Titan International, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Titan International Inc. Second Quarter 2022 Earnings Conference Call. At this time, all participants have been placed on 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 Todd Schute, Senior Vice President, Investor Relations and Treasurer for Titan. Mr. Schute, the floor is yours.

Thank you, Elliot. Good morning and welcome everyone to our second quarter 2022 earnings call. Joining me on the call today are Paul Reitz, Titan's president and CEO, and David Martin, Titan's senior vice president and CFO. Just a reminder that the results we are about to review were presented in an earnings release issued yesterday along with our form 10-Q, which was also filed with the Securities and Exchange Commission yesterday. As a reminder, During this call, we will be discussing certain forward-looking information, including the company's plans and projections for the future that will involve risk, uncertainties, and assumptions that could cause the 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 in the earnings release attached to the form Companies Form 8-K filed earlier as well as our latest Form 10-K and Forms 10-Q, all of which have been filed with the SEC. 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 financial and other quantitative information to be discussed today, as well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures. The second quarter earnings release is available on our website, and a replay of this presentation will be available soon after the call within the investor relations section on our website as well. A copy of today's call transcript will be made available on the investor site afterwards as well. I would now like to turn the call over to Paul.

Thanks, Todd, and good morning. As a reminder, we updated our expectations for 2022 in mid-June. At that point, that's a reflection of the momentum that we saw in our business continuing in a positive direction, and I have to say our Q2 results certainly did not disappoint on that front. This quarter, Titan had sales of $573 million, up 31% from last year. with a strong adjusted EBITDA of $82 million, which compares to $37 million last year. I think we also did a good job of translating the earnings into cash flow with our free cash flow coming in at $56 million for this quarter. As indicated with updates to our 2022 forecast and also with our Q2 results today, we feel good about our business, our end markets, and really the overall performance level of the Titan team. I have noted before, and I'm going to do it again, Our Titan team has done a very good job adjusting to the challenges of the past few years and our results clearly have supported that. We have a strong foundation in place with our people, our products, and our production footprint that is well connected to our customers. You combine that with a management team that's going to continue running hard like a good long distance runner, again, we feel good about the direction of where our company is going. David will share more about the financial information and I'm going to switch gears now to the market landscape. I think in simple terms, you could say our position remains bullish. And there are a number of positive aspects that support that, both within Titan and then externally in the end markets that really line up well for 2022 and even beyond that. Again, our press release issued yesterday afternoon shows results and updated guidance that illustrate that belief. So despite some of the recent noise around agriculture and construction, there is a picture that looks good for the future. What I mean by that comment is the headlines will tell you that the farmer sentiment index and ag capital spending index has slipped in recent weeks. It's a result primarily of corn and soybeans. The commodity price is dropping from record highs. You combine that with the input cost inflation, and then you combine that with the OEM supply chain concerns. And it's helped fuel some, like I said, drop in the indexes and concerns with some folks. Yes, those headlines and statements are accurate, but no. they do not illustrate the complete accurate picture. So let's start with farmers are clearly going to still make a lot of money this year. And if you look at the indications from the USDA, that is going to continue in coming years. That's a really good place to start to feel good about where things are going. The sky is not going to fall from the rising input cost. Farmer income is going to be good. And it's going to compare very favorably to where it's been at historically. Not to mention that farmer balance sheets are in good order as well, and you're going to continue to get good government support around the world for the ag sector. Next, if you look at the global supply demand economics for the primary grains, they look good not just for this year, but well into the future. And that, again, is going to provide support for elevated commodity prices and strong farmer income. These economic factors combined with an age ag fleet that needs updated, especially if they're going to take advantage of the improved technologies that are coming, along with the continuing historically low inventory levels that we're seeing in large ag, both in used equipment and new equipment at dealers, all this really pushes and forms a strong foundation for solid demand for large ag to continue into the foreseeable future. So, elaborating a bit further on that, these market forces, combined with the delays in order deliveries from the OEMs due to related production challenges, provide further indication of good support and momentum for a multi-year demand cycle and large act. On the other side of the equation, with the shortfalls in OEM new equipment deliveries, we are seeing in our business solid aftermarket demand reflecting the needs for replacement tires in the midst of these shortages in available equipment. But it also illustrates the strength of our LSW product portfolio that simply makes existing equipment perform better. As reiterated recently by the major OEMs, it still does not appear likely that you're going to see 2022 OEM production levels really move the needle much with the historically low dealer inventories and large acts. So therefore, you're really looking at 23 before meaningful inventory replenishment could take place. and that unmet 22 demand, retail demand, is going to carry forward into the future. Again, the point being, there are a good number of positive forces in the ag sector, and it definitely appears this positive wave is going to keep flowing. Now, ag is clearly an important driver of our company, but let's move over from the ag world to earth moving and construction. As a reminder, that's a little over 35% of our business. Our undercarriage business, ITM, is a significant driver of this segment for us. And ITM had just flat out an excellent quarter. The strong results were driven by solid OEM demand in all major geographies. And along with that OEM performance, we had good growth in our aftermarket business. We stated last quarter and still believe the outlook for our EMC segment looks promising as we're basing that foundation on a good order book And we're also seeing continuing growth in our mining replacement parts, where that market looks favorably supported by the production activity that's taking place. Looking into the future, you're going to get some infrastructure investments that will kick into gear, and that'll provide some further support beneath that demand. Also similar to ag, there is the continuing production pressure at the OEMs to meet current orders. And that really does, again, like ag, provide a longer tail to this current demand cycle. So wrapping things up, Our expectations for 2022 remain strong, and we expect continued top line and bottom line expansion relative to prior year. Obviously, the business climate these days has a lot of moving pieces that require attention and the ability to adjust rapidly. We have been consistently demonstrating our ability to navigate through these challenges, and we have confidence in our team to continue to take the appropriate timely actions as needed. Most importantly, I am confident in the quality products our people build around the world every day and the important role these products play in meeting the evolving needs of our customers and the end users. So given our strong Q2 performance and our current visibility in the second half of the year, we now expect 2022 full-year sales of around $2.2 billion, and we have increased our target for jets at EBITDA to be between $240 and $250 million. This will also drive improvements to free cash flow performance that is now expected to be in the range of 90 to 100 million. With that, I'd now like to turn the call over to David.