Titan Machinery Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Balance Sheets of the Company as of January 31, 2025 and 2024, and the related Consolidated Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows for the years ended January 31, 2025, 2024 and 2023, and the notes thereto, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Titan Machinery Inc.—Financial Statements Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 45 Report of Independent Registered Public Accounting Firm 48 Consolidated Balance Sheets as of January 31, 2025 and 2024 49 Consolidated Statements of Operations for the fiscal years ended January 31, 2025, 2024 and 2023 50 Consolidated Statements of Comprehensive Income for the fiscal years ended January 31, 2025, 2024 and 2023 51 Consolidated Statements of Stockholders' Equity for the fiscal years ended January 31, 2025, 2024 and 2023 52 Consolidated Statements of Cash Flows for the fiscal years ended January 31, 2025, 2024 and 2023 53 Notes to Consolidated Financial Statements 53 44 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and Board of Directors of Titan Machinery Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Titan Machinery Inc. and subsidiaries (the "Company") as of January 31, 2025, and 2024, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows, for each of the three years in the period ended January 31, 2025, and the related notes and the schedule listed in the Index at Part IV, Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2025, and 2024, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 7, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Inventories – Valuation of Used Equipment Inventories — Refer to Notes 1 and 5 to the financial statements Critical Audit Matter Description The majority of the Company’s used equipment inventories are acquired through trade-ins from customers. Used equipment acquired through a trade-in is recorded based on the estimated future selling price, less a gross profit amount to be realized when the trade-in asset is sold and an estimate of any reconditioning work required to ready the asset for sale. The Company determines net realizable value for the traded-in equipment through internal and third-party data that considers various factors including the age and condition of the equipment, hours of use, and market conditions. The Company’s used equipment inventories are stated at the lower of cost (specific identification) or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company periodically subjects used equipment inventories to lower of cost or net realizable value assessments and adjusts carrying values when such values exceed estimated net realizable value. The Company estimates net realizable value using internal and third-party data that considers various factors including the age and condition of the equipment, hours of use, and market conditions. Given the significant judgments made by management to determine the initial fair value and subsequent net realizable value of used equipment inventories, performing audit procedures to evaluate these judgments to determine the valuation of used equipment inventories required a high degree of auditor judgment and an increased extent of effort. 45 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s judgments regarding the valuation of used equipment inventories included the following, among others: • We tested the effectiveness of controls over the valuation of used equipment inventories, including the reasonableness of various factors including the age and condition of the equipment, hours of use, and market conditions, used to determine the net realizable value of the equipment. • We tested the effectiveness of controls over the internal and external data used to determine the valuation of used equipment inventories. • We evaluated the reasonableness of management’s judgments utilized to determine the fair value or net realizable value of the used equipment inventories by: • Evaluating the reasonableness and consistency of the methodology and assumptions used by management to determine fair value or net realizable value, as applicable. • Testing the underlying determination of the fair value or net realizable value by obtaining documentation containing the age of the equipment and hours of use and comparing it to comparable internal and external data. • Performing a retrospective lookback analysis of management’s process by comparing the actual selling prices of used equipment inventories units sold in the current year to the selling prices estimated by management for those units in the prior year, as applicable. Goodwill Impairment Assessment – Agriculture and Australia Reporting Units – Refer to Notes 1 and 7 to the financial statements Critical Audit Matter Description The Company’s annual evaluation of goodwill for impairment involved the comparison of the Agriculture and Australia reporting units’ fair value to their carrying value. The Company determined the fair value of each reporting unit using a combination of income and market approaches. 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. As of January 31, 2025, the goodwill balance for the Agriculture reporting unit was $37.8 million, and the goodwill balance for the Australia reporting unit was $23.4M. The fair value of the Agriculture and Australia reporting units exceeded their carrying values, and therefore, no impairment was recognized. Given the significant judgements made by management to estimate the fair value of the Agriculture and Australia reporting units and the differences between their fair value and carrying value, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions regarding forecasts of future equipment revenue, profit margins, long-term growth rate, discount rate, and the selection of EBITDA and revenue multiples required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists. How the Critical Matter Was Addressed in the Audit Our audit procedures related to the forecasts of future equipment revenue, profit margins, long-term growth rate, discount rate, and EBITDA and revenue multiples for the Agriculture and Australia reporting units included the following, amount others: • We tested the effectiveness of controls over the evaluation of goodwill for impairment, including those over the underlying assumptions to forecast future equipment revenue, profit margins, long-term growth rate, the selection of the discount rate, and the selection of EBITDA and revenue multiples. • We evaluated management’s ability to accurately forecast future equipment revenues and profit margins by comparing actual results to management’s historical forecasts. • We evaluated the reasonableness of management’s forecasted equipment revenue and profit margins by comparing the forecasts to (1) historical results, (2) internal communications between management and the Board of Directors, and (3) information included in Company press releases as well as in analyst and industry reports. • We performed a sensitivity analysis of certain assumptions such as revenue, profit margins, long-term growth rate, and the discount rate to evaluate the potential change in the fair value resulting from changes in underlying assumptions. 46 Table of Contents • With the assistance of our fair value specialists, we evaluated the valuation methodologies, the long-term growth rate and discount rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the long-term growth rate and discount rate selected by management. • With the assistance of our fair value specialists, we evaluated the EBITDA and revenue multiples used in estimating fair value, including testing the underlying source information and mathematical accuracy of the calculations, and comparing the multiples selected by management to its guideline companies and guideline transactions. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota April 7, 2025 We have served as the Company's auditor since 2013. 47 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Titan Machinery Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Titan Machinery Inc. and subsidiaries (the “Company”) as of January 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2025, of the Company and our report dated April 7, 2025, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ DELOITTE & TOUCHE LLP Minneapolis, Minnesota April 7, 2025 48 Table of Contents TITAN MACHINERY INC. CONSOLIDATED BALANCE SHEETS AS OF JANUARY 31, 2025 AND 2024 (in thousands, except per share data) January 31, 2025 January 31, 2024 Assets Current Assets Cash $ 35,898 $ 38,066 Receivables, net of allowance for expected credit losses 119,814 153,657 Inventories 1,108,672 1,303,030 Prepaid expenses and other 28,244 24,262 Total current assets 1,292,628 1,519,015 Noncurrent Assets Property and equipment, net of accumulated depreciation 379,690 298,774 Operating lease assets 27,935 54,699 Deferred income taxes 2,552 529 Goodwill 61,246 64,105 Intangible assets, net of accumulated amortization 48,306 53,356 Other 1,581 1,783 Total noncurrent assets 521,310 473,246 Total Assets $ 1,813,938 $ 1,992,261 Liabilities and Stockholders' Equity Current Liabilities Accounts payable $ 37,166 $ 43,846 Floorplan payable 755,698 893,846 Current maturities of long-term debt 10,920 13,706 Current maturities of operating leases 5,747 10,751 Deferred revenue 91,933 115,852 Accrued expenses and other 59,492 74,400 Total current liabilities 960,956 1,152,401 Long-Term Liabilities Long-term debt, less current maturities 157,767 106,407 Operating lease liabilities 25,588 50,964 Finance lease liabilities 44,894 1,406 Deferred income taxes 8,818 22,607 Other long-term liabilities 1,838 834 Total long-term liabilities 238,905 182,218 Commitments and Contingencies (Note 12) Stockholders' Equity Common stock, par value $ 0.00001 per share, 45,000,000 shares authorized; 23,124,768 shares issued and outstanding at January 31, 2025; 22,848,138 shares issued and outstanding at January 31, 2024 — — Additional paid-in-capital 262,097 258,657 Retained earnings 360,314 397,225 Accumulated other comprehensive income (loss) ( 8,334 ) 1,760 Total stockholders' equity 614,077 657,642 Total Liabilities and Stockholders' Equity $ 1,813,938 $ 1,992,261 See Notes to Consolidated Financial Statements 49 Table of Contents TITAN MACHINERY INC. CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JANUARY 31, 2025, 2024 AND 2023 (in thousands, except per share data) 2025 2024 2023 Revenue Equipment $ 2,050,298 $ 2,145,316 $ 1,711,559 Parts 428,457 410,841 327,196 Service 180,107 157,315 129,803 Rental and other 43,260 44,973 40,748 Total Revenue 2,702,122 2,758,445 2,209,306 Cost of Revenue Equipment 1,912,803 1,864,558 1,477,539 Parts 294,233 279,921 220,418 Service 66,823 53,981 46,208 Rental and other 32,633 28,631 25,302 Total Cost of Revenue 2,306,492 2,227,091 1,769,467 Gross Profit 395,630 531,354 439,839 Operating Expenses 389,780 362,509 301,516 Impairment of Goodwill 531 — — Impairment of Intangible and Long-Lived Assets 1,311 — — Income from Operations 4,008 168,845 138,323 Other Income (Expense) Interest and other income (expense) ( 4,178 ) 3,300 3,862 Floorplan interest expense ( 34,710 ) ( 13,802 ) ( 1,875 ) Other interest expense ( 15,105 ) ( 7,303 ) ( 5,069 ) Income (Loss) Before Income Taxes ( 49,985 ) 151,040 135,241 (Benefit from) Provision for Income Taxes ( 13,074 ) 38,599 33,373 Net (Loss) Income $ ( 36,911 ) $ 112,441 $ 101,868 (Loss) Earnings per Share: Basic $ ( 1.63 ) $ 4.93 $ 4.50 Diluted $ ( 1.63 ) $ 4.93 $ 4.49 Weighted Average Common Shares: Basic 22,606 22,493 22,373 Diluted 22,606 22,499 22,380 See Notes to Consolidated Financial Statements 50 Table of Contents TITAN MACHINERY INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED JANUARY 31, 2025, 2024 AND 2023 (in thousands) 2025 2024 2023 Net (Loss) Income $ ( 36,911 ) $ 112,441 $ 101,868 Other Comprehensive (Loss) Income Foreign currency translation adjustments ( 10,094 ) 6,779 ( 2,847 ) Comprehensive (Loss) Income $ ( 47,005 ) $ 119,220 $ 99,021 See Notes to Consolidated Financial Statements 51 Table of Contents TITAN MACHINERY INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED JANUARY 31, 2025, 2024 AND 2023 (in thousands) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity Shares Outstanding Amount BALANCE, JANUARY 31, 2022 22,588 $ — $ 254,455 $ 182,916 $ ( 2,172 ) $ 435,199 Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 110 — ( 1,144 ) — — ( 1,144 ) Stock-based compensation expense — — 3,230 — — 3,230 Net income — — — 101,868 — 101,868 Other comprehensive loss — — — — ( 2,847 ) ( 2,847 ) BALANCE, JANUARY 31, 2023 22,698 — 256,541 284,784 ( 5,019 ) 536,306 Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 150 — ( 1,004 ) — — ( 1,004 ) Stock-based compensation expense — — 3,120 — — 3,120 Net income — — — 112,441 — 112,441 Other comprehensive loss — — — — 6,779 6,779 BALANCE, JANUARY 31, 2024 22,848 — 258,657 397,225 1,760 657,642 Common stock issued on grant of restricted stock, net of restricted stock forfeitures and restricted stock withheld for employee withholding tax 277 — ( 852 ) — — ( 852 ) Stock-based compensation expense — — 4,292 — — 4,292 Net loss — — — ( 36,911 ) — ( 36,911 ) Other comprehensive income — — — — ( 10,094 ) ( 10,094 ) BALANCE, JANUARY 31, 2025 23,125 $ — $ 262,097 $ 360,314 $ ( 8,334 ) $ 614,077 See Notes to Consolidated Financial Statements 52 Table of Contents TITAN MACHINERY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JANUARY 31, 2025, 2024 AND 2023 (in thousands) 2025 2024 2023 Operating Activities Net (loss) income $ ( 36,911 ) $ 112,441 $ 101,868 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 38,601 31,479 25,197 Impairment of goodwill, intangible assets and long lived assets 1,842 — — Deferred income taxes ( 15,812 ) 2,910 7,639 Stock-based compensation expense 4,292 3,120 3,230 Noncash interest expense 1,069 292 245 Noncash lease expense 8,067 9,430 9,099 Sale-leaseback financing expense 9,650 — — (Gain) loss on extinguishment of debt ( 3,585 ) — — Other, net 3,575 ( 2,811 ) ( 218 ) Changes in assets and liabilities, net of effects of acquisitions Receivables 28,804 ( 48,091 ) 5,267 Prepaid expenses and other assets 1,471 615 4,619 Inventories 166,182 ( 476,389 ) ( 180,929 ) Manufacturer floorplan payable ( 82,724 ) 368,111 69,633 Deferred revenue ( 25,573 ) ( 15,542 ) ( 20,901 ) Accounts payable, accrued expenses and other and other long-term liabilities ( 28,657 ) ( 17,845 ) ( 13,933 ) Net Cash Provided by (Used for) Operating Activities 70,291 ( 32,280 ) 10,816 Investing Activities Rental fleet purchases — ( 