, this more than doubled our $100,000,000 target for the year. It is a meaningful accomplishment in this environment, and it positions us well heading into fiscal 2027. Importantly, as part of that inventory reduction, we saw significant improvement in the amount of aged equipment we have on our lots.
Aged equipment