What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-05 compared with 2024-12-05 · 114 added, 265 removed, 126 unchanged (75% of the section changed)

2 unchanged sentences

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

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

subsidiary CNH Industrial America, LLC, we are the largest retail dealer of CaseIH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the United States.

Based upon information provided to us by CNH, we are the largest retail dealer of CaseIH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the United States.

We operate our business through four reportable segments:

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Demand for agricultural equipment and, to a lesser extent, parts and service support, is impacted by agricultural commodity prices and net farm income.

Based on September 2024 U.S.

Department of Agriculture publications, the estimate of net farm income for calendar year 2024 indicated an approximate 4.4% decrease as compared to calendar year 2023, which follows an approximate 19.5% decrease in net farm income for calendar year 2023 as compared to calendar year 2022.

Given this expected decrease in farmer profitability, the industry is experiencing decreased demand for equipment purchases.

For the third quarter of fiscal 2025, our net income was $1.7 million, or $0.07 per diluted share, compared to a fiscal 2024 third quarter net income of $30.2 million, or $1.32 per diluted share.

Based upon February 2025 U.S.

Department of Agriculture publications, calendar year 2024 net farm income is estimated to have decreased by 23.6% compared to 2022.

federal government recently imposed significant tariffs on imports from a broad range of countries.

In response, some countries have enacted or are expected to enact retaliatory tariffs on U.S.

Although the overall impact of these trade measures remains uncertain, we recognize the possibility of increases in the wholesale prices that we pay for our equipment and parts inventory.

These higher wholesale prices could compress our margins if we are unable to fully pass on these cost increases to our retail customers.

Additionally, retaliatory tariffs may negatively affect U.S.

agricultural exports, which could have downstream effects on our core customer base in the farming sector.

Some analysts have also cautioned that prolonged disruptions to global trade could increase the risk of broader macroeconomic challenges, including the possibility of a recession.

For the first quarter of fiscal 2026, our net loss was $13.2 million, or $0.58 per diluted share, compared to a fiscal 2025 first quarter net income of $9.4 million, or $0.41 per diluted share.

Significant factors impacting the quarterly comparisons were:

• Gross profit margin decreased to 16.3% for the third quarter of fiscal 2025, as compared to 19.9% for the third quarter of fiscal 2024.

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

In addition, the Company has taken an active stance on managing inventory down to targeted levels.

• Floorplan interest expense increased by $5.9 million in the third quarter of fiscal 2025 as compared to the same period in fiscal 2024.

The increase is primarily due to a higher level of interest-bearing inventory and usage of existing floorplan capacity to finance the O'Connors acquisition in October 2023.

• Revenue in the third quarter of fiscal 2025 decreased by 2.1% compared to the third quarter of fiscal 2024.

The revenue decrease was led by softening of demand for equipment purchases due to the expected decline of net farm income this growing season and mostly offset by the additional revenue resulting from the acquisition of O'Connors, in October 2023.

O’Connor & Sons Pty.

On October 2, 2023, we acquired all of the outstanding equity interests of O’Connors.

The acquired business consisted of 15 CaseIH dealership locations and one parts center in the states of New South Wales, South Australia, and Victoria in Southeastern Australia.

O'Connors has been a successful Case IH complex, and our acquisition of this entity provides us with the opportunity to expand our international presence into the large, well-established Australian agriculture market.

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

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

ERP Transition

In the third quarter of fiscal 2025, we completed the implementation of the phased roll-out plan to integrate all of our domestic stores to the new Enterprise Resource Planning ("ERP").

With the full domestic implementation complete, the focus has now shifted to the next phase, which is working with the ERP provider to enhance the support tools to improve employee efficiency and customer experience.

• Revenue in the first quarter of fiscal 2026 decreased by 5.5% compared to the first quarter of fiscal 2025.

The revenue decrease was led by softening of demand for equipment purchases due to the expected decline of net farm income this growing season.

• Gross profit margin decreased to 15.3% for the first quarter of fiscal 2026, as compared to 19.4% for the first quarter of fiscal 2025.

The decrease in gross profit margin is due to lower equipment margins, driven by softer retail demand and elevated inventory levels across the industry.

Critical Accounting Policies and Estimates

1 unchanged sentence

There have been no changes in our critical accounting policies and estimates since January 31, 2025.

Key Financial Metrics

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

The results of some of these metrics are discussed further throughout this Item 2.

Absorption is an industry term that refers to the percentage of an equipment dealer's operating expense covered by the combined gross profit from parts, service and rental fleet activity.

We calculate absorption by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on rental fleet debt.

This calculation of absorption does not include floorplan interest expense.

We believe that absorption is an important management metric because during economic down cycles our customers tend to postpone new and used equipment purchases while continuing to run, maintain and repair their existing equipment.

Thus, operating at a high absorption rate enables us to operate profitably throughout economic down cycles.

Dollar Utilization

Dollar utilization is a measurement of asset performance and profitability used in the rental industry.

We calculate the dollar utilization of our rental fleet equipment by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period.