10,812 ) ( 9,994 ) Property and equipment purchases (excluding rental fleet) ( 51,845 ) ( 51,549 ) ( 27,217 ) Proceeds from sale of property and equipment 4,160 7,134 3,756 Acquisition consideration, net of cash acquired ( 260 ) ( 107,548 ) ( 100,471 ) Other, net 199 ( 597 ) ( 139 ) Net Cash Used for Investing Activities ( 47,746 ) ( 163,372 ) ( 134,065 ) Financing Activities Net change in non-manufacturer floorplan payable ( 37,694 ) 183,148 22,334 Proceeds from long-term debt borrowings 37,292 19,599 8,415 Principal payments on long-term debt and finance leases ( 18,500 ) ( 13,045 ) ( 7,637 ) Payment of debt issuance costs ( 3,864 ) ( 121 ) ( 9 ) Other, net ( 853 ) ( 1,004 ) ( 1,144 ) Net Cash (Used for) Provided by Financing Activities ( 23,619 ) 188,577 21,959 Effect of Exchange Rate Changes on Cash ( 1,094 ) 1,228 ( 946 ) Net Change in Cash ( 2,168 ) ( 5,847 ) ( 102,236 ) Cash at Beginning of Period 38,066 43,913 146,149 Cash at End of Period $ 35,898 $ 38,066 $ 43,913 Supplemental Disclosures of Cash Flow Information Cash paid during the period Income taxes, net of refunds $ 6,564 $ 39,844 $ 26,575 Interest $ 48,289 $ 19,377 $ 6,519 Supplemental Disclosures of Noncash Investing and Financing Activities Net property and equipment financed with long-term debt, leases, accounts payable and accrued liabilities $ 35,963 $ 17,911 $ 6,404 Finance lease debt to acquire finance asset $ 65,638 $ 2,471 $ 7,119 Net transfer of assets from (to) property and equipment to (from) inventories $ ( 6,765 ) $ ( 497 ) $ ( 3,767 ) See Notes to Consolidated Financial Statements 53 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES Nature of Business Titan Machinery Inc. and its subsidiaries (collectively, “Titan Machinery,” the “Company,” “we,” or us”) are engaged in the retail sale, service and rental of agricultural and construction machinery through its stores in the United States, Europe, and Australia. The Company's North American stores are located in Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, Wisconsin and Wyoming, its European stores are located in Bulgaria, Germany, Romania, and Ukraine, and its Australian stores are located in New South Wales, South Australia, and Victoria. Seasonality The agricultural and construction equipment businesses are highly seasonal, which causes the Company's quarterly results and cash flows to fluctuate during the year. The Company's customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons, which for farmers are the planting and harvesting seasons, and for construction customers is dependent on weather seasons in their respective regions, which is typically the second and third quarters of the Company's fiscal year for much of its Construction footprint. The Company's parts and service revenues are also typically highest during its customers' busy seasons, due to the increased use of their equipment during this time, which generates the need for more parts and service work. However, weather conditions impact the timing of our customers' busy times, which may cause the Company's quarterly financial results to differ between fiscal years. In addition, the fourth quarter typically is a significant period for equipment sales in the United States because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant accounts, transactions and profits between the consolidated companies have been eliminated in consolidation. The Company's foreign subsidiaries have fiscal years ending on December 31 of each year, consistent with statutory reporting requirements in each of the respective countries. The accounts of the Company's foreign subsidiaries are consolidated as of December 31 of each year. No events or transactions occurred related to these subsidiaries in January 2025 that would have materially affected the consolidated financial position, results of operations or cash flows. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, particularly related to realization of inventory, impairment of long-lived assets, goodwill, indefinite-lived intangible assets, collectability of receivables, and income taxes. Concentrations of Credit Risk The Company's sales are to agricultural and construction equipment customers principally in the U.S. states in which it has stores as well as in the European countries and Australian states in which its stores are located. The Company extends credit to its customers in the ordinary course of business and monitors its customers' financial condition to minimize its risks associated with trade receivables; however, the Company does not generally require collateral on trade receivables. The Company's cash balances are maintained in bank deposit accounts, which, at times, are in excess of federally insured limits. Concentrations in Operations The Company currently purchases new equipment, rental equipment and the related parts from a limited number of manufacturers. Although no change in suppliers is anticipated, the occurrence of such a change could cause a possible loss of sales and adversely affect operating results. The Company is the holder of authorized dealerships granted by CNH Industrial America, LLC and CNHI International SA (collectively referred to "CNH Industrial") whereby it has the right to act as an 54 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) authorized dealer for the entity's equipment at specified locations. The dealership authorizations and floorplan payable facilities can be canceled by the respective entity if the Company does not observe certain established guidelines and covenants. In addition, the Company believes that the following factors related to concentrations in suppliers, and in particular CNH Industrial, have a significant impact on its operating results: • CNH Industrial's product offerings, reputation and market share; • CNH Industrial's product prices and incentive and discount programs; • Supply of inventory from CNH Industrial and ability to match demand levels and delivery timelines; • CNH Industrial provides floorplan payable financing for the purchase of a substantial portion of the Company's inventory; and • CNH Industrial provides a significant percentage of the financing and lease financing used by the Company's customers to purchase CNH Industrial equipment from the Company. Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to collect in exchange for those goods or services. Shipping and handling costs are recorded as cost of revenue. Sales, value added and other taxes collected from the Company's customers concurrent with the Company's revenue activities are excluded from revenue. Equipment Revenue. Equipment revenue transactions include the sale of new and used agricultural and construction equipment. The Company satisfies its performance obligations and recognizes revenue at a point in time, upon delivery of the product. Once a product is delivered, the customer has physical possession of the asset, can direct the use of the asset, and has the significant risks and rewards of ownership of the asset. Equipment transactions often include both cash and non-cash consideration. Cash consideration is paid directly by the Company's customers or by third-party financial institutions financing the Company's customer transactions. Non-cash consideration is in the form of trade-in equipment assets. The Company assigns a value to trade-in assets by estimating a future selling price, which the Company estimates based on relevant internal and third-party data, less a gross profit amount to be realized at the time the trade-in asset is sold and an estimate of any reconditioning work required to ready the asset for sale. Both cash and non-cash consideration may be received prior to or after the Company's performance obligation is satisfied. Any consideration received prior to the satisfaction of the Company's performance obligation is recognized as deferred revenue. Receivables recognized for amounts not paid at the time our performance obligation is satisfied, including amounts due from third-party financial institutions, generally do not have established payment terms but are collected in relatively short time periods. Parts Revenue. We sell a broad range of maintenance and replacement parts for both equipment that we sell and other types of equipment. The Company satisfies its performance obligation and recognizes revenue at a point in time, upon delivery of the product to the customer. Once a product is delivered, the Company has a present right to payment, the customer has physical possession of the asset, can direct the use of the asset, and has the significant risks and rewards of ownership of the asset. In many cases, customers tender payment at the time of delivery. Balances not paid at the time of delivery are typically due in full within 30 days. Most parts are sold with a thirty-day right of return or exchange. Historically, parts returns have not been material. Parts revenue also includes the retail value of parts inventories consumed during the course of customer repair and maintenance services and services provided under manufacturer warranties. As further described below, we recognize revenue from these activities over time. Service Revenue. We provide repair and maintenance services, including repairs performed under manufacturer warranties, for our customer’s equipment. We recognize service and associated parts revenue of our repair and maintenance services over time as we transfer control of these goods and services over time. The Company recognizes revenue over time in the amount to which we have the right to invoice the customer, as such an amount corresponds to the value of our performance completed to date. Generally, the Company has the right to invoice the customer for labor hours incurred and parts inventories consumed during the performance of the service arrangement. Customer invoicing most often occurs at the conclusion of our repair and maintenance services. Accordingly, we recognize unbilled receivables for the amount of unbilled labor hours incurred and parts inventories consumed under our repair and maintenance arrangements. Upon customer invoicing, unbilled receivables are reclassified to receivables. In many cases, customers tender payment at the completion of our work and the creation of the invoice. Balances not paid at the time of invoicing are typically due in full within 30 days. 55 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Rental and Other Revenue. We rent equipment to our customers on a short-term basis for periods ranging from a few days to a few months. Rental revenue is recognized on a straight-line basis over the period of the related rental agreement. Revenue from rental equipment delivery and pick-up services is recognized when the service is performed. Other revenues primarily consist of fees charged in connection with short-haul equipment delivery and pick-up services, in which revenue is recognized at a point in time when the service is completed, and Global Positioning System ("GPS") signal subscriptions, in which revenue is recognized on a straight-line basis over the subscription period. Manufacturer Incentives and Discounts The Company receives various manufacturer incentives and discounts, which are based on a variety of factors. Discounts and incentives related to the purchase of inventory are recognized as a reduction of inventory prices and recognized as a reduction of cost of revenue when the related inventory is sold. Other incentives, reflecting reimbursement of qualifying expenses, are recognized as a reduction of the related expense when earned. Receivables and Credit Policy Trade accounts receivable due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 to 90 days from the invoice date. Balances unpaid after the due date based on trade terms are considered past due and begin to accrue interest. Payments of trade receivables are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the earliest unpaid invoices. Trade accounts receivable due from manufacturers relate to warranty work, discount programs and incentive programs. Trade accounts receivable due from finance companies primarily consist of contracts in transit with finance companies and balances due from credit card companies. These receivables do not generally have established payment terms but are collected in relatively short time periods. Unbilled receivables primarily represent unbilled labor hours incurred and parts inventories consumed during the performance of service arrangements for our customers at the Company's retail rates. The carrying amount of trade receivables is reduced by a valuation allowance that reflects management's best estimate of the amounts that will not be collected. Management reviews aged receivable balances and estimates the portion, if any, of the balance that will not be collected. Account balances are charged off after all appropriate means of collection have been exhausted and the potential for recovery is considered remote. Inventories New and used equipment are stated at the lower of cost or net realizable value, determined for each piece of equipment (specific identification). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The majority of our used equipment inventory is acquired through trade-ins from our customers and is initially measured and recognized based on the estimated future selling price of the equipment, less a gross profit amount to be realized when the trade-in asset is sold and an estimate of any reconditioning work required to ready the asset for sale. Subsequent to the initial recognition, all new and used equipment inventories are subject to lower of cost or net realizable value assessments. 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. Equipment inventory values are adjusted whenever the carrying amount exceeds the net realizable value. Parts inventories are valued at the lower of average cost or net realizable value. The Company estimates its lower of average cost or net realizable value adjustments on its parts inventories based on various factors including aging and sales of each type of parts inventory. Work in process represents costs incurred in the reconditioning and preparation for sale of our equipment inventories. 56 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Property and Equipment Property and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful life of each asset, as summarized below: Buildings and leasehold improvements Lesser of 15 - 39 years or lease term Machinery and equipment 3 - 15 years Furniture and fixtures 3 - 10 years Vehicles 5 - 10 years Rental fleet 3 - 10 years Depreciation for income tax reporting purposes is computed using accelerated methods. Goodwill Goodwill is recognized and initially measured as any excess of the acquisition-date consideration transferred in a business combination over the acquisition-date amounts recognized for the net identifiable assets acquired. Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not result in an impairment of goodwill. Impairment testing is performed at the reporting unit level. A reporting unit is defined as an operating segment or one level below an operating segment, referred to as a component. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results of that component. Evaluating goodwill for impairment involves the determination of the fair value of each reporting unit in which goodwill is recorded using a qualitative or quantitative analysis. If fair value is in excess of the carrying value, impairment is not indicated. If the carrying amount of a reporting unit is higher than its estimated fair value, the excess is recorded as an impairment expense. The Company performs its annual goodwill impairment test as of December 31st of each year. See Note 7, Intangible Assets and Goodwill , for details and results of the Company's impairment testing. Intangible Assets Intangible assets with a finite life consist of customer relationships and covenants not to compete, and are carried at cost less accumulated amortization. The Company amortizes the cost of identified intangible assets on a straight-line basis over the expected period of benefit, which generally range from five to ten years for customer relationships and the contractual term for covenants not to compete, which range from three to five years. Intangible assets with an indefinite life consist of distribution rights with manufacturers. Distribution rights are classified as an indefinite-lived intangible asset because the Company's distribution agreements continue indefinitely by their terms, or are routinely awarded or renewed without substantial cost or material modifications to the underlying agreements. Accordingly, the Company believes that its distribution rights intangible assets will contribute to its cash flows for an indefinite period, therefore the carrying amount of distribution rights is not amortized, but is tested for impairment annually, or more frequently upon the occurrence of certain events or when circumstances indicate that impairment may be present. The impairment test is a single-step assessment that identifies both the existence of impairment and the amount of impairment loss by comparing the estimated fair value of the asset to its carrying value, with any excess carrying value over the fair value being recognized as an impairment loss. The Company performs its annual impairment test as of December 31st of each year. See Note 7, Intangible Assets and Goodwill , for details and results of the Company's impairment testing. Impairment of Long-Lived Assets The Company's long-lived assets consist of its property and equipment. These assets are reviewed for potential impairment when events or circumstances indicate that the carrying value may not be recoverable. Recoverability is measured by comparing the estimated future undiscounted cash flows of such assets to their carrying values. If the estimated undiscounted cash flows exceed the carrying value, the carrying value is considered recoverable and no impairment recognition is required. However, if the sum of the undiscounted cash flows is less than the carrying value of the asset, the estimated fair value of the long-lived asset is compared to its carrying value and any amount by which the carrying value exceeds the fair value is recognized as an impairment charge. 57 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Long-lived assets deployed and used by individual store locations are reviewed for impairment at the individual store level. Other long-lived assets shared across stores within a segment or shared across segments are reviewed for impairment on a segment or consolidated level as appropriate. See Note 6, Property and Equipment , for details and results of the Company's impairment testing. Construction of Leased Assets and Sale-Leaseback Accounting The Company, from time to time, performs construction projects on its store locations, which are recorded as property and equipment in the consolidated balance sheet during the construction period. Upon completion, these assets are either placed in service, at which point the depreciation of the asset commences, or are part of a sale-leaseback transaction with a third-party buyer/lessor. In certain other situations, the Company enters into build-to-suit construction projects with third-party lessors. Under the applicable lease accounting rules, certain forms of lessee involvement in the construction of the leased asset deem the Company to be the owner of the leased asset during the construction period and requires capitalization of the lessor's total project costs on the consolidated balance sheet with the recognition of a corresponding financing obligation. Upon completion of a project for which the constructed assets are sold to a buyer/lessor or the completion of a capitalized build-to suit construction project, the Company performs a sale-leaseback analysis to determine if the asset and related financing obligation can be derecognized from the consolidated balance sheet. Certain provisions in a number of our lease agreements, primarily provisions regarding repurchase options, are deemed to be continuing involvement in the sold asset which precludes sale recognition. In such cases, the asset remains on the consolidated balance sheet under property and equipment and the proceeds received in the sale-leaseback transaction are recognized as a financing obligation within long-term debt in the consolidated balance sheet. Both the asset and the financing obligation are amortized over the lease term. In instances in which the Company has no continuing involvement in the sold asset, the criteria for sale recognition are met and the asset and any related financing obligation are derecognized from the consolidated balance sheet, and the lease is analyzed for proper accounting treatment as either an operating or finance lease. Derivative Instruments In the normal course of business, the Company is subject to risk from adverse fluctuations in foreign currency exchange rates. The Company may manage its market risk exposures through a program that includes the use of derivative instruments, primarily foreign exchange forward contracts. The Company's objective in managing its exposure to market risk is to minimize the impact on earnings, cash flows and the consolidated balance sheet. The Company does not use derivative instruments for trading or speculative purposes. All outstanding derivative instruments are recognized in the consolidated balance sheet at fair value. The effect on earnings from recognizing the fair value of the derivative instrument depends on its intended use, the hedge designation, and the effectiveness in offsetting the exposure of the underlying hedged item. Changes in fair values of instruments designated to reduce or eliminate fluctuations in the fair values of recognized assets and liabilities and unrecognized firm commitments are reported currently in earnings along with the change in the fair value of the hedged items. Changes in the fair value of derivative instruments that are not designated as hedging instruments or do not qualify for hedge accounting treatment are reported currently in earnings. Income Taxes The Company uses the asset and liability method to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that a portion or all of the deferred tax assets will not be realized. Changes in valuation allowances are included in its provision for income taxes in the period of the change. Deferred tax assets and liabilities are netted by taxing jurisdiction and presented as either a net asset or liability position, as applicable, on the consolidated balance sheets. The Company recognizes the financial statement benefit of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured as the largest amount that has a greater than 50% likelihood of being realized. Changes in the recognition or measurement of such positions are reflected in its provision for income taxes in the period of the change. The Company's policy is to recognize interest and penalties related to income tax matters within its provision for income taxes. 58 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Advertising Costs Costs incurred for producing and distributing advertising are expensed as incurred. Advertising expense amounted to $ 2.2 million, $ 3.1 million and $ 2.9 million for the years ended January 31, 2025, 2024 and 2023, respectively. Stock-Based Compensation The Company accounts for stock-based compensation at the fair value of the related equity instrument over the applicable service or performance period . Comprehensive Income and Foreign Currency Matters For the Company, comprehensive income (loss) represents net income adjusted for foreign currency translation adjustments. For the Company's foreign subsidiaries in which their local currency is their functional currency, assets and liabilities are translated into U.S. dollars at the balance sheet date exchange rate. Income and expenses are translated at average exchange rates for the year. Foreign currency translation adjustments are recorded directly as other comprehensive income (loss), a component of stockholders' equity. For the Company's foreign subsidiaries in which the local currency is not the functional currency, prior to translation into U.S. dollars, amounts must first be remeasured from the local currency into the functional currency. Nonmonetary assets and liabilities are remeasured at historical exchange rates and monetary assets and liabilities are remeasured at the balance sheet date exchange rate. Income and expenses are remeasured at average exchange rates for the year. Foreign currency remeasurement adjustments are included in the statement of operations. The Company recognized, in interest and other income in its consolidated statements of operations, a net foreign currency transaction (loss) gain of $( 4.0 ) million, $ 1.0 million, and $( 1.2 ) million for the years ended January 31, 2025, 2024, and 2023 respectively. Business Combinations The Company accounts for business combinations by allocating the purchase price amongst the assets acquired, including identifiable intangible assets, and liabilities assumed based on the fair values of the acquired assets and assumed liabilities. The acquisition accounting is finalized during the measurement period, which may not exceed one year from the date of acquisition. During the measurement period the Company's accounting for the business combination transaction may be based on estimates due to various unknown factors present at the date of acquisition. Fair Value Measurements Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Three levels of inputs may be used to measure fair value: Level 1—Values derived from unadjusted quoted prices in active markets for identical assets and liabilities. Level 2—Values derived from observable inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets in markets that are not active. Level 3—Values derived from unobservable inputs for which there is little or no market data available, thereby requiring the reporting entity to develop its own assumptions. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Segment Reporting The Company operates its business in four reportable segments, the Agriculture, Construction, Europe and Australia segments. The segment formerly known as "International" has been updated to "Europe" as of October 31, 2023 and a fourth segment "Australia" was created as a result of the Company's acquisition of J.J. O’Connor & Sons Pty. Ltd. ("O’Connors"), refer to Note 19 - Business Combinations for further details. 59 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Accounting Guidance Not Yet Adopted In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional income tax disclosures in the rate reconciliation table for federal, state and foreign income taxes, in addition to more details about the reconciling items in some categories when items meet a certain quantitative threshold. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the provisions of the amendments and the impact on its future consolidated statements. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in ASU 2024-03 require public entities to disclose specified information about certain costs and expenses. Additionally, in January 2025, FASB issued ASU 2025-01, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date to clarify the effective date of ASU 2024-03. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the provisions of the amendments and the impact on its future consolidated statements. Recently Adopted Accounting Guidance In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. On January 31, 2025, the Company adopted ASU No. 2023-07 to our consolidated financial statements. NOTE 2 - EARNINGS PER SHARE Earnings Per Share ("EPS") The Company uses the two-class method to calculate basic and diluted EPS. Unvested restricted stock awards are considered participating securities because they entitle holders to non-forfeitable rights to dividends during the vesting term. Under the two-class method, earnings of the Company are allocated between common stockholders and these participating securities based on the weighted-average number of shares of common stock and participating securities outstanding during the relevant period. Basic EPS is computed by dividing net income attributable to Titan Machinery Inc. common stockholders by the weighted-average number of shares of common stock outstanding during the relevant period. Diluted EPS is computed by dividing net income attributable to Titan Machinery Inc. common stockholders by the weighted-average number of shares of common stock outstanding after adjusting for potential dilution related to the conversion of all dilutive securities into common stock. All potentially dilutive securities were included in the computation of diluted EPS for years with net income. All anti-dilutive securities were excluded from the computation of diluted EPS. 60 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table sets forth the calculation of basic and diluted EPS: Year Ended January 31, 2025 2024 2023 (in thousands, except per share data) Numerator Net (loss) income $ ( 36,911 ) $ 112,441 $ 101,868 Allocation to participating securities — ( 1,519 ) ( 1,295 ) Net income attributable to Titan Machinery Inc. common stockholders $ ( 36,911 ) $ 110,922 $ 100,573 Denominator Basic weighted-average common shares outstanding 22,606 22,493 22,373 Plus: incremental shares from assumed vesting of restricted stock units — 6 7 Diluted weighted-average common shares outstanding 22,606 22,499 22,380 (Loss) Earnings per Share: Basic $ ( 1.63 ) $ 4.93 $ 4.50 Diluted $ ( 1.63 ) $ 4.93 $ 4.49 Anti-dilutive shares excluded from diluted weighted-average common shares outstanding: Stock options and restricted stock units 12 — — 61 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3 - REVENUE The following tables present our revenue disaggregated by revenue source and segment for the years ended January 31, 2025, 2024 and 2023: Year Ended January 31, 2025 Agriculture Construction Europe Australia Total (in thousands) Equipment $ 1,462,204 $ 222,503 $ 188,296 $ 177,295 $ 2,050,298 Parts 288,968 48,768 58,712 32,009 428,457 Service 129,455 27,797 11,911 10,944 180,107 Other 4,044 1,892 783 867 7,586 Revenue from contracts with customers 1,884,671 300,960 259,702 221,115 2,666,448 Rental 3,757 30,614 1,303 — 35,674 Total revenues $ 1,888,428 $ 331,574 $ 261,005 $ 221,115 $ 2,702,122 Year Ended January 31, 2024 Agriculture Construction Europe Australia Total (in thousands) Equipment $ 1,624,010 $ 221,140 $ 245,423 $ 54,743 $ 2,145,316 Parts 293,554 51,019 54,356 11,912 410,841 Service 117,087 26,913 10,437 2,878 157,315 Other 5,180 1,998 760 276 8,214 Revenue from contracts with customers 2,039,831 301,070 310,976 69,809 2,721,686 Rental 4,432 31,393 934 — 36,759 Total revenues $ 2,044,263 $ 332,463 $ 311,910 $ 69,809 $ 2,758,445 Year Ended January 31, 2023 Agriculture Construction Europe Total (in thousands) Equipment $ 1,269,298 $ 201,077 $ 241,184 $ 1,711,559 Parts 228,520 50,628 48,048 327,196 Service 96,418 25,079 8,306 129,803 Other 4,044 1,897 915 6,856 Revenue from contracts with customers 1,598,280 278,681 298,453 2,175,414 Rental 3,440 29,776 676 33,892 Total revenues $ 1,601,720 $ 308,457 $ 299,129 $ 2,209,306 Deferred revenue from contracts with customers totaled $ 91.7 million and $ 114.6 million as of January 31, 2025 and January 31, 2024, respectively. Our deferred revenue most often increases in the fourth quarter of each fiscal year, due to a higher level of customer down payments or prepayments. During the year ended January 31, 2025, the Company recognized substantially all of the revenue that was included in the deferred revenue balance as of January 31, 2024. The following is a summary of deferred revenue as of January 31, 2025 and January 31, 2024: January 31, 2025 January 31, 2024 (in thousands) Deferred revenue from contracts with customers $ 91,729 $ 114,578 Deferred revenue from rental and other contracts 204 1,274 $ 91,933 $ 115,852 62 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) No material amount of revenue was recognized during the year ended January 31, 2025 from performance obligations satisfied in previous periods. The Company has elected as a practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of service of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. The contracts for which the practical expedient has been applied include (i) equipment revenue transactions, which do not have a stated contractual term, but are short-term in nature, and (ii) service revenue transactions, which also do not have a stated contractual term but are generally completed within 30 days and for such contracts we recognize revenue over time at the amount to which we have the right to invoice for services completed to date. NOTE 4 - RECEIVABLES The Company provides an allowance for expected credit losses on its nonrental receivables. To measure the expected credit losses, receivables have been grouped based on shared credit risk characteristics as shown in the table below. Trade and unbilled receivables from contracts with customers have credit risk and the allowance is determined by applying expected credit loss percentages to aging categories based on historical experience that are updated at least annually. The rates may also be adjusted to the extent future events are expected to differ from historical results. Given that the credit terms for these receivables are short-term, changes in credit loss percentages due to future events may not occur on a frequent basis. In addition, the allowance is adjusted based on information obtained by continued monitoring of individual customer credit. Trade receivables from finance companies, other receivables due from manufacturers, and other receivables have not historically resulted in any credit losses to the Company. These receivables are short-term in nature and deemed to be of good credit quality and have no need for any allowance for expected credit losses. Management continually monitors these receivables and should information be obtained that identifies potential credit risk, an adjustment to the allowance would be made if deemed appropriate. Trade and unbilled receivables from rental contracts are primarily in the United States and are specifically excluded from the accounting guidance in determining an allowance for expected losses. The Company provides an allowance for these receivables based on historical experience and using credit information obtained from continued monitoring of customer accounts. January 31, 2025 January 31, 2024 (in thousands) Trade and unbilled receivables from contracts with customers Trade receivables due from customers $ 49,777 $ 83,187 Unbilled receivables 24,584 22,324 Less allowance for expected credit losses ( 1,994 ) ( 3,038 ) 72,367 102,473 Short-term receivables due from finance companies 16,793 28,486 Trade and unbilled receivables from rental contracts Trade receivables 4,015 3,101 Unbilled receivables 580 666 Less allowance for expected credit losses ( 578 ) ( 465 ) 4,017 3,302 Other receivables Due from manufacturers 25,692 18,775 Other 945 621 26,637 19,396 Receivables, net of allowance for expected credit losses $ 119,814 $ 153,657 63 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Following is a summary of allowance for credit losses on trade and unbilled accounts receivable by segment: Agriculture Construction Europe Australia Total (in thousands) Balance at January 31, 2023 $ 367 $ 124 $ 2,589 $ — $ 3,080 Current expected credit loss provision 42 171 449 56 718 Write-offs charged against allowance ( 265 ) ( 134 ) ( 478 ) — ( 877 ) Credit loss recoveries collected 20 16 52 — 88 Foreign exchange impact — — 26 3 29 Balance at January 31, 2024 164 177 2,638 59 3,038 Current expected credit loss provision 641 269 ( 146 ) 12 776 Write-offs charged against allowance ( 292 ) ( 369 ) ( 1,308 ) ( 39 ) ( 2,008 ) Credit loss recoveries collected 92 132 — 3 227 Foreign exchange impact — — ( 52 ) 13 ( 39 ) Balance at January 31, 2025 $ 605 $ 209 $ 1,132 $ 48 $ 1,994 The following table presents impairment losses on receivables arising from sales contracts with customers and receivables arising from rental contracts: Year Ended January 31, 2025 2024 (in thousands) Impairment losses on: Receivables from sales contracts with customers $ 781 $ 669 Receivables from rental contracts 220 247 $ 1,001 $ 916 NOTE 5 - INVENTORIES January 31, 2025 January 31, 2024 (in thousands) New equipment $ 611,916 $ 745,445 Used equipment 313,867 347,041 Parts and attachments 177,719 203,124 Work in process 5,170 7,420 $ 1,108,672 $ 1,303,030 64 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6 - PROPERTY AND EQUIPMENT January 31, 2025 January 31, 2024 (in thousands) Rental fleet equipment $ 76,447 $ 79,308 Machinery and equipment 38,306 31,760 Vehicles 114,402 103,765 Furniture and fixtures 29,840 57,935 Land, buildings, and leasehold improvements 288,761 204,992 547,756 477,760 Less accumulated depreciation ( 168,066 ) ( 178,986 ) $ 379,690 $ 298,774 The Company includes depreciation expense related to its rental fleet and its trucking fleet, for hauling equipment, in Cost of Revenue, which was $ 9.5 million, $ 8.7 million, and $ 8.2 million for the years ended January 31, 2025, 2024 and 2023, respectively. All other depreciation expense is included in Operating Expenses, which totaled $ 25.3 million, $ 21.3 million, and $ 15.9 million for the years ended January 31, 2025, 2024 and 2023, respectively. The Company had assets related to sale-leaseback financing obligations and finance leases associated with real estate of store locations, which are included in the land, buildings and leasehold improvements balance above. Such assets had gross carrying values totaling $ 53.0 million and $ 18.4 million, and accumulated amortization balances totaling $ 6.4 million and $ 9.7 million, as of January 31, 2025 and 2024, respectively. The Company reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset groups) may not be recoverable. The Company performed the impairment analyses for these assets which have a combined carrying value of $51.6 million. The Company determined, based on changing expectations regarding the future use of certain long-lived assets, that the $18.4 million carrying value of these assets may not be fully recoverable. The Company performed an impairment assessment of these asset groups and as a result recognized an impairment charge 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. The impairment charge is reflected in the Impairment of Intangibles and Long-Lived Assets amount in the Condensed Consolidated Statements of Operations. The Company did not have similar impairments in fiscal 2024 or fiscal 2023. NOTE 7 - INTANGIBLE ASSETS AND GOODWILL Finite-Lived Intangible Assets The Company's finite-lived intangible assets consist of customer relationships and covenants not to compete. The following is a summary of intangible assets with finite lives as of as of January 31, 2025 and 2024: January 31, 2025 January 31, 2024 Cost Accumulated Amortization Net Cost Accumulated Amortization Net (in thousands) (in thousands) Covenants not to compete $ 1,125 $ ( 642 ) $ 483 $ 1,236 $ ( 453 ) $ 783 Customer relationships 11,137 ( 2,278 ) 8,859 12,209 ( 704 ) 11,505 $ 12,262 $ ( 2,920 ) $ 9,342 $ 13,445 $ ( 1,157 ) $ 12,288 Intangible asset amortization expense was $ 1.9 million, $ 0.7 million and $ 0.2 million for the years ended January 31, 2025, 2024 and 2023, respectively. The covenants not to compete and customer relationships assets for the year ended January 31, 2025 have a weighted-average amortization period of 4.7 years and 6.9 years, respectively. The Company reviews its long-lived assets for potential impairment whenever events or circumstances indicate that the carrying value of the long-lived asset (or asset groups) may not be recoverable. The Company performed an impairment assessment of these asset groups and as a result recognized an impairment charge of $0.1 million with respect to its German subsidiary's assets within the Europe segment, which is reflected in Impairment of Intangible and Long-Lived Assets in the Condensed Consolidated Statements of Operations. 65 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of January 31, 2025, future amortization expense is expected to be as follows: Fiscal years ending January 31, Amount (in thousands) 2026 $ 1,703 2027 1,762 2028 1,675 2029 1,555 2030 1,516 Thereafter 1,131 $ 9,342 Indefinite-Lived Intangible Assets The Company's indefinite-lived intangible assets consist of distribution rights assets. Changes in the carrying amount of distribution rights during the years ended January 31, 2025 and 2024 are as follows: Agriculture Construction Australia Total (in thousands) Balance, January 31, 2023 $ 17,178 $ 72 $ — $ 17,250 Arising from business combinations 976 — 21,470 22,446 Foreign currency translation — — 1,372 1,372 Balance, January 31, 2024 18,154 72 22,842 41,068 Foreign currency translation — — ( 2,104 ) ( 2,104 ) Balance, January 31, 2025 $ 18,154 $ 72 $ 20,738 $ 38,964 The Company performs at least an annual impairment testing of its indefinite-lived distribution rights intangible assets. Under the impairment test, the fair value of distribution rights intangible assets is estimated based on a multi-period excess earnings model, an income approach. This model allocates future estimated earnings of the store/complex amongst working capital, fixed assets and other intangible assets of the store/complex and any remaining earnings (the "excess earnings") are allocated to the distribution rights intangible assets. The earnings allocated to the distribution rights are then discounted to arrive at the present value of the future estimated excess earnings, which represents the estimated fair value of the distribution rights intangible asset. The discount rate applied reflects the Company's estimate of the weighted-average cost of capital of comparable companies plus an additional risk premium to reflect the additional risk inherent in the distribution right asset. The results of the Company's annual distribution rights impairment test for the year ended January 31, 2025, indicated no impairment. During the years ended January 31, 2025, 2024 and 2023, no impairment charges were recognized in association with indefinite-lived intangible assets. The Company had gross indefinite-lived intangible assets of $ 40.1 million and accumulated impairments of $1.1 million as of January 31, 2025. 