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Item 7. Management’s Discussion and Analysis

2025-04-07 compared with 2024-04-03 · 144 added, 114 removed, 370 unchanged (41% of the section changed)

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Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties.

You should review the "Information Regarding Forward-Looking Statements" in this Item 7 and "Risk Factors" presented under Item 1A for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis in this annual report.

A discussion of changes in our Financial Results and Cash Flow Comparisons from fiscal year 2022 to fiscal year 2023 has been omitted from this Form 10-K, but may be found in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on March 30, 2023.

You should review the "Information Regarding Forward-Looking Statements" in this Item 7 and the risks and uncertainties described under Item 1A, Risk Factors, of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis in this Form 10-K.

A discussion of changes in our Financial Results and Cash Flow Comparisons from fiscal year 2023 to fiscal year 2024 has been omitted from this Form 10-K, but may be found in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024, filed with the SEC on April 3, 2024.

BUSINESS DESCRIPTION

We own and operate a network of full service agricultural and construction equipment stores in the United States, Europe, and Australia.

Based upon information provided to us by CNH Industrial N.V.

subsidiary CNH Industrial America, LLC, collectively referred to in this Form 10-K as CNH Industrial, we are the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the U.S.

Based upon information provided to us by CNH Industrial N.V., we are the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the U.S.

We operate our business through four reportable segments:

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We sell parts and provide in-store and on-site repair and maintenance services.

We rent equipment and provide other ancillary services such as equipment transportation, GPS signal subscriptions, farm data management systems, precision farming equipment, and finance and insurance products.

We rent equipment and provide other ancillary products and services such as equipment transportation, GPS signal subscriptions, farm data management systems, precision farming equipment, and finance and insurance products.

Throughout our 44-year operating history, we have built an extensive, geographically contiguous network of 93 full service stores located in the United States, 40 in Europe and 15 in Australia.

We have a history of growth through acquisitions, including over 60 acquisitions in 15 U.S.

We have a history of growth through acquisitions, including over 60 acquisitions with locations in 15 U.S.

states, four European countries and three Australian states since January 1, 2003.

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Certain External Factors Affecting our Business

We are subject to a number of factors that affect our business including those factors discussed in the sections in this Form 10-K entitled Item 1A, "Risk Factors" and "Information Regarding Forward-Looking Statements." Certain of these external factors include, but are not limited to, the following:

We are subject to a number of factors that affect our business including those factors discussed in this Form 10-K under Item 1A, Risk Factors, and under the heading “Information Regarding Forward-Looking Statements” in this Item 7.

Certain of these external factors include, but are not limited to, the following:

Russia/Ukraine Geopolitical Conflict

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The Company's business systems in Ukraine have continued to function but have been, and could continue to be, negatively impacted in the future.

To date, the impact of this conflict has not been and is not expected to be material to Titan Machinery’s consolidated business operations and financial performance.

However, the full impact of the conflict remains uncertain and will depend on future developments, including the severity and duration of the conflicts and their impact on regional and global economic conditions.

To date, the impact of this conflict has not been, and in the future is not expected to be, material to Titan Machinery’s consolidated business operations and financial performance.

However, the full impact of the conflict remains uncertain and will depend on future developments, including the severity and duration of the conflicts and its impact on regional and global economic conditions.

The Company will continue to monitor the ongoing conflict between Russia and Ukraine as it is highly complex and continues to evolve.

Macroeconomic and Industry Factors

Our Agriculture and International businesses are primarily driven by the demand for agricultural equipment for use in the production of food, fiber, feed grain and renewable energy.

Our Agriculture and International businesses are primarily driven by the demand for agricultural equipment for use in the production of food, fiber, feed grain and feedstock for renewable energy.

Agriculture industry factors such as changes in agricultural commodity prices and net farm income, have an effect on our customers' sentiment and their ability to secure financing for equipment purchases.

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Based on U.S.

Department of Agriculture ("USDA") publications, the most recent estimate of net farm income for calendar year 2023 decreased 16% compared to calendar year 2022.

The commodity prices of corn and soybeans, which are the predominant crops in our Agriculture store footprint, were at or near record prices in fiscal 2023 but decreased during fiscal 2024.

Based on its February 2024 report, the USDA projected net farm income for calendar year 2024 to decrease 25.5%, as compared to calendar year 2023, but remain in line with the average inflation adjusted net farm income for the previous 20 years.

Department of Agriculture ("USDA") publications, the most recent estimate of net farm income for calendar year 2024 decreased 5.6% compared with calendar year 2023.

The commodity prices of corn and soybeans, which are the predominant crops in our Agriculture store footprint, were at or near record prices in fiscal 2023 but declined in fiscal 2024 and have remained depressed in fiscal 2025.