While our rental fleet has variable expenses related to repairs and maintenance, its primary expense for depreciation is fixed.

Low dollar utilization of our rental fleet has a negative impact on gross profit margin and gross profit dollars due to the fixed depreciation component.

However, high dollar utilization of our rental fleet has a positive impact on gross profit margin and gross profit dollars.

Inventory Turnover

Inventory turnover measures the rate at which inventory is sold during the year.

We calculate it by dividing cost of sales on equipment for the last twelve months by the average of the month-end balances of our equipment and parts inventories for the same twelve-month period.

We believe that inventory turnover is an important management metric in evaluating the efficiency at which we are managing and selling our inventories.

Same-Store Results

Same-store sales for any period represent sales by stores that were part of the Company for the entire comparable period in the current and preceding fiscal years.

We do not distinguish between relocated or recently expanded stores in this same-store analysis.

Closed stores are excluded from the same-store analysis.

Results of Operations

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Segment information is provided later in the discussion and analysis of our results of operations.

Same-store sales for any period represent sales by stores that were part of the Company for the entire comparable period in the current and preceding fiscal years.

We do not distinguish between relocated or recently expanded stores in this same-store analysis.

Closed stores are excluded from the same-store analysis.

Stores that do not meet the criteria for same-store classification are described as excluded stores throughout this Results of Operations section.

Additional information regarding our segments is included in Note 17, Business Segment and Geographic Information, in Item 1.

Comparative financial data for each of our four sources of revenue are expressed below.

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

(dollars in thousands) (dollars in thousands)

Three Months Ended April 30,

(dollars in thousands)

Revenue $ 436,840 $ 468,089

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The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods indicated:

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Three Months Ended April 30,

Equipment 73.5 % 74.5 %

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Operating Expenses 16.2 % 15.8 %

Impairment of Intangible and Long-Lived Assets — % — % 0.1 % — %

Income from Operations 1.7 % 6.7 % 2.6 % 6.7 %

(Loss) Income from Operations (1.0) % 3.6 %

Other Expense (1.9) % (1.6) %

Income Before Income Taxes — % 5.8 % 0.5 % 6.2 %

Provision for Income Taxes (0.2) % 1.5 % 0.1 % 1.5 %

Net Income 0.3 % 4.3 % 0.4 % 4.6 %

Three Months Ended October 31, 2024 Compared to Three Months Ended October 31, 2023

(Loss) Income Before Income Taxes (2.9) % 2.0 %

(Benefit) Provision for Income Taxes (0.7) % 0.5 %

Net (Loss) Income (2.2) % 1.5 %

Three Months Ended April 30, 2025 Compared to Three Months Ended April 30, 2024

Consolidated Results

Three Months Ended October 31, Increase/ Percent

Three Months Ended April 30, Increase/ Percent

2025 2024 (Decrease) Change

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Total Revenue $ 594,336 $ 628,703 $ (34,367) (5.5) %

Total revenue for the third quarter of fiscal 2025 declined by 2.1% or $14.3 million compared to the third quarter of fiscal 2024 primarily due to same-store sales decrease of 10.5% resulting from challenging industry conditions such as decreases in agricultural commodity prices and projected net farm income which have a negative effect on customer sentiment.

Further, in the September 2024 U.S.

Department of Agriculture publications, calendar year 2024's net farm income is forecasted to decrease 4.4% compared to 2023, which in turn had a decline of 19.5% in net farm income compared to 2022.

This was partially offset by the acquisition of O'Connors that was completed in October 2023.

Three Months Ended October 31, Increase/ Percent

Total revenue for the first quarter of fiscal 2026 declined by 5.5% or $34.4 million compared to the first quarter of fiscal 2025 primarily due to challenging industry conditions such as decreases in agricultural commodity prices and projected net farm income which have a negative effect on customer sentiment.

Further, February 2025 U.S.

Department of Agriculture publications estimated calendar year 2024 net farm income to have decreased by 23.6% compared to 2022.

Three Months Ended April 30, Increase/ Percent

2025 2024 (Decrease) Change

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Total Gross Profit Mix 100.0 % 100.0 %

Gross profit for the third quarter of fiscal 2025 decreased 20.1% or $27.8 million, as compared to the same period last year.

Gross profit for the first quarter of fiscal 2026 decreased 25.3% or $30.8 million, as compared to the same period last year.

Gross profit margin declined to 15.3% in the current quarter from 19.4% in the prior year quarter.

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

Our Company-wide absorption rate — which is calculated by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt — decreased to 74.1% for the third quarter of fiscal 2025 compared to 87.4% during the same period last year.

The decrease in our absorption rate was primarily due to increased floorplan interest expense in the third quarter of fiscal 2025 compared to the same period last year.

The decrease in gross profit margin was primarily due to lower equipment margins, driven by softer retail demand and the Company's initiatives to manage inventory to targeted levels.

Our Company-wide absorption rate decreased to 75.5% for the first quarter of fiscal 2026 compared to 77.1% during the same period last year.

