John Mills - IR David Meyer - Chairman and CEO Mark Kalvoda - CFO

Ryan Sigdahl - Craig-Hallum Larry De Maria - William Blair

Greetings and welcome to the Titan Machinery Third Quarter Fiscal 2019 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, John Mills of ICR. Please go ahead, sir.

Thank you. Kevin. Good morning, ladies and gentlemen, and welcome to the Titan Machinery third quarter fiscal 2019 earnings conference call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; and Mark Kalvoda, Chief Financial Officer. By now, everyone should have access to the earnings release for the fiscal third quarter ended October 31, 2018, which went out this morning at approximately 6:45 AM Eastern Time. If you have not received the release, it is available on the Investor Relations page of Titan’s website at ir.titanmachinery.com. This call is being webcast and a replay will be available on the company’s website as well. In addition, we are providing a presentation to accompany today’s prepared remarks. You may access the presentation now by going to Titan's website at ir.titanmachinery.com. The presentation is directly below the webcast information in the middle of the page. You will see on the slide 2 of the presentation, our Safe Harbor statement. 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. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan’s most recently filed Annual Report on Form 10-K. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as maybe 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’ll 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 in the 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 measures in today’s release. The call will last approximately 45 minutes. And at the conclusion of our prepared remarks, we will open the call to take your questions. Now, I'd like to introduce the company’s Chairman and CEO, Mr. David Meyer. Go ahead, David.

Thank you, John. Good morning, everyone. Welcome to our third quarter of fiscal 2019 earnings conference call. On today's call, I’ll provide a summary of our results and then an overview for each of our business segments. Mark will then review financial results for the third quarter of fiscal 2019 and conclude by reviewing our updated modeling assumptions for fiscal 2019. If you turn to slide 3, you will see an overview of our third quarter financial results. Our third quarter revenue was $364 million, with adjusted pretax income of $12.9 million and adjusted earnings per diluted share of $0.49. We're pleased with revenue growth across all segments and the operating leverage we are generating in our business. Our third quarter results are indicative of the efforts we've made over the past couple of years to position our business for improved profitability across all segments. The increase in our agriculture segment revenue is encouraging, given the continued industry challenges. Our improved inventory position is helping drive increases in equipment margins, which combined with our lower operating expenses, is generating improvements in profitability. As a result of these improvements and revenue growth in all segments, adjusted earnings per diluted share grew significantly over the prior year period. Given these current results and expectations for our fourth quarter, we are raising our modeling assumptions for fiscal 2019 adjusted diluted earnings per share to a range of $0.65 to $0.75. I’ll now provide additional detail for our three operating segments, consisting of our domestic agriculture and construction segments and our international segment. On slide 4 is an overview of our domestic agriculture segment. To say the least, it has been a challenging harvest across most of our ag footprint. Due to an abnormally warm October wet spell, the progress of crop harvest has been trailing the 5 year average all fall and factor on un-harvested soybeans in the field today across our Northern footprint to a level which I have not seen in the -- my 42 years in the business. A big thank you to our parts and service teams, as they continue to support our customers through some very difficult harvest conditions. What growers experienced this fall is such a rate of importance to reliable and productive combines and tractors. Growers continue to be impacted by low commodity prices and we are beginning to see an increased number of farm sales and farm consolidation. On a positive note, overall yields on our markers are average to above average. Some growers took advantage of early year crop hedging and marketing opportunities. The USDA is funding the previously announced support programs offsetting some of the impact of tariffs on our commodity prices. The new tax bill will continue to benefit our customers’ tax planning. Duty cycles on grower fleets continue to lengthen and with the increased age and hours, customers will be looking to update or repair their existing equipment. Inventory levels are improving, the results being reflected in our improved margins. Year-end tax volume, technology and continued replacement demand will be the main drivers for fourth quarter equipment sales. We continue to focus on our offseason uptime inspection program, which not only produces parts and service revenues, but brings tremendous value to our customers that keep equipment fleets in top condition. Turning to slide 5, you'll see an overview of our domestic construction segment. The strong economy continues to positively impact the construction equipment industry. Industry growth is more prevalent in the major metros and coastal areas as rural construction equipment markets are being negatively impacted by the depressed commodity prices, affecting construction equipment purchases by farmers as well as other ag related businesses. Despite volatility in crude oil prices, we're seeing a pickup in business from oil and oil related infrastructure. Industry new and used inventory levels are much improved. We are seeing improved rental utilization, resulting from fleet rationalization efforts and increased machine usage is driving increased parts and service revenues and similarly to our ag segment, we’re putting a strong focus on the offseason uptime inspection program to provide additional product support revenues. Our third quarter results in our construction segment have kept us on track for improved year-over-year top and bottom line performance in the second half of fiscal 2019. On slide 6, we have an overview of our international segment, including markets within the countries of Bulgaria, Germany, Romania, Serbia and Ukraine. The rainy season grain crop was our best average due to drought conditions during the growing season. The drought was more prevalent through the Northern Europe, including Germany. With the exception of Germany, late season crops in our footprint were much better than the grain crops due to timely summary of rains. The business climate on our European countries is stable with increasingly available retail credit for our customers’ equipment purchases, particularly in the Ukraine. The Russian-Ukrainian conflict has been concentrated in the Crimea and Far Eastern regions of Donetsk and Luhansk. The facilities are located in the central and western regions of Ukraine, a far distance from the conflict. We continue to mitigate the financial risks arising from potential geopolitical tensions in Ukraine. There have been recent announcements of sizable global investment in Eastern European farms, reflecting the long-term opportunities in this highly productive agricultural region. Our four store acquisition of AGRAM in Germany is being successfully integrated into our organization and we are excited about the future opportunities in the German market. As we increase our parts of equipment in Europe, we continue to focus on parts and service, growing aftermarket product support area of the business. Europe continues to be a solid contributor to our bottom line. Before I turn the call over to Mark, it is great o report improved top and bottom line results and I want to thank all our employees and customers in United States and Europe for a very successful third quarter. Our balance sheet continues to be strong as US farm equipment dealers are looking for a succession solution, Titan Machinery is in an excellent position to bring on additional locations. Now, I’ll turn the call over to Mark Kalvoda to review our financial results in more detail.