66 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Goodwill Changes in the carrying amount of goodwill during the years ended January 31, 2025 and 2024 are as follows: Agriculture Europe Australia Total (in thousands) Balance, January 31, 2023 $ 30,622 $ — $ — $ 30,622 Arising from business combinations 7,198 471 24,261 31,930 Foreign currency translation — 3 1,550 1,553 Balance, January 31, 2024 37,820 474 25,811 64,105 Arising from business combinations — 70 — 70 Foreign currency translation — ( 13 ) ( 2,385 ) ( 2,398 ) Impairment — ( 531 ) — (531) Balance, January 31, 2025 $ 37,820 $ — $ 23,426 $ 61,246 The Company performs at least an annual impairment testing of goodwill as of December 31st of each year. Under the quantitative impairment test, the fair value of the reporting units were estimated using an income 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. Due to ongoing losses, an interim test was completed in the second quarter of fiscal 2025, for our German reporting unit. The results of the Company's impairment test for the German reporting unit indicated that the estimated fair value of the reporting unit was less than the carrying value. The implied fair value of the goodwill associated with the reporting unit approximated zero, thus requiring a full impairment charge of the goodwill carrying value of the reporting unit. As such, a goodwill impairment charge of $0.5 million was recognized, which is included in Impairment of Goodwill in the Condensed Consolidated Statement of Operations. The impairment charge arose as the result of lowered expectations of the future financial performance of this reporting unit, which was impacted by the current year operating performance and challenging industry conditions. This removed all remaining goodwill in our Europe segment. The annual impairment testing of the Agriculture and Australia reporting units exceeded their carrying values, therefore there were no impairments in these two reporting units. During the years ended January 31, 2024 and 2023, the Company did not recognize any Goodwill impairment charges. The gross goodwill balance was $ 63.2 million and $ 65.6 million as of January 31, 2025 and 2024, respectively. The accumulated goodwill impairment loss was $ 2.0 million and $ 1.5 million and as of January 31, 2025 and 2024, respectively , within the Europe segment. NOTE 8 - FLOORPLAN PAYABLE/LINES OF CREDIT Floorplan payable balances reflect amounts owed to manufacturers for equipment inventory purchases and amounts outstanding under our various floorplan line of credit facilities. In the consolidated statements of cash flows, the Company reports cash flows associated with manufacturer floorplan financing as operating cash flows and cash flows associated with non-manufacturer floorplan financing as financing cash flows. As of January 31, 2025, the Company had floorplan lines of credit totaling $ 1.5 billion, which is primarily comprised of three significant floorplan lines of credit: (i) a $ 875.0 million credit facility with CNH Industrial which includes $75.0 million revolver line, (ii) a $ 390.0 million line of credit with a group of banks (the "Bank Syndicate"), and (iii) a $ 80.0 million credit facility with DLL Finance LLC (“DLL Finance”). 67 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) CNH Industrial Floorplan Payable Line of Credit As of January 31, 2025, the Company had an $ 875.0 million credit facility with CNH Industrial, of which $ 650.0 million is available for U.S. domestic financing which includes $75.0 million revolver line, $125.0 million is available for Australian financing, and $ 100.0 million is available for European financing. The U.S. domestic financing facility offers financing for new and used equipment inventories. Available borrowings under this credit facility are reduced by outstanding floorplan payable balances and other acquisition-related financing arrangements with CNH Industrial. This credit facility charges interest at the prime rate plus or minus an agreed upon percentage, but not less than zero, for the financing of new and used equipment inventories and rental fleet assets. CNH Industrial offers periods of reduced interest rates and interest-free periods. Repayment terms vary, but generally payments are made from sales proceeds or rental revenue generated from the related inventories or rental fleet assets. Balances under the outstanding CNH Industrial U.S. domestic credit facility are secured by the inventory or rental fleet purchased with the floorplan proceeds. The European financing facility offers financing for new equipment inventories. Available borrowings under this credit facility are reduced by outstanding floorplan payable balances. Amounts outstanding are generally due approximately 75 days after the date of invoice by CNH Industrial. Generally, no interest is charged on outstanding balances. However, in certain international markets the Company receives extended terms from CNH Industrial similar to what we receive domestically with reduced interest and interest free periods. Amounts outstanding under European financing facility are secured by the inventory purchased with the floorplan proceeds. The Australian financing facility offers financing for new and used equipment inventories. Available borrowings under the credit facility are reduced by outstanding floorplan payable balances. CNH Industrial offers periods of reduced interest rates and interest-free periods. Repayment terms vary, but generally payments are made from sales proceeds. The credit facility charges interest at the CNH Industrial prime rate plus or minus an agreed upon spread, but not less than zero, for the financing of new and used equipment inventories and rental fleet assets. Amounts outstanding under the Australian financing facility are secured by the inventory purchased with the floorplan proceeds. The CNH Industrial credit facility contains financial covenants that impose a maximum level of adjusted debt to tangible net worth of 3.50 :1.00 and minimum fixed charge coverage ratio of 1.10 :1.00. The credit facility also contains various restrictive covenants that require prior consent of CNH Industrial if the Company desires to engage in any acquisition of, consolidation or merger with, any other business entity in which the Company is not the surviving company; create subsidiaries; move any collateral outside of the U.S.; or sell, rent, lease or otherwise dispose or transfer any of the collateral, other than in the ordinary course of business. CNH Industrial’s consent is also required for the acquisition of any CNH Industrial dealership. In addition, the CNH Industrial credit facility restricts the Company's ability to incur any liens upon any substantial part of the assets. The credit facility automatically renews on August 31st of each year unless earlier terminated by either party. In fiscal year 2025, the Company received various letters from CNH Industrial Capital America LLC that waived the Consolidated Fixed Charge Coverage Ratio covenant for the period January 31, 2025 through January 31, 2026. As of January 31, 2025, the Company was in compliance with the adjusted debt to tangible net worth and due to the one year waiver of the fixed charge coverage ratio, that covenant was not applicable. 68 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Bank Syndicate Credit Agreement - Floorplan Payable and Working Capital Lines of Credit On May 17, 2024, the Company entered into a Fourth Amended and Restated Credit Agreement (the "Bank Syndicate Agreement") with a group of banks, which replaced the previous Third Amended and Restated Credit Agreement (the "Prior Credit Facility") the Company had entered into in April 2020. As of January 31, 2025, the Company had a $500.0 million credit facility, consisting of a $ 390.0 million floorplan facility (the "Floorplan Loan") and a $ 110.0 million operating line (the "Revolver Loan"). The amounts available under the Bank Syndicate Agreement are subject to borrowing base calculations and reduced by outstanding standby letters of credit and certain reserves. The Bank Syndicate Agreement includes a variable interest rate on outstanding balances, charges a 0.25 % non-usage fee on the average monthly unused amount, and requires monthly payments of accrued interest. The default loan type is a Secured Overnight Financing Rate ("SOFR") Rate Loan and only if the Company actively selects a Base Rate Loan would the Base Rate Loan be used. For the U.S. borrowings under the Bank Syndicate Agreement, the Company elects at the time of any advance to choose a Base Rate Loan or a SOFR Rate Loan. The SOFR Rate is based upon one-month, three-month or six-month SOFR plus an adjustment ( 0.11 % for one-month term; 0.26 % for three-month term; and 0.43 % for six-month term), as chosen by the Company, but in no event shall the SOFR Rate be less than zero. The Base Rate is the greater of (a) the prime rate of interest announced, from time to time, by Bank of America; (b) the Federal Funds Rate plus 0.50%, or (c) one-month SOFR plus 1.0%, but in no event shall the Base Rate be less than zero. The effective interest rate on the Company’s borrowings is then calculated by adding an applicable margin to the SOFR Rate or Base Rate. The applicable margin is determined based on excess availability as determined under the Bank Syndicate Agreement and ranges from 0.75 % to 1.25 % for Base Rate Loans and 1.75 % to 2.25 % for SOFR Rate Loans. The applicable margins for the U.S. loans under the Bank Syndicate Agreement are 0.25% higher than the margins under the Prior Credit Facility. For the Australian borrowings under the Bank Syndicate Agreement, the Company elects at the time of the advance to choose an Australian Base Rate Loan or an Australian Bill Rate Loan. The Australian Bill Rate is based on the Bank Bill Swap Reference Bid Rate with an equivalent term of the loan, but in no event shall the Australian Bill Rate be less than zero. The Australian Base Rate is the sum of 1% plus the interbank overnight cash rate calculated by the Reserve Bank of Australia (but in no event shall the Australian cash rate be less than zero). The effective interest rate on the Australian’s borrowings is then calculated by adding an applicable margin to the Australian Bill Rate or the Australian Base Rate. The applicable margin is determined based on excess availability as determined under the Credit Agreement and ranges from 1.75 % to 2.25 %. The Bank Syndicate Agreement does not obligate the Company to maintain financial covenants, except in the event that excess availability (each as defined in the Bank Syndicate Agreement) is less than 15% of the lower of the borrowing base or the size of the maximum credit line, at which point the Company is required to maintain a fixed charge coverage ratio of at least 1.10 :1.00. Based on our excess availability and cash collateral, we were not subject to the fixed charge coverage ratio as of January 31, 2025. The Bank Syndicate Agreement includes various restrictions on the Company and its subsidiaries' activities, including, under certain conditions, limitations on the Company’s ability to make certain cash payments including for cash dividends and stock repurchases, issuance of equity instruments, acquisitions and divestitures, and entering into new indebtedness transactions. On December 3, 2024, the Company entered into Amendment No. 1 to the Bank Syndicate Agreement that lowers the adjusted excess availability metric from 15% to 10% for the period December 15, 2024 to March 15, 2025, and thereafter reverts to 15%. As of January 31, 2025, under these provisions of the Bank Syndicate Agreement, the Company did not have any unrestricted dividend availability. The Bank Syndicate Agreement matures on May 17, 2029. The Floorplan Loan is used to finance equipment inventory purchases. Amounts outstanding are recorded as floorplan payables, within current liabilities on the consolidated balance sheets, as the Company intends to repay amounts borrowed within one year. The Revolver Loan is used to finance rental fleet equipment and for general working capital requirements of the Company. Amounts outstanding are typically recorded as long-term debt, within long-term liabilities on the consolidated balance sheets, as the Company does not have the obligation to repay amounts borrowed within one year. As of January 31, 2025 and 2024, the Company did not have a need to utilize the revolver loan as the balance was zero for both periods. 69 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DLL Finance Floorplan Payable Line of Credit As of January 31, 2025, the Company had a $ 80.0 million credit facility with DLL Finance, of which $ 47.3 million, $ 20.0 million and $12.7 million is available for domestic, European and Australian financing, respectively. The DLL Finance credit facility may be used to purchase or refinance new and used equipment inventory. Amounts outstanding for domestic financing bear interest on outstanding balances of one-month SOFR plus 2.37 % spread. Amounts outstanding for European financing bear interest on outstanding balances of three-month EURIBOR plus an applicable margin of 2.10 % to 2.50 %. Amounts outstanding for Australian financing bear interest on outstanding balances of DLL Base Rate plus 1.59% spread. The credit facility allows for increase, decrease or termination of the facility by DLL Finance in its sole discretion at any time. The credit facility contains financial covenants that impose a maximum net leverage ratio of 3.50:1.00 and a minimum fixed charge coverage ratio of 1.10 :1.00. The credit facility also requires the Company to obtain prior consent from DLL Finance if the Company desired to engage in any acquisition meeting certain financial thresholds. The balances outstanding with DLL Finance are secured by the inventory or rental fleet purchased with the floorplan proceeds. Repayment terms vary by individual notes, but generally payments are made from sales proceeds or rental revenue from the related inventories or rental fleet assets. The Company received various letters from DLL Finance LLC that waived the Minimum Consolidated Fixed Charge Coverage Ratio covenant for the period January 31, 2025 through January 31, 2026. As of January 31, 2025, the Company was in compliance with the net leverage ratio and due to the one year waiver of the fixed charge coverage ratio, that covenant was not applicable. Other Lines of Credit The Company’s other lines of credit include various floorplan and working capital lines of credit primarily offered by non-manufacturer financing entities. Interest charged on outstanding borrowings are generally variable rates, such as EURIBOR and BBSY and include interest margins. Outstanding balances are generally secured by inventory and other current assets. In most cases these lines of credit have a one-year maturity, with an annual review process to extend the maturity date for an additional one-year period. Summary of Outstanding Amounts As of January 31, 2025 and 2024, the Company’s outstanding balance of floorplan payables and lines of credit consisted of the following: January 31, 2025 January 31, 2024 (in thousands) CNH Industrial $ 520,927 $ 567,677 Bank Syndicate Agreement Floorplan Loan 127,154 162,845 DLL Finance 37,859 38,528 Other outstanding balances with manufacturers and non-manufacturers 69,758 124,796 $ 755,698 $ 893,846 As of January 31, 2025, the interest-bearing floorplan payables carried a variable interest rate with a range of 4.06 % to 9.15% compared to a range of 5.24 % to 10.70% as of January 31, 2024. As of January 31, 2025 and 2024, $ 302.4 million and $ 428.3 million, respectively, of outstanding floorplan payables were non-interest bearing. NOTE 9 - ACCRUED EXPENSES & OTHER