The decrease in our absorption rate was primarily due to lower gross profit in the first quarter of fiscal 2026 compared to the same period last year.

Operating Expenses

Three Months Ended October 31, Increase/ Percent

Three Months Ended April 30, Increase/ Percent

2025 2024 (Decrease) Change

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Operating Expenses as a Percentage of Revenue 16.2 % 15.8 % 0.4 % 2.5 %

Our operating expenses in the third quarter of fiscal 2025 increased 7.2% as compared to the third quarter of fiscal 2024.

The increase in operating expenses was primarily the result of additional operating expenses due to acquisitions that have taken place in the past year.

Operating expenses as a percentage of revenue increased to 14.5% in the third quarter of fiscal 2025 from 13.3% in the third quarter of fiscal 2024.

Our operating expenses in the first quarter of fiscal 2026 decreased 2.8% as compared to the first quarter of fiscal 2025.

The decrease was primarily driven by lower variable expenses associated with the year-over-year decline in revenue and profitability.

Operating expenses as a percentage of revenue increased to 16.2% in the first quarter of fiscal 2026 from 15.8% in the first quarter of fiscal 2025.

Impairment Charges

Three Months Ended October 31, Increase/ Percent

Three Months Ended April 30, Increase/ Percent

2025 2024 (Decrease) Change

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*n/m - not meaningful

In the third quarter of fiscal 2025, we recognized $0.3 million in impairment expense related to other intangible and long-lived assets, of which $0.2 million was within the Agriculture segment and $0.1 million was within the Construction segment.

In the first quarter of fiscal 2026, we recognized $0.3 million in impairment expense related to other intangible and long-lived assets in our Agriculture segment.

Other Income (Expense)

Three Months Ended October 31, Increase/ Percent

Three Months Ended April 30, Increase/ Percent

2025 2024 (Decrease) Change

(dollars in thousands)

Interest and other income (expense) $ 3,097 $ (235) $ 3,332 n/m

Interest and other income (expense) $ (488) $ (288) $ 200 69.4 %

Floorplan interest expense $ (6,526) $ (7,064) $ (538) (7.6) %

Other interest expense $ (4,286) $ (1,494) $ 2,792 n/m

The change in interest and other income (expense) for the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 was primarily due to foreign currency fluctuations in the quarter.

The increase in floorplan interest expense for the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024 was primarily due to a higher level of interest-bearing inventory, including the usage of existing floorplan capacity to finance the O'Connors acquisition in October 2023.

The increase in other interest expense in the third quarter of fiscal 2025 is the result of increased borrowing on our CNH Industrial revolving line of credit as well as an increased amount of long term debt outstanding resulting from real estate purchased as part of dealership acquisitions and purchases of previously leased facilities in fiscal 2024.

Provision for Income Taxes

Three Months Ended October 31, Increase/ Percent

Other interest expense $ (4,533) $ (2,459) $ 2,074 84.3 %

The decrease in floorplan interest expense for the first quarter of fiscal 2026 as compared to the first quarter of fiscal 2025 was primarily due to a lower level of interest-bearing inventory.

The increase in other interest expense in the first quarter of fiscal 2026 is the result of an increased amount of long-term debt outstanding resulting from the Company's acquisition of previously leased facilities in fiscal 2025 as well as an increase in facilities being financed with finance leases.

(Benefit) Provision for Income Taxes

Three Months Ended April 30, Increase/ Percent

2025 2024 (Decrease) Change

(dollars in thousands)

Provision for Income Taxes $ (1,438) $ 10,259 $ (11,697) (114.0) %

Our effective tax rate was 522.9 % and 25.4 % for each of the three months ended October 31, 2024 and October 31, 2023, respectively.

The decreased effective tax rate was primarily due to the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and the impact of the recognition of valuation allowance on our foreign deferred tax assets.

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

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

As of October 31, 2024, we recognized a nominal income tax expense for Pillar Two GloBE minimum tax.

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

(Benefit) Provision for Income Taxes

$ (4,078) $ 3,345 $ (7,423) (221.9) %

Our effective tax rate was 23.6 % and 26.2 % for the three months ended April 30, 2025 and 2024, respectively.

The effective tax rate for the three months ended April 30, 2025 and 2024, is subject to variation of the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and the impact of the recognition of valuation allowance on our foreign deferred tax assets.

Segment Results

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Revenue between segments is immaterial.

