Titan International, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Titan International, Inc. Second Quarter 2021 Earnings Conference Call. At this time, all participants have been placed on the listen-only mode, and we will open the floor for your questions and comments after the presentation. If you should need assistance, please dial star zero, and an operator will assist you. It is now my pleasure to turn the floor over to Mr. Todd Shoot, Senior Vice President, Investor Relations, and Treasurer for Titan. Mr. Shoot, the floor is yours.

Thank you, Grant. Good morning and welcome everyone to our second quarter 2021 earnings call. On the call today, we also have Titans President and CEO Paul Reitz and Titans Senior Vice President and CFO David Martin. I will begin with a reminder that the results we are about to review were presented in the earnings release issued this morning, along with our Form 10-Q, which has also been filed with the Securities and Exchange Commission this morning. As a reminder, during the call, we will be discussing certain forward-looking information, including the company's plans and projections for the future that involve risk, uncertainties, and assumptions that could cause our actual results to differ materially from the forward-looking information. Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward-looking statements can be found within the safe harbor statement included and many more. In addition, today's remarks may refer to non-GAAP financial measures which are intended to supplement but not be a substitute for the most directly comparable GAAP measures. The earnings release which accompanies today's call contains and other quantitative information to be discussed today as well as a reconciliation of the non-GAAP measures to the most comparable GAAP measures. Today's earnings release is available on the company's website within the investor relations section under news and events. Please note today's call is being recorded. A replay of this presentation will be available soon after the call within the investor relations section on the company's website. A copy of today's call transcript will be made available on our investor website soon after the call. I would now like to turn the call over to Paul.

Thanks, Todd, and good morning. We saw this year get off to a good start in the first quarter, and at that time we felt convincingly that our business was moving in a positive direction in a number of ways. Our second quarter results illustrate that not only have we seen those trends continue this quarter, they have improved. David Martin, Maria Cecilia La Manna, Paul Hawkins, Anthony Eheli, James Pach, Max Narancich Overall, our second quarter performance was one of our strongest in a number of years as we did a really good job battling through the heavy noise that exists in today's operating environment that really is challenging for many, if not all, industrial companies. Just think that we've been able to produce an additional $215 million worth of products in the first half of this year for our customers, demonstrating our ability to adjust quickly to meet the growing needs of our important customers. Our strong Q2 results grew on the momentum from Q1, and now at the mid-year point has put us in position for 2021 adjusted EBITDA to be north of $120 million. So diving further into our performance, both our ag and our earth-moving construction segments experienced strong sales volume growth in the second quarter. Our end markets continue to look very good, and we expect the strong demand levels we have seen the last couple periods to continue into the back half of this year and then really beyond into next year as well. We feel that ag continues to show good, positive signs of current and longer-term strength. What is important for us is that the primary important drivers behind the growth in ag continue to show signals of solid support. For example, the continuing tight inventory levels in both new and used equipment has brought large ag equipment prices to very high levels, if not record levels. In Titan's North America business, we are seeing growing momentum in large ag where orders have increased throughout the quarter, and we believe that this trend should keep moving in a further positive direction as fleets are aged and the large ag equipment market is still roughly 25% below long-term averages. Our smaller ag customer base has been really good the past few years, and so far in 2021, many of those customers have seen their inventory levels depleted to really low levels, again, if not record low levels. This means these dealers will need to rebuild their inventory, which is going to increase our production demand above retail sales levels for 2022, and should keep the momentum going again in small ag as we look into the future. Again, these are just a few from a number of indicators to illustrate the core strength in the current ag market and support the case that ag will have solid longer-term growth. So moving from ag and looking at our earth moving and construction segment, we have seen demand continue to be above initial expectations with sales growth over 57% year-over-year and an increase of 7% compared to our first quarter, which again, we felt was a good quarter to start the year. As we have stated before, a large percentage of our EMC sales comes from our undercarriage division, ITM. ITM has a good, balanced exposure to global markets and really something that we have worked hard through the years to build. We saw solid growth this quarter in construction revenues from both OEMs and aftermarket, and this is coming primarily from Europe and the Far East in our business. The word of the month seems to be transitory, as the debate rages on if inflation is transitory or not. A quarter ago, we thought it was crazy that steel was around $1,500. Well, guess what? It is now floating around $1,800 and appears to be going even higher. This is just an example of the facts of operating in today's post-pandemic world, where costs are rising in everything from raw materials to labor and logistics. Overall, this quarter, Titan was able to balance our pricing with these rising costs, and we continue to believe that we have the ability to pass through the increase in costs. I do want to add another comment specific to Titan that we have a long, strong history of being very good at managing costs, and you see that in our reported SG&A costs. However, going a step further, we also have a strong culture around managing our operational costs, and we will continue as a management team to work hard to manage our overall cost structure, which is definitely a benefit in times like we're in right now. David, we'll spend some time going through the financials with you, but wrapping things up in conclusion today, I'd like to state a few things regarding the actions we have taken to improve our balance sheet, which includes our important long-term debt refinancing that took place in April. These actions have put us in a good position to manage the current and future growth of our company. These are certainly challenging times that we're operating in, but we see in front of us a market with robust and strong broad-based demand. It really bodes well for this year and clearly beyond into next. We believe Titan is in a good position with our global production capabilities and our strong product portfolio to deliver superior value proposition to our customers, and we will be able to benefit from these stronger markets. We are committed as a company to increasing our capacity in key locations and we continue to drive our product innovation to be a strong partner to our customers. Our Titan team is working hard and continues to work hard to effectively deal with the supply chain and labor challenges. And at the midway point of the year, our business is performing very well with our Q2 results really shining bright. Our order books are solid and there are continuing positive signs in our end markets. This puts Titan in a good position to post 2021 adjusted EBITDA north of $120 million. On top of that, we see a path forward to future growth for next year. I'd now like to turn the call over to David.