January 31, 2025 January 31, 2024 (in thousands) Compensation $ 32,882 $ 43,375 Sales, payroll, real estate and value added taxes 7,175 8,075 Insurance 5,613 5,212 Other 13,822 17,738 $ 59,492 $ 74,400 70 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 10 - LONG-TERM DEBT The following is a summary of long-term debt: Year Ended January 31, Description Maturity Dates Interest Rates 2025 2024 (in thousands) Mortgage loans, secured Various through May 2039 2.1 % to 7.3 % $ 129,604 $ 88,669 Sale-leaseback financing obligations December 2028 to December 2030 6.1 % to 6.2 % 9,804 10,043 Vehicle loans, secured Various through January 2031 2.1 % to 7.4 % 27,198 14,433 Other Various through September 2029 2.4% to 7.4 % 2,081 6,968 Total debt 168,687 120,113 Less: current maturities 10,920 13,706 Long-term debt, net $ 157,767 $ 106,407 In fiscal 2025, the Company signed an agreement to purchase 13 of its leased facilities at the end of the respective lease terms or earlier, resulting in a sale-leaseback finance modification expense of $9.7 million, which was recorded to Interest and other income (expense) in the Condensed Consolidated Statements of Operations. In fiscal 2025, the Company purchased and subsequently financed several locations that it previously leased including sale-leaseback financing locations, creating an increase in mortgage loans as of January 31, 2025 compared to January 31, 2024. Additionally, the Company decreased the Other debt balance by $3.6 million for the debt cancellation in relation to the U.S. Treasury Department's New Market Tax Credit Program. The gain in debt cancellation was recorded to Interest and other income (expense) in the Condensed Consolidated Statements of Operations. Long-term debt maturities are as follows: Years Ending January 31, Amounts (in thousands) 2026 $ 10,920 2027 18,486 2028 17,801 2029 29,491 2030 41,377 Thereafter 50,612 $ 168,687 NOTE 11 - DERIVATIVE INSTRUMENTS The Company holds derivative instruments for the purpose of minimizing exposure to fluctuations in foreign currency exchange rates to which the Company is exposed in the normal course of its operations. Derivative Instruments Not Designated as Hedging Instruments The Company periodically uses foreign currency forward contracts to hedge the effects of fluctuations in exchange rates on outstanding intercompany loans. The Company does not formally designate and document such derivative instruments as hedging instruments; however, the instruments are an effective economic hedge of the underlying foreign currency exposure. Both the gain or loss on the derivative instrument and the offsetting gain or loss on the underlying intercompany loan are recognized in earnings immediately, thereby eliminating or reducing the impact of foreign currency exchange rate fluctuations on net income. The Company's foreign currency forward contracts generally have one to three-month maturities. The notional value of outstanding foreign currency contracts was $46.1 million and $25.3 million as of January 31, 2025 and 2024, respectively. As of January 31, 2025, and 2024, the fair value of the Company's outstanding derivative instruments was not material. Derivative instruments recognized as assets are recorded in Prepaid expenses and other in the consolidated balance sheets, and derivative instruments recognized as liabilities are recorded in Accrued expenses and other in the consolidated balance sheets. 71 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table sets forth the gains and (losses) recognized in income related to the Company’s derivative instruments for the years ended January 31, 2025, 2024 and 2023. Year Ended January 31, 2025 2024 2023 (in thousands) Derivatives Not Designated as Hedging Instruments: Foreign currency contracts (a) $ 2,662 $ ( 960 ) $ 1,377 Total Derivatives $ 2,662 $ ( 960 ) $ 1,377 (a) Amounts are included in Interest and other income in the consolidated statements of operations . NOTE 12 - CONTINGENCIES Litigation The Company is engaged in proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between affected parties and governmental intervention. Based upon the information available to the Company and discussions with legal counsel, it is the Company's opinion that the outcome of the various legal actions and claims that are incidental to its business will not have a material impact on the financial position, results of operations or cash flows. Such matters, however, are subject to many uncertainties, and the outcome of any matter is not predictable with assurance. Insurance The Company has insurance policies with varying deductibility levels for property and casualty losses and is insured for losses in excess of these deductibles on a per claim and aggregate basis. The Company is primarily self-insured for health care claims for eligible participating employees. The Company has stop-loss coverage to limit its exposure to significant claims on a per claim and annual aggregate basis. The Company determines its liabilities for claims, including incurred but not reported losses, based on all relevant information, including actuarial estimates of claim liabilities. Other Matters The Company is the lessee under many real estate leases, in which it agrees to indemnify the lessor from certain liabilities arising as a result of the use of the leased premises, including environmental liabilities. Additionally, from time to time, the Company enters into agreements with third parties in connection with the sale of assets in which it agrees to indemnify the purchaser from certain liabilities or costs arising in connection with the assets. Also, in the ordinary course of business in connection with purchases or sales of goods and services, the Company enters into agreements that may contain indemnification provisions. In the event that an indemnification claim is asserted, the Company's liability would be limited by the terms of the applicable agreement. See additional information on operating lease commitments in Note 13, Leases . NOTE 13 - LEASES As Lessee The Company, as lessee, leases certain of its dealership locations, office space, equipment and vehicles under operating and financing classified leasing arrangements. The Company has elected to not record leases with a lease term at commencement of 12 months or less on the consolidated balance sheet; such leases are expensed on a straight-line basis over the lease term. Many real estate lease agreements require the Company to pay the real estate taxes on the properties during the lease term and require that the Company maintains property insurance on each of the leased premises. Such payments are deemed to be variable lease payments, as the amounts may change during the term of the lease. Certain leases include renewal options that can extend the lease term for periods of one to ten years. Most real estate leases grant the Company a right of first refusal or other options to purchase the real estate, generally at fair market value, either during the lease term or at its conclusion. In most cases, the Company has not included these renewal and purchase options within the measurement of the right-of-use lease asset and lease liability. Most often the Company cannot readily determine the interest rate implicit in the lease and thus applies its incremental borrowing rate to capitalize the right-of-use asset and lease liability. We estimate our incremental borrowing rate by incorporating considerations of lease term, asset class and lease currency and geographical market. Our lease agreements do not contain any material non-lease components, residual value guarantees or material restrictive covenants. 72 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company subleases a small number of real estate assets to third parties, primarily dealership locations for which we have ceased operations. All sublease arrangements are classified as operating leases. The components of lease expense were as follows: Year Ended January 31, Classification 2025 2024 2023 (in thousands) Finance lease cost: Amortization of leased assets Operating expenses $ 1,804 $ 679 $ 862 Interest on lease liabilities Other interest expense 2,419 172 184 Operating lease cost Operating expenses and rental and other cost of revenue 8,067 13,356 13,535 Short-term lease cost Operating expenses — — 71 Variable lease cost Operating expenses 1,864 1,885 2,013 Sublease income Interest and other income ( 570 ) ( 2,395 ) ( 1,384 ) $ 13,584 $ 13,697 $ 15,281 Right-of-use lease assets and lease liabilities consist of the following: Classification January 31, 2025 January 31, 2024 (in thousands) Assets Operating lease assets Operating lease assets $ 27,935 $ 54,699 Financing lease assets (a) Property and equipment, net of accumulated depreciation 44,233 1,545 Total leased assets $ 72,168 $ 56,244 Liabilities Current Operating Current operating lease liabilities $ 5,747 $ 10,751 Financing Accrued expenses and other 1,684 559 Noncurrent Operating Operating lease liabilities 25,588 50,964 Financing Other long-term liabilities 44,894 1,406 Total lease liabilities $ 77,913 $ 63,680 (a) Finance lease assets are recorded net of accumulated amortization of $ 2.0 million and $ 1.4 million as of January 31, 2025 and 2024, respectively. Maturities of lease liabilities as of January 31, 2025 are as follows: Operating Finance Leases Leases Total Fiscal Year Ending January 31, (in thousands) 2026 $ 7,306 $ 4,845 $ 12,151 2027 6,653 10,078 16,731 2028 5,572 8,702 14,274 2029 5,307 20,142 25,449 2030 4,266 8,924 13,190 Thereafter 11,126 5,420 16,546 Total lease payments 40,230 58,111 98,341 Less: Interest 8,895 11,533 20,428 Present value of lease liabilities $ 31,335 $ 46,578 $ 77,913 73 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The weighted-average lease term and discount rate as of January 31, 2025 and 2024 are as follows: January 31, 2025 January 31, 2024 Weighted-average remaining lease term (years): Operating leases 7.8 6.9 Financing leases 3.5 4.1 Weighted-average discount rate: Operating leases 6.7 % 6.4 % Financing leases 7.8 % 8.8 % Other lease information is as follows: Year Ended January 31, 2025 2024 2023 (in thousands) Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 8,899 $ 12,561 $ 12,628 Operating cash flow from finance leases 2,419 172 184 Financing cash flows from finance leases 1,622 596 701 Operating lease assets obtained in exchange for new operating lease liabilities 1,893 16,006 6,261 Finance lease assets obtained in exchange for new finance lease liabilities 66,705 113 4,385 As Lessor The Company rents equipment to customers, primarily in the Construction segment, on a short-term basis. Our rental arrangements generally do not include minimum, noncancellable periods as the lessee is entitled to cancel the arrangement at any time. Most often, our rental arrangements extend for periods ranging from a few days to a few months. We maintain a fleet of dedicated rental assets within our Construction segment and, within all segments, may also provide short-term rentals of certain equipment inventory assets. Certain rental arrangements may include rent-to-purchase options whereby customers are given a period of time to exercise an option to purchase the related equipment at an established price with any rental payments paid applied to reduce the purchase price. All of the Company's leasing arrangements as lessor are classified as operating leases. Rental revenue is recognized on a straight-line basis over the rental period. Rental revenue includes amounts charged for loss and damage insurance on rented equipment. In most cases, our rental arrangements include non-lease components, including delivery and pick-up services. The Company accounts for these non-lease components separate from the rental arrangement and recognizes the revenue associated with these components when the service is performed. The Company has elected to exclude from rental revenue all sales, value added and other taxes collected from our customers concurrent with our rental activities. Rental billings most often occur on a monthly basis and may be billed in advance or in arrears, thus creating unbilled rental receivables or deferred rental revenue amounts. The Company manages the residual value risk of its rented assets by (i) monitoring the quality, aging and anticipated retail market value of our rental fleet assets to determine the optimal period to remove an asset from the rental fleet, (ii) maintaining the quality of our assets through on-site parts and service support and (iii) requiring physical damage insurance of our lessee customers. We primarily dispose of our rental assets through the sale of the asset by our retail sales force. Revenue generated from leasing activities is disclosed, by segment, in Note 3, Revenue . The following is the balance of our dedicated rental fleet assets of our Construction segment as of January 31, 2025 and 2024, respectively: January 31, 2025 January 31, 2024 (in thousands) Rental fleet equipment $ 76,447 $ 79,308 Less accumulated depreciation ( 26,327 ) ( 27,282 ) $ 50,120 $ 52,026 74 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14 - INCOME TAXES The components of income (loss) before income taxes for the years ended January 31, 2025, 2024 and 2023 consist of the following: 2025 2024 2023 (in thousands) U.S. $ ( 48,981 ) $ 130,438 $ 115,044 Foreign ( 1,004 ) 20,602 20,197 Total $ ( 49,985 ) $ 151,040 $ 135,241 The provision for (benefit from) income taxes charged to income for the years ended January 31, 2025, 2024 and 2023 consists of the following: 2025 2024 2023 (in thousands) Current Federal $ 1,127 $ 24,074 $ 15,943 State 93 7,020 5,776 Foreign 1,518 4,595 4,015 Total current taxes 2,738 35,689 25,734 Deferred Federal ( 11,303 ) 2,280 6,310 State ( 2,213 ) 266 1,210 Foreign ( 2,296 ) 364 119 Total deferred taxes ( 15,812 ) 2,910 7,639 Total $ ( 13,074 ) $ 38,599 $ 33,373 The reconciliation of the statutory federal income tax rate to the Company's effective rate is as follows: 2025 2024 2023 U.S. statutory rate 21.0 % 21.0 % 21.0 % Foreign statutory rates 2.0 % ( 0.9 ) % ( 0.2 ) % State taxes on income net of federal tax benefit 4.5 % 4.4 % 4.7 % Valuation allowances 2.4 % 0.6 % 0.4 % Debt forgiveness income - Ukraine ( 5.8 ) % — % — % All other, net 2.1 % 0.5 % ( 1.2 ) % 26.2 % 25.6 % 24.7 % 75 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Deferred tax assets and liabilities consist of the following as of January 31, 2025 and 2024: 2025 2024 (in thousands) Deferred tax assets: Right of use lease liability $ 18,992 $ 11,420 Net operating losses 5,946 6,725 Interest 9,343 — Inventory allowances 6,398 3,396 Accrued liabilities and other 5,821 5,141 Stock-based compensation 1,053 865 Receivables 478 614 Other — 675 Total deferred tax assets 48,031 28,836 Valuation allowances ( 6,267 ) ( 7,525 ) Deferred tax assets, net of valuation allowances $ 41,764 $ 21,311 Deferred tax liabilities: Property and equipment $ ( 19,830 ) $ ( 23,092 ) Right of use lease asset ( 17,401 ) ( 9,271 ) Intangible assets ( 10,799 ) ( 11,026 ) Total deferred tax liabilities $ ( 48,030 ) $ ( 43,389 ) Net deferred tax asset (liability) $ ( 6,266 ) $ ( 22,078 ) As of January 31, 2025, the Company has recorded $ 38.5 million of net operating loss carryforwards within certain of its domestic and foreign jurisdictions. The net operating loss carryforward within domestic jurisdictions is $7.2 million with unlimited carryforward period and $10.7 million that expire at various dates between the Company's fiscal years 2035 and 2045. The net operating carryforward within foreign jurisdictions is $ 16.1 million with unlimited carryforward periods and $4.5 million that expire at various dates between the Company's fiscal years 2037 and 2038. In assessing the foreign deferred tax assets as of January 31, 2025 and 2024, the Company concluded that a full valuation allowance is continued to be warranted in the Company's Ukrainian subsidiary, due to geopolitical concerns in the area. The Company also concluded a full valuation allowance on the Company's German and Luxembourg subsidiaries continued to be warranted based on the presence of historical losses and the Company’s expected future sources of taxable income. The Company has recorded valuation allowances of $6.3 million and $7.5 million for the international entities as of January 31, 2025 and 2024, respectively. In fiscal 2025, the Company had a $1.2 million reduction in valuation allowance primarily due the change in the net operating loss from taxable income in Ukraine and taxable loss in Germany. 