Three Months Ended October 31, Increase/ Percent

Three Months Ended April 30, Increase/ Percent

2025 2024 (Decrease) Change

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Europe 93,858 65,105 28,753 44.2 %

Australia 50,135 — 50,135 n/m

Australia 43,963 44,419 (456) (1.0) %

Total $ 594,336 $ 628,703 $ (34,367) (5.5) %

Income (Loss) Before Income Taxes

Agriculture $ 1,876 $ 35,130 $ (33,254) (94.7) %

Construction (941) 4,057 (4,998) (123.2) %

(Loss) Income Before Income Taxes

Agriculture $ (12,777) $ 13,045 $ (25,822) n/m

Construction (4,180) 268 (4,448) n/m

Europe 4,710 1,350 3,360 248.9 %

Australia (298) — (298) n/m

Segment (Loss) Income Before Income Taxes (558) 44,333 (44,891) (101.3) %

Australia (561) (486) (75) (15.4) %

Segment (Loss) Income Before Income Taxes (12,808) 14,177 (26,985) n/m

Shared Resources (4,474) (1,391) (3,083) (221.6) %

Total $ 275 $ 40,452 $ (40,177) (99.3) %

Agriculture segment revenue for the third quarter of fiscal 2025 decreased 9.3% compared to the third quarter of fiscal 2024, primarily driven by a same-store sales decrease of 10.8%.

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

Total $ (17,282) $ 12,786 $ (30,068) n/m

*n/m - not meaningful

Agriculture segment revenue for the first quarter of fiscal 2026 decreased 14.1% compared to the first quarter of fiscal 2025, primarily driven by a decrease in equipment revenue, which resulted from challenging industry conditions, such as decreases in agricultural commodity prices and projected net farm income, which negatively affected customer sentiment in the first quarter of fiscal 2026, as compared to the same period in the prior year.

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

Agriculture segment income before income taxes for the third quarter of fiscal 2025 was $1.9 million compared to $35.1 million for the third quarter of fiscal 2024.

The decrease in gross profit is primarily due to lower sales, which is being driven by softening demand, lower equipment margins, as well as an increase in floorplan interest expense.

Construction segment revenue for the third quarter of fiscal 2025 increased 10.0% compared to the third quarter of fiscal 2024.

The increase in revenue was primarily due to timing of equipment sales.

Our Construction segment loss before income taxes was $0.9 million for the third quarter of fiscal 2025 compared to $4.1 million income before income taxes in the third quarter of fiscal 2024.

The decrease in segment results was primarily related to a lower equipment margins as well as higher floorplan interest expense compared to same period last year.

In addition, dollar utilization of our rental fleet decreased from 33.2% in the third quarter of fiscal 2024 to 26.2% in the third quarter of fiscal 2025.

Dollar fleet utilization is calculated by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period.

Europe segment revenue was $62.4 million for the third quarter of fiscal 2025 compared to $85.2 million in the third quarter of fiscal 2024.

The decrease in revenue results the softening of equipment demand, which results from a decrease in global agricultural commodity prices, sustained higher interest rates and drought conditions in Eastern Europe which have negatively impacted yields and grower profitability.

Our Europe segment loss before income taxes was $1.2 million for the third quarter of fiscal 2025 compared to $5.1 million income before income taxes in the third quarter of fiscal 2024.

The decrease in segment pre-tax income was primarily the result of decreased equipment sales as noted above as well as a reduction in equipment gross margins due to softening of demand.

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

Australia segment revenue for the third quarter of fiscal 2025 was $50.1 million.

Our Australia segment loss before income taxes was $0.3 million for the third quarter of fiscal 2025.

Agriculture segment loss before income taxes for the first quarter of fiscal 2026 was $12.8 million compared to income of $13.0 million before income taxes for the first quarter of fiscal 2025.

The decrease in gross profit is primarily due to lower sales, which is being driven by softening demand, and lower equipment margins.

Construction segment revenue for the first quarter of fiscal 2026 increased 0.9% compared to the first quarter of fiscal 2025.

Our Construction segment loss before income taxes was $4.2 million for the first quarter of fiscal 2026 compared to $0.3 million income before income taxes in the first quarter of fiscal 2025.

The decrease in segment results was primarily related to lower equipment margins compared to same period last year.

Additionally, the dollar utilization of our rental fleet decreased from 21.7% in the first quarter of fiscal 2025 to 20.1% in the first quarter of fiscal 2026.

Europe segment revenue was $93.9 million for the first quarter of fiscal 2026 compared to $65.1 million in the first quarter of fiscal 2025.

The increase in revenue resulted from an increase in equipment demand, which was driven by a stronger than expected response to European Union stimulus programs in Romania.

Our Europe segment income before income taxes was $4.7 million for the first quarter of fiscal 2026 compared to $1.4 million in the first quarter of fiscal 2025.

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

Australia segment revenue was $44.0 million for the first quarter of fiscal 2026 compared to $44.4 million in the first quarter of fiscal 2025.

Our Australia segment loss before income taxes was $0.6 million for the first quarter of fiscal 2026 compared to $0.5 million in the first quarter of fiscal 2025.

Shared Resources/Eliminations

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Since these allocations are set early in the year, unallocated balances may occur.

Shared Resources income before income taxes was $0.8 million for the third quarter of fiscal 2025 compared to loss before income taxes of $3.9 million for the same period last year.