Based on its February 2025 report, the USDA projected net farm income for calendar year 2025 to increase 29.5%, as compared to the estimated results of calendar year 2024.

Our Construction business is primarily impacted by the demand for construction equipment for use in private and government commercial, residential, and infrastructure construction;

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The majority of our business involves the distribution and servicing of equipment manufactured by CNH Industrial.

In fiscal 2024, CNH Industrial supplied approximately 71% of our new equipment revenue on a consolidated basis and 75%, 81%, 51%, and 58% in our Agriculture, Construction, Europe, and Australia segments, respectively, and represented a significant portion of our parts revenue.

In fiscal 2025, CNH Industrial supplied approximately 75% of our new equipment revenue on a consolidated basis and 76%, 79%, 65% and 74% in our Agriculture, Construction, Europe, and Australia segments, respectively.

CNH Industrial also represented a significant portion of our parts revenue.

Thus, we believe the following factors have a significant impact on our operating results:

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Such disruptions in the overall economy and financial markets and the related reduction in consumer confidence in the economy, slow activity in the capital markets, negatively affect access to credit on commercially acceptable terms, and may adversely impact our customers' access to credit and the terms of any such credit.

However, if retail interest rates continue to rise, our business may be negatively affected by customers who find financing purchases of our equipment less attractive due to higher borrowing costs.

However, high retail interest rates negatively impact customer demand due to higher borrowing costs, which makes purchasing equipment less attractive.

Our business is also particularly dependent on our access to credit markets to manage inventory and finance acquisitions.

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Total cash consideration paid for O'Connors was $66.5 million, which was financed through available cash resources and line of credit availability.

The 15 O’Connors store locations are included within our new Australia segment.

The 15 O’Connors store locations are included within our Australia segment.

Heartland Acquisition

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In addition to tracking our sales and expenses to evaluate our operational performance, we also monitor the following key financial metrics.

The results of some of these metrics are discussed further throughout the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-K.

The results of some of these metrics are discussed further throughout this Item 7.

Inventory Turnover

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• Rental and other:

We derive other revenue from equipment rentals and ancillary equipment support activities such as equipment transportation, GPS signal subscriptions and reselling financial and insurance products.

We derive other revenue from equipment rentals and ancillary equipment products and services, such as equipment transportation, GPS signal subscriptions and reselling financial and insurance products.

Cost of Revenue

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Information regarding segment revenue and income (loss) before income taxes is presented for each fiscal year following our discussion of the consolidated results of operations.

Additional information regarding our segments is included in Note 21 of our consolidated financial statements.

Additional information regarding our segments is included in Note 21, Segment Information and Operating Results, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

Year Ended January 31,

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Other Income (Expense) (1.9) % (0.7) %

Income Before Income Taxes 5.5 % 6.1 %

Provision for Income Taxes 1.4 % 1.5 %

Net Income 4.1 % 4.6 %

(Loss) Income Before Income Taxes (1.8) % 5.5 %

(Benefit from) Provision for Income Taxes (0.4) % 1.4 %

Net (Loss) Income (1.4) % 4.1 %

Fiscal Year Ended January 31, 2025 Compared to Fiscal Year Ended January 31, 2024

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Total Revenue $ 2,702,122 $ 2,758,445 $ (56,323) (2.0) %

The increase in total revenue for fiscal 2024, as compared to fiscal 2023, was primarily the result of Company-wide same-store sales increase of 10.1% over the prior fiscal year and our acquisitions of the Heartland Companies, Pioneer Farm Equipment Co.

(“Pioneer”), and O'Connors, completed in August 2022, February 2023, and October 2023, respectively.

The same-store sales increase was primarily driven by equipment sales, which benefited from improved availability of inventory and the sustained high demand of both agriculture and construction equipment.

In addition, parts and service same-store sales also grew in fiscal 2024 compared to fiscal 2023.

Total revenue for fiscal 2025 decreased by 2.0%, or $56.3 million, compared to fiscal 2024, driven primarily by the decrease in Company-wide same-store sales of 9.1%, which largely offsets the revenue accretion from the O'Connors acquisition completed in October 2023.

Same-store sales were negatively impacted by challenging industry conditions, such as, decreases in agricultural commodity prices and projected net farm income, which have a negative effect on retail demand for

Further, in the February 2025 U.S.

Department of Agriculture publications, calendar year 2024 net farm income was estimated to have decreased by 5.6% compared to 2023, which in turn had declined 19.1% from net farm income in 2022.

Year Ended January 31, Increase/ Percent

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Total Gross Profit Mix 100.0 % 100.0 %

Gross profit increased 20.8% or $91.5 million from fiscal 2023 to fiscal 2024, primarily due to higher revenue and gross profit from our equipment, parts, and service business.

Gross profit margin decreased from 19.9% in fiscal 2023 to 19.3% in fiscal 2024.