Thanks, David. Turning to slide 7, revenue in each of our businesses was up in the third quarter, generating total revenue of $364 million, an increase of 10.1% compared to last year. Our revenue increase was across all segments, primarily driven by equipment revenues within our agriculture segment. Parts and service were up 8.3% and 6.7%, aided by the addition of our AGRAM stores in the current quarter. Excluding AGRAM, our parts and service business were still up between 4% 5%, demonstrating continued growth in this high margin area of our business. Our rental and other revenue increased 3.9% in the third quarter, due to a higher level of inventory rental. Our dollar utilization of our designated rental fleet in our construction segment improved to 28.8% for the current quarter, compared to 27.2% in the same period last year. On slide 8, our gross profit of $70 million for the quarter was an increase of 13% compared to the same period last year, primarily driven by higher revenues and improved equipment margins. The higher equipment margins also increased our gross profit margin by 50 basis points versus the prior year to 19.1% despite a revenue shift to a higher mix of equipment revenues in the current quarter. Our equipment margins continue to benefit from stable pricing and our improved equipment inventory position. Our operating expenses increased by $2.9 million to $53 million for the third quarter of fiscal 2019, primarily as a result of increased variable expenses such as commissions due to increased levels of equipment gross profit. Our current quarter also includes a full quarter of operating expenses from our AGRAM acquisition. Despite these increases, we were able to achieve operating leverage during the quarter, due to our leaner, more efficient operating structure. As a percentage of revenue, operating expenses improved in the third quarter to 14.7% compared to 15.2% in the same quarter last year. For the third quarter of fiscal 2019, we recognized $200,000 in restructuring and impairment charges, compared to $2.6 million in the same period last year. Recall that we essentially completed our fiscal 2018 restructuring plan in the third quarter of last year. Floorplan and other interest expense decreased approximately 13% to $3.5 million in the third quarter of fiscal 2019 compared to $4 million in the same quarter last year. This reduction was primarily due to a decrease in interest expense on our senior convertible notes, resulting from the $20 million repurchase of this debt earlier this year. For the third quarter of fiscal 2019, adjusted EBITDA improved to $21 million compared to $16.2 million in the third quarter of last year. In the third quarter of fiscal 2019, our adjusted net income was $10.9 million compared to $4.4 million in the prior year. Our effective tax rate for the quarter was 15.6%. This quarter benefited from certain discrete items, a favorable mix of income in our various tax jurisdictions as well as the positive impact from certain tax planning strategies. I’ll provide more color on our effective tax rate expectations for the remainder of the year in a few minutes. Our adjusted earnings per diluted share was $0.49 compared to $0.20 in the third quarter of last year. You can find a reconciliation of adjusted EBITDA, adjusted net income and adjusted diluted EPS in the appendix to the slide presentation. On slide 9, you will see an overview of our segment results for the third quarter of fiscal 2019. Agriculture revenues were $211 million, an increase of 13%. As David mentioned earlier, ag equipment revenue was supported by customer replacement demand, despite difficult industry conditions as well as improved parts and service performance. Our ag segment achieved adjusted pretax income of $9.9 million compared to adjusted pretax income of $5.5 million in the prior year period. The improvement in our adjusted ag segment profitability was primarily the result of increased revenues and equipment margins. Turning to our construction segment, our revenue was $79 million, which was an increase of 8% compared to the same period last year. Our adjusted pretax income for our construction segment was $800,000 compared to an adjusted pretax loss of $700,000 in the same period last year. The improvement in segment results was primarily the result of increased revenue as well as reduced floorplan interest expense. In the third quarter of fiscal 2019, our international segment revenue was $74 million, an