Titan Machinery’s floorplan payable and floorplan expense increased in the first quarter of the company’s fiscal 2025 as interest-bearing inventory remained on lots as the company used its floorplan line to finance its acquisition of Australian dealer group J.J. O’Conner & Sons.
The Fargo, N.D.-based equipment dealer’s outstanding floorplan payables were $1 billion on $1.4 billion total available as of April 30, up 14.7% quarter over quarter and 131.4% year over year, according to today’s earnings release.
Floorplan interest expense was $7.1 million, up 17.2% QoQ and 455.3% YoY driven by higher interest rates, while inventory turn rate declined to 2 from 2.2 at the end of fiscal 2024 on Jan. 31 and 3, at the end of fiscal 2024’s Q1.
Inventory up
Inventory turns, which the company calculates by dividing cost of sales on equipment for the last 12 months by the average of the month-end balances of our equipment inventory, remains a key metric for Titan as it attempts to reduce floorplan costs, Bo Larsen, chief financial officer and treasurer, said during the earnings call.
“The No. 1 thing is you want to make sure that you are not incurring floorplan interest expenses; that’s not a value-added activity,” he said. “From an inventory turns perspective, that range of 2.2 to 3.2, clearly, we want to be in the middle to the higher end of the range. As we work through 2026 and get a good feel on what industry demand is at that point, that’s the kind of target that we’re looking to hit exiting that year.
Titan Machinery’s equipment inventory at the end of Q1 was $1.2 billion, up 9.1% QoQ and 76.7 YoY, according to the company’s earnings presentation. The company’s total inventory at the end of Q1 was $1.4 billion, up 7.7% QoQ and 63.9% YoY, due to quarterly increases of $105.5 million in new equipment and $27.1 million in used equipment, despite a $7.6 million decrease in parts inventory.
Equipment revenue grows amid inventory slowdown
Titan Machinery’s equipment revenue totaled $468.1 million in Q1, which ended April 30, up 9% year over year, according to the earnings presentation. Total Q1 revenue, which includes equipment, parts, services, rental and other revenue, was $628.7 million, up 10.4% YoY.
While Titan Machinery did not meet its Q1 expectations, the company achieved record first-quarter revenues again, Chief Executive Bryan Knutson said on the earnings call.
“We were able to generate first-quarter revenue growth of over 10% to $629 million, a record number for the first quarter even when excluding the contribution from the O’Connor acquisition,” he said. “We also experienced some margin compression due to our efforts to proactively manage inventory levels through this transition period.”
Titan completed its $63 million purchase of O’Connor in October 2023.
Ag continues growth while construction slows
Titan Machinery’s agricultural segment revenue in Q1 was $447.7 million, up 5.8% YoY, according to the company’s earnings presentation. The agriculture segment had same-store sales growth of 4.3% YoY.
Construction revenue for Q1 was $71.5 million, down 0.7% YoY. The segment’s same-store sales also declined 0.7% YoY, which contributed to the company’s underperformance, Knutson said.
“We were pleased to deliver positive same-store sales growth in our agriculture segment and despite demand being incrementally softer than we anticipated heading into the year,” he said. “We are modestly reducing our revenue assumptions across each of our segments and modifying our underlying assumptions for equipment margin, variable operating expenses and floorplan interest expense,” he added.
For the full year, Titan Machinery forecasts agriculture segment performance to land between a 2.5% decline and a 2.5% growth, while construction revenue should finish between flat growth and a 5% gain, according to the earnings presentation.
Shares of Titan Machinery Inc. [Nasdaq: TITN] were trading at $19.75 at market close today, down $3.41 or 14.72% from market open. Titan Machinery has a market capitalization of $520.7 million.
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