Titan Machinery Inc.

Greetings and welcome to the Titan Machinery Inc. second quarter fiscal 2024 earnings call. At this time, all participants are in the 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 on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jeff Sonick of ICR. Thank you. Please go ahead.

Thank you. Good morning, ladies and gentlemen, and welcome to Titan Machinery's second quarter fiscal 2024 earnings conference call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer, Bo Larson, Chief Financial Officer, and Brian Knudsen, President and Chief Operating Officer. By now, everyone should have access to the earnings release for the fiscal second quarter ended July 31, 2023, which went out this morning at approximately 6.45 a.m. Eastern Time. If you've not received the release, it's available on our investor relations page on Titan'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're providing a presentation to accompany today's prepared remarks. You may access this presentation now by going to Titan's website again at ir.titanmachinery.com. The presentation is available 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. 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 the risk factors section of Titan's most recently filed annual report on Form 10-K. as updated in subsequently filed quarterly reports on Form 10-Q. 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. 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 chairman and CEO, Mr. David Meyer. David, please go ahead.

Thank you, Jeff. Good morning, everyone. Welcome to our second quarter fiscal 2024 earnings conference call. On today's call, I provide a summary of our results, then Brian Knudson, our president and chief operating officer, will give an overview for each of our business segments. Bo Larson, our CFO, will then review financial results for the second quarter of fiscal 2024 and conclude with some commentary around fiscal 2024 full-year expectations. We will also follow up on the O'Connor's acquisition that was announced yesterday with a high-level overview. We carried a strong momentum into the second quarter with revenue increasing 29.4% to $642.6 million. This performance reflects double-digit same-store revenue growth across all three of our operating segments, a combined $86 million contribution from the Heartland and Pioneer acquisitions. Our organic revenue growth was also balanced across equipment, parts, and service, each of which performed well and also delivered healthy gross margins. Taken together, We generated a consolidated pre-tax margin of 6.5% and Zulu earnings per share of $1.38, which is more than a 25% increase over last year's second quarter earnings performance, which, once again, demonstrates the strength of our organization and the efficiency by which we are operating the business. Next, I'd like to provide an update on our equipment inventory. Consistent with our prior expectations, we are seeing some improvement in equipment availability of several equipment categories, but do not anticipate receiving shipments of high horsepower tractors, self-propelled sprayers, or wheel loaders in excess of customer retail units. We continue to see demand for these products sustained at high levels and expect that to continue into next year. With our suppliers' production capacities being limited, we do not anticipate replenishment towards targeted minimum stocking levels for these equipment categories until at least the second half of calendar year 2024. This is undoubtedly limiting our sales levels. I am very proud of the team for achieving these record results given all of these constraints. Now, as you may have seen last night, we're also very excited about our definitive agreement to acquire O'Connor's, the largest case IH dealership group in Australia, and a market leader in high horsepower equipment. O'Connor's has a seasoned management team with a proven track record of driving solid financial performance through a combination of organic and acquisitive growth for over nearly six decades. Additionally, Their operating metrics, core values, and customer-centric focus highly aligns with our own, making them a great partner for our entry into the Australian agriculture market. In their fiscal year, which ended on June 30, 2023, O'Connor's generated revenue of $258 million and an EBITDA of $21.4 million, which demonstrates the scale of the network they've developed. Combined, the Titan Machinery Enterprise, including the O'Connor's acquisition, is expected to generate annualized revenue of approximately $2.9 billion and approximately $200 million in adjusted EBITDA, which makes us an even more formidable player as a global agriculture and construction equipment dealer. Australia is the largest wheat producer in the southern hemisphere and the third largest wheat exporter only behind Europe and Russia. O'Connor stores are located in Australia's highly productive grain belt, which produces 60% of Australia's wheat. The Australian market is benefiting from strong fundamentals that are being driven by enhanced productivity, economies of scale, and farmer profitability. O'Connor's focus on high horsepower cash crop production equipment in Australia's grain belt region is being supported by combined farm expansions and increasing adoption of precision egg technology that enhances productivity and crop yields. These trends are very similar to that of Titan's domestic and European agriculture business, and coupled with Australia's native English language and comparable legal system, this transaction bodes well for a seamless integration that carries over into our shared values and customer-centric focus. We believe it also provides Titan with the unique operational synergy opportunities to expand our global customer service capabilities and capacity across the network. The Australian market is in the early stages of dealer consolidation, and through a combined approach where we're able to leverage O'Connor's existing leadership team and bring Titan's broader capabilities and resources to bear, We believe we are well-positioned to capitalize on continued opportunities to unlock network synergies while driving market share gains. Together, we believe we will be able to build upon their presence in the heart of the Australian Grain Belt and capitalize on operational synergies across our three-continent footprint, consisting of some of the best global agricultural markets, generating significant value for our shareholders. We are excited to welcome the O'Connor's management team and employees to the Titan Machinery family, and we look forward to a smooth transaction closing and integration process. We expect closing to be completed in Q4 of calendar year 2023. In closing, we remain highly encouraged by the ongoing demand we are seeing in our business, and we're working hard to get our customers their equipment as OEM production and delivery schedules allow. Our team is ready to support our customers through the very busy harvest and year-end construction seasons in the second half of our fiscal year. With that, I will turn the call over to Brian Knutson for a segment review.