76 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of January 31, 2025, the Company has recorded a liability for unrecognized tax benefits of $3.0 million. The liability was recorded as a reduction in the Company's deferred tax assets, mainly, related to its net operating losses and also the Company’s tax liability. If recognized, the entire $3.0 million of unrecognized tax benefits would affect the Company's effective tax rate. As of January 31, 2025, the Company did not have accumulated accrued interest and penalties, and for the year ended January 31, 2025 the Company did not recognize interest or penalties in its provision (benefit) for income taxes. The Company had no unrecognized tax benefits as of January 31, 2024 and January 31, 2023. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows: Year ended January 31, 2025 (in thousands) Unrecognized tax benefits - February 1 $ — Gross increases - tax positions in prior period — Gross decreases - tax positions in prior period — Gross increases - tax positions in current period 2,995 Lapse of statute of limitations — Unrecognized tax benefits - January 31 $ 2,995 The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign countries. It is no longer subject to income tax examinations by U.S. federal tax authorities for fiscal years ended prior to January 31, 2022 and state tax authorities for fiscal years ended prior to January 31, 2021. Certain foreign jurisdictions are subject to income tax examinations for the calendar year periods ranging between 2018 and 2024, depending on the jurisdiction of the entity. As of January 31, 2025, the Company had accumulated undistributed earnings in non-U.S. subsidiaries of approximately $ 52.0 million. Upon repatriation of such earnings the Company could be subject to additional U.S. or foreign taxes. The Company has not recorded a deferred tax liability associated with these undistributed earnings as such earnings are to be reinvested outside of the U.S. indefinitely. It is not practicable to estimate the amount of additional tax that might be payable if such earnings were repatriated. NOTE 15 - CAPITAL STRUCTURE The Company's certificate of incorporation provides it with the authority to issue 50,000,000 shares of $ 0.00001 par value stock, consisting of 45,000,000 shares of common stock and 5,000,000 shares classified as undesignated. NOTE 16 - STOCK-BASED COMPENSATION Stock-Based Compensation Plans The Company has one stock-based compensation plan, the Second Amended and Restated Titan Machinery Inc. 2014 Equity Incentive Plan (the "2014 Equity Incentive Plan"), to provide incentive compensation to participants for services that have been or will be performed for continuing as employees or members of the Board of Directors of the Company. Under the 2014 Equity Incentive Plan, which has been approved by the stockholders of the Company, the Company may grant stock-based awards for up to a maximum number of shares of common stock set forth in the 2014 Equity Incentive Plan under specified forms of equity award types. Shares issued for stock-based awards consist of authorized but unissued shares. During the year ended January 31, 2025, the 2014 Equity Incentive Plan was amended and restated to increase the shares available for equity awards from 2,200,000 shares to 3,150,000 shares. As of January 31, 2025, the Company had 1,027,150 shares authorized and available for future equity awards under the 2014 Equity Incentive Plan. Compensation cost arising from stock-based compensation and charged to operations was $ 4.4 million, $ 3.3 million and $ 3.3 million for the years ended January 31, 2025, 2024 and 2023, respectively. The related income tax benefit (net) was $ 1.1 million, $ 1.1 million and $ 1.3 million for the years ended January 31, 2025, 2024 and 2023, respectively. Restricted Stock Awards ("RSAs") The Company grants RSAs as part of its long-term incentive compensation to employees and members of the Board of Directors of the Company. The fair value of these awards is determined based on the closing market price of the Company's stock on the date of grant. The RSAs primarily vest over a period of approximately four years for employees and over one year 77 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) for members of the Board of Directors. The Company recognizes compensation expense ratably over the vesting period of the award. The restricted common stock underlying these awards are deemed issued and outstanding upon grant and carry the same voting and dividend rights of unrestricted outstanding common stock; provided, however, any dividends paid shall be subject to a right of forfeiture until the underlying rule of forfeiture of the RSA has lapsed. The following table summarizes RSA activity for the year ended January 31, 2025: Shares Weighted Average Grant Date Fair Value (in thousands) Nonvested at January 31, 2024 336 $ 25.48 Granted 319 18.22 Forfeited ( 152 ) 22.88 Vested ( 10 ) 23.26 Nonvested at January 31, 2025 493 $ 21.63 The weighted-average grant date fair value of RSAs granted was $ 18.22 , $ 26.48 and $ 27.06 during the years ended January 31, 2025, 2024 and 2023, respectively. The total fair value of RSAs vested was $ 3.4 million, $ 3.7 million and $ 4.6 million during the years ended January 31, 2025, 2024 and 2023, respectively. As of January 31, 2025, there was $ 7.7 million of unrecognized compensation cost related to nonvested RSAs that is expected to be recognized over a weighted-average period of 2.4 years. Restricted Stock Units ("RSUs") The Company grants RSUs as part of its long-term incentive compensation to certain employees of the Company in our European operations. The fair value of these awards is determined based on the closing market price of the Company's common stock on the date of grant. The RSUs primarily vest over a period of approximately four years. The Company recognizes compensation expense ratably over the vesting period of the award. The common stock underlying these awards are not deemed issued or outstanding upon grant, and do not carry any voting or dividend rights. The following table summarizes RSU activity for the year ended January 31, 2025: Shares Weighted Average Grant Date Fair Value (in thousands) Nonvested at January 31, 2024 11 $ 24.17 Granted 6 18.20 Vested ( 5 ) 20.07 Nonvested at January 31, 2025 12 $ 22.82 The weighted-average grant date fair value of RSUs granted was $ 18.20 , $ 26.47 , and $ 26.23 for the fiscal years ended January 31, 2025, 2024, and 2023, respectively. As of January 31, 2025, there was $ 0.2 million of unrecognized compensation cost related to nonvested RSUs that is expected to be recognized over a weighted-average period of 2.4 years. Long-Term Cash Incentive Awards The Company grants long-term cash incentive awards as part of its long-term incentive compensation to certain international employees of the Company. The awards vest over a period of approximately four years and entitle the award recipient to a cash payment on the vesting date equal to the number of vested shares multiplied by the stock price of the Company on the date of vesting. These awards are liability-classified share-based payment awards in which fair value of the award is remeasured at each period until the liability is settled. Fair value of these awards is determined based on the closing price of the Company's stock as of the end of each reporting period. Changes in the fair value of the liability are recognized as compensation cost over the requisite service period. The percentage of the fair value that is accrued as compensation cost at the end of each period is equal to the percentage of the requisite service that has been rendered at that date. 78 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes activity for long-term cash incentive awards for the year ended January 31, 2025: Shares Weighted Average Grant Date Fair Value (in thousands) Nonvested at January 31, 2024 36 $ 24.73 Granted 35 17.93 Forfeited ( 8 ) 20.34 Vested ( 15 ) 21.54 Nonvested at January 31, 2025 48 $ 21.50 The weighted-average grant date fair value of long-term cash incentive awards granted was $ 17.93 during the year ended January 31, 2025. As of January 31, 2025, based on the Company's stock price on that day, there was $ 0.4 million of unrecognized compensation cost related to nonvested awards that is expected to be recognized over a weighted-average period of 1.4 years. NOTE 17 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following is a summary of the changes in accumulated other comprehensive income (loss), by component, for the fiscal years ended January 31, 2025, 2024 and 2023: Foreign Currency Translation Adjustment Net Investment Hedging Instruments, Unrealized Gain Total Accumulated Other Comprehensive Income (Loss) (in thousands) Balance, January 31, 2022 $ ( 4,883 ) $ 2,711 $ ( 2,172 ) Total other comprehensive loss ( 2,847 ) — ( 2,847 ) Balance, January 31, 2023 ( 7,730 ) 2,711 ( 5,019 ) Total other comprehensive income 6,779 — 6,779 Balance, January 31, 2024 ( 951 ) 2,711 1,760 Total other comprehensive loss ( 10,094 ) — ( 10,094 ) Balance, January 31, 2025 $ ( 11,045 ) $ 2,711 $ ( 8,334 ) Income taxes are not provided for foreign currency translation adjustments arising from permanent investments in international subsidiaries. NOTE 18 - EMPLOYEE BENEFIT PLANS The Company has a 401(k) profit-sharing plan ("401(k) Plan") for all U.S. employees at least 19 years of age. The Company matches 50% of the first 8% of the participating employee's contribution. In addition, the Company may make a discretionary contribution to the 401(k) Plan as determined by the Board of Directors, with a maximum amount equal to the amount allowed under the IRS regulations. The Company recognized expense for contributions made to the 401(k) Plan totaling $ 8.6 million, $ 7.0 million and $ 5.4 million for the years ended January 31, 2025, 2024 and 2023, respectively. All amounts contributed during these years reflected matching contributions, as no discretionary contributions were made by the Company to the 401(k) Plan. NOTE 19 - BUSINESS COMBINATIONS Fiscal 2025 The Company acquired Gose Landtechnik e.K. on March 1, 2024, which consists of one location in Germany and is included in the Europe segment. This acquisition is not considered material to the overall consolidated financial statements during the year ended January 31, 2025 and has been included in the Condensed Consolidated Financial Statements from the date of the acquisition. 79 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fiscal 2024 On October 2, 2023, the Company acquired all of the outstanding equity interests of O’Connors. The acquired business consisted of 15 Case IH dealership locations and one parts center in the states of New South Wales, South Australia, and Victoria in Southeastern Australia. 