The decrease in gross profit margin is primarily the result of a partial normalization of equipment gross profit margin as the supply of many product categories has caught up with demand.

Our Company-wide absorption rate declined to 79.2% for fiscal 2024 as compared to 82.7% during fiscal 2023.

The lower absorption rate in fiscal 2024 compared to fiscal 2023, was primarily impacted by a significant rise in floorplan interest expense in fiscal 2024, the fiscal 2023 absorption rate was also favorably impacted by a gain of $1.4 million recognized on the divestiture of our consumer products store in North Dakota in the first quarter of fiscal 2023.

Gross profit for fiscal 2025 decreased 25.5%, or $135.7 million, as compared to fiscal 2024.

Gross profit margin also decreased to 14.6% in fiscal 2025 from 19.3% in fiscal 2024.

The decrease in gross profit margin for fiscal 2025 was primarily due to lower equipment margins, which are being driven by higher levels of inventory and softening demand.

Our Company-wide absorption rate decreased to 68.0% for fiscal 2025 as compared to 79.2% during fiscal 2024.

The decrease in absorption was primarily driven by increased floorplan interest expense in fiscal 2025 compared to fiscal 2024.

Operating Expenses

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Operating Expenses as a Percentage of Revenue 14.4 % 13.1 % 1.3 % 9.9 %

Operating expenses for fiscal 2024 increased $61.0 million, as compared to fiscal 2023.

The increase in operating expenses was primarily due to acquisitions that have occurred in the last eighteen months as well as variable expenses associated with increased sales.

In fiscal 2024, operating expenses as a percentage of revenue decreased to 13.1% from 13.6% in fiscal 2023.

The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in fiscal 2024 compared to fiscal 2023, which positively affected our ability to leverage our fixed operating costs.

Operating expenses for fiscal 2025 increased by 7.5%, or $27.3 million, as compared to fiscal 2024.

The increase in operating expenses was primarily driven by acquisitions that occurred late in fiscal 2024, which includes the O'Connors acquisition.

Operating expenses as a percentage of revenue increased to 14.4% in fiscal 2025 from 13.1% in fiscal 2024.

Impairment Charges

Year Ended January 31, Increase/ Percent

2025 2024 (Decrease) Change

(dollars in thousands)

Impairment of Goodwill $ 531 $ — N/M N/M

Impairment of Intangible and Long-Lived Assets $ 1,311 $ — N/M N/M

*N/M = Not Meaningful

In fiscal 2025, we recognized $0.5 million of impairment expense related to goodwill assets in our Europe segment.

In fiscal 2025, we recognized $1.3 million of impairment expense related to other intangible and long-lived assets of, which $0.2 million was within the Agriculture segment, $0.2 million was within the Construction segment and $0.9 million was within the Europe segment.

Other Income (Expense)

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Other interest expense (15,105) (7,303) 7,802 106.8 %

The decrease in interest and other income (expense) compared to fiscal 2023 was primarily the result of changes in foreign currency fluctuations.

The increase in floorplan interest expense for fiscal 2024, as compared to fiscal 2023, was primarily due to increased interest-bearing borrowings, resulting from higher inventory levels, as well as a higher interest rate environment.

The increase in other interest expense in fiscal 2024 is the result of an increased amount of long term debt resulting from real estate purchased via acquisition or the buyout of previously leased facilities in fiscal 2023 and 2024.

Provision for Income Taxes

Year Ended January 31, Percent

2024 2023 Increase Change

Interest and other income (expense) for fiscal 2025 decreased by approximately $7.5 million as compared to fiscal 2024.

The decrease in interest and other income (expense) compared to fiscal 2024 was primarily due to a $9.7 million non-cash, sale-leaseback financing expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms and offset by a $3.6 million gain on cancellation of debt in relation to the U.S.

Treasury Department’s New Market Tax Credit Program.

Floorplan interest expense increased $20.9 million for fiscal 2025, as compared to fiscal 2024, primarily due to a higher level of interest-bearing inventory, including the usage of existing floorplan capacity to finance the O'Connors acquisition in October 2023.

The increase in other interest expense in fiscal 2025 is the result of an increased amount of long term debt outstanding resulting from purchases of previously leased facilities during fiscal 2024 and fiscal 2025 as well as increased borrowing on our CNH Industrial Capital revolving line of credit.

(Benefit from) Provision for Income Taxes

Year Ended January 31, Increase/ Percent

2025 2024 (Decrease) Change

(dollars in thousands)

Provision for Income Taxes $ 38,599 $ 33,373 $ 5,226 15.7 %

(Benefit from) Provision for Income Taxes $ (13,074) $ 38,599 $ (51,673) (133.9) %

Our effective tax rate increased from 25.6% in fiscal 2024 to 26.2% in fiscal 2025.

