Titan Machinery Inc. · NASDAQ:TITN
Titan Machinery — Investor Day (December 2017)
42 slides from Titan Machinery's investor day presentation, Dec 12, 2017
Slide 1: Titan Machinery Investor Day December 12, 2017
Titan Machinery Investor Day December 12, 2017
Slide 2: Agenda
Agenda • Our Growth Journey – David Meyer, CEO • Our Execution Model – BJ Knutson, COO • Our CX Advantage – Jeff Bowman, CXO • Our Financial Foundation – Mark Kalvoda, CFO 2
Slide 3: Legal Disclaimers
Legal Disclaimers Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the federal securities laws. Statements about our beliefs and expectations and statements containing the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipat
Slide 4: David Meyer, Chairman & CEO
TITAN David Meyer MACHINERY Chairman & CEO Power & Precision to Grow
Slide 5: Serving Customers Who Feed & Build Our World
Serving Customers Who Feed & Build Our World • Population growth driven by developing countries • Continued urbanization and infrastructure build-out • Growing middle class with demand for improved diet 5
Slide 6: Productivity Imperative
Productivity Imperative • 2X output by 2050 • Productivity growth/gap • Mechanize & modernize • Growing scale of farms Source: Global Harvest Initiative, 2016 GAP Report 6
Slide 7: The Growing Role of Our Dealership
The Growing Role of Our Dealership • Purchase – An expanding set of machine & purchase options • Operation – Real-time machine control & data-driven optimization • Support – Increasingly complex components, systems & controls • Performance – Partnership for farm & jobsite profitability & growth 7
Slide 8: Our Strong Partnership with CNH Industrial
Our Strong Partnership with CNH Industrial • Product innovation legacy and ongoing focus • Global manufacturer with local field support • Strong Ag and Construction brands • A shared commitment to customer success and growth 8
Slide 9: Key Advantages of Our Public Structure
Key Advantages of Our Public Structure • Capital – Access & Permanence • Management – Talent & Continuity • Succession – Stability & Longevity 9
Slide 10: Titan Growth Milestones
1980 Today2000 2002-2003 2007 2009 2011 2013 Industry Leadership 1st Construction Stores 1 st International Stores $1B Revenue $2B RevenueIPO: TITNIncorporated 1989 1st Acquisition Capitalization 95 Stores Consolidation Growth Improvement E&Y Entrepreneur of Year & VC Awards Titan Growth Milestones
Slide 11: Ongoing Success Built on Customers, Team, Growth
Ongoing Success Built on: • Commitment to CUSTOMERS • Strength of OUR TEAM • Focus on GROWTH 11
Slide 12: BJ Knutson, Chief Operating Officer
BJ Knutson Chief Operating Officer 12
Slide 13: Our Business Model: Delivering and Capturing Value
Our Business Model: Delivering and Capturing Value to Create Sustainable Growth • Customer o Markets o Solutions o Experience • Team o Process & Resources o People o Partners • Growth o Profitability o Market Share o Stakeholder Returns 13
Slide 14: Revenue by Segment and Source; Territory Snapshot
12% 61% 27% 66% 19% 10% 5% Equipment Construction Agriculture Parts Service Rental FY17 Revenue by Segment FY17 Revenue by Source International Territory Snapshot • Contiguous network of 75 NA stores: Highly productive farming region Vast construction footprint from Canada to Mexico • Internation
Slide 15: Agriculture Segment Growth Drivers
Agriculture Segment Growth Drivers • Long-term economic factors Long-term growth in net farm income Improving diets in developing markets • Compelling ROI for equipment purchases • Titan’s scale supports market share growth New technologies require sophisticated dealer support Capacity & cap
Slide 16: Construction Segment Growth Drivers
Construction Segment Growth Drivers • Energy industry in Titan footprint: Oil (ND 2nd), natural gas, coal • Construction activity in residential, commercial and infrastructure • Equipment used in Ag applications • Leverage of Rental business operating within retail stores • Machine control systems p
Slide 17: Eastern European Growth Opportunities
Eastern European Growth Opportunities Leveraging Our Core Capabilities • Climate, soils, and crops similar to Titan NA footprint • Titan can provide NA machine technology to region • Progressively higher level of product support required • Customer need for precision technology rapidly increasing 17
Slide 18: Customer Quotes on Service and Technology
“I talk to other farmers about the service they get.” “…the machines are becoming more complex and more things that, as a farmer, I’m unable to fix, because everything is electronic and computer controlled.” “Constantly keeping in touch is the biggest thing. Make sure you stay in touch to our needs
Slide 19: Store Consolidation
Store Consolidation • Store Consolidation is a long-term trend in our Industry • Leverage state-of-the-art service facilities, service technicians, parts availability, precision farming and other expertise across an area instead of relying on a single store • Increased field service coverage, added
Slide 20: Expert Team Operating Structure
Expert Team Operating Structure • Leveraging more experienced management with functional expertise across our footprint and industries • Centralizing key support functions to achieve better efficiency and consistency • Freeing up local store team to focus more on customer-facing sales and support ac
