Titan International, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Titan International Inc. Second Course 2025 Earnings Conference Call. At this time, all participants have been placed on listen-only mode. We'll open the floor for your questions and comments after the presentation. If you should need assistance during the call, please save them by pressing star followed by one on your, star followed by zero on your telephone keypad. It is now my pleasure to turn the floor over to Amin Schneider, Vice President Financial Planning and Vist Appellations from Titan. Amin Schneider, the floor is yours.

Thank you and good morning. I'd like to welcome everyone to Titan's second quarter 2025 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 this morning, along with our Form 10Q, which was also filed with the Securities and Exchange Commission this morning. 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 8K filed earlier, as well as our latest Form 10K and Forms 10Q, all of which have been filed with 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 Q2 earnings release is available on the company's website. A replay of this presentation, a copy of today's transcript, and the company's 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. Overall, our Titan team had a solid quarter. We're pleased with our Q2 results that were within our guidance ranges for both revenue and adjusted EBITDA, while also driving positive free cash flow for the quarter. Our Titan team continues to execute well. We're taking operational, commercial, and administrative actions as needed. In response to the extended market softness, we are continuing to experience. At a high level, conditions for the OEMs in our end markets remain similar to last quarter, as buyers of equipment continue to take a wait and see approach. Based on our conversations with dealers, farmers, and OEMs, it seems clear that this cautious mindset is primarily a function of waiting for interest rates to come down, coupled with a desire for more clarity on tariffs and trade policy. We have continued to experience some fairly large drop-in orders, similar to what I mentioned last quarter, as OEMs need to adjust rapidly when they see lower inventory levels get out of sync with pull-through retail demand. You're looking ahead, the macro environment appears to be similar to what we've seen. So for the coming period, our Q3 guidance indicates exactly that. Digging into the trade and tariff topics a bit more, we have seen the tariffs have an impact on our consumer segment this quarter. As many aftermarket customers are choosing to wait for some resolution on tariffs to the extent possible before restocking their shelves. The positive is that we have seen some consumer customers in July place good size orders to get inventory back in line with sales. Recall our commentary has been that trade policy applied somewhat consistently around the globe would benefit Titan in the long-term, and we still believe that. The bottom line remains, it is important that tariffs and trade policy result in a more level playing field in the end. The cases we have won with the international trade commission over the past couple, couple decades illustrate we have not been competing in a level playing field regarding off-road tires. Again, I want to reiterate that our U S based production amidst a strong global footprint has us well positioned to benefit as tariffs are levied on imports. A number of industries in the U S with steel and tires being a couple of prominent examples have had to compete with foreign producers that take advantage of cheap labor and significant government subsidies for many years. And on the whole, we are glad to see these efforts to end unfair competition. Our position is, and our customers say it as well, that Titan has an exceptional competitive position in the markets we serve, and that is further solidified when irrational import pricing is removed from the equation. Central to that is our one stop shop strategy. Our culture of innovation and customer service driven by large, our large product portfolio and production capabilities puts us in a good position. We pride ourselves on our ability to deliver products to our customers quickly, whether it be North America, Latin America, or Europe. The markets we serve demand maximum uptime from their equipment and our ability to deliver replacement tires and undercarriage parts quickly helps make us a key partner for these customers. I also want to briefly touch on the recent legislation that was passed as we think it will be a long-term positive for farmers on the whole with the increased appreciation rate is the most important element that's getting a lot of the attention, the ability to appreciate 100% of the investment in new equipment, such as tractors and year one is obviously beneficial and should improve farmers balance sheets over time. So bringing these general comments together, I want to stress that we are by no means sitting back waiting for our markets to turn. We continue to be proactive on a variety of fronts to drive growth wherever we can and continue to invest in product development and constructive partnerships. Last quarter, we highlighted our expanded license agreement with Goodyear. We're busy working to maximize this opportunity with the Goodyear brand, which we've been doing successfully for over 20 years. And we think it will absolutely help drive growth over time. The new partnership, the new segments of this partnership that we added with the new agreement. I'm also excited to announce that we signed an initial minority investment in a strategic partnership with Brazilian wheel manufacturer, Roderos. We have been actively looking for an opportunity to get to the Brazilian wheel market for a number of years, and this is a great partnership to do so. Over the years, we have been talking with OEMs about this and they have expressed enthusiasm about bringing wheels and tires and assemblies into that market, just like we have done successfully here in North America. Roderos is the second largest manufacturer of agriculture wheels in Brazil, and we look forward to working with them on the development of integrated solutions tailored to the Brazilian and South American markets. Brazil has become an increasingly important market for Titan as their ag economy has grown and we think this investment is an excellent use of some of our local cash to further extend our leadership in that market. We expect this transition transaction to close in the third quarter, which is subject to some customary regulatory approval. Turning more specifically to the ag segments, farmers are guardedly optimistic about their businesses. I know I'm repeating myself and saying that the feedback we get from them centers around interest rates. Seems to be a fairly universal opinion that they need to come down with farmers and dealers citing financing costs is one of the main impediments to a pickup and large equipment purchasing. That has an hesitancy is elongating OEMs efforts to further destock their finished good inventories, but we are starting to see some pockets where distributors have let inventory get too low. As we did in Q1, we've seen some good large size drop in orders this quarter, and we think that sort of buy as you need it ordering behavior will persist until rates come down. You know, our Titan, our priority is to manage costs effectively while staying close to our customers and being prepared to ramp up to meet demand when needed. You know, reiterating a point I made last quarter when the cycle turns, it typically turns fast and our team and the breadth of our production capabilities are best suited to meet our customer needs in those moments. Shifting away into our -U.S. markets, there are cross currents which are ultimately resulting in flattish demand in Europe. You know, why Brazil has generally fared the best of our operating regions? As a reminder, we have largely localized manufacturing in Brazil and Europe, so our sales in those regions will continue to be a function of local economic activity. Our consumer segment was most directly impacted by tariffs, as we mentioned earlier. This far U.S. consumer related economic data has not really shown any significant deterioration, but it's also clear that people are being cautious when it comes to discretionary equipment purchases. As with Ag, we expect interest rate cuts will help spur demand in our consumer segment, you know, to the obvious reduced cost of financing, whether it be at the dealer or end customer level. To the extent that settled trade policy will make various market sectors more stable in their staffing of higher plans, that would also be a positive for consumer segment as outdoor enthusiasts might feel more secure in being able to afford a discretionary purchase. Moving over to our EMC segment, there has been little change from Q1. We continue to view European infrastructure investment as the primary driver for activity. That investment is a function of many inputs, including trade policy and continued military conflict in the region. While those items remain unsettled, there really was no material change in our EMC segment activity. That being said, equipment continues to be used and wear out. So the demand for aftermarket parts and the time will come when owners have no choice but to replace that equipment. So we wrap things up here. You know, we are really doing quite well and holding our own despite some significant macro challenges thus far in 2025. We are focused on our customers and our execution as success on both of those fronts is the best approach to delivering success, not only this year, but beyond. We are well positioned to do so when the end markets start moving upwards, which they most certainly will. With that, I'll hand it over to