The effective tax rate for each of the years ended January 31, 2024 and 2023, is subject to variation primarily due to the impact of items related to the vesting of share-based compensation, limitation on the tax deductibility of officers' compensation and the mix of domestic and foreign income.

The effective tax rate for each of the years ended January 31, 2025 and 2024, is subject to variation of the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and the impact of the recognition of valuation allowance on our foreign deferred tax assets.

The Organization for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GloBE”) model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million.

Numerous foreign jurisdictions have already enacted tax legislation based on the GloBE rules, with some effective as early as January 1, 2024.

As of January 31, 2025, we did not recognize any additional income tax expense for Pillar Two GloBE minimum tax.

The Company is continuously monitoring the evolving application of this legislation and assessing its potential impact on our future tax liability.

Segment Results

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Total $ 2,702,122 $ 2,758,445 $ (56,323) (2.0) %

Income Before Income Taxes

(Loss) Income Before Income Taxes

Agriculture $ (39,773) $ 121,072 $ (160,845) (132.9) %

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Europe (3,893) 16,487 (20,380) (123.6) %

Australia 4,115 — 4,115 *N/M

Segment income before income taxes 160,020 141,499 18,521 13.1 %

Australia 2,889 4,115 (1,226) (29.8) %

Segment (loss) income before income taxes (47,429) 160,020 (207,449) (129.6) %

Shared Resources (2,556) (8,980) 6,424 (71.5) %

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*N/M = Not Meaningful

Agriculture segment revenue for fiscal 2024 increased 27.6%, or $442.5 million, compared to the same period last year.

The higher revenue was driven primarily by the acquisitions of the Heartland Companies and Pioneer in August 2022 and February 2023, respectively, as well as an increase in same-store sales of 12.1%.

The same-store sales increase was primarily driven by equipment sales, which benefited from improved availability of inventory and the sustained high demand for new and used equipment.

In addition, same-store sales for parts and service also grew in fiscal 2024 compared to fiscal 2023.

Agriculture segment income before income taxes for fiscal 2024 improved by $18.3 million, or 17.9%, compared to fiscal 2023.

The improvement in segment results was primarily the result of higher revenue partially offset by higher operating expenses due to variable expenses associated with increased sales.

Construction segment revenue for fiscal 2024 increased 7.8%, or $24.0 million, compared to fiscal 2023.

When accounting for the divestitures of the North Dakota consumer products store in March 2022, same-store sales increased 8.3%.

Construction activity in our footprint sustained at healthy levels, which was the primary factor in the same-store sales growth.

The Construction segment income before income taxes was $18.3 million for fiscal 2024 compared to income of $18.6 million for the prior year.

The decline in segment results was primarily due to the $1.4 million gain on our consumer products store in the first quarter of fiscal 2023 which was mostly offset by an increase in same-store sales, in fiscal 2024.

The dollar utilization of our rental fleet decreased from 30.2% in fiscal 2023 to 29.3% in fiscal 2024.

Europe segment revenue for fiscal 2024 increased 4.3%, or $12.8 million, compared to fiscal 2023.

Revenue, net of the effect of foreign currency fluctuations, was up 2.1% or $6.2 million compared to fiscal 2023.

The increase in revenue was primarily related to pricing increases in fiscal 2024 compared to fiscal 2023.

Our Europe segment income before income taxes was $16.5 million for fiscal 2024, compared to $20.2 million for fiscal 2023.

The decrease in segment pre-tax income was primarily the result of increased operating expenses.

We entered into the Australian market in October 2023 with the O'Connor acquisition.

Agriculture segment revenue for fiscal 2025 decreased 7.6%, or $155.8 million, compared to fiscal 2024.

The revenue decrease was due to a same-store sales decrease of 9.2% during the fiscal 2025 as compared to fiscal 2024.

The same-store sales decrease was due to a decrease in equipment revenue resulting from challenging industry conditions, such as decreases in agricultural commodity prices and projected net farm income, which negatively affected customer sentiment in fiscal 2025, as compared to the fiscal 2024.

Changes in actual or anticipated net farm income generally have a direct correlation with retail demand for equipment.

Agriculture segment loss before income taxes was $39.8 million for fiscal 2025 compared to income before income taxes of $121.1 million for fiscal 2024.

The decrease in gross profit is primarily due to lower equipment margins, which are driven by higher levels of inventory and softening demand.

In addition, we recorded a net $5.2 million non-cash, sale-leaseback finance modification expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms and had an increase in our operating expenses and floorplan interest expense.

Construction segment revenue for fiscal 2025 decreased 0.3%, or $0.9 million, compared to fiscal 2024

Our Construction segment loss before income taxes was $6.7 million for fiscal 2025 compared to $18.3 million of income before income taxes for fiscal 2024.