Nine Months Ended October 31, 2024 Compared to Nine Months Ended October 31, 2023

Consolidated Results

Nine Months Ended October 31, Increase/ Percent

2024 2023 (Decrease) Change

(dollars in thousands)

Equipment $ 1,428,469 $ 1,431,272 $ (2,803) (0.2) %

Parts 339,118 320,077 19,041 5.9 %

Service 143,468 122,178 21,290 17.4 %

Rental and other 31,145 32,785 (1,640) (5.0) %

Total Revenue $ 1,942,200 $ 1,906,312 $ 35,888 1.9 %

Total revenue for the first nine months of fiscal 2025 increased by 1.9%, or $35.9 million, compared to the first nine months of fiscal 2024, driven primarily by the acquisition of O'Connors that was completed in October 2023 and offset by the decrease in Company-wide same-store sales of 7.6%.

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

Further, in the September 2024 U.S.

Department of Agriculture publications, calendar year 2024's net farm income is forecasted to decrease by 4.4% compared to 2023, which in turn had a decline of 19.5% in net farm income compared to 2022.

Nine Months Ended October 31, Increase/ Percent

2024 2023 (Decrease) Change

(dollars in thousands)

Equipment $ 135,648 $ 193,612 $ (57,964) (29.9) %

Parts 108,186 103,302 4,884 4.7 %

Service 92,715 81,168 11,547 14.2 %

Rental and other 8,077 12,236 (4,159) (34.0) %

Total Gross Profit $ 344,626 $ 390,318 $ (45,692) (11.7) %

Gross Profit Margin

Equipment 9.5 % 13.5 % (4.0) % (29.6) %

Parts 31.9 % 32.3 % (0.4) % (1.2) %

Service 64.6 % 66.4 % (1.8) % (2.7) %

Rental and other 25.9 % 37.3 % (11.4) % (30.6) %

Total Gross Profit Margin 17.7 % 20.5 % (2.8) % (13.7) %

Gross Profit Mix

Equipment 39.4 % 49.6 % (10.2) % (20.6) %

Parts 31.4 % 26.5 % 4.9 % 18.5 %

Service 26.9 % 20.8 % 6.1 % 29.3 %

Rental and other 2.3 % 3.1 % (0.8) % (25.8) %

Total Gross Profit Mix 100.0 % 100.0 %

Gross profit decreased 11.7% or $45.7 million for the first nine months of fiscal 2025, as compared to the same period last year.

Gross profit margin also decreased to 17.7% in the first nine months of fiscal 2025 from 20.5% in the same period last year.

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

Our Company-wide absorption rate for the first nine months of fiscal 2025 decreased to 72.8%, as compared to 95.9% during the same period last year.

The decrease in absorption was primarily driven by increased floorplan interest expense in the first nine months of fiscal 2025 compared to the same period last year.

Operating Expenses

Nine Months Ended October 31, Increase/ Percent

2024 2023 (Decrease) Change

(dollars in thousands)

Operating Expenses $ 293,087 $ 262,182 $ 30,905 11.8 %

Operating Expenses as a Percentage of Revenue 15.1 % 13.8 % 1.3 % 9.4 %

Our operating expenses for the first nine months of fiscal 2025 increased $30.9 million as compared to the first nine months of fiscal 2024.

The increase in operating expenses was primarily driven by acquisitions that have occurred in the last twelve months.

Operating expenses as a percentage of revenue increased to 15.1% in the first nine months of fiscal 2025 from 13.8% in the first nine months of fiscal 2024.

Impairment Charges

Nine Months Ended October 31, Increase/ Percent

2024 2023 (Decrease) Change

(dollars in thousands)

Impairment of Goodwill $ 531 $ — n/m n/m

Impairment of Intangible and Long-Lived Assets $ 1,206 $ — n/m n/m

*N/M = Not Meaningful

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

In the first nine months of fiscal 2025, we recognized $1.2 million of impairment expense related to other intangible and long-lived assets of which $0.2 million was within the Agriculture segment, $0.1 million was within the Construction segment and $0.9 million was within the Europe segment.

Other Income (Expense)

Nine Months Ended October 31, Increase/ Percent

2024 2023 (Decrease) Change

(dollars in thousands)

Interest and other income (expense) $ (4,239) $ 1,129 $ (5,368) n/m

Floorplan interest expense (26,275) (7,774) 18,501 n/m

Other interest expense (10,479) (4,008) 6,471 n/m

The change in interest and other income (expense) compared to the first nine months of fiscal 2024 was primarily due to the impact of $11.2 million of non-cash, sale-leaseback financing expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms and offset by the $3.6 million gain on cancellation of debt in relation to a New Market Tax Credit Program.

Floorplan interest expense increased $18.5 million for the first nine months of fiscal 2025, as compared to the same period last year, primarily due to a higher level of interest-bearing inventory, including the usage of existing floorplan capacity to finance the O'Connors acquisition in October 2023.

The increase in other interest expense in the first nine months of fiscal 2025 is the result of an increased amount of long term debt outstanding resulting from real estate purchased as part of dealership acquisitions and purchases of previously leased facilities in fiscal 2024 as well as increased borrowing on our CNH Industrial revolving line of credit.

