For the second quarter of fiscal year 2024, which ended July 31, 2023, Titan Machinery reported consolidated revenue increased 29.4% year over year to $642.6 million. Of that, revenue from equipment grew to $480.1 million in 2QFY24, up from $375.2 million in the same quarter last year. Parts revenue jumped 39.6% year over year to $108.5 million, while revenue generated from service grew 27.2% to $42.5 million versus $33.4 million in 2QFY23. Quarterly revenue from rental and other was $11.5 million year over year, an increase of 11.7%.
For the Agriculture segment specifically, Titan saw 2QFY24 revenue grow to $469.1 million year over year from $349.0 million in 2QFY23, an increase of 34.4%. The company primarily attributes this increase to the acquisitions of Heartland Ag Systems in August 2022 and Pioneer Farm Equipment in February 2023. It also benefited from same-store growth of 10.0%, which Titan achieved in addition to strong year-over-year performance. Pre-tax income for 2QFY24 grew 32.5% to $33.0 million versus $24.9 million in 2QFY23.
Titan’s gross profit for 2QFY24 was up to $133.4 million versus $102.7 million in the same quarter last year, and year-over-year gross profit margin for the quarter increased slightly (0.1%) to 20.8%.
Quarterly operating expenses jumped 29.1% year over year to $88.8 million driven primarily by additional operating expenses due to acquisitions and an increase in variable expenses associated with increased sales. Operating expenses as a percentage of revenue, however, dropped 10 basis points to 13.8% versus 13.9% in 2QFY23. Floorplan and other interest expense increased 131.3% year over year to $3.7 million compared to $1.6 million for the same period last year.
Net income for 2QFY24 was $31.3 million, or earnings per diluted share of $1.38, versus $25.0 million, or earnings per diluted share of $1.10, for 2QFY23.
"Consistent with our prior expectations, we are seeing some improvement in equipment availability but do not anticipate receiving shipments of high-horsepower tractors, self-propelled sprayers or wheel loaders in excess of units that have already been retailed to customers,” says David Meyer, Titan Machinery's chairman and chief executive officer. “As such, we do not anticipate replenishment toward targeted minimum stocking levels for these equipment categories until at least the second half of calendar year 2024."
Meyer continues, "Despite constraints on the availability of key equipment categories, the year-to-date performance of our Agriculture segment has been consistent with our expectations, underpinned by strong organic growth and operating performance.” Titan maintained its FY24 guidance that the Agriculture segment would be up 20-25% year over year.
In a note to investors, Baird analyst Mircea (Mig) Dobre expressed surprise that despite beating expectations, the company did not raise its guidance for FY24 “as core Ag assumptions were unchanged despite higher inventory/equipment availability.”
Dobre adds, “Lack of upside in part owed to 2H equipment margins which are expected to contract year/year. Keep in mind this is happening before any real erosion in used equipment prices (which are now flat year/year). Early comments on CY24 demand calls for flattish volume; this combined with rising inventory and peaking used prices point to earnings risk into CY24/FY25.”