The decrease in segment results was due to a $4.5 million non-cash, sale-leaseback finance modification expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms, lower equipment gross margins as a result of increased supply and moderately softer demand, and increased floorplan interest expense compared to fiscal 2024.

In addition, the dollar utilization of our rental fleet decreased from 29.3% for fiscal 2024 to 23.8% for fiscal 2025.

Europe segment revenue for fiscal 2025 decreased 16.3%, or $50.9 million, compared to fiscal 2024.

The decrease in revenue reflects the softening of new equipment demand caused by a decrease in global agricultural commodity prices, sustained higher interest rates and drought conditions in Eastern Europe which negatively impacted crop yields and grower profitability.

Our Europe segment loss before income taxes was $3.9 million for fiscal 2025 compared to $16.5 million of income before income taxes for fiscal 2024.

The decrease in segment pre-tax income was primarily the result of decreased equipment sales as noted above.

Additionally, we recorded $0.5 million of impairment expense related to certain goodwill assets and $0.9 million in impairment expense related to other intangible assets and long-lived assets.

We entered the Australian market in October 2023 with our acquisition of O'Connors.

Australia segment revenue for fiscal 2025 was $221.1 million.

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We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments.

Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur and cause a difference in reported shared resource expense.

Shared Resource loss before income taxes was $9.0 million for fiscal 2024 compared to $6.3 million for fiscal 2023.

Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur.

Shared Resources loss before income taxes was $2.6 million for fiscal 2025 compared to $9.0 million for fiscal 2024.

Liquidity and Capital Resources

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Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan payable and other credit facilities.

We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various financial covenants as further described in Note 8, Floorplan Payable/Lines of Credit , of the Notes to our Consolidated Financial Statements included in this Form 10-K.

We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various financial covenants as further described in Note 8, Floorplan Payable/Lines of Credit , to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

We have worked in the past, and will continue to work in the future if necessary, with our lenders to implement satisfactory modifications to these financial covenants when appropriate for the business conditions confronted by us.

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Borrowings and repayments on manufacturer floorplan facilities are reported as operating cash flows, while borrowings and repayments on non-manufacturer floorplan facilities are reported as financing cash flows in our consolidated statements of cash flows.

During the year ended January 31, 2025, letters were received from CNH Industrial Capital America LLC (“CNH Industrial Capital”) and DLL Finance to waive the Consolidated Fixed Charge Coverage Ratio covenants for the reporting periods between January 31, 2025 to January 31, 2026.

On December 3, 2024, we entered into Amendment No.

1 to the Bank Syndicate Agreement that lowered the adjusted excess availability metric from 15% to 10% for the period from December 15, 2024 to March 15, 2025, and thereafter reverts to 15%.

As of January 31, 2025, we had floorplan payable lines of credit for equipment purchases totaling $1.5 billion, which includes a $875.0 million credit facility with CNH Industrial Capital, a $390.0 million floorplan payable line under the Bank Syndicate Agreement, a $80.0 million credit facility with DLL Finance, and additional credit facilities related to our foreign subsidiaries.

Available borrowing capacity under these lines of credit are reduced by amounts outstanding under such facilities, borrowing base calculations and amount of standby letters of credit outstanding with respect to the Bank Syndicate Agreement, and certain acquisition-related financing arrangements with respect to the CNH Industrial Capital credit facility.

As of January 31, 2024, the Company was in compliance with the financial covenants under its credit agreements.

Additional details on each of these credit facilities are disclosed in Note 8 to our consolidated financial statements included in this Form 10-K.

Due to the waivers listed above, as of January 31, 2025, the Company was not subject to the financial covenants under its credit agreements.

Additional details on each of these credit facilities are disclosed in Note 8, Floorplan Payable/Lines of Credit, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data , of this Form 10-K.

As of January 31, 2025, the Company was not subject to the fixed charge ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined in the Bank Syndicate Agreement) was not less than 10% of the total amount of the credit facility.

Please refer to Note 8, Floorplan Payable/Lines of Credit , of the Notes to our Consolidated Financial Statement included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information regarding the Company's line of credit.

Please refer to Note 8, Floorplan Payable/Lines of Credit , to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information regarding the Company's line of credit.

Our equipment inventory turnover decreased to 1.6 times for fiscal 2025 compared to 2.2 times for fiscal 2024.

Our equipment inventory balance increased 104.4% from January 31, 2023 to January 31, 2024.

The decrease in equipment turnover was primarily due to the increase in average equipment inventory in fiscal 2024 as compared to fiscal 2023 as we were coming off very low inventory levels in fiscal 2023, due to allocation restrictions implemented by our suppliers.

Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 18.2% as of January 31, 2024, from 51.7% as of January 31, 2023.

