Titan Machinery Inc., a major network of full-service Case-IH and New Holland agricultural and construction equipment stores, reported satisfying financial results for the fiscal fourth quarter and full year ended January 31, 2023. Both revenues and profit increased significantly in the US, as well as on the international markets.
David Meyer, Titan Machinery’s Chairman and Chief Executive Officer, stated, “Fiscal 2023 was a record year for us, driven by strong execution and our continued commitment to outstanding customer service. We generated sales of $2.2 billion, reflecting solid organic growth and operating leverage that was further supported by a strong year of acquisition activity, adding 22 store locations over the last 14 months. Our Agriculture segment was the standout performer with strong operational execution which benefited from high demand levels that are being supported by a favorable farm economy. Our Construction and International segments each had a great year as well, highlighted by significant expansion in pre-tax income margin in fiscal 2023, finishing the full year at 6.0% and 6.8%, respectively. We are very pleased with our team, who has driven significant sales growth and improved profitability in this supply constrained environment.”
Consolidated Results
For the fourth quarter of fiscal 2023, revenue increased to $583.0 million, compared to $507.6 million in the fourth quarter last year. Equipment revenue was $471.0 million for the fourth quarter of fiscal 2023, compared to $413.2 million in the fourth quarter last year. Parts revenue was $72.2 million for the fourth quarter of fiscal 2023, compared to $58.5 million in the fourth quarter last year. Revenue generated from service was $28.0 million for the fourth quarter of fiscal 2023, compared to $26.2 million in the fourth quarter last year. Revenue from rental and other was $11.8 million for the fourth quarter of fiscal 2023, compared to $9.8 million in the fourth quarter last year.
Gross profit for the fourth quarter of fiscal 2023 was $108.9 million compared to $94.2 million in the fourth quarter last year. The Company’s gross profit margin increased to 18.7% in the fourth quarter of fiscal 2023, compared to 18.6% in the fourth quarter last year. The fourth quarters of fiscal 2023 and fiscal 2022 each included benefits related to manufacturer incentive plans of $1.8 million and $6.4 million, respectively. The amounts differed primarily due to the timing of incentive accruals and were both $6.4 million on a full year basis. The year-over-year increase in the underlying gross profit margin in the fourth quarter and full year was primarily driven by stronger equipment margins.
Operating expenses were $83.7 million for the fourth quarter of fiscal 2023, compared to $64.6 million in the fourth quarter last year. The year-over-year increase was driven by inclusion of operating expenses related to the acquisitions that have occurred in the past year, as well as higher variable expenses on increased sales volume. Operating expenses as a percentage of revenue increased 170 basis points to 14.4% for the fourth quarter of fiscal 2023, compared to 12.7% of revenue in the prior year period. The year-over-year increase as a percentage of sales was primarily due to the prior year’s operating expenses being reduced by an offsetting $5.7 million gain on the divestiture of the Montana and Wyoming stores within our Construction segment.
Segment Results
Agriculture
Revenue for the fourth quarter of fiscal 2023 was $440.9 million, compared to $346.3 million in the fourth quarter last year. The revenue increase was positively impacted by organic growth as well as the acquisitions of Jaycox Implement in December 2021, Mark’s Machinery in April 2022, and Heartland Ag Systems in August 2022. Pre-tax income for the fourth quarter of fiscal 2023 was $19.3 million compared to $17.7 million in the fourth quarter of the prior year; both periods reflect benefits associated with manufacturer incentive plans in the amounts of $1.8 million and $5.1 million, respectively.
Construction
Revenue for the fourth quarter of fiscal 2023 was $85.1 million, compared to $87.9 million in the fourth quarter last year. Same-store sales increased 27.8% primarily due to increased equipment demand, but was offset by the lost sales contributions from the Company’s fiscal 2022 fourth quarter divestiture of construction stores in Montana and Wyoming, and the fiscal 2023 first quarter divestiture of the Company’s consumer products store in North Dakota. Pre-tax income for the fourth quarter of fiscal 2023 was $5.4 million, and compared to $9.0 million in the fourth quarter last year. The prior year fourth quarter included a $5.7 million gain associated with the Montana and Wyoming divestitures.
International
Revenue for the fourth quarter of fiscal 2023 was $57.0 million, compared to $73.4 million in the fourth quarter last year; foreign currency fluctuations accounted for $6.2 million of the decrease in revenue. Net of the effect of these foreign currency fluctuations, revenue decreased $10.2 million or 13.9%, and the primary driver of that decrease was lower sales in Ukraine which remains impacted by the on-going conflict with Russia. Pre-tax income for the fourth quarter of fiscal 2023 was $1.5 million. This compares to pre-tax income of $3.1 million in the fourth quarter last year, which included a $1.3 million benefit earned through manufacturer incentives specific to Ukraine and did not repeat in fiscal 2023. Adjusted pre-tax income, was $1.7 million for the fourth quarter of fiscal 2023 and $3.1 million in the fourth quarter of last year.
Fiscal 2023 Full Year Results
Revenue increased 29.1% to $2.2 billion for fiscal 2023. Net income for fiscal 2023 was $101.9 million, or a record $4.49 per diluted share which included approximately $0.21 of benefits associated with manufacturer incentive plans. This compares to $66.0 million, or $2.92 per diluted share, for the prior year which included approximately $0.47 of benefits associated with manufacturer incentive plans, a gain on the sale of the Montana and Wyoming construction store locations, and a partial release of an income tax valuation allowance. Adjusted net income for fiscal 2023 was $102.6 million, or $4.52 per diluted share, compared to an adjusted net income of $67.3 million, or $2.98 per diluted share, for the prior year. The Company generated adjusted EBITDA of $165.9 million in fiscal 2023, representing an increase of 45.0% compared to adjusted EBITDA of $114.5 million in fiscal 2022.
Additional Management Commentary
Mr. Meyer concluded, “The fourth quarter was negatively impacted by delayed new equipment shipments. This abnormal congestion at the very end of the fiscal year limited our ability to deliver equipment to customers and recognize revenue, which resulted in an increase of pre-sold units coming on to our balance sheet at year end. While this impacted our financial performance in the fourth quarter, it is ultimately a timing nuance, as we expect to catch up on the backlog as we progress throughout the year. We are carrying significant demand into fiscal 2024 and continue to believe that we are experiencing an extended cycle that is being supported by strong Ag fundamentals which should drive sustained demand throughout the fiscal year. Equipment availability will likely remain a limiting factor in the near-term, but we are focused on those elements we can control and have an incredible foundation for another strong year as laid out in the modeling assumptions we are introducing today.”
