Greetings. Welcome to the Titan Machinery First Quarter Fiscal 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to John Mills of ICR. Thank you. You may begin.

Thank you. Good morning, ladies and gentlemen, and welcome to the Titan Machinery first quarter fiscal 2022 earnings conference call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; Mark Kalvoda, Chief Financial Officer; and Bryan Knutson, Chief Operating Officer. By now everyone should have access to the earnings release for the fiscal first quarter ended April 30, 2021, which went out this morning at approximately 6:45 AM Eastern Time. If you’ve 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're 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 available directly below the webcast information in the middle of the page. You'll see on 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 and updated in subsequently filed quarterly reports on Form 10-Q. 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've 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. 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 first quarter fiscal 2022 earnings conference call. On today's call, I will provide a summary of our results and then Bryan Knutson, our Chief Operating Officer will give an overview for each of our business segments. Mark Kalvoda, our CFO, will then review financial results for the first quarter of fiscal 2022, provide an update to our full year modeling assumptions. If you turn to Slide 3, you will see an overview of our first quarter financial results. The fiscal first quarter exceeded our expectations on all fronts with impressive operating leverage that showcases the earnings power of our efficient dealership network. On a consolidated basis, we grew revenue by 20% to $373 million driven by continued momentum in equipment sales, which is visible across each of our segments. The strong sales coupled with a modest increase in operating expenses and lower interest expense resulted in a 179% improvement to our adjusted pre-tax income of $13.5 million and 207% growth and our adjusted earnings per diluted share of $0.46. I am proud of our team’s performance and pleased to share this success with all our stakeholders. I will now turn the call over to Bryan to review our three segments in more detail.

Thank you, David, and good morning, everyone. I am excited to cover our Agriculture, Construction, and International business segments with you all this morning. And slide 4 is an overview of our domestic Agriculture segment. The big news is that during our first quarter, we saw large increases in corn and soybean prices, which have reached levels not seen since 2013. These commodity prices in conjunction with carryover from healthy 2020 government payment and favorable planting conditions have driven extremely positive customer sentiment. And as a result, we currently have a very robust demand for both new and used farm equipment. Further adding to this demand is the ROI from the new precision technology available on our cash crop equipment. The fact current equipment fleets are becoming aged and the tax benefits provided by equipment purchases collectively making for compelling reasons to upgrade equipment. While we have production slots for delivery in this fiscal year for all types of equipment we sell, we are starting to book orders for pre-sold high horsepower equipment into Q1 and Q2 of fiscal year 2023. Our focus on the aftermarket parts and service business continues to pay dividend and the repairs and maintenance needed on the aged fleets mentioned earlier, along with precision technology retrofit continue to bolster our partnered service business. While our customers will need timely rains during the growing season, and some of our Dakota markets are experiencing exceptionally dry conditions, there is a tremendous amount of optimism in our North American Ag business. Turning to Slide 5, you will see an overview of our domestic construction segment. We are seeing increased construction activity in most of our construction equipment footprint. Demand for new and used equipment continues to increase due to the opening up of the economy, lower interest rates, new housing starts, construction equipment demand from farmers and ranchers for land improvement, livestock operations and material handling, along with improved oil prices and potential for infrastructure investments. The market factors I just mentioned, along with our internal rental initiatives make us optimistic about improved rental utilization with our smaller rental fleet. The operational improvements that our team has implemented to-date have helped produce another consecutive quarter of profitability and we look forward to continued bottom-line contributions from our Construction segment going forward. On Slide 6, we have an overview of our International segment, which represents our business in the countries of Bulgaria, Germany, Romania, Serbia, and Ukraine. As we saw drought conditions and poor yields in some of our key European markets last year, this year is starting off much better with further early crop development, along with improved moisture conditions in areas affected by last year’s dry weather. Also, our European customers are benefiting from the strong global commodity prices creating robust demand for equipment purchases. As you can see, this strong demand is reflected in our International segment Q1 top and bottom-line results. As we are also experiencing domestically, there is a growing adoption rate for equipment with new precision technology in Europe. Also, similar to the U.S., there are supply side challenges causing some interruption in timing of deliveries. We continue to focus on the partnered service areas of our International business as customers in these developing markets are looking for higher levels of product support as equipment becomes more sophisticated and technologically advanced. Before I turn the call over to Mark, I would like to sincerely thank all of our employees for another great quarter as they support our customers through this busy and important spring season. With that, I will turn the call over to Mark to review our financial results in more detail. Mark?

Thanks, Bryan. Turning to Slide 7, total revenue increased 20.1% to $372.7 million for the first quarter of fiscal 2022. Our equipment business increased 26.3% versus prior year, which was driven by significant year-over-year growth across each of our segments, Agriculture Construction and International. Our Parts and Service business also performed well against solid performance in the prior year. Parts generated growth of 10.6% versus a 9% increase in the prior year and Service increased 8.2%, compared to a 12.1% increase last year. Rental and other revenue decreased 32.6% versus prior year due to a smaller rental fleet in our current construction footprint, as well as a reduced fleet due to the January 2021 divestiture of our construction stores in Arizona. Despite the decrease, our dollar utilization of our Construction segment rental fleet improved slightly to 19.2% for the current quarter, compared to 18.9% in the same period last year. On Slide 8, our gross profit for the quarter increased 21.5% to $71 million, and our gross profit margin increased by 20 basis points. The current favorable end-markets, coupled with our healthy inventory led to enhanced equipment margins, which offset the impact of sales mix away from our higher margin Parts and Service businesses. Operating expenses increased $3.3 million versus the prior year to $56.4 million for the first quarter of fiscal 2022. This modest increase was more than offset by revenue growth and led to 200 basis points of operating expense leverage compared to the prior year reducing our operating expenses as a percentage of revenue to 15.1%. Floorplan and other interest expense decreased 28.1% to $1.5 million in the first quarter of fiscal 2022, compared to the same quarter last year. The decrease was due to lower borrowings and our lower interest rate environment. In the first quarter of fiscal 2022, our adjusted net income increased 207.9% to $10.4 million. The adjusted first quarter fiscal 2022 net income excludes a $100,000 Ukraine remeasurement gain, while the adjusted first quarter fiscal 2021 net income excluded $1.1 million of expenses net of taxes. Our adjusted earnings per diluted share for the quarter was $0.46, compared to $0.15 in the first quarter of last year. Adjusted EBITDA increased 78.8% to $19.8 million, compared to $11.1 million in the first quarter of last year. You can find a reconciliation of adjusted net income, adjusted income per diluted share, and adjusted EBITDA to their most comparable GAAP amounts in the appendix to the slide presentation. On Slide 9, you will see an overview of our segment results for the first quarter of fiscal year 2022. Agriculture segment sales increased 18.6% to $229.6 million, helping to drive a significant increase in our adjusted pre-tax income of 82.1% to $11.2 million. In addition to the strong sales across Equipment, Parts and Service, the bottom-line also benefited from higher equipment margins and lower floor plan interest expense. Turning to our Construction segment. Revenue increased 14.1% to $68.6 million, compared to the prior year period. The stronger revenue, despite the January divestiture of two stores in Arizona, combined with lower interest costs, drove a $2.8 million improvement in segment adjusted pre-tax income to positive $100,000, compared to a loss of $2.7 million in the first quarter of the prior year. Our International segment revenue rebounded in first quarter and increased 32% to $74.5 million. As Bryan discussed in his remarks, the improved growing conditions and strong global Ag fundamentals have generated heightened equipment sales activity across our international footprint. The strong equipment sales and solid equipment margins yielded a $2.2 million improvement in adjusted pre-tax income to a positive $2.7 million. On Slide 10, we provided an overview of our balance sheet highlights at the end of the first quarter of fiscal 2022. We had cash of $89.7 million as of April 30, 2021. Our equipment inventory at the end of the first quarter was $330 million, a decrease of $8 million from January 31, 2020 reflecting the net effect of a $5 million increase in new equipment that was more than offset by a $13 million decrease in use. Strong sales and lower inventory levels continued to drive equipment inventory turns, which increased in the first quarter to 2.3 versus 16 in the prior year period. I will provide a little more color on our inventory on the next slide. Our rental fleet assets at the end of the first quarter increased slightly to $79 million, compared to $78 million at the end of fiscal 2021. We still anticipate our fleet size to be around $80 million at the end of fiscal 2022. As of April 30, 2021, we had $169 million of outstanding floor plan payables on $770 million of floor plan lines of credit, which leaves us with considerable capacity in our credit lines to handle our equipment financing needs. Our adjusted debt-to-tangible net worth ratio is a strong 0.9, compared to 1.3 in the prior year period and is well below 3.5, which is the leverage covenant requirement of our two largest floor plan facilities outside our bank syndicate credit agreement. Turning to slide 11, the amount of new and used equipment inventories are reflected in the size of the red and blue bars on this slide. As we discussed last quarter, and earlier on this call, supply chain disruptions due to the pandemic and strong customer demand due in part to the resurgence of agricultural commodities has created an overall tighter industry supply of equipment and helped us generate a higher inventory turn of 2.3. We believe our equipment orders level of pre-sells, and used equipment inventory have us well positioned to meet our revenue modeling assumptions for fiscal year 2022. Given current inventory levels, and stronger end-markets in each of our segments, we expect our inventory turn will continue to increase for the full fiscal year 2022. The overall quality of our inventory remains very healthy. Our inventory under non-interest bearing terms, which can be seen by the gray bar on the slide ended first quarter at 36.4%. Given our current cash position, we have elected to forego certain non-interest bearing terms with our suppliers in exchange for cash discounts on equipment purchases. This practice enhances equipment margins but decreases our level and percentage of non-interest bearing inventory. Slide 12, provides an overview of our cash flows from operating activities for the first three months of fiscal 2022. The GAAP reported cash flow provided by operating activities for the period was $27 million, compared to cash used for operating activities of $5.4 million in the comparable prior period. As part of our adjusted cash flow provided by operating activities, we include all our equipment inventory financing including non-manufacturer floor plan activity and adjust our cash flow to reflect the constant equity in our equipment inventory allowing us to evaluate operating cash flows exclusive of changes in equipment inventory financing decisions. After applying these adjustments, our adjusted cash provided by operating activities was $7 million for the three months period ended April 30, 2021, compared to adjusted cash used for operating activities of $3.6 million for the same period last year. Slide 13 shows our updated fiscal 2022 annual modeling assumptions, which we are raising across the board. Each of our business segments are performing better than expected and are off to a great start in fiscal 2022. Improving end-markets combined with years of operational improvements are combining to generate strong bottom-line results. For the Agriculture segment, we are increasing our revenue growth assumption to up 15% to 29%, from up 10% to 15%. The fiscal 2022 growth range includes a full year revenue contribution from our HorizonWest acquisition that closed in May 2020. For the Construction segment, we are increasing our revenue assumption to up 2% to 7% from flat to down 5%. Impacting this assumption is the divestment of two of our construction equipment stores in Arizona at the end of fiscal 2021, which accounted for approximately $27 million of combined revenue. Excluding these revenues from the prior year base, our modeling equates to a same-store sales range of up 10% to 15%. For the International segment, we are increasing our revenue assumption to up 17% to 22% from up 12% to 17%. From an earnings per share perspective, we are increasing our diluted earnings per share assumption by $0.40 at the midpoint to a new range of $1.65 to $1.85 for fiscal 2022. As a reminder, this range includes all ERP implementation costs. This concludes our prepared remarks. Operator, we are now ready for the question-and-answer session of our call.

Thank you. [Operator Instructions] Our first question is from Steve Dyer with Craig-Hallum Capital Group. Please proceed.

Good morning, guys. Ryan Sigdahl on for Steve, and congrats on the results.

Hello, Ryan.

Curious what benefit you think you’ve seen from higher corn and soybean prices driving equipment purchases now, realize there is some but versus the expectation, potentially greater demand this fall after harvest and the sale of futures that may be already locked in from a pricing standpoint. I know you mentioned bookings, quarter is good, but can you break those two out of kind of the benefit?

Hey, Ryan, this is Bryan. Yes, I think, definitely, the customer sentiment has been positively impacted by the corn and soybean prices, which has been up significantly here. And the new guide, as I mentioned the tax benefits, which are going to come into play here like you said as they continue to book more sales. It really helps to put together a solid year this year and really next year as well and actually out into calendar year 2023, you can lock in some real good prices right now. So, yes, I think that’s driving a lot of it, but then also just the aged fleet and then the opportunity to update to the newer technology and the efficiency benefits what that can do for their bottom-line. So, I definitely think it’s a combination of both long overdue and these commodity prices are really helpful.

And then, how much of the new equipment buying versus replacing that old equipment kind of the maintenance that kind of long overdue like you said?

It’s sometimes hard to discern exactly what because of the technology purchase versus to update their aged fleet from a maintenance perspective, because really the grower picks up the benefit of both at the same time along with the tax benefits. So, the three together really make for a compelling reason, but the downtime is really expensive too. So, the aged fleet becomes problematic for the growers from that standpoint. So, all three are really big drivers, but definitely the updating to the newer technology, again the precision technology and then just the newer equipment requiring less maintenance and downtime would be the biggest two.

And then John Deere said their U.S. and Canada large Ag industry sales outlook for 2021 was plus 25% year-over-year. Your Ag, updated Ag guidance for 15% to 20%, how should we think about the delta between those two – between kind of the OEM versus the retail side?

Yes, good question, Ryan. It’s – like you said, it’s not apples-to-apples on the dealer retailer versus the OEM. Deere is commenting on large Ag production precision North America as well, we are looking at all Ag business including the lower horsepower tractors, hay and forage. Also, in our guidance is our Parts and Service which are more stable and don’t typically have the large equipment growth swings. Deere’s guidance also includes Canada which is experiencing stronger growth right now than the U.S. And then, also, keep in mind that our Titan FY 2021 Q4 was up 39% as we reported our prior year results, compared to that same three months period for Deere, which is reflected in their current year guidance. So, just kind of that timing between the fiscal year there and the reporting with us being a quarter laggard to them. Mark, anything to add on that?

No, I think, you covered it all. Good.

Great. Helpful. Thanks guys and good luck. I’ll hop back in the queue.

Thanks, Ryan.

Our next question is from Mig Dobre with Baird. Please proceed.

Good morning. I guess, the way I would ask a guidance question is, maybe slightly different. When you are looking at your increase in Agriculture segment revenue relative to the previous assumptions, I am wondering if there was any limiting factor behind this guidance increase, meaning, is this 500 basis point increase your view of sort of where true retail demand is going to be based on incoming orders so on and so forth, or does this reflect some degree of constrained vis-à-vis equipment availability for fiscal 2022 that could carry into fiscal 2023?

Yes. Hey, Mig. This is Bryan. I think you are right. We’ve got that modeled into our assumption. generally we believe industry demand will exceed current year production a bit. But we do have some on hand inventory to sell down as well also some access to lease returns and deplete inventory but that unfilled demand will move into calendar year 2022 production as we continue to pre-sell those customers into those units. So, yes, we’ve modeled that into our guidance. We are in constant communication with CNH on that. Obviously, there are supply chain issues that limit component availability, labor shortages and so on. Their logistic guys are jumping through a lot of hoops to keep enough material and components to keep the plants going. We are really proud of them. They are doing a really good job with that to this day and again, stay in close communication with us. So, we’ve guided that in and again, any of those lease returns or additional dealer transfers, or any additional orders we get will be then increased incremental.

Just to clarify, because I am still a little bit confused here. Your stand that you are taking [ERPs] (ph) into Q1 and Q2 of fiscal 2023. I mean, that’s great. I am just trying to understand if this is sort of different than a year ago or different than normal and is this a factor of customers saying, hey, look, I need the equipment and you are basically saying, well, I am going to have to put you in backlog basically and deliver in Q1 and Q2 of 2023. Or is it that just sort the customers’ demand naturally is associated with those two quarters? I don’t know if I am making sense here. But I am trying to understand if we are really dealing with supply constraints on your part in terms of equipment availability?

Yes. It’s a little bit of both what you said there Mig, but more so the first bullet point. It is the production lead times are longer, lot of the orders slots are filled up, so depending on the product category and then other times depending on customer desire that will get us out into the Q1 and Q2. But more prevalent would be the production schedules are getting out there on some product categories.

Alright. And then, I guess, my second question is on, just the normal seasonality of the business relative to your guidance. I mean, historically, from what I can see, Q1 is not one of the seasonally strong quarters and has done quite well, right, $0.46 in earnings better than I guess, all of us expected. So, as you look relative to your full year guidance, how do you think about Q1 relative to other quarters? Is there a reason to think that the fourth quarter for instance has – is in anyway lower than Q1 has been?

Yes. Some of the things that we’ve done over the years, we talked about this for a while, but promoting that pre-sell and really pushing the pre-sell and we’ve done a nice job of that and have moved that. And by doing that, we have kind of moved some of that fourth quarter what we have done in the past and this has been done gradually over the years more so into that first quarter. So, we have kind of shifted the seasonality if you will somewhat on some of that equipment from the fourth quarter to the first quarter and somewhat into the second quarter as well with the pre-sell activity. So, yes, the first quarter, certainly this year doesn’t appear to be our soft quarter.

Okay. Well, I guess, I’ll talk to you more about this, Mark, offline. But my final question and I am kind of going back a few years here, back to 2017, I remember the last Analyst Day you guys put together at the time, you were talking about rightsizing the cost structure to be able to deliver pre-tax margin of 5% on about $1.5 billion of revenue. And clearly, we are talking about revenue here that’s better than $1.5 billion. And if we are looking at your equipment margins, they are also in better shape and I think you anticipated back in 2017 when you put those targets together. So my question for you Mark is, how have things changed over the past four years? And how realistic is it for you to be able to attain these kinds of pre-tax margins on volume that’s better than $1.5 billion of revenue? Thank you.

Yes. I think, so, when we gave that presentation back in 2017, we talked about kind of mid-cycle conditions and I think we are entering that. We are getting very close to that on the Ag side and quite frankly, I think we’ve got a good shot of getting there this year on the Ag side and maybe even surpassing it a little bit. Where we still need some level of improvement to get to the total what we talked about $2 EPS at the time is we still need further traction and we’ve come a long way I think on both International and our Construction segment. But we still need to get more traction there to get us up to that total 5% for the company. So, I think as Bryan mentioned on the call, I think we’ve got four quarters now of profitability on Construction. We are certainly looking to build on that and there has been a nice resurgence here from International moving in the right direction. So, I think, we talked about back then it’s certainly within reach and maybe a possibility for this year, but probably more likely in other year or two with similar market conditions and we could be there.

Alright. Good luck guys.

Thanks, Mig.

Our next question is from Rick Nelson with Stephens. Please proceed.

Thanks. Good morning and congrats on a terrific start to the year. I am curious if you could update us on the acquisition environment you covered kind of slowed those discussions. But now if the cover easing, are things starting to heat up there?

Well, I think, if you look at some of the demographics of the profiles of the eight dealer principles out there, Rick, and which on the sophistication of the equipment, the capital requirements, OEM requirements, lack of successional terms, that hasn’t really changed much right now. But dealers, for the most part are doing really well, right now financially and consumer who are in the cycle both impactful timing and the pricing of the acquisitions. So, they are not going away. Like I talked about in the last couple of calls, there is a little bit of pause right now or if many of the dealers are working through the PPP loan forgiveness process and I don’t think there has been a lot of activity from some of the banks and to get those at all through in process. So, we continue – we are engaged. We’ve got a number of targets out there and lot of discussions going on. So, like you say, the demographics haven’t changed and the dealer principle. I think there is still a lot of opportunity. We are seeing industry consolidation taking place. So, yes, we are definitely all over doing acquisitions and we had a nice, that Northwood acquisition was nice and the HorizonWest one we did last year and we’ve got a strong balance sheet. We’ve got some cash we want to deploy through all of that. So, it’s going to happen. We just got to be smart about it and discipline in the pricing and make sure that the timing is right for both more place to the seller and our team.

Thanks for that color. More so, with the inventory quite a bit you talked about supply constraints. What’s seen that has a positive implications for merchants carry a smart bubble of equipment margin this year building into that fiscal 2022 guidance?

Yes. So the first quarter was a very good quarter from an equipment margin perspective, better than we were anticipating as well. So it was at like 11.7% in certainly some of the end-market conditions that we are talking about helped both in pricing and limiting inventory adjustments. We did also in the first quarter, we did benefit from some very strong used sales kind of in the mix for Ag. And then, on the International side, the new equipment sales there were quite strong, which they generally get higher equipment margins and then we get over here. So, certainly, certainly mix had something to do with it as well. So we don’t anticipate maintaining this 11.7%. However, we’d still expect some nice improvement off of last year, which I think was kind of in that mid to lower tens. I think closer to that 11% overall is going to be we are landing right around that 11% when we get toward the end of the year as well that we still have some of those bigger deals that happen that have some of those higher ticketed items that will take down the full year number, as well. So, overall, kind of a blended right around 11% is what we are looking at.

Great. And inventory turn 2.3 times. I know, the top end of your goal has been three times. Do you see that potentially with the tight inventory situation potentially going above three times?

Getting above this year is still going to be difficult. It’s possible in this environment, certainly with the tightness of supply. But probably, just south of three is where we are looking at right now for the full year. Nonetheless, some good improvement, certainly limits the amount of write-downs, but we also need that equipment this year to get – especially with these supply chain challenges. So we are looking to get that equipment as much as possible.

Great. And the timing of inventory normalizing, I think last call you were suggesting fourth quarter, now it sounds like maybe until early next year. Your thoughts on that?

We’ll just say, a little bit of both. The sales schedules and the lead times continued to move and evolve, but a lot of that that we talked on the last call was, did get ordered and we did get those sales and so, we’ve got a lot of equipment coming into Q4. And now as the calendar rolls forward, we are starting to see in certain product categories book some of those pre-sell into Q1 and Q2.

Makes sense. Thanks and good luck.

Thanks, Rick.

[Operator Instructions] Our next question is from Larry De Maria with William Blair. Please proceed.

Thanks. Good morning, everybody.

Good morning, Larry.

Just to clarify. On the pre-sales that you are doing already for next year, is this part of a new program? Or just a function of the environment or – I think it’s the latter. But if so, can early orders become the norm and then something we can build on and what – or do you have to put discounts into get those orders in place now or are they for retail price? Thank you.

Yes, Larry, you are right. It’s more so the latter. It’s more so a function of the environment and just the lead times in the demand. But as Mark mentioned, also a little bit of our internal initiatives to drive more pre-sell, which also helped our inventory turns, helps cash flow, helps us get more visibility to the guidance and to future revenues. So, yes, we are going to continue to drive that. As far as margins there, we incentivized the customer. There is up an OEM and it’s going to fare for the customer to commit, put their name on it. But more so the bigger driver would be then they get to spec out the equipment they wanted. There is lots of different options on the equipment today very similar to when you order an automobile often times even more so. So they get to spec up they want. They get to plan their business with their banker and then they get to help ensure availability of when they’ll want it.

Okay. That’s very helpful. And maybe let’s turn into more of a – the both. As far as the equipment gross margins, I know, let’s talk about margins a little bit, but the delta was obviously on the equipment side. You mentioned a couple factors in International new, but could you help us understand the difference between maybe the impacts of cost cuts that are little bit more structural and maybe from a temporary, growth maybe more importantly, the mix of new versus used equipment in the equipment sales. What is it now? What is it historically in sustainable, because obviously, I have to think that you are making much more money on the used equipment prices that are surging and that’s leading to some of the upside margins. So, can you just help kind of pull that all together?

Yes. I’ll try and elaborate a little bit more, specifically on the equipment margins there, Larry. Yes, so, on the used, so every month, we have – and quarter for external purposes, but we have write-downs that happen on our use we have a lower cost to market price. So, certainly in this environment, where pricing is strong, because of the limited demand. The level of some of those write-downs are much lower than what they are in different parts of the cycle. So, when you are swinging up, there is a lot less pressure on those types of adjustments. And then, same with the pricing side, the pricing can hold together quite nicely and that combined with the aging of our equipment. We don’t have the level of aging. It’s very healthy inventory at this point where there is not giving on pricing there to the extent we’ve had in the past. So, those are certainly factors that lift the overall equipment margins. On the new, I kind of mentioned just different products and maybe segments between the segments and new was particularly strong there with international where we do get higher equipment margins. So, certainly that mix is helpful there as well. And then I think you asked about just kind of overall margin in the business. And so this year relative to last year, we certainly took on some more expenses, anticipated some more expenses, some of those expenses are moving through. But we are certainly benefiting from some of the cost initiatives that we had in prior year and two three years before that with different initiatives that were done to help bring that more to the bottom-line there. And then, finally on the floor plan and interest expense, you can see that’s come down significantly over the years just with the cash generation paying off the converts from a couple of years ago and basically out of our domestic lines at this point as well, all of that contributing nicely to the bottom.

Okay. Great. Thanks for that detailed answer. Last question, just trying to get a sense of inventory now and at year end. And my guess is, obviously, you’d like to have more inventory and the industry would like to have more inventory, but curious to hear from you. If you could have your way, how much higher inventory be now and where would you like the inventory in this – maybe at year end, going into next year. Just trying to get a sense of how short the industry is and how short you guys think you are and where you think you need to be to really satisfy the industry demand and feel comfortable in going into the next year?

And maybe I’ll start it, Larry, and then, PJ Dave can add on. I think – I think right now, things are – things have been fine as far as the inventory coming in and getting to the customer and getting the sale done. I think it’s more about the unknown and the risks that we are hearing about and that type of things that would cause me to want, cause as I think to want more new equipment at this time to kind of take out some of that risk for the back half of the year. We don’t know the exact level of demand that’s going to be there and we’d certainly want to enough to get every sale done. And then, if demand even increases or something like that that we’ve got the available inventory for that. So, as things stayed steady the way they are and we end the year with around $400 million, something like that. I think we’d be fine. It’s just getting it in, in kind of time for that. So, I don’t know that there is a magic number for inventory. $400 million kind of feels about right to me as long as we are getting it satisfy those sales in between.

Okay. Understood. Thank you and good luck.

We now have a follow-up question from Mig Dobre with Baird. Please proceed.

Just a quick one. Thanks for taking the follow-up. Can we get a quick update on the ERP rollout here? Where are you in terms of progress? When do you think you’ll be done with this? Maybe an updated view as to what the benefits with your price are going to be out of this initiative? And a quick update on cost and what – how much of a drag we have in fiscal 2022?

Mig, this is Dave. I’ll start off and so, the benefits we are going to see are increased functionality, improved customer experience, we are going to see more BI. I think if you look at our ability to add on and integrate different assets there and some of the things that we tie into what we are seeing in movements with the digital or even the precision or some of the telematic stuff, I think, it’s all going to tie up – tie in much better from both a functionality standpoint and long-term enterprise value. So, we are pretty positive about that. As we talked on our last call, we’ve got one test store that’s running very well right now. We are continuing with the development and when we do a full roll out it takes potentially try to bring on a few more stores in all of our – both the CE and the Ag segment, they will get some of the rental tested and then for the full roll out, we definitely want this to happen sometime in calendar – I think within next 12 months or so for that full roll out. So, it’s all about timing. When we really feel comfortable minimizing risk or what could potentially happen in that roll out. So, that’s where we are and we are excited about that. So, I mean, I’ll let Mark talk a little bit to how he should be looking at the financial side of it.

Yes, from a cost perspective, similar to what we talked about last quarter, so last year, we had just over $3 million involved with the ERP. This year, it’s going to be a little bit higher than that. We talked about $4 million, $4.5 million, still looking to be above that that’s in our guidance numbers and it hasn’t changed really a lot as far as the expectation for current year.

I see. And just to clarify here though, the progress is still sort of in line with your expectations. There are no issues or delays or something like that. And Mark, should we expect these costs to be – I am presuming they are going to be coming down in fiscal 2023, based on what David was saying as far as the scheduled roll out. How should we think about it?

Yes. I think from a cost perspective, I don’t see – well, yes, it should come down some – I would expect next year if we get this done within 12 months, costs would come down in the area of like external consulting and that type of thing. And not whatever building as much and capitalizing as much into ERP assets. But yes, I wouldn’t expect any kind of big decrease or anything like that in the initial year when you go live. There will be a lot of support that’s necessary. A lot of support that’s we want to make sure that our teams are well supported as they roll on to the new system.

Yes, like - Mig, I am sure, I – in ERP, that will never happen fast enough. But I think we are really making sure our testing, on our training of our team and really - to start a robust roll out there and any risk of any type of interruption. I think that’s we want to make sure we got that dialing and so, I think, everything is fine and progressing and like I say, it never happens fast enough, but we want to get it right. So, that’s where we are.

Great. Thank you for that, Dave.

We have reached the end of our Question-And-Answer Session. I would like to turn the conference back over to Mr. Meyer for closing comments.

Alright. Thanks everybody for being on the call and your interest in Titan Machinery. We look forward to updating you on our progress on our next call. So, have a good day everybody.

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