Provision for Income Taxes

Nine Months Ended October 31, Increase/ Percent

2024 2023 Decrease Change

(dollars in thousands)

Provision for Income Taxes $ 1,959 $ 29,004 $ (27,045) (93.2) %

Our effective tax rate was 22.2% for the first nine months of fiscal 2025 and 24.7% for the same period last year.

The lower effective tax rate for the nine months ended October 31, 2024 and 2023 was primarily due to the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and the impact of the recognition of valuation allowance on our foreign deferred tax assets.

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

As of October 31, 2024, we recognized a nominal income tax expense for Pillar Two GloBE minimum tax.

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

Segment Results

Certain financial information for our Agriculture, Construction, Europe and Australia business segments is presented below.

“Shared Resources” in the table below refers to the various unallocated income/(expense) items that we have retained at the general corporate level.

Revenue between segments is immaterial.

Nine Months Ended October 31, Increase/ Percent

2024 2023 (Decrease) Change

(dollars in thousands)

Agriculture $ 1,353,744 $ 1,423,669 $ (69,925) (4.9) %

Construction 236,971 232,368 4,603 2.0 %

Europe 195,633 250,275 (54,642) (21.8) %

Australia 155,852 — 155,852 n/m

Total $ 1,942,200 $ 1,906,312 $ 35,888 1.9 %

Income (Loss) Before Income Taxes

Agriculture $ 15,556 $ 92,311 $ (76,755) (83.1) %

Construction (5,566) 13,746 (19,312) (140.5) %

Europe (2,115) 17,097 (19,212) (112.4) %

Australia 578 — 578 n/m

Segment Income Before Income Taxes 8,453 123,154 (114,701) (93.1) %

Shared Resources 356 (5,671) 6,027 106.3 %

Total $ 8,809 $ 117,483 $ (108,674) (92.5) %

Agriculture segment revenue for the first nine months of fiscal 2025 decreased 4.9% compared to the same period last year.

The revenue decrease was due to a same-store sales decrease of 6.5% during the first nine months of fiscal 2025 as compared to the prior year period.

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

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

Agriculture segment income before income taxes was $15.6 million for the first nine months of fiscal 2025 compared to $92.3 million over the first nine months of fiscal 2024.

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

In addition, we recorded a $6.1 million non-cash, sale-leaseback finance modification expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms and had an increase in our operating expenses and floorplan interest expense.

Construction segment revenue for the first nine months of fiscal 2025 increased 2.0% compared to the same period last year.

Our Construction segment loss before income taxes was $5.6 million for the first nine months of fiscal 2025 compared to $13.7 million of income before income taxes for the first nine months of fiscal 2024.

The decrease in segment results was led by a $5.1 million non-cash, sale-leaseback finance modification expense related to the agreement to purchase for 13 of our leased facilities at the end of the respective lease terms, equipment gross margins were also lower due to increased supply and

moderately softer demand, and floorplan interest expense increased compared to the same period last year.

The dollar utilization of our rental fleet decreased from 30.1% in the first nine months of fiscal 2024 to 24.2% in the first nine months of fiscal 2025.

Europe segment revenue for the first nine months of fiscal 2025 decreased 21.8% compared to the same period last year.

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

Our Europe segment loss before income taxes was $2.1 million for the first nine months of fiscal 2025 compared to $17.1 million of income before income taxes for the same period last year.

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

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

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

Australia segment revenue for the first nine months of fiscal 2025 was $155.9 million.

Our Australia segment income before income taxes was $0.6 million for the first nine months of fiscal 2025.

Shared Resources/Eliminations

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

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

Shared Resources income before income taxes was $0.4 million for the first nine months of fiscal 2025 compared to a loss before income taxes of $5.7 million for the same period last year.

Non-GAAP Financial Measures

To supplement net income and diluted earnings per share ("Diluted EPS"), both GAAP measures, we present adjusted net income and adjusted Diluted EPS, both non-GAAP financial measures that include an adjustment for the impact of a one-time, non-cash sale-leaseback financing expense.

We believe that the presentation of adjusted net income and adjusted Diluted EPS is relevant and useful to our management and investors because it provides a measurement of earnings on activities that we consider to occur in the ordinary course of our business.

Adjusted net income and adjusted Diluted EPS should be evaluated in addition to, and not considered a substitute for, or superior to, the most comparable GAAP measure.

In addition, other companies may calculate these non-GAAP financial measures in a different manner, which may hinder comparability of our adjusted results with those of other companies.

The following tables reconcile (i) net income, a GAAP measure, to adjusted net income and (ii) Diluted EPS, a GAAP measure, to adjusted Diluted EPS:

TITAN MACHINERY INC.