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 the Australia segment. The Company incurred $ 1.1 million in acquisition related expenses in connection with this acquisition, which are included in Operating Expenses in the Consolidated Statements of Operations for the year ended January 31, 2024. The Company completed other acquisitions that were not considered material, individually or collectively, to the overall consolidated financial statements during the year ended January 31, 2024. These acquisitions consisted of five locations of Pioneer Farm Equipment Co. on February 1, 2023, in the state of Idaho, one location of Midwest Truck Parts Inc. on June 1, 2023, in the state Minnesota and one location of Scott Supply Co. on January 10, 2024, in the state of South Dakota, all of which are included in the Agriculture segment. The Company also acquired MAREP GmbH on May 1, 2023, which included two locations in Germany and is included in the Europe segment. These acquisitions have been included in the Condensed Consolidated Financial Statements from the date of the respective acquisition. The Company completed other acquisitions that were not considered material, individually or collectively, to the overall consolidated financial statements during the year ended January 31, 2024. These acquisitions consisted of five locations of Pioneer Farm Equipment Co. on February 1, 2023, in the state of Idaho, one location of Midwest Truck Parts Inc. on June 1, 2023, in the state Minnesota and one location of Scott Supply Co. on January 10, 2024, in the state of South Dakota, all of which are included in the Agriculture segment. The Company also acquired MAREP GmbH on May 1, 2023, which included two locations in Germany and is included in the Europe segment. These acquisitions have been included in the Condensed Consolidated Financial Statements from the date of the respective acquisition. Fiscal 2023 On August 1, 2022, the Company acquired all outstanding equity interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as the "Heartland Companies") for $ 94.4 million in cash consideration. The Heartland Companies consist of 12 CaseIH commercial application agriculture locations, in the states of Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and Wisconsin. The Heartland Companies have been a successful CaseIH commercial application dealer group and our acquisition of these entities provides the Company the opportunity for synergies due to the overlap of our footprints, which allows us to package deals that will include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint. These locations are included in the Company's Agriculture segment. In the most recently completed fiscal year, prior to acquisition, the Heartland Companies generated revenue of approximately $214.0 million. The results of operations for the Heartland Companies from the August 1, 2022 acquisition closing date through January 31, 2023, were approximate ly $103.2 million of revenue and $4.6 million of pre-tax income. The Company incurred $ 1.1 million i n acquisition related expenses in connection with this acquisition, which are included in operating expenses in the consolidated statements of operations for the year ended January 31, 2023. The Company has completed another acquisition that was not considered material to the overall consolidated financial statements during the year ended January 31, 2023. This acquisition included the two locations of Mark's Machinery, Inc. on April 1, 2022, in the state of South Dakota, which is included in the Agriculture segment. This acquisition has been included in the consolidated financial statements from the date of the acquisition. 80 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Purchase Price Allocation Each of the above acquisitions has been accounted for under the acquisition method of accounting, which requires the Company to estimate the acquisition date fair value of the assets acquired and liabilities assumed. As of January 31, 2025, the purchase price allocation for all business combinations from fiscal 2025 and prior are complete. The following summarizes the acquisition date fair value of consideration transferred and the acquisition date fair value of the identifiable assets acquired and liabilities assumed, including an amount for goodwill (in thousands): O’Connors October 2, 2023 Assets acquired: Cash $ 4,165 Receivables 8,323 Inventories 96,802 Prepaid expenses and other 314 Property and equipment 11,450 Operating lease assets 14,798 Intangible assets: Customer Relationships 10,928 Distribution Rights 21,470 Goodwill 24,261 Total assets 192,511 Liabilities Assumed: Accounts payable 4,702 Floorplan payable 74,815 Current operating lease liabilities 1,064 Deferred revenue 12,008 Accrued expenses and other 17,284 Long-term debt 2,371 Operating lease liabilities 13,733 Total liabilities 125,977 Net assets acquired $ 66,534 Goodwill recognized by segment: Australia $ 24,261 Goodwill expected to be deductible for tax purposes — The recognition of goodwill in the above business combination arose from the acquisition of an assembled workforce and anticipated synergies expected to be realized. The acquired customer relationship intangible assets are being amortized on a straight line basis over a useful life of seven years. The distribution rights assets are indefinite-lived intangible assets not subject to amortization, but are tested for impairment annually, or more frequently upon the occurrence of certain events or when circumstances indicate that impairment may be present. The Company estimated the fair value of these intangible assets using a multi-period excess earnings model, an income approach. 81 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Pro Forma Information The following summarized unaudited pro forma condensed statement of operations information for the twelve months ended January 31, 2025, 2024 and 2023, assumes the Heartland Companies acquisition occurred as of February 1, 2021 and O’Connors acquisition occurred as of February 1, 2022. The Company prepared the following summarized unaudited pro forma financial results for comparative purposes only. The summarized unaudited pro forma information may not be indicative of the results that would have occurred had the Company completed the acquisitions as of these dates or that will be attained in the future. Year Ended January 31, 2025 2024 2023 (in thousands) Total Revenues $ 2,702,122 $ 2,951,697 $ 2,595,342 Net (Loss) Income $ ( 36,911 ) $ 122,126 $ 120,339 NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS As of January 31, 2025 and 2024, the fair value of the Company's foreign currency contracts, which are either assets or liabilities measured at fair value on a recurring basis, was not material. These foreign currency contracts were valued using a discounted cash flow analysis, an income approach, utilizing readily observable market data as inputs, which is classified as a Level 2 fair value measurement. The Company also estimated the fair value of long-lived assets to be approximately zero in certain instances when no future cash flows were assumed to be generated from the use of such assets and the expected sales values were deemed to be nominal. All such fair value measurements were based on unobservable inputs and thus are Level 3 fair value inputs. The Company also has financial instruments that are not recorded at fair value in the consolidated balance sheets, including cash, receivables, payables, and long-term debt. The carrying amounts of these financial instruments approximated their fair values as of January 31, 2025 and January 31, 2024. Approximate fair value of these financial instruments was estimated based on Level 2 fair value inputs. The estimated fair value of the Company's Level 2 long-term debt, which is provided for disclosure purposes only, is as follows: January 31, 2025 January 31, 2024 (in thousands) Carrying amount $ 158,883 $ 99,031 Fair value $ 145,010 $ 103,102 NOTE 21 - BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION The Company has four reportable and operating segments: Agriculture, Construction, Europe and Australia. This segmentation aligns with the results of operations presented to the Company's chief operating decision maker ("CODM") in reviewing the Company to make decisions regarding the allocation of resources, to assess the Company's operating performance and to make strategic decisions. The Company identifies the CODM to be the Company's Chief Executive Officer. The Company's segments are determined based on management structure, which is organized based on types of products sold and geographic areas, as described in the following paragraphs. The performance measure used to evaluate segment performance and allocate resources across segments is segment income (loss) before taxes. Corporate unallocated expenses are centrally managed costs and are therefore excluded from this profit measure to provide transparency of our segment operating results. Our CODM considers variances of actual performance to our annual operating plan and periodic forecasts when making decisions. The Company's Agriculture segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming to home and garden use in North America. This segment also includes ancillary sales and services related to agricultural activities and products such as equipment transportation, GPS signal subscriptions and finance and insurance products. The Company's Construction segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from heavy construction to light industrial machinery use to customers in North America. This segment also includes ancillary sales and services related to construction activities such as equipment transportation, GPS signal subscriptions and finance and insurance products. 82 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company’s Europe segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming and construction to home and garden use to customers in Eastern Europe and Germany. Similar to the Agriculture segment, this segment also includes ancillary sales and services related to agricultural activities and products such as equipment transportation, GPS signal subscriptions and finance and insurance products. The Company’s Australian segment sells, services, and rents machinery, and related parts and attachments, for uses ranging from large-scale farming and construction to home and garden use to customers in Southeastern Australia. This segment also includes ancillary sales and services related to agricultural activities and products such as equipment transportation, GPS signal subscriptions and finance and insurance products. The Company retains various unallocated income/(expense) items and assets at the general corporate level, which the Company refers to as "Shared Resources" in the table below. Shared Resource assets primarily consist of cash and property and equipment. Revenue between segments is immaterial. Net sales and long-lived assets, by geographic area were as follows: Revenue Year Ended January 31, 2025 2024 2023 (in thousands) United States $ 2,220,002 $ 2,376,726 $ 1,910,177 Australia 221,115 69,809 — Other international countries 261,005 311,910 299,129 $ 2,702,122 $ 2,758,445 $ 2,209,306 Long-lived assets Year Ended January 31, 2025 2024 (in thousands) United States $ 363,672 $ 305,512 Australia 24,512 27,637 Other international countries 20,323 21,233 $ 408,507 $ 354,382 83 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Certain financial information for each of the Company's business segments is set forth below. Year Ended January 31, 2025 (in thousands) Agriculture Construction Europe Australia Total Revenue Equipment $ 1,462,204 $ 222,503 $ 188,296 $ 177,295 $ 2,050,298 Parts 288,968 48,768 58,712 32,009 428,457 Service 129,455 27,797 11,911 10,944 180,107 Rental and other 7,801 32,506 2,086 867 43,260 $ 1,888,428 $ 331,574 $ 261,005 $ 221,115 $ 2,702,122 Cost of Revenue Equipment $ 1,395,384 $ 197,354 $ 162,581 $ 157,484 Parts 194,917 34,681 43,346 21,289 Service 47,840 8,613 6,446 3,924 Rental and other 7,522 22,624 1,351 1,136 Operating expense 254,858 61,517 42,739 30,363 Impairment Charge (1) 201 168 1,473 — Floorplan interest expense 21,384 5,462 4,159 2,172 Sale-leaseback financing expense 5,139 4,511 — — Other segment expense (income), net (2) 962 3,294 2,804 1,859 Segment (loss) income before taxes $ ( 39,779 ) $ ( 6,650 ) $ ( 3,894 ) $ 2,888 $ (47,435) Shared resources unallocated expense ( 2,550 ) Loss before taxes $ ( 49,985 ) Depreciation and amortization $ 14,022 $ 10,518 $ 3,670 $ 3,623 Total Segment Assets (3) $ 1,060,180 $ 252,471 $ 248,282 $ 192,331 $ 1,753,264 Shared Resources Assets 60,674 Total Assets $ 1,813,938 Total Segment Capital Expenditures $ 41,874 $ 10,076 $ 4,100 $ 3,190 $ 59,240 Shared Resources Assets Capital Expenditures ( 7,395 ) Total Capital Expenditures $ 51,845 (1) Impairment charge related to goodwill, intangible and long-lived assets. (2) Balance consists of other interest income (expense) and foreign currency. (3) Agriculture and Construction cash balances are held at Shared Resources. 84 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended January 31, 2024 (in thousands) Agriculture Construction Europe Australia Total Revenue Equipment $ 1,624,010 $ 221,140 $ 245,423 $ 54,743 $ 2,145,316 Parts 293,554 51,019 54,356 11,912 410,841 Service 117,087 26,913 10,437 2,878 157,315 Rental and other 9,612 33,391 1,694 276 44,973 $ 2,044,263 $ 332,463 $ 311,910 $ 69,809 $ 2,758,445 Cost of Revenue Equipment $ 1,425,414 $ 186,815 $ 204,056 $ 48,273 Parts 197,026 35,850 39,107 7,938 Service 39,930 7,480 5,447 1,124 Rental and other 6,592 20,628 1,085 326 Operating expense 246,514 60,151 42,749 7,147 Floorplan interest expense 8,281 1,816 1,651 406 Other segment expense (income), net (1) ( 564 ) 1,378 1,328 481 Segment income before taxes $ 121,070 $ 18,345 $ 16,487 $ 4,114 $ 160,016 Shared resources unallocated expense ( 8,976 ) Income before taxes $ 151,040 Depreciation and amortization $ 12,244 $ 9,676 $ 3,290 $ 938 Total Segment Assets (2) $ 1,183,367 $ 257,142 $ 280,354 $ 225,421 $ 1,946,284 Shared Resources Assets 45,977 Total Assets $ 1,992,261 Total Segment Capital Expenditures $ 38,734 $ 12,050 $ 6,764 $ 529 $ 58,077 Shared Resources Assets Capital Expenditures 4,284 Total Capital Expenditures $ 62,361 (1) Balance consists of other interest income (expense) and foreign currency. (2) Agriculture and Construction cash balances are held at Shared Resources. 85 Table of Contents TITAN MACHINERY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended January 31, 2023 (in thousands) Agriculture Construction Europe Total Revenue Equipment $ 1,269,298 $ 201,077 $ 241,184 $ 1,711,559 Parts 228,520 50,628 48,048 327,196 Service 96,418 25,079 8,306 129,803 Rental and other 7,484 31,673 1,591 40,748 $ 1,601,720 $ 308,457 $ 299,129 $ 2,209,306 Cost of Revenue Equipment $ 1,107,195 $ 169,825 $ 200,519 Parts 151,639 35,489 33,290 Service 33,963 7,488 4,757 Rental and other 4,626 19,593 1,083 Operating expense 199,020 56,595 37,730 Floorplan interest expense 2,855 733 646 Other segment expense (income), net (1) ( 309 ) 166 907 Segment income before taxes $ 102,731 $ 18,568 $ 20,197 $ 141,496 Shared resources unallocated expense ( 6,255 ) Income before taxes $ 135,241 Depreciation and amortization $ 9,200 $ 9,170 $ 2,575 Total Segment Assets (2) $ 788,265 $ 187,739 $ 170,647 $ 1,146,651 Shared Resources Assets 42,044 Total Assets $ 1,188,695 Total Segment Capital Expenditures $ 15,303 $ 10,721 $ 2,767 $ 28,791 Shared Resources Assets Capital Expenditures 7,691 Total Capital Expenditures $ 36,482 (1) Balance consists of other interest income (expense) and foreign currency. (2) Agriculture and Construction cash balances are held at Shared Resources. 86 Table of Contents Schedule II—Valuation and Qualifying Accounts and Reserves Titan Machinery Inc. Classification Beginning Balance Additions Charged to Expenses Deductions for Write-offs, Net of Recoveries Foreign Currency Translation Adjustments Ending Balance (in thousands) Valuation reserve deduction from receivables: Year Ended January 31, 2025 $ 3,503 $ 1,001 $ ( 1,890 ) $ ( 42 ) $ 2,572 Year Ended January 31, 2024 3,440 928 ( 922 ) 57 3,503 Year Ended January 31, 2023 2,448 1,674 ( 655 ) ( 27 ) 3,440 87 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.