Titan International, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Titan International Inc. Four Quarters 2024 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 need assistance during the call, please press star followed by zero on your telephone keypad. It is now my pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Investor Relations for Titan. Mr. Snyder, the floor is yours.

Thank you, and good morning. I'd like to welcome everyone to Titan's fourth quarter 2024 earnings call. On the call with me today are Paul Reitz, Titan's president and CEO, and David Martin, Titan's senior vice president and CFO. I will begin with a reminder that the results we are about to review were presented in the earnings release issued yesterday, along with our Form 10-K, 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 involve risks, 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 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 Q4 earnings release is available on the company's website. A replay of this presentation, a copy of today's transcript, and the company's latest quarterly investor presentation will all be available soon after the call on Titan's website. I would now like to turn the call over to Paul.

Thanks, Alan, and good morning, everyone. Since we last spoke with you all at the end of October, there has been no shortage of change in the world. And when it comes to our business, the change has us feeling better than we did on our last call. On that third quarter call, we expressed that the bottom of the ag cycle was drawing closer and that we were seeing the early signs of a cyclical recovery. As we sit here today, while we are not completely there yet, we are seeing reasons to be more optimistic. First, there has been an improvement in farmer sentiment. There seems to be optimism born out of the new administration as farmers expect the government to be supportive of U.S. agriculture. It goes without saying that positive sentiment among farmers regarding their future prospects could ultimately lead to their willingness to invest in farm assets. That sentiment is typically a function of a range of factors such as crop prices, yield forecasts, and input cost levels. which all tie into the big driver, farm income. Speaking of crop prices, recent corn prices have been over 15% higher than they were a year ago at this time, reaching levels over $5 per bushel. This, along with government support, bodes well for farm income. Outside the U.S., we're encouraged by increasing activity in Brazil, an important market for Titan. This year is starting off well there, and demand is expected to be up nicely in both our OE and aftermarket channels. Our team in Brazil is highly experienced and done an excellent job, not just in driving market share, but in how they manage the cost and operational side of their business during this highly volatile times for their currency, the REI. History has been that Brazil is a good leading indicator for the broader global ag market. Moving over to Europe, I was just there recently and can confirm what the ag OEMs have been saying in terms of business being slow in that region. You know, that said, an end to the Ukraine situation could be a positive, and we're certainly hoping for that. You know, summing things up by geography as we look around the world, we have all seen the production forecast from the major ag OEMs that have generally indicated Brazil to be their strongest improving region, while Europe and North America haven't crossed that line yet to return to growth, but with expectations for improved second half of the year, especially as they move into 26th. Recently, our conversation with customers have been taking more of a positive nature. I do not want to get ahead of myself, but I will say there has been an observable shift in tone with the number of customers asking about our ability to ramp up production in the second half of this year. Maintaining our productive capacity and expertise was an emphasis for Titan, despite the reduction in demand we have worked through over the last 18 months. So we are certainly happy to tell our customers that, yes, we will be ready to go when they are. As we see that demand come back, we will also be focused on expanding customer relationships via our one-stop shop strategy. We've talked a lot about that and it really took hold for us following last year's Carlstar acquisition. A big part of that is our aftermarket business. We have seen that be a steady performer through this down cycle. And one of our focal points of our management team in recent years has been to expand our aftermarket offering in all three of our segments. And we expect it to continue to be a steadier source of business for us in the future as well. We also continue to emphasize innovation and new products, while also working to introduce existing products such as LSWs to segments where we have not marketed them as aggressively in the past, such as mid and low horsepower tractor. My team is also focusing on the cross-selling of Titan and Carlstar's products into new segments and geographies. Looking around, there are really good opportunities for us to continue to drive sales via these initiatives. Turning over the consumer segment, much like ag, our aftermarket business has held up better than the OEMs. Our team has done a good job integrating Carlstar and working to capture a range of synergies as their product lineup complements our legacy Titan products. This enables us to bring our customers a much wider range of products to suit their needs. Our off-road consumer products go on a wide range of equipment that owners continue to use, whether it be landscaping, riding lawnmowers, a recreational ATV user, or on-road trailers used to transport equipment, all of which underpin a steadier demand for replacement tires in this segment. On the OEM side, leading consumer product manufacturers have noted their plans to continue underproducing demand in the first half of this year. These OEMs are mindful of the health of their dealers and are working to make sure they're not saddled with excess inventory. Looking at ourselves, I mean, we have the premier product portfolio across this off-road spectrum with a strong footprint of our manufacturing and distribution locations. Therefore, we can serve our customers better in this environment and make sure those fill-in orders are taken care of. For us, a healthy OEM dealer ecosystem is also generally supportive of our aftermarket business. So we really view this continuing actions at the OEMs to manage inventory as a long-term positive for our business. Moving over to the EMC segment, we believe overall construction market conditions remain fairly stable and mining activity continues to be solid. Precious metal prices are strong and have risen in response to geopolitical developments. As those prices for minerals rise, owners and operators of mining assets are incentivized to run their equipment as much as possible. That's going to generate solid demand for aftermarket undercarriage parts. We are in a good position in this segment with our innovations in product development and undercarriage along with our strong service capabilities, which make us poised for growth in this segment. Tariffs are on everyone's mind these days, both in business and in our personal lives. You can't avoid hearing about them in the endless media barrage on that topic. At this point, the current tariffs are not a significant issue for us to navigate. It seems the early reactions to tariffs have created a renewed investment interest in U.S. manufacturing. I think we're all seeing that daily in the reports coming about investment into the US. During complex and volatile times, when you look at it from Titan's perspective, we have historically seen that environment as a benefit to Titan because our customers can count on us to meet their evolving needs. We have the market-leading product portfolio. We have a broad geographical footprint. We have the best technical team in the business. And we are extremely committed to serving our customers during these complex times. And so we look at this environment as a long-term catalyst for Titan being able to demonstrate to our customers our full capabilities of mitigating the risk of their supply chain. So wrapping things up here, overall, I want to talk about taking a quick look at 2024. We successfully navigated a deep cyclical downturn. with strong cash flow and successfully integrated a large acquisition. That is really due to the effective actions and timely decision-making of our OneTitan team, and I want to express my appreciation to them for their efforts throughout 2024. Overall, we are encouraged about what lies ahead for Titan, with good reasons to feel that way. Our investments in our one-stop shop strategy have us well-positioned to provide more comprehensive products and services for our customers, and we are positioned to see accelerating results as demand improves in the future. New product innovation continues to be a cornerstone of our value proposition and cements our position as the market leader in our space. With that, I will hand it over to David.