Non-GAAP Reconciliations

(in thousands, except per share data)

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Adjusted Diluted Earnings Per Share

Diluted Earnings Per Share $ 0.07 $ 1.32 $ 0.30 $ 3.88

Impact of sale-leaseback finance modification expense (1)

Total Pre-Tax Adjustments — — 0.48 —

Tax Effect of Adjustments — — (0.12) —

Total Adjustments — — 0.36 —

Adjusted Diluted Earnings Per Share $ 0.07 $ 1.32 $ 0.66 $ 3.88

Adjusted Income Before Income Taxes

Income Before Income Taxes $ 275 $ 40,452 $ 8,809 $ 117,483

Impact of sale-leaseback finance modification expense (1)

Total Adjustments — — 11,159 —

Adjusted Income Before Income Taxes $ 275 $ 40,452 $ 19,968 $ 117,483

(1 ) One-time, non-cash accounting impact sale-leaseback finance modification expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms.

(2 ) The tax effect of U.S.

related adjustments was calculated using a 25.5% tax rate, determined based on a 21% federal statutory rate and a 4.5% blended state income tax rate.

Shared Resources loss before income taxes was $4.5 million for the first quarter of fiscal 2026 compared to $1.4 million for the same period last year.

Liquidity and Capital Resources

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We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future.

However, our borrowing capacity under our floorplan and other credit facilities is dependent on compliance with various covenants as further described in the "Risk Factors" section of our Annual Report on Form 10-K.

However, our borrowing capacity under our floorplan and other credit facilities is dependent on compliance with various covenants as further described in the “Risk Factors” section and Note 8 to our Condensed Consolidated Financial Statement contained in our Annual Report on Form 10-K.

Equipment Inventory and Floorplan and Working Capital Payable Credit Facilities

As of October 31, 2024, the Company had floorplan payable lines of credit for equipment purchases totaling $1.5 billion, which is primarily comprised of a $875.0 million credit facility with CNH Industrial, a $390.0 million floorplan payable line and a $110.0 million working capital line of credit under the Bank Syndicate Agreement, and a $80.0 million credit facility with DLL Finance.

Our equipment inventory turnover decreased from 2.4 times for the rolling 12 month period ended October 31, 2023 to 1.6 times for the rolling 12 month period ended October 31, 2024.

The decrease in equipment turnover was attributable to an

increase in equipment inventory over the rolling 12 month period ended October 31, 2024 and a decline in demand for equipment purchases.

Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 13.9% as of October 31, 2024 from 18.2% as of January 31, 2024.

As of April 30, 2025, the Company had floorplan payable lines of credit for equipment purchases totaling $1.5 billion, which is primarily comprised of a $875.0 million credit facility with CNH, a $390.0 million floorplan payable line and a $110.0 million working capital line of credit under the Bank Syndicate Agreement, and a $80.0 million credit facility with DLL Finance.

Our equipment inventory turnover decreased from 2.0 times for the rolling 12 month period ended April 30, 2024 to 1.7 times for the rolling 12 month period ended April 30, 2025.

The decrease in equipment turnover was attributable to an increase in equipment inventory over the rolling 12 month period ended April 30, 2025 and a decline in demand for equipment purchases.

Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 21.2% as of April 30, 2025 from 25.9% as of January 31, 2025.

Adequacy of Capital Resources

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Based on our current operational performance, we believe our cash flow from operations, available cash and available borrowing capacity under our existing credit facilities will adequately provide for our liquidity needs for, at a minimum, the next 12 months.

As of October 31, 2024, we were in compliance with the financial covenants under our CNH Industrial and DLL Finance credit agreements and we were not subject to the fixed charge coverage ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the lesser of (i) aggregate borrowing base and (ii) maximum credit amount as of October 31, 2024.

During fiscal 2025, we received various letters from CNH and DLL Finance that waived the consolidated fixed charge coverage ratio covenant for the periods through January 31, 2026, and therefore as of April 30, 2025, we were not subject to this financial covenant under our CNH and DLL Finance credit agreements.

We were also not subject to the fixed charge coverage ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined therein) was not less than 15% of the lesser of (i) aggregate borrowing base and (ii) maximum credit amount as of April 30, 2025.

The financial covenants also require us to maintain an adjusted debt to tangible net worth ratio of 3.5, which is measured on a quarterly basis.

On December 2, 2024, we received a letter from CNH Industrial Capital America LLC that waived the Consolidated Fixed Charge Cover Ratio covenant for the period February 1, 2025 through January 31, 2026.

We also received a letter from DLL Finance LLC dated December 2, 2024, which waived the Minimum Consolidated Fixed Charge Coverage Ratio covenant for the period April 30, 2025 through January 31, 2026.

On December 3, 2024, we 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%.

While not expected to occur, if operating results were to create the likelihood of a future covenant violation, we would continue to work with our lenders on an appropriate modification or amendment to our financing arrangements.

Cash Flow Used for Operating Activities

Net cash used for operating activities was $56.2 million for the first nine months of fiscal 2025, compared to $82.1 million for the first nine months of fiscal 2024.

The decrease in the usage of cash for operating activities was primarily driven by an increase in inventory and favorable collection of outstanding receivables, which was partially offset by decrease in the amount drawn on manufacturing floorplan payables and decrease in net income for the first nine months of fiscal 2025 compared to the prior year period.