increase of 4.7% compared to the same quarter last year. The revenue increase was driven by our AGRAM acquisition, which was completed early in the third quarter of fiscal 2019. The impact of increased revenue from AGRAM was partially offset by lower equipment revenue in certain of our other European markets, which faced a difficult year-over-year comparison against the third quarter of fiscal 2018, in which revenues were up over 50%. Our international segment adjusted pretax income was $2.6 million, compared to $2.5 million in the same quarter last year. Turning to slide 10, you see our revenue results for the first nine months of fiscal year. In contrast to our third quarter results, our revenue for the first nine months of fiscal 2019 and in particular our parts and service revenue was impacted by our store closings associated with our fiscal 2018 restructuring plan. During the first half of fiscal 2018, we closed 13 agriculture stores. Despite the decreased store count, our total revenue increased 5.3% compared to the same period last year. Turning to slide 11, our gross profit for the first nine months was $176 million, a 7.8% increase compared to the same period last year. Our gross profit margin increased by 50 basis points year-over-year to 19.4% for the first nine months of fiscal 2019. We realized an improvement in gross profit margin due to increased equipment margin. Our operating expenses declined by $5.2 million or 3.4% for the year-to-date period to $147.7 million, due to cost savings from last year's restructuring plan. As a percentage of revenue, in the first nine months, operating expenses decreased 150 basis points to 16.2% compared to 17.7% in the same period last year, reflecting the leveraging of our lower cost structure coupled with higher revenues in the first nine months of fiscal 2019. Restructuring and impairment charges were $900,000 for the first nine months of fiscal 2019 compared to $10.5 million in the same period last year. Floorplan and other interest expense decreased $2.3 million or 17.2% to $11.1 million in the first nine months of fiscal 2019, reflecting a decrease in our average interest bearing inventory compared to the first nine months of fiscal 2018 as well as interest expense savings resulting from our repurchases of our senior convertible notes. Our adjusted diluted earnings per share was $0.71 for the first nine months of fiscal 2019 compared to an adjusted diluted loss per share of $0.03 in the prior year period. On slide 12, we provide our segment overview for the nine month period. Overall, our adjusted pretax income was $19.9 million for the first nine months of fiscal 2019 compared to an adjusted pretax loss of $200,000 in the same period last year. This improvement is primarily the result of strengthening equipment margins on higher sales volumes combined with lower operating and floorplan expenses in our agriculture segment as well as overall revenue growth in our international segment. On slide 13, you will see the progress that we've made in our expense structure and a corresponding improvement in our absorption rate. As you recall, absorption is a metric that reflects the ability of parts, service and rental gross profits to cover fixed operating costs. We have reduced our annual operating expenses from fiscal 2014 to the trailing 12 months ended October 31, 2018 by $91 million or 31%. And over the same time period, increased our absorption rate from 71% to approximately 83%. Operating at this expense level into the trough of the ag cycle positions us to be profitable during challenging times, while enabling us to significantly leverage our operating expenses when industry conditions recover and revenues increase. Our absorption rate for the third quarter of fiscal 2019 improved to 94% compared to 92% in the same period last year, due to the strength in our parts and service businesses. Turning to slide 14, we provide an overview of our balance sheet highlights at the end of the third quarter of fiscal 2019. We had cash of $52 million as of October 31, 2018. Our equipment inventory at the end of the third quarter was $451 million, an increase of $51 million from January 31, 2018, reflecting a $74 million increase in new equipment, partially offset by a $23 million decrease in used equipment. Our third quarter equipment inventory turns terms were flat versus the prior year comparable period at 1.7 times. Our equipment inventory level reduced sequentially from the prior