For the first quarter of fiscal 2023, Titan Machinery reported revenue increased to $461 million compared to $372.7 million in the first quarter last year. Equipment sales were $356.4 million for the first quarter vs. $276 million in the same quarter last year.
Parts sales were $68.6 million compared to $62.6 million in the first quarter last year. Revenue generated from service was $29.5 million vs. $27.7 million one year ago. Revenue from rental and other was $6.6 million for the first quarter of fiscal 2023, compared to $6.4 million in the first quarter last year.
Gross profit for the first quarter of fiscal 2023 was $88.7 million, compared to $71 million in the first quarter last year. The Company's gross profit margin increased to 19.2% in the first quarter of fiscal 2023, compared to 19% in the first quarter last year. Gross profit margin primarily increased due to stronger equipment margins, which were partially offset by revenue mix, with a greater proportion of equipment revenue in the first quarter of fiscal 2023, versus higher margin parts and service revenue, as compared to the first quarter of the prior year.
Floorplan and other interest expense of $1.5 million in the first quarter of fiscal 2023 was flat as compared to the same period last year.
In the first quarter of fiscal 2023, net income was $17.5 million compared to net income of $10.5 million in the same quarter last year.
Ag Revenue Benefits from More Deliveries
Agriculture revenue for the first quarter of fiscal 2023 was $318.5 million, compared to $229.6 million in the first quarter last year. "At the segment level, our agriculture segment benefited from robust demand which was supported by an increase in equipment deliveries from our suppliers following a delay in fiscal fourth quarter 2022," said Meyer in the company's earnings call.
"Demand for new and used equipment is the highest we’ve seen in decades, supported by ongoing momentum in commodity prices which remain at high levels through our first quarter," said Bryan Knutson, CFO at Titan. "While it’s been a late and wet spring, there has been good planting progress in our markets in Iowa, Nebraska, southern Minnesota and southern South Dakota. Recent rainfalls have been very welcome in the drier western Dakotas and Nebraska territories and we expect planting to get into full swing as fields finally dry out in our North Dakota and northern Minnesota footprint.
"With the equipment supply challenges, we continue to focus on presales and procuring new equipment from our OEMs. Our parts and service customer support businesses continue to be a strong contributor to our bottom line."
It was noted during the earnings call that Titan's absorption rate in its ag equipment segment has been growing since 2018 from under 70% to about 90% today.
Ukraine Impact Less Severe Than Expected
In updating its modeling assumptions for the year, Titan lowered its forecast losses in its international segment from –8-13% in its previous earnings call to –0-5%, saying the updated projection "includes a reduction in revenue of approximately 50% (vs. 75% previously) from our Ukraine subsidiary compared to fiscal 2022."
"With regards to our business in Ukraine, we have opened or partially opened all of our stores to support our customers for their equipment, parts and service needs during spring planting. According to Ukrainian sources, 77% of the arable acres in markets in which Titan has locations have been seeded compared to 72% for Ukraine as a whole. This speaks to Titan’s footprint in the central and western part of the country and demonstrates the resiliency of producers in those regions which have largely kept pace with seasonal farming activities," said Knutson.
"Although the conflict in Ukraine is extremely disruptive to our Ukrainian business, the impact has been less severe than projected in March as reflected in our updated modeling assumptions."
New Equipment Inventories Increase
In the company's 1Q23, inventories increased to $494.2 million as of April 30, 2022, compared to $421.8 million as of Jan. 31, 2022. This inventory increase includes increases in new equipment inventory of $65.6 million and parts inventory of $8 million, which is partially offset by a $2.1 million decrease in used equipment inventory.
"We are very pleased with the level of inventory shipments received from our suppliers during the first quarter," said Mark Kalvoda, Titan's chief financial officer and treasurer. "The receipt of these orders generated the higher sales performance and are reflected in the $66 million increase in new equipment inventory in the quarter. At the end of the first quarter, we drove another sequential improvement in inventory turns to 3.5 times. Given the favorable industry conditions, health of our inventory and ongoing supply chain challenges, I expect we will continue to operate at higher turn levels throughout the year."
Revenue Beats Analyst Forecasts
According to analysis from Senior Research Analysts at RW Baird Mircea (Mig) Dobre and Joseph M. Grabowski, Titan's earnings beat the firm's projections.
"Revenue was up 23.7% year-over-year to $461 million, compared to the $408.3 million consensus (RWB: $410.9 million). Revenue upside vs. our expectations came from Equipment: Equipment revenues were up 29.1% (vs. our +9% estimate), Parts was up 9.5% (vs. our +15% estimate), Service was up 6.6% (vs. our +13.4% estimate), Rental & Other was up 2.5% (vs. our +2.0% estimate)."
Fiscal 2023 Modeling Assumptions
The following are the Company's current expectations for fiscal 2023 modeling assumptions.
|Current Assumptions||Previous Assumptions|
|Agriculture revenue||Up 27-32%||Up 22-27%|
|Construction revenue||Down 10-15%||Down 12-17%|
|International revenue||Down 0-5%||Down 8-13%|