Cash Flow Provided by (Used for) Operating Activities

Net cash provided by operating activities was $6.2 million for the first three months of fiscal 2026, compared to net cash used for operating activities of $32.4 million for the three months ended April 30, 2024.

The change in cash from operating

activities was primarily attributable to changes in inventory and a changing mix in floorplan financing, which was partially offset by a decrease in net income for the first three months of fiscal 2026 compared to the prior year period.

Cash Flow Used for Investing Activities

Net cash used for investing activities was $29.4 million for the first nine months of fiscal 2025, compared to $64.1 million for the first nine months of fiscal 2024.

The decrease in net cash used for investing activities was primarily the result of the acquisitions of Pioneer Farm Equipment and MAREP in the first nine months of fiscal 2024.

Cash Flow Provided by Financing Activities

Net cash provided by financing activities was $71.0 million for the first nine months of fiscal 2025 compared to $170.3 million for the first nine months of fiscal 2024.

The decrease was primarily driven by a higher amount drawn on non-manufacturing floorplan payables during the first nine months of fiscal 2024.

Net cash used for investing activities was $5.2 million for the first three months of fiscal 2026, compared to $12.9 million for the first three months of fiscal 2025.

The decrease in net cash used for investing activities was primarily due to a decrease of purchases of property and equipment compared to the prior year period.

Cash Flow (Used for) Provided by Financing Activities

Net cash used for financing activities was $15.8 million for the first three months of fiscal 2026 compared to net cash provided by financing activities $43.1 million for the first three months of fiscal 2025.

The change in cash from financing activities was primarily driven by lower non-manufacturing floorplan payables during the first three months of fiscal 2026.

Information Concerning Off-Balance Sheet Arrangements

As of October 31, 2024, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of April 30, 2025, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Therefore, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

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Forward-looking statements are contained in this Quarterly Report on Form 10-Q, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in our Annual Report on Form 10-K for the year ended January 31, 2025, and in other materials filed by the Company with the Securities and Exchange Commission (and included in oral statements or other written statements made by the Company).

expected benefits of our new ERP system and the timing of the phased roll-out of the ERP system to the Company's domestic locations, the general market conditions of the agricultural and construction industries, equipment inventory levels and our ability to manage inventory down to target levels and the effects of these actions on future results, and our primary liquidity sources being sufficient to meet future business needs for the foreseeable future, and the adequacy of our capital resources to provide for our liquidity needs for the next 12 months.

Forward-looking statements are statements based on future expectations and specifically may include, among other things, the impact of farm income levels on customer demand for agricultural equipment and services, the general market conditions of the agricultural and construction industries, equipment inventory levels and our ability to manage inventory down to target levels and the effects of these actions on future results, and our primary liquidity sources being sufficient to meet future business needs for the foreseeable future, and the adequacy of our capital resources to provide for our liquidity needs for the next 12 months.

Any statements that are not based upon historical facts, including the outcome of events that have not yet occurred and our expectations for future performance, are forward-looking statements.

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These forward-looking statements involve important risks and uncertainties that could significantly affect anticipated results or outcomes in the future and, accordingly, actual results or outcomes may differ from those expressed in any forward-looking statements made by or on behalf of the Company.

These risks and uncertainties include, but are not limited to, the impact of the Russia-Ukraine conflict on our Ukrainian subsidiary, our ability to successfully integrate and realize growth opportunities and synergies in connection with the O'Connors acquisition, the risk that we have assumed unforeseen or other liabilities in connection with the O'Connors acquisition, the impact of those conditions and obligations imposed on us under the CaseIH dealer agreements entered into in connection with our acquisition of the Heartland companies, commercial application equipment business, our substantial dependence on CNH Industrial, including CNH Industrial's ability to design, manufacture and allocate inventory to our stores in quantities necessary to satisfy our customer's demands, disruptions of supply chains and associated impacts on the Company's supply vendors and their ability to provide the Company with sufficient and timely inventory to meet customer demand, adverse market conditions in the agricultural and construction equipment industries, and those matters identified and discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K.

These risks and uncertainties include, but are not limited to, the impact of the Russia-Ukraine conflict on our Ukrainian operations, our ability to successfully integrate and realize growth opportunities and synergies in connection with the O'Connors acquisition, the risk that we have assumed unforeseen or other liabilities in connection with the O'Connors acquisition, the impact of those conditions and obligations imposed on us under the CaseIH dealer agreements entered into in connection with our acquisition of the Heartland companies', commercial application equipment business, our substantial dependence on CNH, including CNH's ability to design, manufacture and allocate inventory to our stores in quantities necessary to satisfy our customer's demands, disruptions of supply chains and associated impacts on the Company's supply vendors and their ability to provide the Company with sufficient and timely inventory to meet customer demand, adverse market conditions in the agricultural and construction equipment industries, and those matters identified and discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K.

In addition to those matters, there may exist additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that may materially adversely affect our business, financial condition or results of operations and may cause results to differ materially from those contained in any forward-looking statement.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis