NYSE:TWI
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1st Quarter 2025 Financial Results
Titan (NYSE:TWI) continued to effectively manage the cyclical trough that most of its end markets are experiencing and continued to generate positive Adjusted EBITDA. In the 1st quarter of 2025, Adjusted EBITDA was $30.8 million, a substantial increase from $9.15 million in the 4th quarter of 2024 and $20.5 million in the 3rd quarter of 2024.
Net sales for the 1st quarter of 2025 were $490.7 million, which compares to $482.2 million in the 1st quarter of 2024. This was primarily attributable to increased sales volumes resulting from the positive contribution of the Carlstar (now called Titan Specialty) acquisition as well as positive price/mix effects. This growth was partially offset by declines in the agricultural and earthmoving/construction segments in North America and Europe due to lower end customer demand.
Gross profit in the 1st quarter was $68.6 million (14.0% gross margin), compared to $77.4 million (16.0% gross margin) in the prior year period. The declines in gross profit and gross margin were primarily due to significantly lower volumes that affected fixed cost leverage across global production facilities.
SG&A for the 1st quarter was $49.9 million, or 10.2% of net sales, compared to $39.4 million, or 8.2% of net sales, for the 1st quarter of 2024. The increase was primarily due to the recurring SG&A incurred from the Titan Specialty operations, which includes the management of distribution centers and increased D&A expenses associated with the acquisition.
Operating Income for 1st quarter was $11.8 million, compared to operating income of $25.1 million for the prior year period. The aftermarket business continues to be a strong point and represents about 45% of total revenues. In the Consumer segment, the aftermarket business represents over 70% of sales.
The company continues to maintain a safe and liquid balance sheet with cash of $174.4 million and total debt of $585.4 million as of 3/31/25. Working capital was net positive at $571.4 million at the end of the quarter. Operating cash flow was a use of cash of ($38.6) million in the 1st quarter and capital expenditures were $15.1 million. Operating cash flow was negatively affected by a significant increase in Accounts Receivable to $97.1 million. The increase in accounts receivable was attributed to seasonality, as sales increased during the 1st quarter of 2025 compared to the 4th quarter of 2024 by $107.1 million.
The trailing 12-month leverage ratio at year-end was 3.8x. We expected this ratio to drift down by the end of 2025 due to pay down of outstanding debt balances from free cash flow.
Segment Results
The Agricultural segment showed a sales decline of 17.5% with sales of $197.8 million compared to $239.7 million in the prior year period. The sales decline was primarily driven by lower global demand for agricultural equipment, particularly in North America and Europe. This was a result of lower farm income, higher financing costs, and actions taken by OEM customers to reduce elevated inventory levels in their retail channels. Agricultural gross profits declined to $24.5 million from $40.6 million and gross margins decreased to 12.4% from 16.9%. The decline in gross profit was attributed to reduced sales volume, lower fixed cost leverage, and higher material costs.
The Earthmoving/Construction segment generated revenues of $143.3 million which was a decrease of 13.3% from $165.2 million in the prior year period. The decrease was primarily due to softer demand from its construction end markets in North America and Europe. Gross profits declined to $14.9 million from $23.0 million in the prior year period. Gross margins deteriorated to 10.4% from 13.9% in the prior year period. The decrease in gross profit was attributed to lower sales volume in North America and Europe, reduced fixed cost leverage and higher inflationary costs.
The Consumer segment generated revenues of $149.7 million which was an increase of 93.6% when compared to $77.3 million in the prior year period. The increase was largely attributed to the revenue contribution from Carlstar and was partially offset by lower sales volumes in the Americas due to challenging market conditions. Gross profits increased to $29.3 million from $13.8 million in the prior year period. Gross margins increased to 19.6% from 17.8%. The gross profit and gross margin increases were
We believe approximately 75% of Carlstar revenues were in the Consumer segment and 20% in the Agricultural segment with the remaining in the EMC segment.
Management Commentary
Relative to other competitors, Titan appears to be better positioned as it pertains to risks from the global tariff situation. There are no other manufacturers in Titan’s industry that has the U.S. production capabilities that they have. This could actually benefit the company because many of its competitors have significantly greater exposure to tariffs due to their higher dependence on overseas production, particularly in China. The company is actively assessing the evolving global tariff situation and will make timely decisions on supply chain and production plans that are the result of data driven analysis and the evaluation of longer-term trade policy.
However, constantly evolving trade policies are presenting challenges, especially when it comes to longer-term capital planning for its OEM customers. The company has quality manufacturing assets strategically located in the key markets and they have the ability to geographically match production with sales which is a key competitive advantage for Titan.
Titan CEO Paul Reitz stated, “At Titan we are proud of our manufacturing capabilities that are strategically located to best serve the needs of our customers and end-users. Regardless of what’s going on in the world, we are confident in our strategy and our growth prospects, including new products, further penetration of our leading LSW technology, offering new third party-sourced products, and driving revenue synergies among our segments and product families. Finally, our expanded licensing agreement with Goodyear, which we just announced, helps to complement the above growth initiatives and presents even more opportunities to provide our customers with high quality products that meet end users’ needs.”
An important part of the current business dynamic is the expanded aftermarket business, which has been a big positive as it has helped reduce the level of cyclicality across all three reporting segments. The company is believed to have the broadest and best product offerings in its markets, which enables them to build strong relationships with customers, OEMs and in the aftermarket business. As market conditions improve in 2025, we believe Titan can maintain and possibly improve its market share in the industries it serves.
In addition, there are signs that farmer income will increase and remain strong in 2025. This is driven by higher market prices for commodities, particularly corn, and an expectation of higher levels of government support for farmers under the new presidential administration. This would likely lead to the greater ability and willingness to invest in ag related capital equipment.
Another leading factor in the company’s positive outlook for 2025 is the current market activity level in Brazil, where Titan maintains a leading position in ag tires. Demand in Brazil for the 1st quarter of 2025 has increased nicely in both OEM and aftermarket channels when compared to the 4th quarter of 2024. This positive news in that region has traditionally been followed by a turnaround in U.S. markets
Valuation and Estimates
The company provided preliminary 2nd quarter 2025 guidance which included revenues between $450 million and $500 million and Adjusted EBITDA between $25 million and $35 million. We update our 2025 EPS estimate to $0.05 per diluted share based on higher than expected tax rates throughout the rest of 2025. Our 2026 EPS estimate is $0.45. Our 2025 Adjusted EBITDA estimate is approximately $110.8 million.
The transitory depressed earnings experienced in 2024 are not reflective of the steady generation of positive EBITDA and free cash flow that is expected as the cycle turns around. The company has positioned itself in recent years to not only survive cyclical downturns but to also thrive and continue to develop advanced technologies that position them as the industry leader.
We maintain our price target of $16.00 as we believe 2025 will be the beginning of a more normalized operating year and possibly the return to revenue growth at some point throughout the year.
The company recently provided a framework for what a normal year could look like financially when a sustained rebound in its end markets happens. Adjusted EBITDA could range between $250-$300 million and free cash flow of at least $125 million could be generated.
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