Titan Machinery Inc. (TITN) Q2 2027 Earnings Report, Transcript and Summary

Greetings. Welcome to Titan Machinery Inc. Second Quarter Fiscal 2027 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Jeff Sonnek with ICR. Thank you. You may begin.

Thank you. Welcome to the Titan Machinery Second Quarter Fiscal 2027 Earnings Conference Call. On the call today from the company are Bryan Knutson, President and Chief Executive Officer; and Bo Larsen, Chief Financial Officer. By now, everyone should have access to the earnings release for the fiscal second quarter ended July 31, 2026, which is also available on Titan's Investor Relations website at ir.titanmachinery.com. In addition, we're providing a supplemental presentation to accompany today's prepared remarks, along with webcast and replay information, which can also be found on Titan's Investor Relations website within the Events & Presentations section. We would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These forward-looking statements are based on management's current expectations and involve inherent risks and uncertainties, including those identified in the forward-looking statements section of today's earnings release and the company's filings with the SEC, including the Risk Factors section of Titan's most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These risks and uncertainties could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. Please note that during today's call, we may discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly when comparing underlying results from period to period. We have included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure in today's release and supplemental presentation. At the conclusion of our prepared remarks, we will open the call to take your questions. And with that, I'd now like to introduce the company's President and CEO, Bryan Knutson. Please go ahead, Bryan.

Thank you, Jeff. I'll begin today's call with a review of our second quarter results and then provide an update on what we are seeing across each of our business segments before turning the call over to Bo for his financial review and updated outlook assumptions. Overall, our second quarter results were largely in line with our expectations, and I am pleased with the continued progress our team is making on the operational priorities we established heading into FY 2027. The highlight of the quarter was the continued improvement in equipment margins across our agricultural business, which contributed to a 190 basis point increase in consolidated gross margin compared to the prior year period. This improvement reflects the work our team has done over the last 2 years to reduce aged inventory, improve inventory mix and strengthen inventory management processes across our organization. Importantly, these margin improvements are being driven by actions within our control, rather than any meaningful improvement in underlying industry demand. While the agricultural market remains challenged, our business is becoming healthier, more efficient and better positioned to perform through the cycle. I would like to thank and recognize our employees across the organization for their disciplined execution of our initiatives. Turning to the broader agricultural environment. Customer profitability remains under pressure. Despite recent trends upward, commodity prices for key crops such as corn and soybeans continue to sit below levels that would support a meaningful rebound in equipment demand, while elevated input costs remain a headwind for many producers. As a result, customers continue to make equipment replacement decisions cautiously and remain highly focused on preserving cash. While this environment remains difficult, we continue to believe the industry is working through the trough of this cycle in 2026. Dealer inventory levels across the market have improved significantly over the last 2 years, equipment fleets continue to age and the long-term fundamentals supporting agricultural production remain intact. We also continue to support initiatives that improve demand for corn and soybean products, including higher ethanol blends, renewable diesel and sustainable aviation fuel. Over time, stronger demand for those commodities should be supportive of healthier and sustainable farm income and equipment demand. Despite the challenges facing the industry, parts and service continue to provide an important foundation within our business. This doesn't happen without a lot of hard work, especially because the current lack of grower profitability causes more of a fix-on-fail maintenance mentality, causing customers to delay discretionary maintenance and repairs where possible. This dynamic highlights the importance of our customer care strategy and the investments we continue to make in supporting our customers and earning their business. Now turning to more specifics on each segment. In Domestic Ag, the environment for our grower customers remain very challenging due to the factors I discussed earlier. As a reminder, our top line results through the first half of the fiscal year were higher than internal expectations due to earlier than anticipated shipments of presold equipment from the factories, which resulted in a pull forward of our deliveries to customers relative to prior expectations. This timing shift strengthened first half results, but is expected to contribute to some relative headwinds to year-on-year comparisons in the back half of the fiscal year. Yields generally look good across much of our footprint, though dry conditions in July and August will translate to yield reductions in some areas. This is something our team is monitoring closely as we anticipate what year-end buying will look like. Our Construction segment performed well during the quarter. Activity related to infrastructure investment and data center projects remains healthy across much of our footprint, and is providing support for improved equipment demand. These end markets have helped offset softer activity from agricultural customers who also purchase construction equipment. Overall, we continue to view the underlying fundamentals for our Construction business as stable and reasonably healthy. Within our Europe segment, results came in below our expectations. Part of the year-over-year decline was anticipated as we wind down our German operations and we anticipated some decline in Romania after last year's robust results. However, market conditions across the region have also become more challenging than we anticipated entering the year. Low commodity prices, elevated operating costs, broader geopolitical uncertainty, poor crop conditions in certain areas and weaker farmer sentiment have led many customers to delay equipment purchasing decisions. As a result of these factors, we are adjusting our expectations downward for Europe for the remainder of FY '27. In Australia, equipment demand is being influenced by the same global dynamics pressuring our other ag markets, but with sharper increases in input costs, particularly diesel fuel and fertilizer, given the lack of in-country production. Helping offset this has been healthy rainfall and the resulting prospect for improved yields across much of our footprint, which is translating to improved customer sentiment and should help increase equipment demand as we progress through the second half of the year. In closing, I'm extremely proud of the progress our team continues to make in the face of a challenging demand environment. However, inventory levels across the industry are getting healthier, and fundamentals are starting to suggest that 2026 could be the bottom of this ag cycle. As for Titan, we continue to execute in the areas that we can control. Inventory quality is improving, equipment margins are strengthening and our operating model continues to become more efficient. While we remain disciplined in our view of near-term demand, the actions we have taken over the past several years have positioned Titan Machinery to execute effectively and remain resilient through the remainder of this cycle and to capitalize on opportunities as the industry conditions improve. With that, I will turn the call over to Bo.

Thanks, Bryan, and good morning, everyone. Starting with our consolidated results for the FY '27 second quarter. Total revenue was $496.4 million compared to $546.4 million in the prior year period, reflecting a 6.2% decrease in same-store sales. Despite the sales headwinds in the second quarter, gross profit was essentially flat at $92.4 million, resulting in gross profit margin expansion of 150 basis points to 18.6%. This year-over-year improvement primarily reflects stronger equipment margins, which improved 190 basis points year-over-year to 8.5%, driven by the continued improvement in inventory health alongside a higher mix of parts and service revenue in our consolidated totals. Our operating expenses of $94.1 million were up modestly year-over-year. This is largely a function of higher variable expenses tied to our sales initiatives, including those in support of clearing aged inventory. However, the key message is that our head count and discretionary spending continue to be down year-over-year as a result of disciplined expense management, which speaks to our efforts to control what we can and position ourselves for the other side of this cycle. Floorplan and other interest expense decreased 30% to $8.1 million from last year's $11.5 million, reflecting the significant reduction in interest-bearing inventory levels over the past year. In the second quarter of FY '27, net loss was $9.2 million or $0.40 per share. This compared to a net loss of $6 million or $0.26 per share in the prior year period, which included a $2.2 million tax benefit that didn't repeat this year, given the tax valuation allowance that we put on in Q4 of last year. Absent last year's tax benefit, net loss was very similar year-over-year despite the lower sales volume. Adjusted EBITDA was $4.6 million compared to $5.6 million last year. Now turning to a brief overview of our segment results for the second quarter. Domestic Ag segment sales of $310.2 million reflected a same-store sales decrease of 8.4%, driven by softer equipment demand compared to the prior year. Equipment revenue in this segment came in modestly ahead of our expectations for the quarter and was down 13.5%, while parts and service revenues tracked closely to our expectations. Segment pretax loss improved by $9 million to $3.3 million versus the prior year period, reflecting the actions we have taken to accelerate inventory reductions and the resulting improvement in equipment margins that we have achieved. In our Construction segment, same-store sales increased by 9.2% to $78.6 million, primarily due to higher equipment sales. Equipment margins remained strong relative to the prior year, reflecting healthier inventory and improved industry conditions across our Construction footprint. Pretax income improved to $0.4 million compared to a pretax loss of $1.2 million in the second quarter of the prior year. In our Europe segment, sales declined to $66.1 million for the quarter, which included a $1.1 million net benefit related to foreign currency fluctuations. On a constant currency basis, revenue decreased approximately 34%. As we noted last quarter, the wind-down of our German operations is a meaningful portion of the year-over-year decline in this segment, and will continue to be through the balance of the year. Germany contributed approximately $11 million or about 1/3 of the year-over-year revenue decline in the second quarter, with the balance attributed to lower equipment demand in the current year period against a strong prior year comp, which benefited from the European Union's stimulus programs in Romania. Pretax loss for the segment was $1.3 million compared to a pretax income of $5.1 million in the second quarter of last year. In our Australian segment, sales increased 36% to $41.4 million