Titan Machinery Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. Overview 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, 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: Agriculture, Construction, Europe and Australia. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities. 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 the February 2026 U.S. Department of Agriculture ("USDA") publications, the most recent estimate of farm cash receipts for calendar year 2025 is estimated to increase 3.0% compared with calendar year 2024. The USDA projects farm cash receipts for calendar year 2026 to decrease 2.7%, as compared to the estimated results for calendar year 2025. The U.S. federal government has 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. exports. 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. 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 2027, our net loss was $12.6 million, or a loss of $0.55 per diluted share, compared to a fiscal 2026 first quarter net loss of $13.2 million, or a loss of $0.58 per diluted share. Significant factors impacting the quarterly comparisons were: • Revenue in the first quarter of fiscal 2027 decreased by 12.1% compared to the first quarter of fiscal 2026. The revenue decrease was led by softening of demand for equipment purchases due to a decline in farmer profitability over the past few years, which is expected to remain challenged in 2026. • Gross profit margin increased to 17.1% for the first quarter of fiscal 2027, as compared to 15.3% for the first quarter of fiscal 2026. The increase was primarily related to an equipment gross profit margin increase from 6.8% in the first quarter of fiscal 2026 to 7.8% in the first quarter of fiscal 2027 and a change in sales mix, with a greater proportion of revenue earned from our higher margin parts and service business during the first quarter of fiscal 2027 as compared to same period last year. • Floorplan interest expense decreased by $3.0 million in the first quarter of fiscal 2027 as compared to the same period in fiscal 2026. The decrease is primarily due to lower inventory levels subject to interest. 20 Table of Contents Critical Accounting Policies and Estimates Our critical accounting policies and estimates are included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. There have been no changes in our critical accounting policies and estimates since January 31, 2026. 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 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 and incentive expense, 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 Sales 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. 21 Table of Contents Results of Operations The results presented below include the operating results of each acquisition made during these periods, from the date of acquisition, as well as the operating results of any stores closed or divested during these periods, up to the date of the store closure. The period-to-period comparisons included below are not necessarily indicative of future results. Segment information is provided later in the discussion and analysis of our results of operations. Additional information regarding our segments is included in Note 17, Business Segment and Geographic Information, to our Condensed Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q. Comparative financial data for each of our four sources of revenue are expressed below. Three Months Ended April 30, 2026 2025 (dollars in thousands) Equipment Revenue $ 364,654 $ 436,840 Cost of revenue 336,157 407,349 Gross profit $ 28,497 $ 29,491 Gross profit margin 7.8 % 6.8 % Parts Revenue $ 103,753 $ 105,629 Cost of revenue 72,391 73,080 Gross profit $ 31,362 $ 32,549 Gross profit margin 30.2 % 30.8 % Service Revenue $ 43,768 $ 44,017 Cost of revenue 17,297 16,609 Gross profit $ 26,471 $ 27,408 Gross profit margin 60.5 % 62.3 % Rental and other Revenue $ 10,206 $ 7,850 Cost of revenue 7,253 6,363 Gross profit $ 2,953 $ 1,487 Gross profit margin 28.9 % 18.9 % 22 Table of Contents The following table sets forth our statements of operations data expressed as a percentage of total revenue for the periods indicated: Three Months Ended April 30, 2026 2025 Revenue Equipment 69.8 % 73.5 % Parts 19.9 % 17.8 % Service 8.4 % 7.4 % Rental and other 1.9 % 1.3 % Total Revenue 100.0 % 100.0 % Total Cost of Revenue 82.9 % 84.7 % Gross Profit Margin 17.1 % 15.3 % Operating Expenses 18.1 % 16.2 % Impairment of Intangible and Long-Lived Assets 0.1 % — % Loss from Operations (1.1) % (1.0) % Other Expense (1.3) % (1.9) % Loss Before Income Taxes (2.4) % (2.9) % Provision (Benefit) for Income Taxes — % (0.7) % Net Loss (2.4) % (2.2) % Three Months Ended April 30, 2026 Compared to Three Months Ended April 30, 2025 Consolidated Results Revenue Three Months Ended April 30, Increase/ Percent 2026 2025 (Decrease) Change (dollars in thousands) Equipment $ 364,654 $ 436,840 $ (72,186) (16.5) % Parts 103,753 105,629 (1,876) (1.8) % Service 43,768 44,017 (249) (0.6) % Rental and other 10,206 7,850 2,356 30.0 % Total Revenue $ 522,381 $ 594,336 $ (71,955) (12.1) % Total revenue for the first quarter of fiscal 2027 decreased by 12.1%, or $72.0 million, compared to the same period last year. The decrease was primarily attributable to challenging industry conditions, including sustained lower agricultural commodity prices and projected total crop receipts, which negatively impacted customer sentiment. 23 Table of Contents Three Months Ended April 30, Increase/ Percent 2026 2025 (Decrease) Change (dollars in thousands) Gross Profit Equipment $ 28,497 $ 29,491 $ (994) (3.4) % Parts 31,362 32,549 (1,187) (3.6) % Service 26,471 27,408 (937) (3.4) % Rental and other 2,953 1,487 1,466 98.6 % Total Gross Profit $ 89,283 $ 90,935 $ (1,652) (1.8) % Gross Profit Margin Equipment 7.8 % 6.8 % 1.0 % 14.7 % Parts 30.2 % 30.8 % (0.6) % (1.9) % Service 60.5 % 62.3 % (1.8) % (2.9) % Rental and other 28.9 % 18.9 % 10.0 % 52.9 % Total Gross Profit Margin 17.1 % 15.3 % 1.8 % 11.8 % Gross Profit Mix Equipment 31.9 % 32.4 % (0.5) % (1.5) % Parts 35.1 % 35.8 % (0.7) % (2.0) % Service 29.6 % 30.1 % (0.5) % (1.7) % Rental and other 3.4 % 1.7 % 1.7 % 100.0 % Total Gross Profit Mix 100.0 % 100.0 % Gross profit for the first quarter of fiscal 2027 decreased 1.8%, or $1.7 million, compared to the same period last year. Gross profit margin increased to 17.1% in the current quarter compared to 15.3% in the prior year quarter. The increase in gross profit margin was primarily related to an equipment gross profit margin increase from 6.8% in the first quarter of fiscal 2026 to 7.8% in the first quarter of fiscal 2027 and a change in sales mix, with a greater proportion of revenue earned from higher margin parts and service business during the first quarter of fiscal 2027 as compared to the same period last year. Our Company-wide absorption rate was 74.0% for the first quarter of fiscal 2027 compared to 75.5% 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 2027 compared to the same period last year. Operating Expenses Three Months Ended April 30, Increase/ Percent 2026 2025 (Decrease) Change (dollars in thousands) Operating Expenses $ 94,382 $ 96,404 $ (2,022) (2.1) % Operating Expenses as a Percentage of Revenue 18.1 % 16.2 % 1.9 % 11.7 % Our operating expenses in the first quarter of fiscal 2027 decreased 2.1% as compared to the same period last year. Operating expenses as a percentage of revenue increased to 18.1% in the first quarter of fiscal 2027 from 16.2% in the first quarter of fiscal 2026. The increase in operating expenses as a percentage of total revenue was due to lower revenue primarily related to the challenging agricultural industry conditions. 24 Table of Contents Impairment Charges Three Months Ended April 30, Increase/ Percent 2026 2025 (Decrease) Change (dollars in thousands) Impairment of Intangible and Long-Lived Assets $ 502 $ 266 $ 236 88.7 % *n/m - not meaningful In the first quarter of fiscal 2027, we recognized $0.5 million in impairment expense related to long-lived assets in our Europe segment. In the first quarter of fiscal 2026, we recognized $0.3 million in impairment expense related to long-lived assets in our Agriculture segment. Other Income (Expense) Three Months Ended April 30, Increase/ Percent 2026 2025 (Decrease) Change (dollars in thousands) Interest and other income (expense) $ 1,302 $ (488) $ 1,790 n/m Floorplan interest expense $ (3,553) $ (6,526) $ (2,973) (45.6) % Other interest expense $ (4,623) $ (4,533) $ 90 2.0 % *n/m - not meaningful Interest and other income (expense) for the first quarter of fiscal 2027 increased by approximately $1.8 million as compared to the same period last year, primarily due to foreign currency fluctuations in the quarter. Floorplan interest expense decreased in the first quarter of fiscal 2027 compared to the same period last year due to lower inventory levels subject to interest. Provision (Benefit) for Income Taxes Three Months Ended April 30, Increase/ Percent 2026 2025 (Decrease) Change (dollars in thousands) Provision (Benefit) for Income Taxes $ 141 $ (4,078) $ 4,219 (103.5) % *n/m - not meaningful Our effective tax rate was 1.1 % and 23.6 % for the three months ended April 30, 2026 and 2025, respectively. The effective tax rate is subject to variation due to the impact of several items, mainly the mix of domestic and foreign income and the impact of the recognition of valuation allowance on our domestic and foreign deferred tax assets. In the three months ended April 30, 2026, we recorded a valuation allowance of $0.7 million on our Australian subsidiary due to the presence of historical losses and the Company’s expected future sources of taxable income. 25 Table of Contents 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. Three Months Ended April 30, Increase/ Percent 2026 2025 (Decrease) Change (dollars in thousands) Revenue Agriculture $ 344,218 $ 384,386 $ (40,168) (10.4) % Construction 67,463 72,129 (4,666) (6.5) % Europe 60,435 93,858 (33,423) (35.6) % Australia 50,265 43,963 6,302 14.3 % Total $ 522,381 $ 594,336 $ (71,955) (12.1) % (Loss) Income Before Income Taxes Agriculture $ (6,181) $ (12,777) $ 6,596 51.6 % Construction (612) (4,180) 3,568 85.4 % Europe (933) 4,710 (5,643) n/m Australia (1,781) (561) (1,220) n/m Segment Loss Before Income Taxes (9,507) (12,808) 3,301 25.8 % Shared Resources (2,968) (4,474) 1,506 33.7 % Total $ (12,475) $ (17,282) $ 4,807 27.8 % *n/m - not meaningful Agriculture Agriculture segment revenue for the first quarter of fiscal 2027 decreased 10.4% compared to the same period last year. This decrease in revenue was primarily due to a decrease in equipment revenue resulting from challenging industry conditions, such as sustained lower agricultural commodity prices and total crop receipts, which continue to negatively impact customer sentiment. Changes in actual or anticipated crop receipts and farmer profitability generally have a direct correlation with the retail demand for equipment. Agriculture segment loss before income taxes for the first quarter of fiscal 2027 was $6.2 million compared to $12.8 million for the first quarter of fiscal 2026. The improvement in segment results was driven by an improved inventory position, which helped to generate higher equipment gross profit margins as well as a decrease in floorplan interest expense. Construction Construction segment revenue for the first quarter of fiscal 2027 decreased 6.5% compared to the same period last year. The decrease in revenue was primarily driven by the timing of equipment deliveries. Our Construction segment loss before income taxes was $0.6 million for the first quarter of fiscal 2027 compared to $4.2 million in the first quarter of fiscal 2026. The improvement in segment results was driven by an improved inventory position, which helped to generate higher equipment gross profit margins as well as a decrease in floorplan interest expense. The dollar utilization of our rental fleet increased from 20.1% in the first quarter of fiscal 2026 to 23.5% in the first quarter of fiscal 2027. Europe Europe segment revenue for the first quarter of fiscal 2027 decreased 35.6% compared to the same period last year. The decrease in revenue was primarily due to lower equipment demand compared to prior year period, which had been driven by a strong response to European Union stimulus programs in Romania. Our Europe segment loss before income taxes was $0.9 million for the first quarter of fiscal 2027 compared to income before income taxes of $4.7 million in the first quarter of fiscal 2026. The decrease in segment results was primarily the result of a decrease in equipment sales. 26 Table of Contents Australia Australia segment revenue for the first quarter of fiscal 2027 increased 14.3% compared to the same period last year. The current year results include additional revenue related to the acquisition of Bellevue Machinery, completed in October 2025. Our Australia segment loss before income taxes was $1.8 million for the first quarter of fiscal 2027 compared to $0.6 million in the first quarter of fiscal 2026. The decrease in segment results was primarily the result of softer equipment margins compared to same period last year. 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, unallocated balances may occur. Shared Resources loss before income taxes was $3.0 million for the first quarter of fiscal 2027 compared to $4.5 million for the same period last year. Liquidity and Capital Resources Sources of Liquidity Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan and other credit facilities. We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future. However, our borrowing capacity under our floorplan and other credit facilities is dependent on compliance with various covenants as further described in Item 1A, “Risk Factors,” and Note 8, Floorplan Payable/Lines of Credit, to our Consolidated Financial Statements contained in our Annual Report on Form 10-K for fiscal 2026. Floorplan and Working Capital Payable Credit Facilities and Equipment Inventory As of April 30, 2026, 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 $67.5 million credit facility with DLL Finance. Our equipment inventory turnover was 1.9 and 1.7 times for the rolling 12 month period ended April 30, 2026 and April 30, 2025, respectively. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 24.0% as of April 30, 2026 from 31.9% as of January 31, 2026. Adequacy of Capital Resources Our primary uses of cash have been to fund our operating activities, including the purchase of inventories and providing for other working capital needs, meeting our debt service requirements, making payments due under our various leasing arrangements, funding capital expenditures, including rental fleet assets, and funding acquisitions. 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. During fiscal year 2027, letters were received from CNH Capital America LLC (“CNH Capital”) and DLL Finance to waive the Consolidated Fixed Charge Coverage Ratio covenants in the separate credit agreements with CNH Capital and DLL Finance in each case for the reporting periods between February 1, 2026 to January 31, 2027. Notwithstanding these waivers, as of April 30, 2026, we were in compliance with the financial covenants under our CNH Industrial and DLL Finance credit agreements and 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, 2026. The financial covenants also require us to maintain an adjusted debt to tangible net worth ratio of 3.5:1.00, which is measured on a quarterly basis. 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 Cash Flow Provided by (Used for) Operating Activities Net cash used for operating activities was $23.1 million for the first three months of fiscal 2027, compared to net cash provided by operating activities of $6.2 million for the three months ended April 30, 2025. The change in cash from operating 27 Table of Contents activities was primarily attributable to timing of inventory receipts and changing mix in floorplan financing, which was partially offset by receivable collections compared to the prior year period. Cash Flow Provided by (Used for) Investing Activities Net cash provided by investing activities was $1.1 million for the first three months of fiscal 2027, compared to net cash used for investing activities of $5.2 million for the first three months of fiscal 2026. The change in net cash used for investing activities was primarily attributable to the reduced purchases of property and equipment and proceeds from business divestiture received during the first quarter of fiscal 2027. Cash Flow Provided by (Used for) Financing Activities Net cash provided by financing activities was $23.4 million for the first three months of fiscal 2027 compared to net cash used for financing activities of $15.8 million for the first three months of fiscal 2026. The change in cash from financing activities was primarily driven by lower non-manufacturer floorplan payables during the first three months of fiscal 2027. Information Concerning Off-Balance Sheet Arrangements As of April 30, 2026, 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. FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. 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 fiscal year ended January 31, 2026, and in other materials filed by the Company with the SEC (and included in oral statements or other written statements made by the Company). 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. The words “potential,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “will,” “plan,” “anticipate,” and similar words and expressions are intended to identify forward-looking statements. These statements are based upon the current beliefs and expectations of our management. 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, our ability to reduce inventory levels and improve profitability, the impact of the Russia-Ukraine conflict on our Ukrainian operations, 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 customers' 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 for fiscal 2026. 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. Other than as required by applicable law, we disclaim any obligation to update such risks and uncertainties or to publicly announce results of revisions to any of the forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect future events or developments. 28 Table of Contents