Slide 21: Strong Partners That Perform for Our Customers
Strong Partners That Perform for Our Customers 21
Slide 22: Jeff Bowman, Chief Experience Officer
Jeff Bowman Chief Experience Officer 22
Slide 23: Powerful and reliable equipment, supported by expert team
Powerful and reliable equipment, with the most productive technology, supported by our dedicated and expert team, helping customers simplify their work and grow. Strong brands, company, equipment, solutions… Leading technology, precision, productivity… Unsurpassed commitment, expertise, teamwork… Be
Slide 24: The Moments Multiplier
The Moments Multiplier Multiplying Our Moments Better – Connect and Perfect More – Integrate and Automate New – Inputs and Outcomes Customer Moments Customer Experience Brand Loyalty Understanding Customers* Priority Initiatives Success Factors Perceived Barriers Buyer’s Journey
Slide 25: From Dirt to Decisions: Unearthing the Value Relationship
From Dirt to Decisions: Unearthing the Value Relationship Supplier Consultant Partner Trigger Transaction Interaction Operation Detection React Monitor Predict Action Report Prescribe Decide 25
Slide 26: Creating New Value Beyond the Iron
Creating New Value Beyond the Iron • B2B eCommerce – Predict & personalize with a 360° view • Co-Equipment Management – Facilitate end-to-end process • Expanded Precision Solutions – Optimize across all data streams • Farm/Jobsite Management – Integrated workflow, insights & tools 26
Slide 27: One Customer, One Titan, One Moment
Title One Customer One Titan One Moment Anticipate customer needs based on a data-driven view of transactions, interactions and operations Deliver proactive solutions that improve productivity and profitability and simplify customer workflow Leverage scale and expertise across Titan’s network to pro
Slide 28: Mark Kalvoda, Chief Financial Officer
Mark Kalvoda Chief Financial Officer 28
Slide 29: Persistent Market Conditions Dampening Demand
Persistent Market Conditions Dampening Demand… • Agriculture – Low commodity prices following record high equipment purchases • Construction – Footprint impacted by reduced oil activity and Ag downturn • International – Geopolitical challenges in Ukraine $2.2 $1.9 $1.4 $1.2 $1.2 FY'14 FY'15 FY'16 FY
Slide 30: Operating Expenses Aligned to Market Conditions
Operating Expenses Aligned to Market Conditions • Reduced by 28% or $80 million from FY14 to FY17 • Restructuring optimizing store coverage against costs • All efforts focusing on customer service • Absorption rates demonstrating consistent improvement 65% 70% 75% 80% $150 $200 $250 $300 FY14 FY15 F
Slide 31: Inventory Reduction Resulting in Greater Balance Sheet Efficiency
• Nearly 60% reduction in equipment inventory* • Freeing up cash for alternative use • Driving margin expansion and reduced carrying costs • Near-term goal of ~2x turns with a path toward ~3x *Includes amounts classified as Held for Sale as of 1/31/15 Inventory Reduction Resulting in Greater Balance
Slide 32: Utilizing Cash to Strengthen Our Balance Sheet
Utilizing Cash to Strengthen Our Balance Sheet • $750M debt/liability reduction since FY14 driving significant balance sheet improvement • Positioned well to fund future capital needs 32
Slide 33: Foundation in Place for Improved Profitability
• Improved Inventory Position o Resulting in improved equipment margins o Lower floorplan/interest expense • Expense reductions o Structural reductions allow for operating leverage when revenues recover • Path toward improved EPS exclusive of acquisitions TODAY FUTURE * *Exclusive of the charges ass
Slide 34: Early Signs of Earnings Recovery
Early Signs of Earnings Recovery • Stabilizing revenues • Improving equipment margins • Reduction in operating and interest expense (in millions of dollars, except per share) Q3 FY2018 Q3 FY2017 Change Total Revenue $330.3 $332.3 -0.6% Gross Profit Margin 18.6% 17.6% +100 bps Operating Expense Margi
Slide 35: Capital Allocation
Capital Allocation Debt Retirement Continue de-levering convertible debt and floorplan payables CAPEX and Working Capital Flexibility New & Existing Dealerships Opportunistic increases in working capital needs Strategic M&A Availability for selective acquisitions and new store openings 35
Slide 36: Titan Machinery is Well Positioned for Future Growth
Titan Machinery is Well Positioned for Future Growth • Structural improvements drive greater profitability at all levels of demand • Continuous improvement efforts enable future operating leverage as revenues recover • Balance sheet strength positions us for smart selective acquisitions, new store o
Slide 37: Our Next Ten Years
Our Next Ten Years • New Frontiers in Innovation • Further Consolidation • Expanded Service Opportunities
Slide 38: Q&A
Q&A
Slide 39: Slide 39
Slide 40: Appendix
Appendix
Slide 41: Presentation Footnotes
Presentation Footnotes _______________________________________ (1) Absorption is calculated in a given period by dividing our gross profit from sales of parts, service and rental fleet activity (described as "Gross Profit on Recurring Revenue" when used in reference to absorption discussions) for th
Slide 42: Non-GAAP Reconciliation Tables (continued)
Non-GAAP Reconciliation Tables (continued) 42