and included a $3.9 million net benefit related to foreign currency fluctuations. On a constant currency basis, revenue increased $6.9 million or 22.5%, with the current period benefiting from contributions from our addition of the New Holland brand to 6 of our rooftops in the fall of last year. Pretax loss for the segment was $3.4 million compared to a pretax loss of $2.1 million in the second quarter of last year. Now on to our balance sheet and inventory position. We had cash of approximately $30 million and an adjusted debt to tangible net worth ratio of 1.6x as of July 31, 2026, which is well below our bank covenant of 3.5x. Total inventory at quarter end was $931.5 million, a modest increase of $28 million compared to year-end. This increase was very much in line with our expectations and reflects the normal seasonal cadence of inventory flows. As Bryan noted, our focus in FY '27 remains on reducing aged inventory, mix optimization and increasing inventory turns, all of which we continue to expect to see improvement throughout the rest of the year. Turning to our FY '27 modeling assumptions. We are reaffirming our overall profitability outlook for the year, while updating a number of our segment revenue assumptions to reflect our year-to-date performance and our current expectations for the balance of the year. We continue to expect our Domestic Agriculture segment to be down in the range of 15% to 20%, though at this point, we'd expect it to be closer to the 15% range. In Construction, we are raising our outlook for growth in the range of up 5% to 10%, reflecting the momentum we're seeing from infrastructure, data center and otherwise generally improved demand in our footprint. In Europe, we are revising our outlook to a decrease of 30% to 40% and widening the range to reflect the uncertainty we're seeing in the region. A meaningful portion of that decline, or about $44 million, continues to be driven by the wind down of our German operations, with the balance reflecting broader softness across the rest of the region. In Australia, we are raising our outlook for growth to be in the range of about 15% to 20%, and we expect full year results to be closer to the high end of the range around that 20% growth mark. Reported results for Australia are benefiting from favorable foreign currency translation, and that alone is expected to provide 8% growth for the full year. From a margin perspective, we expect consolidated full year equipment margin to be approximately 8.3%, which compares to 7.3% in FY '26. I'd note that through the first half of the year, we are at 8.2%, which speaks to the impact of our inventory initiatives and our confidence in delivering against this full year expectation across the balance of the year. Full year operating expenses will decrease year-over-year despite our continued investment in our customer care strategy, which is supporting stability in our parts and service businesses. We expect operating expenses to be approximately 17.5% to 18% of sales. On floorplan interest expense, given the great progress on the health of our inventory, we now expect to achieve a year-over-year decline of approximately 30% for the full fiscal year. Bringing it all together, we are reaffirming our full year adjusted EBITDA range of $17 million to $29 million, and our adjusted diluted loss per share range of $1.25 to $1.75. In summary, our second quarter results reflect the continued progress we're making on inventory health and our operational priorities as we progress through the bottom of this cycle. We remain focused on executing the initiatives within our control to position us well when industry conditions inflect. This concludes our prepared comments. Operator, we are now ready for the question-and-answer session of our call.