quarter and we expect further reduction in our fourth quarter and should end the year relatively flat as compared to the prior year, when excluding inventory associated with our AGRAM acquisition. Included in the appendix to this slide deck is our equipment inventory chart with inventory levels and turns for the past five years. Our rental fleet assets at the end of the third quarter decreased to $114 million compared to $123 million at the end of the fourth quarter of fiscal 2018. We have reduced the size of our fleet to focus on improving our utilization rates and have seen some success in the current quarter. We expect our fleet size to decrease to around 110 million, as we finish fiscal 2019. We had $333 million of outstanding floorplan payables on $653 million of total discretionary floorplan lines of credit as of October 31, 2018. We continue to have ample capacity in our credit lines to handle our equipment finance needs. Our total liabilities to tangible net worth’s, ratio is a healthy 1.5. The current outstanding balance of our senior convertible notes remains at $46 million. We have retired $104 million or approximately 70% of the original $150 million face value of our senior convertible notes with $95 million in cash. The remaining balance of our convertible notes are due on May 1, 2019 and we are confident in our ability to fully satisfy these notes at maturity. Slide 15 provides an overview of our cash flows from operating activities for the first nine months of fiscal 2019. The GAAP reported cash flow provided by operating activities for the period was $12 million. As part of our adjusted cash flow used for operating activities, we include all equipment inventory financing, including non-manufacture of floor plan activity. Our adjustment for non-manufacturer floor plan payables was $44 million for the first nine months of fiscal 2019. We also adjusted our cash flow to reflect the constant equity in our equipment inventory, which enables us to evaluate operating cash flows, exclusive of changes in equipment inventory financing decisions. The equity in our equipment inventory decreased to 26.2% during the nine-month period ended October 31, 2018 and represents a $54 million adjustment to our cash flow used for operating activities. We reduced our equity in equipment inventory during the nine month period ended October 31, 2018 as we drew in our floor plan lines to reduce debt, increased our equipment inventory and fund the AGRAM acquisition. After all adjustments, our adjusted cash flow provided by operating activities was $2 million for the nine-month period ended October 31, 2018 compared to an 11 million use for the same period last year. We expect to generate cash in the fourth quarter, as we further reduce equipment inventories. Slide 16 shows our updated fiscal 2019 annual modeling assumptions. You're leaving all segment revenue growth assumptions constant with agriculture up 0 to 5%, construction up 0 to 5% and international up 10% to 15%. Recall that our range for international includes the revenue contribution from the AGRAM acquisition, which closed early in the third quarter of fiscal 2019. We continue to see strength in our equipment margins, particularly in our ag segment. We are now forecasting equipment margins to be in the range of 9.1% to 9.4% versus prior expectations for the full year in the range of 8.7% to 9.2%. Earlier in the year, I indicated that our adjusted diluted EPS range included an annual effective tax rate of 28%, which included assumptions regarding the new tax law and estimated mix of domestic and foreign income as well as income or loss by country within our international segment. Variances in our effective tax rate can occur with the changing mix of income and losses among our various tax jurisdictions, particularly when we have valuation allowances within some of these jurisdictions. Now that there is more visibility to these variables, we are expecting a full year effective tax rate of approximately 25%. This effective tax rate is a few percentage points lower than what we would expect into the future as we anticipate fewer valuation allowances will impact our rate. Given the lower anticipated effective tax rate and improvement in equipment margins, we are raising our adjusted diluted earnings per share expectations for fiscal 2019 to a range of $0.65 to $0.75 from the previous range of $0.45 to $0.65. Operator, we are now ready for the question-and-answer session of our call.

[Operator Instructions] Our first question is coming from Steve Dyer from Craig-Hallum.

Ryan Sigdahl on for Steve Dyer. You mentioned replacement demand helping the ag segment. Do you think it's a normal replacement demand going on right now or is there some of that occurring, but farmers are hunkering down with the low corn and soybean prices, trade uncertainty, et cetera.

Yeah. They are hunkering down, but the replacement demand is really, I mean, we're getting the age, we're getting the hours on machinery and when you look at the importance of uptime and reliability in the field, especially during the peak planting season and harvest season, the growers need updated equipment sold. They are going to make those purchase decisions, whether it's our new piece or a late model used. And if they don't with their higher hour usage, there is also that, if they decide to keep it and really want to get that in top shape, then it's that parts and service business that is keeping. But [indiscernible] since say 2013, so they’re definitely getting some age on some of this equipment.

Maybe just said differently or a follow up on that, so the ages of fleets is that, call it, 5 year lows or since 2013, is that continuing to trend down or is that kind of at a stable point now where replacement demand is offsetting that?

I would say it's flat but maybe extending longer. It's that same plateau a little bit longer. It's not improving. It's getting more hours or more age on the equipment. And one more comment on that too is from a depreciation standpoint, with all the accelerated depreciation and the length of the fleet, typically the growers like to have some depreciation basis in their fleet and they're at some of the lowest levels they’ve ever been. So from a tax standpoint and the advice they get from their banks and their tax people is to try to have as much depreciation basis in their fleet as possible. So, that's another motivating factor for that equipment purchase.

Switching gears to construction, have you seen any impact from the recent declines in oil and talking mainly October November here?

You know, there has been some volatility, but we're seeing -- we got [indiscernible] in the western North Dakota that the infrastructure is built, there's still fracking going on. There's oil -- there's not only the well themselves, but then there is new wells going in and -- but it's the infrastructure behind them, it's the roads, it’s the communities, it's the pipelines are going in, some refineries going in and just -- in building out some of the infrastructure to support that area. So we continue to see some business, even though there has been some volatility in the oil prices. It's improved for us in those markets.

Last one for me and then I'll hop back in the queue. Equipment margins have been steadily improving with guidance being raised. I mean without getting too much in the weeds for next year, do you think there's room for continued improvement or are we kind of at a normal level here at that kind of low 9% range?

Yeah. We've kind of talked about, if you go back and look at it, our historical averages there, it's right around that 9.5%, maybe a little bit north of that, so we're nearing those, I think, the midpoint of our guidance here is around 9.25 now. So I think there's some level for -- some level of improvement there, but certainly not to the level that we've experienced year-over-year here. So I think we're reaching those historical averages there.

Our next question is coming from Mig Dobre from Robert W. Baird.

It’s [indiscernible] on for Mig this morning. This was a second quarter in a row of nice growth in parts and service, looks like maybe we’ve turned the corner there. What kind of are the drivers of the improvement in growth rates and what’s the outlook going forward?

Yeah. We were happy, so parts and service up 8.3, 6.7% respectively. Part of that growth that’s in there is the addition of AGRAM in there for the quarter, but despite that still up around that 4% to 5%. As far as going forward, I think that aging fleet that David mentioned earlier, that's certainly something that's providing some opportunity for us here that there continues to be some more parts and service opportunity on that. I think as we move forward, that 4%, 5% is probably a little bit stronger than what we expect, but it's kind of in the ballpark there. Certainly, our international business has had some good opportunity for parts and service growth. That's a less mature business over there and we continue to maximize the parts and service opportunities over there. Also just with our new structure that we’ve had here with the expert team, there is a heavy focus on that parts and service businesses as well as you know.

And you talked about the drivers of the uptick in SG&A. Is this perhaps like a new run rate going forward or maybe there were some unusual drivers in the quarter?

Anytime you have a higher level of equipment gross profit, some of those variable expenses such as the commissions are going to ride up with that. I think for the year, I think we've been talking just over that 200 million and I don't think that's changed. I think we're still around that level. So certainly with Q3 and Q4, we expect a little higher level of operating expenses here, because of that higher contribution of equipment gross profit.

If I can maybe sneak in one more quick one. You mentioned outlook for inventory at the end of the year being sort of flattish versus prior year, ex AGRAM. How much inventory is coming from AGRAM?

AGRAM inventory I think is right around, I think, in the acquisition right around 20 million, maybe just shy of 20 million.

[Operator Instructions] Our next question is coming from Larry De Maria from William Blair.

You guys obviously now that you’ve discussed this replacement demand, maybe can you put in some numbers, David, around maybe the average hours that farmers or your customers are willing to put on equipment and where they are now to give us a sense of the level of replacement that's going on and the need?

Well, historically, if I look at this, well, let’s break this segment, there's probably that 20% that comes from farmers out there that are -- buy an 80% of that new equipment. For a combine, for example, once all those combines get the day be 2 to 3 years old, 1000 hours on them, they'd like to have those replaced. I mean that seems to be historically and I talked to a grower the other day that who has been financially very solid, been a longtime new buyer, he had combines that were 7 years old and approaching 3000 hours on them. So to put in context and you see a lot of those similar situations out there where the life of these combines are in the hours on them are way farther than what they really feel comfortable from a reliability standpoint. Then couple that with some of the newer technology out there, some of the precision, some of the -- some of that that’s in the newer equipment, so that coupled on the higher age and hours is really driving some of these new equipment purchases.

Is it same for tractors or the combines more greatest?

Yeah. I think the combine is definitely something they want fairly updated, self-propelled sprayers a little bit the same way, but then tractors as they start approaching that $5000 or $4500, 5 years old, you don’t run into the same, we need to upgrade that. And they’re again a tremendous amount of technology, fuel efficiency, higher horse powers, some of the technology and then some of the newer forward drives. So again, driving those purchases.

Now you mentioned technology, can you give maybe some further examples of where customers are upgrading around technology, I mean, maybe [indiscernible], but are you getting the same level that some of the other companies are talking about? Is that leading to better mix and better revenue opportunities for you?

Well, we've had the auto guidance systems for a while. So, we're seeing pretty -- become mainstream in the tractors and combines or these two themselves. So, on the combine front, you have got the harvest command with the combine automation, on the planner side, high speed precision planners, you've got the variable speeds prescription capabilities. Something that’s industry leading from the KSIH, there is AFS soil command [indiscernible] applications. If you look at that, the whole AFS connectivity and we’re providing that telematics to be able to access that machine connectivity with the AFS platform. And I think, we recently announced a digital agreement with farmers, that's really exciting Larry that’s offering the customers, there is an integrated digital platform for their -- not only their current machine, but their legacy equipment. The farmers, functionality which is not only for the new equipment, but they can put it all into that mix fleet. The other thing that it does too is that with that open architecture is that you can have a mix fleet, you can have the older equipment and get all that on that whole software platform with that technologies. So those are a few things I think are really exciting and that's – and there definitely is, growers are seeing the return on investment on all that technology out there, higher yields, more efficiency and more productivity and some time, more fuel savings and all those things are really driving that and better ergonomic decisions in season from what these people, from all that data collection and data software.

So in other words, some of the stuff that your green competitor talks about with their software platforms, you're able to mitigate that with the farmer’s edge, it sounds like, just if you can kind of confirm that, that would be helpful. And then just from a top line and I'll leave it here, a high level perspective. It sounds like replacement and technology are obviously driving things. We know that, but does that imply that despite the low commodity prices and some of the trade concerns that all else being equal, we can consider that the replacement cycle and technology lead to further, let's say, moderate growth in ag over the next couple of years, unless something bad happens with trade. Is that fair or no? How do you think about it?

Well, I think that we’re working on an awful lot of numbers, right. If you look at where these industry are -- numbers are right and we’re working off some really low numbers, so to be able to sustain that, it's not going to take a lot of units in order to stay at the same numbers. So, we've experienced these low commodity prices and at this level right now and we feel that at the levels of unit sales are fairly sustainable and that's really what's driving that business is the replacement demand and in a way, if we saw some uptick in commodity prices, then we could probably see some improvement. So getting back to the precision, Titan Machinery has always been the leading edge and the technology, early days related to our network and what we have right now from KSIH and definitely leading edge technology and it is open architecture, it accommodates fleets, leading edge stuff and if you take some of the partnerships, they have a tremble, the partnership with Raven, the partnerships with Farmer’s Edge, I definitely think we've got a very affordable precision platform that delivers go to the marketplace with. Definitely ADRAM as good as anything that Deere has out there.

Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over to Mr. Meyer for any further closing comments.

Okay. Well, I want to thank everybody for participation on the call and looking forward to a good fourth quarter. So, thank you.

Thank you. That does conclude today’s teleconference. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.