Titan International, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Titan International Incorporated third quarter 2022 earnings conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for 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 matt good morning i'd like to welcome everyone to titan's third quarter 2022 earnings call on the call with me today are paul wright titan's president and ceo and david martin titan's senior vice president and cfo i will begin with the reminder that the results we are about to review were presented in the earnings release issued yesterday along with our forum 10q which was also filed with the secures 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 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 in the earnings release attached to the company's Form 8K filed earlier, as well as our latest Form 10K and Forms 10Q, 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 Q3 earnings release is available on our website. A copy of the replay of this presentation will be available soon after the call within the investor relations section on Titan's website. And a copy of today's call transcript will also be made available. In addition, our latest quarterly investor presentation is now available on our website as well. I would now like to turn the call over to Paul.

Thanks, Todd. Good morning. I get the pleasure of starting the call by saying this was another quarter where the Titan team has demonstrated our operational resilience and our determination to produce solid financial results, but most importantly, satisfy the needs of our customers. Our high level of execution was throughout all of our businesses as our global team continues to overcome challenges as they are presented. Our third quarter results were led by a solid top line growth of 18% to 531 million that was supported with healthy volume gains. Our growth margins expanded to 16.5% that led to strong adjusted EBITDA of 61 million and EPS generation of 68 cents per share. It's also good to see our financial performance translating into strong free cash flow which was $40 million for this quarter, and that puts us at $69 million year-to-date. That's a whopping $96 million year-over-year increase in free cash flow, and it's truly impressive to compare the strength of our balance sheet today to where it was just a few years ago. We have confidence in our business, our end markets, and of course, the performance of our Titan team. We see 2022 finishing at the top end of our previously communicated targets. Along with that, we expect free cash flow to exceed $100 million for the year. It's really good to see our team overcome the challenges of the past few years and serve our customers as well as we have during this period of challenges. Our company has a solid foundation in place with our people, product, and our production footprint. David will of course share more information on the financial side, but right now I'm going to switch over to the market landscape. It's reasonable to say that the business climate is a noisy place these days, but we do continue to believe that our end markets are still standing on firm ground. especially when you look at the large ag segment. And there really are a number of positive indicators that support the fundamental in our end markets. Let's start with the farmers that are in a good financial position with their balance sheets and their income levels. The recent USDA report illustrates that corn and soybean supply demand factors, along with the low stocks, will bring good pricing levels into 2024 at a minimum. With good crop prices and income, farmers will continue to invest in upgraded new equipment and the latest technology in replacement tires. The strong farmer income from recent years combined with pent-up large equipment demand from supply chain and labor disruptions to OEMs, along with the continuing low levels of available used equipment, bodes very well for 2023 large ag demand. We believe that the bigger picture view is that large ag is in a solid position and we expect the sector to work through the current supply chain challenges to a good future ahead. Looking at small ag, it appears that inventory is starting to normalize to pre-COVID levels. However, overall inventory is still below longer historical norms, and there is a need to maintain current production levels in order to normalize their dealer operations. We at Titan have a strong customer base in small ag, and we'll watch the inventory and order levels closely as we prepare our 2023 plans. Moving over to earth moving and construction, we had a strong Q3 with sales growth of 19% with solid increases in demand. Our earth moving construction segment continues to perform at a high level in meeting our customers' growing demand, especially during this quarter that is traditionally heavily impacted by the August holidays. The strong results were driven by solid OEM demand in all major geographies, and we had healthy growth in our aftermarket business as well. We stated last quarter that our order book in EMC is good, and that remains true. And this quarter, other companies have really started to make positive comments as well as they look towards the end of this year and the next. So we still believe that the outlook for the EMC segment looks promising for 2023. I have to say, over the last few weeks, I've met with quite a few customers, dealers, and a peer group of some industrial CEOs that And I have to say the overall market landscape for heavy industrials, especially when you look at our primary end markets of agriculture and construction, remains in a solid, healthy place. So wrapping things up, our expectations for the fourth quarter remain strong for sales, adjusted EBITDA, and free cash flow. And with our performance year-to-date and current visibility for the remainder of the year, we expect to finish the year at the top end of our previously communicated targets. Obviously, the business climate these days has a lot of moving pieces that require attention and the ability to adjust rapidly. Titan has been consistently demonstrating our ability to navigate through these challenges, and we have confidence in our team to take the appropriate timely actions as needed. Most importantly, I am confident, our team is confident, our customers are confident in the quality products that we build around the world every day. And really, the important role these products play in meeting the involving needs of customers not just our customers, but the end users using that equipment. We continue to believe that the key elements are in place to drive continued positive momentum at Titan, and I really want to take a moment, though, to express appreciation to our Titan team for delivering tremendous results this quarter and really over the past couple years. Our team is committed to taking care of our customers, and we see healthy demand from them that will require us to continue to work very hard here. With that, I would like to turn the call over to David.