[Operator Instructions] Our first question is from Liam Burke with B. Riley Securities.

The headlines in the turmoil in the Black Sea with not only shipment, obviously, you've discussed the implications in Europe. Does that have a ripple effect on other of the markets that you're serving, particularly the U.S., either good or bad?

Yes, certainly, a lot of small grain especially comes out of that area between Ukraine and Russia and both have been heavily impacted. And so we are certainly monitoring that closely with our Ukraine customers. They are having difficulty moving grain for sure. And so we're stocking appropriately manage inventories appropriately in Ukraine as we go forward here based on what we're anticipating for sales out of that region over the rest of the year and into next year due to the impact there. But on the other hand, definitely a positive for U.S., a positive for us in our Australia footprint. We're anticipating, especially wheat and other small grain prices, to continue to be on the rise here, and that continues to be a positive for them.

Terrific. And we sort of look at a benchmark of corn pricing of $5, and starting to think that the Agriculture segment begins to benefit at -- corn at $5 and above. It's now in sort of the $5.50 area. How long does it have to stay there in order for the Agriculture segment to start being comfortable with loosening the purse strings?

Yes. Maybe first, just to clarify how the basis impacts that, Liam. Just in the Midwest or depending on an area's distance from major ports or shipping route, and so on that basis will vary. In the Midwest here, we have a pretty large basis. So always important to differentiate the futures price versus the cash grain price. And that can be anywhere from like right now, $0.30 to $0.50 in some of our areas of Iowa and Nebraska, all the way up to almost $1 in Minnesota and about $0.80 to $0.90 in North Dakota, as an example right now. So that's that basis spread that essentially for cash grain price today, you'd have to subtract off of there. But to your question, this definitely a run here lately in commodity prices. Yesterday was a really big day. We anticipate further increases here as the Pro Farmer Tour continues, certainly, they're seeing that the previously anticipated yields aren't there and that the drought conditions and some of the fertilizer impact has certainly impacted the crop along with other weather events all over the globe. So that's helping with the ending stocks and the stock-to-use ratio predictions as well as you've heard us talk a lot about other uses for the crops. And so we're starting to see the fruits of some of that with the renewable fuels and more E15 adoption and purchasing as well as biodiesel and the additional crushing plants have been coming online. You look at some other positives with now selling soybean meal over to Europe. It's a really big positive in the purchases recently from China here. And I think you're going to see more of that. Even though we're getting pretty well into the year here before the end of the year, I think you'll see a fair amount more opportunity for purchases from China, both soybeans and U.S. corn as well. So there's some of those more structural fundamentals that we're really starting to see the positivity around it as we look at the renewable fuels standards for next year, as we -- and that also is going to bode well. So we'll continue to monitor the weather closely. That's what's driving it up here like yesterday and as the crop continues to come in and then see how weather patterns develop next year. But basically, also to your question, these recent movements look very encouraging for getting our farmers into the black for 2026 here. And then when could we start to see the impact of that of '27 or a material impact to it, I should say. If these can sustain and they'll do forward contracting into '27 and put together a good crop and then anticipate that buying would really pick up then.

Our next question is from Steve Dyer with Craig-Hallum Capital Group.

This is Matthew Raab on for Steve. Maybe picking up where you left off there, Bryan. Maybe where we stand from a U.S. ag perspective and what your current thoughts are into next year? Deere commented last week that their EOPs are up in the mid-single-digit range. We'll see where that actually ends up, but at least moving in the right direction? Maybe Bryan or Bo give you the opportunity to comment on that, and whether you're hearing similar or different across your stores as we look into next year.

Yes. And generally, we're seeing the same as the OEMs on that front. And again, it's early. I know Deanna commented on that on Deere's call, too, that both -- all the OEMs tend to come out earlier with the seasonal spring equipment like the planters and sprayers and so those we're a little further into, but still not done with those yet either. So we'll kind of see how that wraps up and then certainly, a little way to go here yet on the bulk of it which is the tractors and combines and -- but early indications are basically in line with what they're seeing. And then just as a reminder for us, we also have our inventory sales, too, which will be a big indicator as well. So hopefully, this run continues in the commodity prices here, which with some of the Section 179 incentives out there and stuff that could be a benefit for growers here if they get into a profitability scenario. So yes, again, the -- there's a lot of structural fundamentals, though, out there that I want to reiterate and point to besides the -- just some of the recent gains we're seeing in commodity prices that are more so tied to the weather. But as we look at the -- again, as I mentioned, with biofuels and just really looking at the livestock markets right now and they've had -- our livestock producers have had good prices here for quite a while. So early in that run, if we go all the way back to last year, they're paying down debt and hesitant to spend some of that money, but that's been a good run now. And then also just replacement demand. As we get in and look to 27, if we can, again, continue commodity prices up in some of these structural things that support commodity prices, there's also those structural benefits within our business that the fleet just continues to age here. We've been at really low industry volumes now for a long time. FY '27, we'll start out looking at roughly 25% below where we were like 10 years ago for industry volumes. And so that just continues to age the fleet and put more hours on and exacerbate the need to trade. And if they don't, it bodes well for our parts and service.