The decrease in our equity in equipment inventory is primarily due to the stocking of new equipment inventories as availability has improved, as well as drawing on our floorplan loan with the Bank Syndicate in conjunction with the O'Connors acquisition.

The decrease in equipment turnover was attributable to an increase in average equipment inventory in fiscal 2025 as compared to

Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, increased to 25.9% as of January 31, 2025 from 18.2% as of January 31, 2024.

Long-Term Debt Facilities

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The Revolver Loan is used to finance our working capital requirements and fund certain capital expenditures, as needed.

As of January 31, 2024, the Company did not have a need to utilize any of the Revolver Loan, as such the outstanding balance was zero.

The Company works with various lenders to finance the purchase of real estate we currently lease or are acquiring through an acquisition.

As of January 31, 2025, the Company did not have a need to utilize any of the Revolver Loan, and, as such the outstanding balance was zero.

The Company works with various lenders to finance the purchase of real estate we currently lease or purchase through an acquisition.

The Company may also decide in the future to finance a portion of our rental fleet as well as our capital expenditures using long-term debt from various lenders.

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making payments due under our various leasing arrangements;

and funding capital expenditures, including the purchase of rental fleet assets.

and funding capital expenditures.

The primary factor affecting our ability to generate cash and to meet cash requirements, is our operating performance as impacted by (i) industry factors, (ii) competition, (iii) general economic conditions, (iv) the timing and extent of acquisitions, and (v) business and other factors including those identified in Item 1A, Risk Factors, and discussed in this Form 10-K.

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Based on our current operational performance, we believe our cash flow from operations, available cash, and available borrowings under our existing credit facilities will be adequate to meet our liquidity needs beyond the next 12 months.

In fiscal 2024, we used $10.8 million in cash for rental fleet purchases and $51.5 million in cash for property and equipment purchases and financed $17.9 million in property and equipment purchases with long-term debt and finance leases.

In fiscal 2025, we used $51.8 million in cash for property and equipment purchases and financed $36.0 million in property and equipment purchases with long-term debt and finance leases.

The property and equipment purchases in fiscal 2025 primarily related to improvements to, or purchases of, real estate assets and the purchase of vehicles.

In fiscal 2023, we used $10.0 million in cash for rental fleet purchases, $27.2 million in cash for property and equipment purchases, and financed $6.4 million in property and equipment purchases with long-term debt.

In fiscal 2024 , we used $62.4 million in cash for property and equipment purchases, and financed $17.9 million in property and equipment purchases with long-term debt.

The property and equipment purchases in fiscal 2024 primarily related to the purchase of vehicles, trucks and real estate.

We expect our cash expenditures for property and equipment, exclusive of rental fleet purchases, for fiscal 2025 to be approximately $50.0 million and expect cash expenditures for our rental fleet for fiscal 2025 to be approximately $10.0 million.

We expect our cash expenditures for property and equipment for fiscal 2026 to be approximately $40.0 million.

The actual amount of our fiscal 2026 capital expenditures will depend upon factors such as general economic conditions, growth prospects for our industry and our decisions regarding financing and leasing options.

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We enter into contractual obligations in the ordinary course of business that may require future cash payments.

Such obligations include, but are not limited to, debt arrangements, leasing arrangements, and costs related to Information Technology ("IT"), including ERP expenses.

The Notes to the Consolidated Financial Statements provide additional information in regard to Long Term Debt (Note 10) and Leases (Note 13).

Other purchase obligations consist primarily of IT related expenses with estimated cash payments of $4.1 million for fiscal 2025, as well as a combined $0.7 million for fiscal 2026, 2027, and 2028.

Such obligations include, but are not limited to, debt arrangements, leasing arrangements, and costs related to Information Technology ("IT"), including enterprise resource planning (“ERP”) expenses.

The Notes to the Consolidated Financial Statements in Item 8, Financial Information and Supplementary Data, of this Form 10-K provide additional information in regard to Long Term Debt (Note 10) and Leases (Note 13).

Other purchase obligations consist primarily of IT related expenses with estimated cash payments of $5.2 million for fiscal 2026, as well as a combined $15.3 million through fiscal 2030.

Cash Flow (Used For) Provided By Operating Activities

Net cash used for operating activities in fiscal 2024 was $32.3 million compared to net cash provided by operating activities of $10.8 million in fiscal 2023.

This decrease in operating cash flow was driven by an increase in inventories and partially offset by an increase in floorplan lines of credit from manufacturers, timing and collections of accounts receivable and higher net income for fiscal year 2024.

Net cash provided by operating activities in fiscal 2025 was $70.3 million compared to net cash used for operating activities of $32.3 million in fiscal 2024.

