Titan Machinery Inc.

Welcome to Titan Machinery Incorporated's second quarter fiscal 2027 earnings call. At this time, all participants are in a 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. Please note this conference is being recorded. I will now turn the conference over to Jeff Sonick with ICR. Thank you. You may begin.

Thank you. Welcome to the Titan Machinery second quarter fiscal 2027 earnings conference call. On the call today from the company are Bryan 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 second quarter ended July 31st, 2026, which is also available on Titan's investor relations website at ir.titanmachinery.com. In addition, we're providing a supplemental presentation to accompany today's prepared remarks along with webcast and replay information, which can also be found on Titan's Investor Relations website within the events and presentations section. 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. The statements do not guarantee future performance and therefore undue reliance should not be placed upon them. These forward-looking statements are based on management's current expectations and involve inherent risks and uncertainties, including those identified in the forward-looking statement section of today's earnings release and the company's filings with the SEC, including the risk factors section of Titan's most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These risks and uncertainties 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. 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 transparency into Titan'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 measure in today's release and supplemental presentation. At the conclusion of our prepared remarks, we will open the call to take your questions. and with that, I'd now like to introduce the company's president and CEO, Bryan Knutson. Please go ahead, Bryan.

Thank you, Jeff. I'll begin today's call with a review of our second quarter results and then provide an update on what we are seeing across each of our business segments before turning the call over to Beau for his financial review and updated outlook assumptions. Overall, our second quarter results were largely in line with our expectations, and I am pleased with the continued progress our team is making on the operational priorities we established heading into FY2027. The highlight of the quarter was the continued improvement in equipment margins across our agricultural business, which contributed to a 190 basis point increase in consolidated gross margin compared to the prior year period. This improvement reflects the work our team has done over the last two years to reduce aged inventory, improve inventory mix, and strengthen inventory management processes across our organization. Importantly, these margin improvements are being driven by actions within our control, rather than a meaningful improvement in underlying industry demand. While the agricultural market remains challenged, our business is becoming healthier, more efficient, and better positioned to perform through the cycle. I would like to thank and recognize our employees across the organization for their disciplined execution of our initiatives. Turning to the broader agricultural environment, customer profitability remains under pressure. Despite recent trends upward, commodity prices for key crops such as corn and soybeans continue to sit below levels that would support a meaningful rebound in equipment demand, while elevated input costs remain a headwind for many producers. As a result, customers continue to make equipment replacement decisions cautiously and remain highly focused on preserving cash. While this environment remains difficult, we continue to believe the industry is working through the trough of this cycle in 2026. Dealer inventory levels across the market have improved significantly over the last two years. Equipment fleets continue to age and the long-term fundamentals supporting agricultural production remain intact. We also continue to support initiatives that improve demand for corn and soybean products, including higher ethanol blends, renewable diesel, and sustainable aviation fuel. Over time, stronger demand for those commodities should be supportive of healthier and sustainable farm income and equipment demand. Despite the challenges facing the industry, parts and service continue to provide an important foundation within our business. This doesn't happen without a lot of hard work. especially because the current lack of grower profitability causes more of a fix-as-fail maintenance mentality, causing customers to delay discretionary maintenance and repairs where possible. This dynamic highlights the importance of our customer care strategy and the investments we continue to make in supporting our customers and earning their business. Now turning to more specifics on each segment. In domestic ag, the environment for our grower customers remains very challenging due to the factors I discussed earlier. As a reminder, our top line results through the first half of the fiscal year were higher than internal expectations due to earlier than anticipated shipments of pre-sold equipment from the factories, which resulted in a pull forward of our deliveries to customers relative to prior expectations. This timing shift strengthened first half results but is expected to contribute to some relative headwinds to year on year comparisons in the back half of the fiscal year. Yields generally look good across much of our footprint, though dry conditions in July and August will translate to yield reductions in some areas. This is something our team is monitoring closely as we anticipate what year end buying will look like. Our construction segment performed well during the quarter. Activity related to infrastructure investment and data center projects remains healthy across much of our footprint and is providing support for improved equipment demand. These end markets have helped offset softer activity from agricultural customers who also purchase construction equipment. Overall, we continue to view the underlying fundamentals for our construction business as stable and reasonably healthy. Within our Europe segment, results came in below our expectations. Part of the year-over-year decline was anticipated as we wind down our German operations and we anticipated some decline in Romania after last year's robust results. However, market conditions across the region have also become more challenging than we anticipated entering the year. Low commodity prices, elevated operating costs, broader geopolitical uncertainty, Poor crop conditions in certain areas and weaker farmer sentiment have led many customers to delay equipment purchasing decisions. As a result of these factors, we are adjusting our expectations downward for Europe for the remainder of FY27. In Australia, equipment demand is being influenced by the same global dynamics pressuring our other ag markets. but with sharper increases in input costs, particularly diesel fuel and fertilizer, given the lack of in-country production. Helping offset this has been healthy rainfall and the resulting prospect for improved yields across much of our footprint, which is translating to improved customer sentiment and should help increase equipment demand as we progress through the second half of the year. In closing, I'm extremely proud of the progress our team continues to make in the face of a challenging demand environment. However, inventory levels across the industry are getting healthier and fundamentals are starting to suggest that 2026 could be the bottom of this egg cycle. As for Titan, we continue to execute in the areas that we can control. Inventory quality is improving, equipment margins are strengthening, and our operating model continues to become more efficient. While we remain disciplined in our view of near-term demand, the actions we have taken over the past several years have positioned Tite Machinery to execute effectively and remain resilient through the remainder of this cycle and to capitalize on opportunities as industry conditions improve. With that, I will turn the call over to both.