Very helpful. And then maybe from an equipment gross margin perspective, it was 100 bps higher in Q1, nearly 200 in Q2. But I'm curious how the Domestic Ag segment looks and how you think that trends through the second half? And then I know you don't have a guide out for fiscal year '28, but directionally, how should we think about that stepping off point from the second half into next year from a margin perspective?

Yes. So I've been really pleased specifically with our Domestic Ag margins for the first half of the year. Domestic Ag equipment margin of 6.7%. Last year was unusually compressed, that was down at like 3.1%, so we're up significantly at 360 basis points. But last year, right, we still had a lot of those factors that we were having to work through and make progress on from an inventory perspective. And then we saw that margin inflect in the second half of the year. So it's been really good to see that it's continued to go up. Generally speaking, our guide, I mentioned first half was 6.7%, generally expecting about 6.9% for full year Domestic Ag equipment margin. So expecting a little bit more improvement, but not to the same extent as the first half of the year. Again, really pleased with where we're at from an inventory health perspective but still have some work to do. As a reminder, we generally would prescribe a range of Domestic Ag equipment margins in terms of a normal range between, call it, 8% and 11% or 12%. Those higher ends really in peak conditions and the lower end, really below mid-cycle. But just as a reminder, right, this year, we're 50% of the average of the last 25 years. So to get us inching closer to the 7% and on the way to 8%, when we're so far below average, that's been really pleasing. As we continue to make progress, I would expect that margins slowly march upwards toward that 8%. But I think we do need a bit of a lift on those industry volumes. We don't need to get anywhere near mid-cycle, but we're half of it right now or half of the historical average, I should say. So as we make progress there, we'll get into the lower end of that range. And yes, we'll continue to see how expectations develop for demand heading into next year.

That's great. And then maybe if I can squeeze one more in here. How are you thinking about Q3 versus Q4, fairly even between the quarters? Or are there some differences that we should know?

Yes. And I appreciate the question there, too. And before I directly answer that, I just want to say, we had some of the commentary in terms of timing of shipments from OEMs and the deliveries to customers, and that's partly because of the differences there. So Domestic Ag, in the first half of the year, equipment sales was down about 13.5%. Our guide is implying more that equipment sales in the back half of the year is down more like 20%, which would bring the full year at 17% and kind of right in the middle of the expected range from an industry volume perspective of down 15% to 20%, right? So that's partly why we were calling that out. We're definitely expecting that. We've been really expecting that kind of all year. But yes, overall, from a consolidated perspective, across segments, across revenue streams, expecting Q4 to be a little stronger than Q3, but pretty balanced there. And yes, as we're looking at ag, which -- or Domestic Ag, which is about 70% of that business, there is a bit of a change there on the equipment sales side of things. And that's -- we want to call that out to make sure people understood what we were expecting to see.

Our next question is from Mig Dobre with Baird.

I want to talk about Australia a little bit. I know we don't spend a lot of time focusing here, but you've had good growth, and I understand some of that is FX, but even if we take FX out, you've had good growth. You're guiding for growth. And at the same time, we're looking at pretty soft pretax margins here. We're looking at a loss. So I guess I'm trying to understand really the moving pieces here in terms of what is causing this drag on margins? And what do you think needs to happen here in order to get this to breakeven or better?

Yes. So from a full year perspective, for Australia, we're expecting a total pretax loss of low single digits. So extrapolating the Q2 results would kind of overemphasize what that would be. But really, this year, it's softer equipment margins for Australia. We've really been working on their aging profile. They -- each of the regions, obviously, has a little bit different timing. Generally speaking, Australia a little bit further behind. Equipment takes longer to get in the country. They caught up later, right? So then they sold through their backlog. So then their aging is a bit later, and they're just working through all of that. Additionally, the first half of the year here, I would say, farmer sentiment was pretty weak and demand was really soft. We saw TIVs pulling back to multi-decade lows in some cases. That said, rainfall has been really good across our footprint. Generally speaking, we're expecting some really nice yields. We've started to see farmer sentiment pick up. That is baked into the expectations on the growth side. But to answer the question, the pullback in profitability, the equipment margin driven, it was us attacking aging. We like the progress we're making there. Still have some work to do there this year, but definitely expect that to work back up next year and then kind of see improved profitability profile without necessarily calling what demand is going to look like.

I'm sorry, I don't think I understand your comments here in terms of what improved the margins on a go-forward basis and...

It is simply working through the aged -- it's working through the aged inventory. Just like we saw on the U.S. side, I'd just say that their timing is behind the U.S.

And then I guess my follow-up, just conceptually here. You've expanded into Europe. You're obviously reworking the footprint there, what you're doing in Germany. You've expanded into Australia. Thus far, we haven't really seen any profits out of this Australian business flow through. I guess the bigger picture question that I'm wondering here is, do you view the geographic expansion as an asset for the company? And is there an argument to be made that refocusing towards expanding within Canada or the U.S. proper is actually more conducive to generating superior longer-term returns?

Yes. So I feel proud about -- we both feel proud about the work that we've done on the footprint and focusing down right and divesting of Germany. We've divested out some outlying locations on the U.S. side to really be focusing on the Upper Midwest. Within Australia, I think you'll see that focus as well, and we're recently getting dual-branded in 6 of the 15 locations. But yes, for sure, we're excited about the pipeline on the U.S. side in the Upper Midwest, really focusing on that density dollar for dollar when those opportunities present themselves, that's where we want it to be. At the same time, yes, we're happy with and absolutely considered Australia an asset. The timing, obviously, wasn't favorable relative to us buying and then really demand conditions across the globe getting softer, right? But what we're measuring ourselves against right now is troughs, multi-decade low industry demand, both on the U.S., well everywhere, right? So as that normalizes, that will improve. But I would say, for sure, considering that a strong asset for the future that will generate returns for shareholders, but absolutely focused on the Upper Midwest and the United States and really want to continue to see M&A activity there. That is dollar for dollar, the most impactful, and it's going to leverage the synergies we have here and everything we're investing in from a customer care strategy perspective. We've talked about this at length, right, sharing parts, sharing equipment, leaner balance sheets, all of that good stuff, the more that we continue to execute on that in the Upper Midwest here though, I think the stronger the profitability will look going forward.

[Operator Instructions] Our next question is from David Raso with Evercore ISI.

Can you clarify a little bit, when you say early -- earlier than anticipated shipments of presold equipment, can you just explain why and any quantification of how much that was and how much earlier than you did expect it to arrive? And then thinking about some of the comments about maybe some of the economics here to get some of your customers back into the black? When we think of bonus depreciation buying at year-end, how you're thinking of managing your inventory? Are you getting quote activity in a different way the last few weeks? Because obviously, that swing to profitability puts [ in decent ] position to think about using bonus depreciation more. And I don't think I heard you comment about your own inventory management. Has anything changed with the recent improved economics out there for the farmer?

Yes. Thank you, David. I'll take just a couple of those high level and then let Bo follow up with some more details. Yes. So to your question on the farmer economics and recent activity picking up. We've definitely seen some of that, especially at this juncture on the used equipment. This time of year is typically a little slower time as you look at farmers are just either finishing wheat harvest or about to start corn and soybean harvest, as an example. And so as we plan well out with them and often work with hand-in-hand with them, it's -- the goal is to try to have them ready to go by right now with what they have. So therefore, you don't typically see -- if it were going the other way, we wouldn't see a lot done either the other way at this time of year. So as we start to get through harvest and then that's where we'll see if this continues, some of the benefits of that. As far as the timing of orders from the factories, there's obviously a lot of components that go into this very complex technology, advanced equipment, a lot of different suppliers that the OEMs are getting components from and so on. So with anything, when we do presales or when we order inventory and we work very closely with the factories. And on the lead times, and of course, they are always their best predictions, but it's certainly not uncommon to have those fluctuate plus or minus a month depending on, again, how deliveries work through from their suppliers and how their build schedules are going and so forth. And so just from our suppliers, they essentially shipped us some of these a little earlier than requested and anticipated. And then the growers, typically -- and the contractors want them as soon as possible. So it's just generally standard process that we get them in here and do what we do to them, which is a lot of predelivery and inspection and finishing some of the technology and so forth and then get them turned around and delivered to the customers. So that's what that was specifically.

Yes. And I would just say, like not trying to overstate that. So I mean just think about, again, the split. First half of the year, Domestic Ag revenue is down 13.5%, second half we're seeing 20%. It's not that we're saying demand is softening for the second half of the year. There are just some timing differences there. And thus, we were not down as much in the first half as we will be in the second. But it's really been -- for Domestic Ag, there's been -- it's as anticipated, right? I don't think anybody has changed large ag expectation of down 15% to 20%. It just, yes, seems to be exactly as advertised. And in some ways, in this environment, it's been comforting. Clearly, the improvement in commodity prices, does that pick up year-end buying, a lot of that, when it comes down to depreciation, they don't know what things look like until they get late November to December. That's when you would see who is in the black. And then is that driving some incremental behavior where they're showing up on the lot and looking at stuff they might want to buy. And then generally, from an overall inventory perspective, I would say, as conditions are improving, it's not -- I wouldn't say it's necessarily changing how we're managing inventory. And first, just a couple of points as well. I'll take the opportunity since we're talking about it. We were expecting inventory generally flat, pretty much is. So we certainly usually have some seasonal build here and heading into the fall, getting some combines to land on the balance sheet. We'll get those turned around to customers. But there's plenty of evidence that things are continuing to work in the right direction. I definitely highlight from a year-to-date perspective, used equipment is down $40 million. That's a huge plus for us. A lot of that was focused on getting aging down. New equipment is up like $60 million. That speaks to the mix, right? We're getting that stuff landed and ready to deliver to customers ahead of harvest, for example. Total ag inventory, which is Domestic Ag inventory, which, of course, we're talking about the softest market in several decades, that inventory is down actually $16 million this year. And then from a strength perspective, we've talked about Construction and demand conditions improving and the inventory there is up $30 million. So I think everything we're doing is working and things continue to trend in the right direction. We continue to see those decreases on the floorplan interest perspective. We're convinced that we want to continue to drive higher presale rates, get our turns up closer and tighter around the 2.5x turns. And in order to do that, we are changing the way we've done some things in the past, and we're more aggressive on how we look at the aging profile for use and what we need to do to move that. We're looking more at how we leverage our footprint and not have to have the same stock inventory in every location, right, leveraging the fact that we can go down the road to the next dealership if somebody is wanting to get in the cab on something. So we're purposely building towards what we think is a leaner, meaner balance sheet that really helps de-risk some of the profitability volatility that we've seen in the last cycle and combine that with what we're doing from a customer care perspective. We're getting really excited about what we think we can do here when demand inflects. And that's what we're working on a lot on the daily basis here. We're not necessarily talking a lot about it. Inventory tends to get the oxygen here as well as the current demand environment, but we're excited to show what we can do based on everything we're building towards and the moves we've made here over the last 2 years.

That was all very helpful. On my way out the door here, can we just ask about pricing a little bit? What are you seeing large ag versus small, and I am thinking more domestic market on new and used?

Yes. On the new side, relatively flat, a little bit of list price increases, maybe generally offset by a little bit of programming. On the used side, I think you've heard all the OEMs comment lately about the divergence now coming to an end here from the new-to-use spread. In other words, used values stabilizing that -- almost catching a falling knife scenario we had going on in '24 and throughout most of '25 as well. Again, the used market, kind of finding a bottom here and stabilizing, yet to converge, though. So again, I think as we talk about farmer profitability and we look at the long-term fundamentals and commodity prices and so on, we'll need to get that for a while yet and sustain for a while yet in order to see the used prices come up a bit more. That -- again, there's a lot of healthy things in play there as we've been an early mover in reducing our inventories and reducing our aged inventory as Bo indicated, especially around the used side. Other dealers that have been a little behind have been working through that now in '26 and are on a really good pace and trajectory to, very possibly by the end of the year, have that generally cleaned up. So as our peers and the rest of the industry gets that cleaned up, that also will bode well for used prices as well and as that market tightens in. All that should start to bring used values up more, which is actually what we need to decrease or diminish some of that spread that we saw happen over the last few years here on the new-to-used trade differences. So again, that will also bode well for trading as we go into next year and industry volume potential.

There are no further questions at this time. I would like to turn the call back over to management for closing remarks.

Yes. Thank you to all of you for your interest in Titan Machinery. And again, thanks to all our employees for a tremendous execution on our controllables here. And thank you to all our contractors and farmers that we serve and what we believe to be the 2 most noble industries in the world and wish them the best building and feeding the world here as we go forward. Thanks again, everyone. We look forward to talking to you on our next call.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.