The increase was primarily driven by a decrease in inventory and a favorable collection of outstanding receivables, which was partially offset by a decrease in manufactured floorplan payables and a decrease in net income for fiscal 2025 compared to the prior year period.

Cash Flow Used For Investing Activities

Net cash used for investing activities is primarily comprised of cash used for property and equipment purchases, including rental fleet purchases, and for business acquisitions.

Net cash used for investing activities is primarily comprised of cash used for property and equipment purchases and for business acquisitions.

Net cash used for investing activities was $47.7 million in fiscal 2025, compared to $163.4 million in fiscal 2024.

The primarily driver was due to an increase of $25.2 million in cash used for purchases of property and equipment and increase of $7.1 million in acquisition activity compared to prior year.

Cash Flow Provided By Financing Activities

Net cash provided by financing activities was $188.6 million in fiscal 2024, compared to $22.0 million in fiscal 2023.

the increase in net cash provided by financing activities was the result of increased non-manufacturer floorplan payables in fiscal 2024, as the Company drew on its Bank Syndicate Agreement floorplan loan in fiscal 2024, to finance higher inventory levels.

The primarily driver of the decrease was due to the fiscal 2024 acquisitions of $107.5 million compared to $0.3 million in fiscal 2025.

There was also year over year decrease of $10.5 million in cash used for purchases of property and equipment compared to the prior year.

Cash Flow (Used for) Provided By Financing Activities

Net cash used for financing activities was $23.6 million in fiscal 2025, compared to $188.6 million net cash provided by in fiscal 2024.

The change was primarily driven by a $220.8 million decrease in non-manufacturer floorplan payables, which represents the Company's other credit lines including its Bank Syndicate Agreement.

Critical Accounting Policies and Use of Estimates

In the preparation of financial statements prepared in conformity with U.S.

In the preparation of financial statements in conformity with U.S.

generally accepted accounting principles, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures.

While we believe the estimates and judgments we use in preparing our financial statements are appropriate, they are subject to future events and uncertainties regarding their outcome and therefore actual results may materially differ from these estimates.

We describe in Note 1, Business Activity and Significant Accounting Polices, of the Notes to our Consolidated Financial Statements the significant accounting policies used in preparing the consolidated financial statements.

We describe in Note 1, Business Activity and Significant Accounting Polices , to the Consolidated Financial Statements in Item 8, Financial Information and Supplementary Data , of this Form 10-K the significant accounting policies used in preparing the consolidated financial statements.

We consider the following items in our consolidated financial statements to require significant estimation or judgment.

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We estimate net realizable value using internal information, management judgment and third-party data that considers various factors including age and condition of equipment, hours of use and market conditions.

Generally, used equipment prices are more volatile to changes in market conditions than prices for new equipment due to incentive programs that may be offered by manufacturers to assist in the sale of new equipment.

Generally, used equipment prices are more volatile to changes in market conditions than prices for new equipment due to incentive programs that may be offered by manufacturers to assist in the sale

of new equipment.

We review our equipment inventory values and adjust them whenever the carrying amount exceeds the estimated net realizable value.

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In light of these circumstances, we performed step one of the impairment analysis for these assets, which have a combined carrying value of $51.6 million, to determine if the asset values are recoverable.

In all cases, our analyses indicated that the carrying values are recoverable based on our estimates of future undiscounted cash flows under step one of the impairment analysis.

In the situations where it was concluded that the carrying value was not recoverable, we preformed step two of the impairment analysis and estimated the fair value of the assets using an income approach.

The Company recognized total impairment charges of $1.3 million, of which $0.2 million was within the Agriculture segment, $0.2 million was within the Construction segment, and $0.9 million was within the Europe segment.

Our impairment analyses require significant judgment, including identification of the grouping of long-lived and other assets and liabilities for impairment testing, estimates of future cash flows arising from these groups of assets and liabilities, and estimates of the remaining useful lives of the long-lived assets being evaluated.

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If the qualitative test indicates there may be an impairment, we perform the quantitative test, which measures the amount of the goodwill impairment, if any.

To perform the quantitative test, we calculate the fair value of each reporting unit, primarily utilizing the income approach.

The income approach is based on discounted cash flow models that use reporting unit estimates for forecasted future financial performance, including revenues, margins, operating expenses, capital expenditures, depreciation, amortization, tax and discount rates.

These estimates are developed as part of our planning process based on assumed growth rates, along with historical data and various internal estimates.

To perform the quantitative test, we calculate the fair value of each reporting unit, primarily utilizing the income appro ach and market approach.

The income approach is based on discounted cash flow models that use estimates for forecasts of future operating performance for the reporting units.

These forecasts include estimates of revenues, margins, operating expenses, capital expenditures, depreciation, amortization, tax and discount rates.

Projected future cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated risk-adjusted weighted-average cost of capital relevant to each reporting unit.

The market approach is based on assumptions related to earnings before interest, taxes, depreciation, and amortization multiples or revenue multiples.

These estimates are developed as part of our planning process based on assumed growth rates, along with historical data and various internal estimates.

We perform our annual goodwill impairment analysis as of December 31 and when an event occurs or circumstances change that may reduce the fair value of a reporting unit below its carrying amount.

In 2024, we elected to perform the qualitative test on all reporting units with the exception of our German reporting unit, which management decided to perform a quantitative assessment.

Our test indicated that there is no goodwill impairment in any of our reporting units as of our annual assessment date.

In 2025, we elected to perform a quantitative test on all reporting units.

Our test indicated that all of our goodwill in the Europe segment should be impaired for $0.5 million and the test for our Agriculture and Australia segments did not indicate any impairment in these two reporting units as of our annual assessment date.

We had goodwill of $61.2 million and $64.1 million at January 31, 2025 and 2024, respectively.

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New Accounting Pronouncements

Refer to Note 1, Business Activity and Significant Accounting Polices, of the Notes to our Consolidated Financial Statements for a description of new accounting pronouncements recently adopted or not yet adopted and the impact or anticipated impact of such pronouncements to our consolidated financial statements.

Refer to Note 1, Business Activity and Significant Accounting Polices , to the Consolidated Financial Statements in Item 8, Financial Information and Supplementary Data , of this Form 10-K for a description of new accounting pronouncements recently adopted or not yet adopted and the impact or anticipated impact of such pronouncements to our consolidated financial statements.

Information Regarding Forward-Looking Statements

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Such factors include, but are not limited to, the following:

• our dependence on CNH Industrial, our primary supplier of equipment and parts inventory, to supply competitive products, provide financial and marketing support and continue committing to its product warranties and reimbursement of dealers for warrant repairs, and our relationships with other equipment suppliers;

• the terms of the CNH Industrial Dealer Agreements that subject us to restrictions that may adversely impact our business and growth;

• the impact of net farm income, which is influenced by factors over which we have no control;

• market factors, over which we have no control, negatively impacting our construction equipment sales;

• increased inflation and higher interest rates negatively impacting our customers’ equipment purchasing decisions;

• downturns in the equipment distribution market, which can arise from factors over which we have no control;

• the highly competitive nature of our industry;

• the recent agreements of equipment manufacturers, including CNH Industrial, to provide farmers and independent repair shops access to diagnostic tools;

• supply chain disruptions;

• the impact of the Russian-Ukraine military conflict on our operations in Ukraine;

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• general economic conditions and construction activity in the markets where we operate;

• our dependence on CNH Industrial, our primary supplier of equipment and parts inventory, and our relationships with other equipment suppliers;

• the terms of the CNH Industrial dealer agreements that subject us to restrictions that may adversely impact our business and growth;

• the risks associated with our international operations;

• risks resulting from the implementation or design of our new ERP system;

• risks resulting from the impact of the enactment of "right to repair" legislation;

• the impact of security breaches and other disruptions to our information system;

• risks and uncertainties arising from our international operations;

• our ability to effectively manage our inventory;

• our level of indebtedness and ability to comply with the terms of agreements governing our indebtedness;

• the risks associated with the expansion of our business;

• the risks resulting from outbreaks or other public health crises;

• risks related to our ability to attract, train, and develop key employees necessary for our success;

• the potential inability to integrate any businesses we acquire;

• competitive pressures;

• exposure to interest rate risks as a result of our variable rate indebtedness;

• the seasonal nature of the agricultural and construction equipment industries;

• customer credit risks;

• our ability to manage increased maintenance costs as the age of our rental fleet increases;

• our ability to manage changes in tax rates or the adoption of new tax legislation;

• risks relating to climate change and weather conditions;

• increased government regulations relating to greenhouse gas emission standards and climate change;

• the risks associated with the expansion of our business, including the potential inability to integrate any businesses we acquire;

• risks relating to our ability to attract, train, and develop key employees necessary for our success;

• labor organizing activities;

• liability risks arising from products sold, rented or serviced by us, which our commercial liability insurance may not be adequate to cover;

• significant fluctuations in the price of our common stock;

• risks related to our dependence on our information technology systems and the impact of potential breaches and other disruptions;

• compliance with laws and regulations;

• other factors discussed under Item 1A, Risk Factors, or elsewhere in this Form 10-K.

• other factors discussed under Item 1A, Risk Factors, and elsewhere in this Form 10-K.

You should read the risk factors and the other cautionary statements made in this Form 10-K as being applicable to all related forward-looking statements wherever they appear in this Form 10-K.

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In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, if at all.

Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.

Other than as required by law, we undertake no obligation to update these forward-looking statements, whether as a result of new information, future events, or otherwise.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis