Titan Machinery Inc. (TITN)

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 8, Financial Statements and Supplementary Data, of this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the "Information Regarding Forward-Looking Statements" in this Item 7 and the risks and uncertainties described under Item 1A, Risk Factors, of this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis in this Form 10-K.

A discussion of changes in our Financial Results and Cash Flow Comparisons from fiscal year 2023 to fiscal year 2024 has been omitted from this Form 10-K, but may be found in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024, filed with the SEC on April 3, 2024.

BUSINESS DESCRIPTION

We own and operate a network of full service agricultural and construction equipment stores in the United States, Europe, and Australia. Based upon information provided to us by CNH Industrial N.V., we are the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through four reportable segments: Agriculture, Construction, Europe and Australia. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.

The agricultural equipment we sell and service includes machinery and attachments for uses ranging from large-scale farming to home and garden use. The construction equipment we sell and service includes heavy construction machinery, light industrial machinery for commercial and residential construction, road and highway construction machinery, energy, and forestry operations equipment. We offer our customers a one-stop solution for their equipment needs through:

•new and used equipment sales;

•parts sales;

•equipment repair and maintenance services; and

•equipment rental and other activities.

The new equipment and parts we sell are supplied primarily by CNH Industrial. According to its public reports, CNH Industrial is a leading manufacturer and supplier of agricultural and construction equipment based on the number of units sold, primarily through the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands. Sales of new CNH Industrial products accounted for approximately 75% of our new equipment revenue in fiscal 2025, with our single largest manufacturer other than CNH Industrial representing approximately 4% of our total new equipment revenue in fiscal 2025. We acquire used equipment for resale primarily through trade-ins from our customers and in some cases through selective purchases. We sell parts and provide in-store and on-site repair and maintenance services. We rent equipment and provide other ancillary products and services such as equipment transportation, GPS signal subscriptions, farm data management systems, precision farming equipment, and finance and insurance products.

Throughout our 44-year operating history, we have built an extensive, geographically contiguous network of 93 full service stores located in the United States, 40 in Europe and 15 in Australia. We have a history of growth through acquisitions, including over 60 acquisitions with locations in 15 U.S. states, four European countries and three Australian states since January 1, 2003. We believe that there will continue to be opportunities for dealership consolidation in the future, and we expect that acquisitions will continue to be a component of our long-term growth strategy.

Certain External Factors Affecting our Business

We are subject to a number of factors that affect our business including those factors discussed in this Form 10-K under Item 1A, Risk Factors, and under the heading “Information Regarding Forward-Looking Statements” in this Item 7. Certain of these external factors include, but are not limited to, the following:

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Russia/Ukraine Geopolitical Conflict

Since the onset of the active conflict in February 2022, most of Titan Machinery Ukraine's customers have been able to continue their work, although at a reduced capacity and schedule. The Company's business systems in Ukraine have continued to function but have been, and could continue to be, negatively impacted in the future. To date, the impact of this conflict has not been, and in the future is not expected to be, material to Titan Machinery’s consolidated business operations and financial performance. However, the full impact of the conflict remains uncertain and will depend on future developments, including the severity and duration of the conflicts and its impact on regional and global economic conditions. The Company will continue to monitor the ongoing conflict between Russia and Ukraine as it is highly complex and continues to evolve.

Macroeconomic and Industry Factors

Our Agriculture and International businesses are primarily driven by the demand for agricultural equipment for use in the production of food, fiber, feed grain and feedstock for renewable energy. Agriculture industry factors such as changes in agricultural commodity prices and net farm income, have an effect on our customers' sentiment and their ability to secure financing for equipment purchases. Macroeconomic and industry factors that affect commodity prices and net farm income include changing worldwide demand for agriculture commodities, crop yields and supply disruptions caused by weather patterns and crop diseases, crop stock levels, production costs, and changing U.S. dollar foreign currency exchange rates. Based on U.S. Department of Agriculture ("USDA") publications, the most recent estimate of net farm income for calendar year 2024 decreased 5.6% compared with calendar year 2023. The commodity prices of corn and soybeans, which are the predominant crops in our Agriculture store footprint, were at or near record prices in fiscal 2023 but declined in fiscal 2024 and have remained depressed in fiscal 2025. Based on its February 2025 report, the USDA projected net farm income for calendar year 2025 to increase 29.5%, as compared to the estimated results of calendar year 2024.

Our Construction business is primarily impacted by the demand for construction equipment for use in private and government commercial, residential, and infrastructure construction; demolition; maintenance; energy and forestry operations. Industry reports show that demand for construction equipment in our markets is driven by several factors, one of which is public infrastructure spending, including roads and highways, sewer and water. Any growth in federal allocations to public infrastructure spending over the next few years should positively impact our future results of operations. Likewise, any decline in federal allocations to public infrastructure spending over the next few years should negatively impact our future results of operations.

Seasonality & Weather

The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and our available cash flow to fluctuate during the year. Our customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons, which for farmers are the planting and harvesting seasons; and which for Construction customers are typically the second and third quarters of our fiscal year for much of our Construction footprint. Our parts and service revenues are typically highest during our customers' busy seasons as well, due to the increased use of their equipment during this time, which generates the need for more parts and service work. However, weather conditions impact the timing of our customers' busy times, which may cause greater than expected fluctuations in our quarterly financial results year over year. In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.

Seasonal weather trends, particularly severe wet or dry conditions, can have a significant impact on regional agricultural and construction market performance by affecting crop production and the ability to undertake construction projects. Weather conditions that adversely affect the agricultural or construction markets decrease the demand for our products and services.

In addition, numerous external factors such as credit markets, government subsidies, commodity prices, production yields, input costs, and other circumstances may disrupt normal purchasing practices and buyer sentiment, further contributing to the seasonal fluctuations.

Dependence on our Primary Supplier

The majority of our business involves the distribution and servicing of equipment manufactured by CNH Industrial. In fiscal 2025, CNH Industrial supplied approximately 75% of our new equipment revenue on a consolidated basis and 76%, 79%, 65% and 74% in our Agriculture, Construction, Europe, and Australia segments, respectively. CNH Industrial also represented a significant portion of our parts revenue. Thus, we believe the following factors have a significant impact on our operating results:

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•CNH Industrial’s product offerings, reputation and market share;

•CNH Industrial’s product prices and incentive and discount programs;

•CNH Industrial's supply of inventory and ability to match demand levels and delivery timelines;

•CNH Industrial's offering of floorplan payable financing for the purchase of a substantial portion of our inventory; and

•CNH Industrial's offering of financing and leasing used by our customers to purchase CNH Industrial equipment from us.

Credit Market Changes

Changes in credit markets can affect our customers' ability and willingness to make capital expenditures, including purchasing our equipment. Tight credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity markets have the potential to adversely affect our business. Such disruptions in the overall economy and financial markets and the related reduction in consumer confidence in the economy, slow activity in the capital markets, negatively affect access to credit on commercially acceptable terms, and may adversely impact our customers' access to credit and the terms of any such credit. However, high retail interest rates negatively impact customer demand due to higher borrowing costs, which makes purchasing equipment less attractive.

Our business is also particularly dependent on our access to credit markets to manage inventory and finance acquisitions. We cannot predict what future changes will occur in credit markets or how these changes will impact our business.

Inflation

Inflationary pressures have led to rising inventory and supply costs as well as increased labor costs. To date, in those instances in which we have experienced cost increases, we have been able to increase selling prices to offset much of the increases and expect to continue to do so in the future.

Significant Items Impacting Our Financial Position and Results of Operations

J.J. O’Connor & Sons Pty. Ltd. Acquisition

On October 2, 2023, we acquired all of the outstanding equity interests of J.J. O’Connor & Sons Pty. Ltd. ("O’Connors"). The acquired business consisted of 15 CaseIH dealership locations and one parts center in the states of New South Wales, South Australia, and Victoria in Southeastern Australia. O'Connors has been a successful Case IH complex, and our acquisition of this entity provides the Company with the opportunity to expand our international presence into the large, well-established Australian agriculture market. Total cash consideration paid for O'Connors was $66.5 million, which was financed through available cash resources and line of credit availability. The 15 O’Connors store locations are included within our Australia segment.

Heartland Acquisition

On August 1, 2022, we acquired all of the outstanding equity interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as "Heartland Companies"). The acquired business consisted of 12 CaseIH commercial application agriculture locations, in the states of Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and Wisconsin. Our acquisition of these entities provides the Company with the opportunity for synergies due to overlap of our footprints, which allows us to package deals that include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint. Total cash consideration paid for the Heartland Companies was $94.4 million, which was financed through available cash resources and line of credit availability. The 12 Heartland Companies store locations are included within our Agriculture segment.

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Key Financial Metrics

In addition to tracking our sales and expenses to evaluate our operational performance, we also monitor the following key financial metrics. The results of some of these metrics are discussed further throughout this Item 7.

Inventory Turnover

Inventory turnover measures the rate at which inventory is sold during the year. We calculate it by dividing cost of sales on equipment for the last twelve months by the average of the month-end balances of our equipment and parts inventories for the same twelve-month period. We believe that inventory turnover is an important management metric in evaluating the efficiency at which we are managing and selling our inventories.

Same-Store Results

Same-store results for any period represent results of operations by stores that were part of our Company for the entire comparable period in the preceding fiscal year. We do not distinguish relocated or newly-expanded stores in this same-store analysis.

Absorption

Absorption is an industry term that refers to the percentage of an equipment dealer's operating expense covered by the combined gross profit from parts, service and rental fleet activity. We calculate absorption by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt. We believe that absorption is an important management metric because during economic down cycles our customers tend to postpone new and used equipment purchases while continuing to run, maintain and repair their existing equipment. Thus, operating at a high absorption rate enables us to operate profitably throughout economic down cycles.

Dollar Utilization

Dollar utilization is a measurement of asset performance and profitability used in the rental industry. We calculate the dollar utilization of our rental fleet equipment by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period. While our rental fleet has variable expenses related to repairs and maintenance, its primary expense for depreciation is fixed. Low dollar utilization of our rental fleet has a negative impact on gross profit margin and gross profit dollars due to the fixed depreciation component. However, high dollar utilization of our rental fleet has a positive impact on gross profit margin and gross profit dollars.

Key Financial Statement Components

Revenue

•Equipment: We derive equipment revenue from the sale of new and used agricultural and construction equipment.

•Parts: We derive parts revenue from the sale of parts for brands of equipment that we sell, other makes of equipment, and other types of equipment and related components. Our parts sales provide us with a relatively stable revenue stream that is less sensitive to the economic cycles that affect our equipment sales.

•Service: We derive service revenue from repair and maintenance services to our customers' equipment. Our repair and maintenance services provide a high-margin, relatively stable source of revenue through changing economic cycles.

•Rental and other: We derive other revenue from equipment rentals and ancillary equipment products and services, such as equipment transportation, GPS signal subscriptions and reselling financial and insurance products.

Cost of Revenue

•Equipment: Cost of equipment revenue is the lower of the acquired cost or the net realizable value of the specific piece of equipment sold.

•Parts: Cost of parts revenue is the lower of the acquired cost or the market value of the parts sold, based on average costing.

•Service: Cost of service revenue represents costs attributable to services provided for the maintenance and repair of customer-owned equipment and equipment then on-rent by customers.

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•Rental and other: Costs of other revenue represent costs associated with equipment rental, such as depreciation, maintenance and repairs, as well as costs associated with providing transportation, hauling, parts freight, GPS subscriptions and damage waivers, including, among other items, drivers' wages, truck depreciation, fuel costs, shipping costs and our costs related to damage waiver policies.

Operating Expenses

Our operating expenses include sales and marketing expenses, sales commissions (which generally are based upon equipment gross profit margins), payroll and employee benefit costs, insurance expenses, professional fees, property rental and related costs, property and other taxes, administrative overhead, and depreciation associated with property and equipment (other than rental and trucking equipment).

Floorplan Interest

The cost of financing inventory is an important factor affecting our results of operations. Floorplan payable financing from CNH Industrial Capital, the Bank Syndicate Agreement, DLL Finance and various credit facilities related to our foreign subsidiaries represent the primary sources of financing for equipment inventories. CNH Industrial regularly offers interest-free periods as well as additional incentives and special offers. As of January 31, 2025, 44.1% of our floorplan payable financing was non-interest bearing.

Other Interest Expense

Interest expense represents the interest on our debt instruments, other than floorplan payable financing facilities. This includes long-term debt used to finance the purchase of real estate and vehicles.

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Results of Operations

Comparative financial data for each of our four sources of revenue for fiscal 2025 and 2024 are presented below. The results include the acquisitions made during these periods. The year-to-year comparison included below is not necessarily indicative of future results. Information regarding segment revenue and income (loss) before income taxes is presented for each fiscal year following our discussion of the consolidated results of operations. Additional information regarding our segments is included in Note 21, Segment Information and Operating Results, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

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The following table sets forth our statements of operations data expressed as a percentage of revenue for the fiscal years indicated.

Fiscal Year Ended January 31, 2025 Compared to Fiscal Year Ended January 31, 2024

Consolidated Results

Revenue

Total revenue for fiscal 2025 decreased by 2.0%, or $56.3 million, compared to fiscal 2024, driven primarily by the decrease in Company-wide same-store sales of 9.1%, which largely offsets the revenue accretion from the O'Connors acquisition completed in October 2023. Same-store sales were negatively impacted by challenging industry conditions, such as, decreases in agricultural commodity prices and projected net farm income, which have a negative effect on retail demand for

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equipment. Further, in the February 2025 U.S. Department of Agriculture publications, calendar year 2024 net farm income was estimated to have decreased by 5.6% compared to 2023, which in turn had declined 19.1% from net farm income in 2022.

Gross Profit

Gross profit for fiscal 2025 decreased 25.5%, or $135.7 million, as compared to fiscal 2024. Gross profit margin also decreased to 14.6% in fiscal 2025 from 19.3% in fiscal 2024. The decrease in gross profit margin for fiscal 2025 was primarily due to lower equipment margins, which are being driven by higher levels of inventory and softening demand.

Our Company-wide absorption rate decreased to 68.0% for fiscal 2025 as compared to 79.2% during fiscal 2024. The decrease in absorption was primarily driven by increased floorplan interest expense in fiscal 2025 compared to fiscal 2024.

Operating Expenses

Operating expenses for fiscal 2025 increased by 7.5%, or $27.3 million, as compared to fiscal 2024. The increase in operating expenses was primarily driven by acquisitions that occurred late in fiscal 2024, which includes the O'Connors acquisition. Operating expenses as a percentage of revenue increased to 14.4% in fiscal 2025 from 13.1% in fiscal 2024.

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Impairment Charges

In fiscal 2025, we recognized $0.5 million of impairment expense related to goodwill assets in our Europe segment.

In fiscal 2025, we recognized $1.3 million of impairment expense related to other intangible and long-lived assets of, which $0.2 million was within the Agriculture segment, $0.2 million was within the Construction segment and $0.9 million was within the Europe segment.

Other Income (Expense)

Interest and other income (expense) for fiscal 2025 decreased by approximately $7.5 million as compared to fiscal 2024. The decrease in interest and other income (expense) compared to fiscal 2024 was primarily due to a $9.7 million non-cash, sale-leaseback financing expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms and offset by a $3.6 million gain on cancellation of debt in relation to the U.S. Treasury Department’s New Market Tax Credit Program. Floorplan interest expense increased $20.9 million for fiscal 2025, as compared to fiscal 2024, primarily due to a higher level of interest-bearing inventory, including the usage of existing floorplan capacity to finance the O'Connors acquisition in October 2023. The increase in other interest expense in fiscal 2025 is the result of an increased amount of long term debt outstanding resulting from purchases of previously leased facilities during fiscal 2024 and fiscal 2025 as well as increased borrowing on our CNH Industrial Capital revolving line of credit.

(Benefit from) Provision for Income Taxes

Our effective tax rate increased from 25.6% in fiscal 2024 to 26.2% in fiscal 2025. The effective tax rate for each of the years ended January 31, 2025 and 2024, is subject to variation of the impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and the impact of the recognition of valuation allowance on our foreign deferred tax assets.

The Organization for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GloBE”) model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million. Numerous foreign jurisdictions have already enacted tax legislation based on the GloBE rules, with some effective as early as January 1, 2024. As of January 31, 2025, we did not recognize any additional income tax expense for Pillar Two GloBE minimum tax. The Company is continuously monitoring the evolving application of this legislation and assessing its potential impact on our future tax liability.

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Segment Results

Agriculture

Agriculture segment revenue for fiscal 2025 decreased 7.6%, or $155.8 million, compared to fiscal 2024. The revenue decrease was due to a same-store sales decrease of 9.2% during the fiscal 2025 as compared to fiscal 2024. The same-store sales decrease was due to a decrease in equipment revenue resulting from challenging industry conditions, such as decreases in agricultural commodity prices and projected net farm income, which negatively affected customer sentiment in fiscal 2025, as compared to the fiscal 2024. Changes in actual or anticipated net farm income generally have a direct correlation with retail demand for equipment.

Agriculture segment loss before income taxes was $39.8 million for fiscal 2025 compared to income before income taxes of $121.1 million for fiscal 2024. The decrease in gross profit is primarily due to lower equipment margins, which are driven by higher levels of inventory and softening demand. In addition, we recorded a net $5.2 million non-cash, sale-leaseback finance modification expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms and had an increase in our operating expenses and floorplan interest expense.

Construction

Construction segment revenue for fiscal 2025 decreased 0.3%, or $0.9 million, compared to fiscal 2024

Our Construction segment loss before income taxes was $6.7 million for fiscal 2025 compared to $18.3 million of income before income taxes for fiscal 2024. The decrease in segment results was due to a $4.5 million non-cash, sale-leaseback finance modification expense related to the agreement to purchase 13 of our leased facilities at the end of the respective lease terms, lower equipment gross margins as a result of increased supply and moderately softer demand, and increased floorplan interest expense compared to fiscal 2024. In addition, the dollar utilization of our rental fleet decreased from 29.3% for fiscal 2024 to 23.8% for fiscal 2025.

Europe

Europe segment revenue for fiscal 2025 decreased 16.3%, or $50.9 million, compared to fiscal 2024. The decrease in revenue reflects the softening of new equipment demand caused by a decrease in global agricultural commodity prices, sustained higher interest rates and drought conditions in Eastern Europe which negatively impacted crop yields and grower profitability.

Our Europe segment loss before income taxes was $3.9 million for fiscal 2025 compared to $16.5 million of income before income taxes for fiscal 2024. The decrease in segment pre-tax income was primarily the result of decreased equipment sales as noted above. Additionally, we recorded $0.5 million of impairment expense related to certain goodwill assets and $0.9 million in impairment expense related to other intangible assets and long-lived assets.

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Australia

We entered the Australian market in October 2023 with our acquisition of O'Connors. Australia segment revenue for fiscal 2025 was $221.1 million. Our Australia segment income before income taxes was $2.9 million for fiscal 2025.

Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur. Shared Resources loss before income taxes was $2.6 million for fiscal 2025 compared to $9.0 million for fiscal 2024.

Liquidity and Capital Resources

Sources of Liquidity

Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan payable and other credit facilities. We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various financial covenants as further described in Note 8, Floorplan Payable/Lines of Credit, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Form 10-K. We have worked in the past, and will continue to work in the future if necessary, with our lenders to implement satisfactory modifications to these financial covenants when appropriate for the business conditions confronted by us.

Equipment Inventory and Floorplan Payable Credit Facilities

Floorplan payable balances reflect the amount owed for new equipment inventory purchased from a manufacturer and used equipment inventory, which is primarily purchased through trade-in on equipment sales, net of unamortized debt issuance costs incurred for floorplan credit facilities. Certain manufacturers from which we purchase new equipment inventory offer financing on these purchases, either offered directly from the manufacturers or through the manufacturers’ captive finance affiliate. CNH Industrial's captive finance subsidiary, CNH Industrial Capital, also provides financing of used equipment inventory. We also have floorplan payable balances with non-manufacturer lenders for new and used equipment inventory. Borrowings and repayments on manufacturer floorplan facilities are reported as operating cash flows, while borrowings and repayments on non-manufacturer floorplan facilities are reported as financing cash flows in our consolidated statements of cash flows.

During the year ended January 31, 2025, letters were received from CNH Industrial Capital America LLC (“CNH Industrial Capital”) and DLL Finance to waive the Consolidated Fixed Charge Coverage Ratio covenants for the reporting periods between January 31, 2025 to January 31, 2026. On December 3, 2024, we entered into Amendment No. 1 to the Bank Syndicate Agreement that lowered the adjusted excess availability metric from 15% to 10% for the period from December 15, 2024 to March 15, 2025, and thereafter reverts to 15%.

As of January 31, 2025, we had floorplan payable lines of credit for equipment purchases totaling $1.5 billion, which includes a $875.0 million credit facility with CNH Industrial Capital, a $390.0 million floorplan payable line under the Bank Syndicate Agreement, a $80.0 million credit facility with DLL Finance, and additional credit facilities related to our foreign subsidiaries. Available borrowing capacity under these lines of credit are reduced by amounts outstanding under such facilities, borrowing base calculations and amount of standby letters of credit outstanding with respect to the Bank Syndicate Agreement, and certain acquisition-related financing arrangements with respect to the CNH Industrial Capital credit facility. Due to the waivers listed above, as of January 31, 2025, the Company was not subject to the financial covenants under its credit agreements. Additional details on each of these credit facilities are disclosed in Note 8, Floorplan Payable/Lines of Credit, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Form 10-K.

As of January 31, 2025, the Company was not subject to the fixed charge ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined in the Bank Syndicate Agreement) was not less than 10% of the total amount of the credit facility. Please refer to Note 8, Floorplan Payable/Lines of Credit, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information regarding the Company's line of credit.

Our equipment inventory turnover decreased to 1.6 times for fiscal 2025 compared to 2.2 times for fiscal 2024. The decrease in equipment turnover was attributable to an increase in average equipment inventory in fiscal 2025 as compared to

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fiscal 2024. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, increased to 25.9% as of January 31, 2025 from 18.2% as of January 31, 2024.

Long-Term Debt Facilities

As of January 31, 2025, we had a $110.0 million working capital line of credit under the Bank Syndicate Agreement (the "Revolver Loan"). The Revolver Loan is used to finance our working capital requirements and fund certain capital expenditures, as needed. As of January 31, 2025, the Company did not have a need to utilize any of the Revolver Loan, and, as such the outstanding balance was zero. The Company works with various lenders to finance the purchase of real estate we currently lease or purchase through an acquisition. The Company may also decide in the future to finance a portion of our rental fleet as well as our capital expenditures using long-term debt from various lenders.

Adequacy of Capital Resources

Our primary uses of cash have been to fund our operating activities, including the purchase of inventory and providing for other working capital needs; meeting our debt service requirements; making payments due under our various leasing arrangements; and funding capital expenditures. The primary factor affecting our ability to generate cash and to meet cash requirements, is our operating performance as impacted by (i) industry factors, (ii) competition, (iii) general economic conditions, (iv) the timing and extent of acquisitions, and (v) business and other factors including those identified in Item 1A, Risk Factors, and discussed in this Form 10-K.

Our ability to service our debt will depend upon our ability to generate necessary cash. This will in turn depend on our operating performance, general economic conditions, and financial, competitive, business and other factors, some of which are beyond our immediate control, and future acquisition activity. Based on our current operational performance, we believe our cash flow from operations, available cash, and available borrowings under our existing credit facilities will be adequate to meet our liquidity needs beyond the next 12 months.

In fiscal 2025, we used $51.8 million in cash for property and equipment purchases and financed $36.0 million in property and equipment purchases with long-term debt and finance leases. The property and equipment purchases in fiscal 2025 primarily related to improvements to, or purchases of, real estate assets and the purchase of vehicles. In fiscal 2024, we used $62.4 million in cash for property and equipment purchases, and financed $17.9 million in property and equipment purchases with long-term debt. The property and equipment purchases in fiscal 2024 primarily related to the purchase of vehicles, trucks and real estate. We expect our cash expenditures for property and equipment for fiscal 2026 to be approximately $40.0 million. The actual amount of our fiscal 2026 capital expenditures will depend upon factors such as general economic conditions, growth prospects for our industry and our decisions regarding financing and leasing options. We currently expect to finance property and equipment purchases with borrowings under our existing credit facilities, financing with long-term debt, with available cash or with cash flow from operations. We may need to incur additional debt if we pursue any future acquisitions.

There can be no assurances, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available under the credit facilities with the Bank Syndicate, CNH Industrial Capital and DLL Finance in amounts sufficient to allow us to service our indebtedness and to meet our other commitments. If we are unable to generate sufficient cash flow from operations or to obtain sufficient future borrowings, we may be required to seek one or more alternatives such as refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. There can be no assurances that we will be able to succeed with one of these alternatives on commercially reasonable terms, if at all. In addition, if we pursue strategic acquisitions, we may require additional equity or debt financing to consummate the transactions, and we cannot give absolute assurance that we will succeed in obtaining this financing on favorable terms or at all. If we incur additional indebtedness to finance any of these transactions, this may place increased demands on our cash flow from operations to service the resulting increased debt. Our existing debt agreements contain restrictive covenants that may restrict our ability to adopt any of these alternatives. Any non-compliance by us under the terms of our debt agreements could result in an event of default which, if not cured, could result in the acceleration of our debt. We have met all financial covenants under these credit agreements as of January 31, 2025. If anticipated operating results create the likelihood of a future covenant violation, we would seek to work with our lenders on an appropriate modification or amendment to our financing arrangements.

We enter into contractual obligations in the ordinary course of business that may require future cash payments. Such obligations include, but are not limited to, debt arrangements, leasing arrangements, and costs related to Information Technology ("IT"), including enterprise resource planning (“ERP”) expenses. The Notes to the Consolidated Financial Statements in Item 8, Financial Information and Supplementary Data, of this Form 10-K provide additional information in regard to Long Term Debt (Note 10) and Leases (Note 13). Other purchase obligations consist primarily of IT related expenses with estimated cash payments of $5.2 million for fiscal 2026, as well as a combined $15.3 million through fiscal 2030.

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Cash Flow

Cash Flow (Used For) Provided By Operating Activities

Net cash provided by operating activities in fiscal 2025 was $70.3 million compared to net cash used for operating activities of $32.3 million in fiscal 2024. The increase was primarily driven by a decrease in inventory and a favorable collection of outstanding receivables, which was partially offset by a decrease in manufactured floorplan payables and a decrease in net income for fiscal 2025 compared to the prior year period.

Cash Flow Used For Investing Activities

Net cash used for investing activities is primarily comprised of cash used for property and equipment purchases and for business acquisitions.

Net cash used for investing activities was $47.7 million in fiscal 2025, compared to $163.4 million in fiscal 2024. The primarily driver of the decrease was due to the fiscal 2024 acquisitions of $107.5 million compared to $0.3 million in fiscal 2025. There was also year over year decrease of $10.5 million in cash used for purchases of property and equipment compared to the prior year.

Cash Flow (Used for) Provided By Financing Activities

Net cash used for financing activities was $23.6 million in fiscal 2025, compared to $188.6 million net cash provided by in fiscal 2024. The change was primarily driven by a $220.8 million decrease in non-manufacturer floorplan payables, which represents the Company's other credit lines including its Bank Syndicate Agreement.

Critical Accounting Policies and Use of Estimates

In the preparation of financial statements in conformity with U.S. generally accepted accounting principles, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. While we believe the estimates and judgments we use in preparing our financial statements are appropriate, they are subject to future events and uncertainties regarding their outcome and therefore actual results may materially differ from these estimates. We describe in Note 1, Business Activity and Significant Accounting Polices, to the Consolidated Financial Statements in Item 8, Financial Information and Supplementary Data, of this Form 10-K the significant accounting policies used in preparing the consolidated financial statements. We consider the following items in our consolidated financial statements to require significant estimation or judgment.

Revenue Recognition

Equipment revenue transactions include the sale of agricultural and construction equipment and often include both cash and noncash consideration received from our customers, with noncash consideration in the form of used, trade-in, equipment assets. The amount of revenue recognized in the sale transaction is dependent on the value assigned to the trade-in asset. Significant judgment is required to estimate the value of trade-in assets. We assign value based on the estimated selling price for that piece of equipment in the applicable market, less a gross profit amount to be realized at the time the trade-in asset is sold and an estimate of any reconditioning work required to ready the asset for sale. We estimate future selling prices of trade-in assets using various external industry data and relevant internal information, and consider the impact of various factors including model year, hours of use, overall condition, and other equipment specifications. Our estimates of the value of trade-in assets are impacted by changing market values of used equipment and the availability of relevant and reliable third-party data. In instances in which relevant third-party information is not available, the value assigned to trade-in equipment is dependent on internal judgments.

Inventories

New and used equipment inventories are stated at the lower of cost or net realizable value, determined for each piece of equipment (specific identification). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The majority of our used equipment inventory is acquired through trade-ins from our customers and is initially measured and recognized based on the estimated future selling price of the equipment, less a gross profit amount to be realized when the trade-in asset is sold and an estimate of any reconditioning work required to ready the asset for sale. Subsequent to the initial recognition, all new and used equipment inventories are subject to lower of cost or net realizable value assessments. We estimate net realizable value using internal information, management judgment and third-party data that considers various factors including age and condition of equipment, hours of use and market conditions. Generally, used equipment prices are more volatile to changes in market conditions than prices for new equipment due to incentive programs that may be offered by manufacturers to assist in the sale

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of new equipment. We review our equipment inventory values and adjust them whenever the carrying amount exceeds the estimated net realizable value.

Parts inventories are valued at the lower of average cost or net realizable value. We estimate net realizable value of our parts inventories based on various factors including aging and sales history of each type of parts inventory.

Impairment of Long-Lived Assets

Our long-lived assets consist primarily of property and equipment and operating lease assets. We review these assets for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Recoverability is measured by comparing the estimated future undiscounted cash flows of such assets to their carrying values. If the estimated undiscounted cash flows exceed the carrying value, the carrying value is considered recoverable and no impairment recognition is required. However, if the sum of the undiscounted cash flows is less than the carrying value of the asset, the second step of the impairment analysis must be performed to measure the amount of the impairment, if any. The second step of the impairment analysis compares the estimated fair value of the long-lived asset to its carrying value and any amount by which the carrying value exceeds the fair value is recognized as an impairment charge.

When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Long-lived assets deployed and used by individual store locations are reviewed for impairment at the individual store level. Other long-lived assets shared across stores within a segment or shared across segments are reviewed for impairment on a segment or consolidated level as appropriate.

During our 2025 fiscal year, we determined that events or circumstances were present that may indicate that the carrying amount of certain of our store long-lived assets might not be recoverable. The events or circumstances which indicated that certain of our store long-lived assets might not be recoverable included a current period operating loss combined with historical losses and anticipated future operating losses within certain of our stores, or an expectation that a long-lived asset (or asset group) will be disposed of before the end of its previously estimated useful life. In light of these circumstances, we performed step one of the impairment analysis for these assets, which have a combined carrying value of $51.6 million, to determine if the asset values are recoverable. In the situations where it was concluded that the carrying value was not recoverable, we preformed step two of the impairment analysis and estimated the fair value of the assets using an income approach. The Company recognized total impairment charges of $1.3 million, of which $0.2 million was within the Agriculture segment, $0.2 million was within the Construction segment, and $0.9 million was within the Europe segment.

Our impairment analyses require significant judgment, including identification of the grouping of long-lived and other assets and liabilities for impairment testing, estimates of future cash flows arising from these groups of assets and liabilities, and estimates of the remaining useful lives of the long-lived assets being evaluated. Our estimates inherently include a degree of uncertainty and are impacted by macroeconomic and industry conditions, the competitive environment and other factors. Adverse changes in any of these factors in future periods could result in impairment charges in future periods which could materially impact our results of operations and financial position.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of businesses acquired and is allocated to our reporting units at the time of the acquisition. We analyze goodwill on an annual basis and when an event occurs or circumstances change that may reduce the fair value of a reporting unit below its carrying amount. We have the option of first analyzing qualitative factors to determine whether it is more likely than not that the fair value of any reporting unit is less than its carrying amount. However, we may elect to perform a quantitative goodwill impairment test in lieu of the qualitative test. An entity must recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Subsequent reversal of goodwill impairment charges is not permitted.

When we perform a qualitative goodwill test, we analyze qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. If the qualitative test indicates there may be an impairment, we perform the quantitative test, which measures the amount of the goodwill impairment, if any. To perform the quantitative test, we calculate the fair value of each reporting unit, primarily utilizing the income approach and market approach. The income approach is based on discounted cash flow models that use estimates for forecasts of future operating performance for the reporting units. These forecasts include estimates of revenues, margins, operating expenses, capital expenditures, depreciation, amortization, tax and discount rates. Projected future cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated risk-adjusted weighted-average cost of capital relevant to each reporting unit. The market approach is based on assumptions related to earnings before interest, taxes, depreciation, and amortization multiples or revenue multiples.

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These estimates are developed as part of our planning process based on assumed growth rates, along with historical data and various internal estimates.

We perform our annual goodwill impairment analysis as of December 31 and when an event occurs or circumstances change that may reduce the fair value of a reporting unit below its carrying amount.

In 2025, we elected to perform a quantitative test on all reporting units. Our test indicated that all of our goodwill in the Europe segment should be impaired for $0.5 million and the test for our Agriculture and Australia segments did not indicate any impairment in these two reporting units as of our annual assessment date.

We had goodwill of $61.2 million and $64.1 million at January 31, 2025 and 2024, respectively.

Income Taxes

In determining our provision for income taxes, we must make certain judgments and estimates, including an assessment of the realizability of our deferred tax assets. In evaluating our ability to realize the benefit of our deferred tax assets we consider all available positive and negative evidence, including our historical operating results and our expectation of future taxable income, the availability to implement prudent tax-planning strategies, and the carryforward periods over which the assets may be realized. These assumptions require significant judgment and estimation.

The initial recognition of, and any changes in, a deferred tax asset valuation allowance are recorded to the provision for income taxes and impacts our effective tax rate. Our assessment of the need for, and magnitude of, valuation allowances for our deferred tax assets may be impacted by changes in tax laws, our assumptions regarding the ability to generate future taxable income and the availability of tax-planning strategies. Changes in any of these factors could lead to a change in the recognized valuation allowance which may impact our future results of operations and financial position.

New Accounting Pronouncements

Refer to Note 1, Business Activity and Significant Accounting Polices, to the Consolidated Financial Statements in Item 8, Financial Information and Supplementary Data, of this Form 10-K for a description of new accounting pronouncements recently adopted or not yet adopted and the impact or anticipated impact of such pronouncements to our consolidated financial statements.

Information Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We include "forward-looking" information in this Form 10-K, including this Item 7, as well as in other materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us).

This Form 10-K contains forward-looking statements that involve risks and uncertainties. In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would," or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Our forward-looking statements in this Form 10-K generally relate to the following:

•our beliefs and intentions with respect to our growth strategies, including growth through strategic acquisitions, the types of acquisition targets we intend to pursue, the availability of suitable acquisition targets, the industry climate for dealer consolidation, and our ability to implement our growth strategies;

•our beliefs with respect to factors that will affect demand and seasonality of purchasing in the agricultural and construction industries;

•our beliefs with respect to our primary supplier (CNH Industrial) of equipment and parts inventory;

•our beliefs with respect to the equipment market, our competitors and our competitive advantages;

•our beliefs with respect to the impact of U.S federal government policies on the agriculture economy;

•our beliefs with respect to the impact of commodity prices for crops, fossil fuels and other commodities on our operating results;

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•our beliefs with respect to the impact of government regulations;

•our beliefs with respect to our business strengths and the diversity of our customer base;

•our plans and beliefs with respect to real property used in our business;

•our plans and beliefs regarding future sales, sales mix, and marketing activities;

•our beliefs and assumptions regarding the payment of dividends;

•our beliefs and assumptions regarding valuation reserves, equipment inventory balances, fixed operating expenses, and absorption rate;

•our beliefs and expectations regarding the impact of the Russia-Ukraine military conflict on our Ukrainian operations;

•our beliefs and assumptions with respect to our rental equipment operations;

•our beliefs with respect to our employee relations;

•our assumptions, beliefs and expectations with respect to past and future market conditions, including interest rates, and public infrastructure spending, new environmental standards, and the impact these conditions will have on our operating results;

•our beliefs with respect to the impact of our credit agreements, including future interest expense, limits on corporate transactions, financial covenant compliance, and ability to negotiate amendments or waivers, if needed;

•our beliefs with respect to the impact of increase or decrease in applicable foreign exchange rates;

•our plans and assumptions for future capital expenditures and rental fleet purchases; and

•our cash needs, sources of liquidity, and the adequacy of our working capital.

While we believe that the forward-looking statements in this Form 10-K are reasonable, such statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this Form 10-K in the context of these risks and uncertainties. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

•our dependence on CNH Industrial, our primary supplier of equipment and parts inventory, to supply competitive products, provide financial and marketing support and continue committing to its product warranties and reimbursement of dealers for warrant repairs, and our relationships with other equipment suppliers;

•the terms of the CNH Industrial Dealer Agreements that subject us to restrictions that may adversely impact our business and growth;

•the impact of net farm income, which is influenced by factors over which we have no control;

•market factors, over which we have no control, negatively impacting our construction equipment sales;

•increased inflation and higher interest rates negatively impacting our customers’ equipment purchasing decisions;

•downturns in the equipment distribution market, which can arise from factors over which we have no control;

•the highly competitive nature of our industry;

•the recent agreements of equipment manufacturers, including CNH Industrial, to provide farmers and independent repair shops access to diagnostic tools;

•supply chain disruptions;

•the impact of the Russian-Ukraine military conflict on our operations in Ukraine;

•assumptions regarding our cash needs and the amount of inventory we need on hand;

•general economic conditions and construction activity in the markets where we operate;

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•risks and uncertainties arising from our international operations;

•our ability to effectively manage our inventory;

•our level of indebtedness and ability to comply with the terms of agreements governing our indebtedness;

•exposure to interest rate risks as a result of our variable rate indebtedness;

•the seasonal nature of the agricultural and construction equipment industries;

•customer credit risks;

•our ability to manage increased maintenance costs as the age of our rental fleet increases;

•our ability to manage changes in tax rates or the adoption of new tax legislation;

•risks relating to climate change and weather conditions;

•increased government regulations relating to greenhouse gas emission standards and climate change;

•the risks associated with the expansion of our business, including the potential inability to integrate any businesses we acquire;

•risks relating to our ability to attract, train, and develop key employees necessary for our success;

•labor organizing activities;

•liability risks arising from products sold, rented or serviced by us, which our commercial liability insurance may not be adequate to cover;

•significant fluctuations in the price of our common stock;

•risks related to our dependence on our information technology systems and the impact of potential breaches and other disruptions; and

•other factors discussed under Item 1A, Risk Factors, and elsewhere in this Form 10-K.

You should read the risk factors and the other cautionary statements made in this Form 10-K as being applicable to all related forward-looking statements wherever they appear in this Form 10-K. We cannot assure you that the forward-looking statements in this Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, if at all. Other than as required by law, we undertake no obligation to update these forward-looking statements, whether as a result of new information, future events, or otherwise.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 8, Financial Statements and Supplementary Data, of this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the "Information Regarding Forward-Looking Statements" in this Item 7 and "Risk Factors" presented under Item 1A for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis in this annual report.

A discussion of changes in our Financial Results and Cash Flow Comparisons from fiscal year 2022 to fiscal year 2023 has been omitted from this Form 10-K, but may be found in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on March 30, 2023.

BUSINESS DESCRIPTION

We own and operate a network of full service agricultural and construction equipment stores in the United States, Europe, and Australia. Based upon information provided to us by CNH Industrial N.V. or its U.S. subsidiary CNH Industrial America, LLC, collectively referred to in this Form 10-K as CNH Industrial, we are the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through four reportable segments: Agriculture, Construction, Europe and Australia. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.

The agricultural equipment we sell and service includes machinery and attachments for uses ranging from large-scale farming to home and garden use. The construction equipment we sell and service includes heavy construction machinery, light industrial machinery for commercial and residential construction, road and highway construction machinery, energy, and forestry operations equipment. We offer our customers a one-stop solution for their equipment needs through:

•new and used equipment sales;

•parts sales;

•equipment repair and maintenance services; and

•equipment rental and other activities.

The new equipment and parts we sell are supplied primarily by CNH Industrial. According to its public reports, CNH Industrial is a leading manufacturer and supplier of agricultural and construction equipment based on the number of units sold, primarily through the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands. Sales of new CNH Industrial products accounted for approximately 71% of our new equipment revenue in fiscal 2024, with our single largest manufacturer other than CNH Industrial representing approximately 3% of our total new equipment revenue in fiscal 2024. We acquire used equipment for resale primarily through trade-ins from our customers and in some cases through selective purchases. We sell parts and provide in-store and on-site repair and maintenance services. We rent equipment and provide other ancillary services such as equipment transportation, GPS signal subscriptions, farm data management systems, precision farming equipment, and finance and insurance products.

Throughout our 43-year operating history, we have built an extensive, geographically contiguous network of 94 full service stores located in the United States, 39 in Europe and 15 in Australia. We have a history of growth through acquisitions, including over 60 acquisitions in 15 U.S. states, four European countries and three Australian states since January 1, 2003. We believe that there will continue to be opportunities for dealership consolidation in the future, and we expect that acquisitions will continue to be a component of our long-term growth strategy.

Certain External Factors Affecting our Business

We are subject to a number of factors that affect our business including those factors discussed in the sections in this Form 10-K entitled Item 1A, "Risk Factors" and "Information Regarding Forward-Looking Statements." Certain of these external factors include, but are not limited to, the following:

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Russia/Ukraine Geopolitical Conflict

Since the onset of the active conflict in February 2022, most of Titan Machinery Ukraine's customers have been able to continue their work, although at a reduced capacity and schedule. The Company's business systems in Ukraine have continued to function but have been, and could continue to be, negatively impacted in the future. To date, the impact of this conflict has not been and is not expected to be material to Titan Machinery’s consolidated business operations and financial performance. However, the full impact of the conflict remains uncertain and will depend on future developments, including the severity and duration of the conflicts and their impact on regional and global economic conditions. The Company will continue to monitor the ongoing conflict between Russia and Ukraine as it is highly complex and continues to evolve.

Macroeconomic and Industry Factors

Our Agriculture and International businesses are primarily driven by the demand for agricultural equipment for use in the production of food, fiber, feed grain and renewable energy. Agriculture industry factors such as changes in agricultural commodity prices and net farm income, have an effect on our customers' sentiment and their ability to secure financing for equipment purchases. Macroeconomic and industry factors that affect commodity prices and net farm income include changing worldwide demand for agriculture commodities, crop yields and supply disruptions caused by weather patterns and crop diseases, crop stock levels, production costs, and changing U.S. dollar foreign currency exchange rates. Based on U.S. Department of Agriculture ("USDA") publications, the most recent estimate of net farm income for calendar year 2023 decreased 16% compared to calendar year 2022. The commodity prices of corn and soybeans, which are the predominant crops in our Agriculture store footprint, were at or near record prices in fiscal 2023 but decreased during fiscal 2024. Based on its February 2024 report, the USDA projected net farm income for calendar year 2024 to decrease 25.5%, as compared to calendar year 2023, but remain in line with the average inflation adjusted net farm income for the previous 20 years.

Our Construction business is primarily impacted by the demand for construction equipment for use in private and government commercial, residential, and infrastructure construction; demolition; maintenance; energy and forestry operations. Industry reports show that demand for construction equipment in our markets is driven by several factors, one of which is public infrastructure spending, including roads and highways, sewer and water. Any growth in federal allocations to public infrastructure spending over the next few years should positively impact our future results of operations. Likewise, any decline in federal allocations to public infrastructure spending over the next few years should negatively impact our future results of operations.

Seasonality & Weather

The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and our available cash flow to fluctuate during the year. Our customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons, which for farmers are the planting and harvesting seasons; and which for Construction customers are typically the second and third quarters of our fiscal year for much of our Construction footprint. Our parts and service revenues are typically highest during our customers' busy seasons as well, due to the increased use of their equipment during this time, which generates the need for more parts and service work. However, weather conditions impact the timing of our customers' busy times, which may cause greater than expected fluctuations in our quarterly financial results year over year. In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.

Seasonal weather trends, particularly severe wet or dry conditions, can have a significant impact on regional agricultural and construction market performance by affecting crop production and the ability to undertake construction projects. Weather conditions that adversely affect the agricultural or construction markets decrease the demand for our products and services.

In addition, numerous external factors such as credit markets, government subsidies, commodity prices, production yields, input costs, and other circumstances may disrupt normal purchasing practices and buyer sentiment, further contributing to the seasonal fluctuations.

Dependence on our Primary Supplier

The majority of our business involves the distribution and servicing of equipment manufactured by CNH Industrial. In fiscal 2024, CNH Industrial supplied approximately 71% of our new equipment revenue on a consolidated basis and 75%, 81%, 51%, and 58% in our Agriculture, Construction, Europe, and Australia segments, respectively, and represented a significant portion of our parts revenue. Thus, we believe the following factors have a significant impact on our operating results:

•CNH Industrial’s product offerings, reputation and market share;

•CNH Industrial’s product prices and incentive and discount programs;

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•CNH Industrial's supply of inventory and ability to match demand levels and delivery timelines;

•CNH Industrial's offering of floorplan payable financing for the purchase of a substantial portion of our inventory; and

•CNH Industrial's offering of financing and leasing used by our customers to purchase CNH Industrial equipment from us.

Credit Market Changes

Changes in credit markets can affect our customers' ability and willingness to make capital expenditures, including purchasing our equipment. Tight credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity markets have the potential to adversely affect our business. Such disruptions in the overall economy and financial markets and the related reduction in consumer confidence in the economy, slow activity in the capital markets, negatively affect access to credit on commercially acceptable terms, and may adversely impact our customers' access to credit and the terms of any such credit. However, if retail interest rates continue to rise, our business may be negatively affected by customers who find financing purchases of our equipment less attractive due to higher borrowing costs.

Our business is also particularly dependent on our access to credit markets to manage inventory and finance acquisitions. We cannot predict what future changes will occur in credit markets or how these changes will impact our business.

Inflation

Inflationary pressures have led to rising inventory and supply costs as well as increased labor costs. To date, in those instances in which we have experienced cost increases, we have been able to increase selling prices to offset much of the increases and expect to continue to do so in the future.

Significant Items Impacting Our Financial Position and Results of Operations

J.J. O’Connor & Sons Pty. Ltd. Acquisition

On October 2, 2023, we acquired all of the outstanding equity interests of J.J. O’Connor & Sons Pty. Ltd. ("O’Connors"). The acquired business consisted of 15 CaseIH dealership locations and one parts center in the states of New South Wales, South Australia, and Victoria in Southeastern Australia. O'Connors has been a successful Case IH complex, and our acquisition of this entity provides the Company with the opportunity to expand our international presence into the large, well-established Australian agriculture market. Total cash consideration paid for O'Connors was $66.5 million, which was financed through available cash resources and line of credit availability. The 15 O’Connors store locations are included within our new Australia segment.

Heartland Acquisition

On August 1, 2022, we acquired all of the outstanding equity interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as "Heartland Companies"). The acquired business consisted of 12 CaseIH commercial application agriculture locations, in the states of Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and Wisconsin. Our acquisition of these entities provides the Company with the opportunity for synergies due to overlap of our footprints, which allows us to package deals that include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint. Total cash consideration paid for the Heartland Companies was $94.4 million, which was financed through available cash resources and line of credit availability. The 12 Heartland Companies store locations are included within our Agriculture segment.

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Key Financial Metrics

In addition to tracking our sales and expenses to evaluate our operational performance, we also monitor the following key financial metrics. The results of some of these metrics are discussed further throughout the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-K.

Inventory Turnover

Inventory turnover measures the rate at which inventory is sold during the year. We calculate it by dividing cost of sales on equipment for the last twelve months by the average of the month-end balances of our equipment and parts inventories for the same twelve-month period. We believe that inventory turnover is an important management metric in evaluating the efficiency at which we are managing and selling our inventories.

Same-Store Results

Same-store results for any period represent results of operations by stores that were part of our Company for the entire comparable period in the preceding fiscal year. We do not distinguish relocated or newly-expanded stores in this same-store analysis.

Absorption

Absorption is an industry term that refers to the percentage of an equipment dealer's operating expense covered by the combined gross profit from parts, service and rental fleet activity. We calculate absorption by dividing our gross profit from sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt. We believe that absorption is an important management metric because during economic down cycles our customers tend to postpone new and used equipment purchases while continuing to run, maintain and repair their existing equipment. Thus, operating at a high absorption rate enables us to operate profitably throughout economic down cycles.

Dollar Utilization

Dollar utilization is a measurement of asset performance and profitability used in the rental industry. We calculate the dollar utilization of our rental fleet equipment by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period. While our rental fleet has variable expenses related to repairs and maintenance, its primary expense for depreciation is fixed. Low dollar utilization of our rental fleet has a negative impact on gross profit margin and gross profit dollars due to the fixed depreciation component. However, high dollar utilization of our rental fleet has a positive impact on gross profit margin and gross profit dollars.

Key Financial Statement Components

Revenue

•Equipment: We derive equipment revenue from the sale of new and used agricultural and construction equipment.

•Parts: We derive parts revenue from the sale of parts for brands of equipment that we sell, other makes of equipment, and other types of equipment and related components. Our parts sales provide us with a relatively stable revenue stream that is less sensitive to the economic cycles that affect our equipment sales.

•Service: We derive service revenue from repair and maintenance services to our customers' equipment. Our repair and maintenance services provide a high-margin, relatively stable source of revenue through changing economic cycles.

•Rental and other: We derive other revenue from equipment rentals and ancillary equipment support activities such as equipment transportation, GPS signal subscriptions and reselling financial and insurance products.

Cost of Revenue

•Equipment: Cost of equipment revenue is the lower of the acquired cost or the net realizable value of the specific piece of equipment sold.

•Parts: Cost of parts revenue is the lower of the acquired cost or the market value of the parts sold, based on average costing.

•Service: Cost of service revenue represents costs attributable to services provided for the maintenance and repair of customer-owned equipment and equipment then on-rent by customers.

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•Rental and other: Costs of other revenue represent costs associated with equipment rental, such as depreciation, maintenance and repairs, as well as costs associated with providing transportation, hauling, parts freight, GPS subscriptions and damage waivers, including, among other items, drivers' wages, truck depreciation, fuel costs, shipping costs and our costs related to damage waiver policies.

Operating Expenses

Our operating expenses include sales and marketing expenses, sales commissions (which generally are based upon equipment gross profit margins), payroll and employee benefit costs, insurance expenses, professional fees, property rental and related costs, property and other taxes, administrative overhead, and depreciation associated with property and equipment (other than rental and trucking equipment).

Floorplan Interest

The cost of financing inventory is an important factor affecting our results of operations. Floorplan payable financing from CNH Industrial Capital, the Bank Syndicate Agreement, DLL Finance and various credit facilities related to our foreign subsidiaries represent the primary sources of financing for equipment inventories. CNH Industrial regularly offers interest-free periods as well as additional incentives and special offers. As of January 31, 2024, 47.9% of our floorplan payable financing was non-interest bearing.

Other Interest Expense

Interest expense represents the interest on our debt instruments, other than floorplan payable financing facilities. This includes long-term debt used to finance the purchase of real estate and vehicles.

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Results of Operations

Comparative financial data for each of our four sources of revenue for fiscal 2024 and 2023 are presented below. The results include the acquisitions made during these periods. The year-to-year comparison included below is not necessarily indicative of future results. Information regarding segment revenue and income (loss) before income taxes is presented for each fiscal year following our discussion of the consolidated results of operations. Additional information regarding our segments is included in Note 21 of our consolidated financial statements.

The following table sets forth our statements of operations data expressed as a percentage of revenue for the fiscal years indicated.

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Fiscal Year Ended January 31, 2024 Compared to Fiscal Year Ended January 31, 2023

Consolidated Results

Revenue

The increase in total revenue for fiscal 2024, as compared to fiscal 2023, was primarily the result of Company-wide same-store sales increase of 10.1% over the prior fiscal year and our acquisitions of the Heartland Companies, Pioneer Farm Equipment Co. (“Pioneer”), and O'Connors, completed in August 2022, February 2023, and October 2023, respectively. The same-store sales increase was primarily driven by equipment sales, which benefited from improved availability of inventory and the sustained high demand of both agriculture and construction equipment. In addition, parts and service same-store sales also grew in fiscal 2024 compared to fiscal 2023.

Gross Profit

Gross profit increased 20.8% or $91.5 million from fiscal 2023 to fiscal 2024, primarily due to higher revenue and gross profit from our equipment, parts, and service business. Gross profit margin decreased from 19.9% in fiscal 2023 to 19.3% in fiscal 2024. The decrease in gross profit margin is primarily the result of a partial normalization of equipment gross profit margin as the supply of many product categories has caught up with demand.

Our Company-wide absorption rate declined to 79.2% for fiscal 2024 as compared to 82.7% during fiscal 2023. The lower absorption rate in fiscal 2024 compared to fiscal 2023, was primarily impacted by a significant rise in floorplan interest expense in fiscal 2024, the fiscal 2023 absorption rate was also favorably impacted by a gain of $1.4 million recognized on the divestiture of our consumer products store in North Dakota in the first quarter of fiscal 2023.

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Operating Expenses

Operating expenses for fiscal 2024 increased $61.0 million, as compared to fiscal 2023. The increase in operating expenses was primarily due to acquisitions that have occurred in the last eighteen months as well as variable expenses associated with increased sales. In fiscal 2024, operating expenses as a percentage of revenue decreased to 13.1% from 13.6% in fiscal 2023. The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in fiscal 2024 compared to fiscal 2023, which positively affected our ability to leverage our fixed operating costs.

Other Income (Expense)

The decrease in interest and other income (expense) compared to fiscal 2023 was primarily the result of changes in foreign currency fluctuations. The increase in floorplan interest expense for fiscal 2024, as compared to fiscal 2023, was primarily due to increased interest-bearing borrowings, resulting from higher inventory levels, as well as a higher interest rate environment. The increase in other interest expense in fiscal 2024 is the result of an increased amount of long term debt resulting from real estate purchased via acquisition or the buyout of previously leased facilities in fiscal 2023 and 2024.

Provision for Income Taxes

Our effective tax rate increased from 24.7% in fiscal 2023 to 25.6% in fiscal 2024. The effective tax rate for each of the years ended January 31, 2024 and 2023, is subject to variation primarily due to the impact of items related to the vesting of share-based compensation, limitation on the tax deductibility of officers' compensation and the mix of domestic and foreign income.

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Segment Results

Agriculture

Agriculture segment revenue for fiscal 2024 increased 27.6%, or $442.5 million, compared to the same period last year. The higher revenue was driven primarily by the acquisitions of the Heartland Companies and Pioneer in August 2022 and February 2023, respectively, as well as an increase in same-store sales of 12.1%. The same-store sales increase was primarily driven by equipment sales, which benefited from improved availability of inventory and the sustained high demand for new and used equipment. In addition, same-store sales for parts and service also grew in fiscal 2024 compared to fiscal 2023.

Agriculture segment income before income taxes for fiscal 2024 improved by $18.3 million, or 17.9%, compared to fiscal 2023. The improvement in segment results was primarily the result of higher revenue partially offset by higher operating expenses due to variable expenses associated with increased sales.

Construction

Construction segment revenue for fiscal 2024 increased 7.8%, or $24.0 million, compared to fiscal 2023. When accounting for the divestitures of the North Dakota consumer products store in March 2022, same-store sales increased 8.3%. Construction activity in our footprint sustained at healthy levels, which was the primary factor in the same-store sales growth.

The Construction segment income before income taxes was $18.3 million for fiscal 2024 compared to income of $18.6 million for the prior year. The decline in segment results was primarily due to the $1.4 million gain on our consumer products store in the first quarter of fiscal 2023 which was mostly offset by an increase in same-store sales, in fiscal 2024. The dollar utilization of our rental fleet decreased from 30.2% in fiscal 2023 to 29.3% in fiscal 2024.

Europe

Europe segment revenue for fiscal 2024 increased 4.3%, or $12.8 million, compared to fiscal 2023. Revenue, net of the effect of foreign currency fluctuations, was up 2.1% or $6.2 million compared to fiscal 2023. The increase in revenue was primarily related to pricing increases in fiscal 2024 compared to fiscal 2023.

Our Europe segment income before income taxes was $16.5 million for fiscal 2024, compared to $20.2 million for fiscal 2023. The decrease in segment pre-tax income was primarily the result of increased operating expenses.

Australia

We entered into the Australian market in October 2023 with the O'Connor acquisition. Australia segment revenue for fiscal 2024 was $69.8 million. Our Australia segment income before income taxes was $4.1 million for fiscal 2024.

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Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur and cause a difference in reported shared resource expense. Shared Resource loss before income taxes was $9.0 million for fiscal 2024 compared to $6.3 million for fiscal 2023.

Liquidity and Capital Resources

Sources of Liquidity

Our primary sources of liquidity are cash reserves, cash generated from operations, and borrowings under our floorplan payable and other credit facilities. We expect these sources of liquidity to be sufficient to fund our working capital requirements, acquisitions, capital expenditures and other investments in our business, service our debt, pay our tax and lease obligations and other commitments and contingencies, and meet any seasonal operating requirements for the foreseeable future, provided, however, that our borrowing capacity under our credit agreements is dependent on compliance with various financial covenants as further described in Note 8, Floorplan Payable/Lines of Credit, of the Notes to our Consolidated Financial Statements included in this Form 10-K. We have worked in the past, and will continue to work in the future if necessary, with our lenders to implement satisfactory modifications to these financial covenants when appropriate for the business conditions confronted by us.

Equipment Inventory and Floorplan Payable Credit Facilities

Floorplan payable balances reflect the amount owed for new equipment inventory purchased from a manufacturer and used equipment inventory, which is primarily purchased through trade-in on equipment sales, net of unamortized debt issuance costs incurred for floorplan credit facilities. Certain manufacturers from which we purchase new equipment inventory offer financing on these purchases, either offered directly from the manufacturers or through the manufacturers’ captive finance affiliate. CNH Industrial's captive finance subsidiary, CNH Industrial Capital, also provides financing of used equipment inventory. We also have floorplan payable balances with non-manufacturer lenders for new and used equipment inventory. Borrowings and repayments on manufacturer floorplan facilities are reported as operating cash flows, while borrowings and repayments on non-manufacturer floorplan facilities are reported as financing cash flows in our consolidated statements of cash flows.

As of January 31, 2024, we had floorplan payable lines of credit for equipment purchases totaling $1.4 billion, which includes a $875.0 million credit facility with CNH Industrial Capital, a $275.0 million floorplan payable line under the Bank Syndicate Agreement, a $80.0 million credit facility with DLL Finance, and additional credit facilities related to our foreign subsidiaries. Available borrowing capacity under these lines of credit are reduced by amounts outstanding under such facilities, borrowing base calculations and amount of standby letters of credit outstanding with respect to the Bank Syndicate Agreement, and certain acquisition-related financing arrangements with respect to the CNH Industrial Capital credit facility. As of January 31, 2024, the Company was in compliance with the financial covenants under its credit agreements. Additional details on each of these credit facilities are disclosed in Note 8 to our consolidated financial statements included in this Form 10-K.

As of January 31, 2024, the Company was not subject to the fixed charge ratio covenant under the Bank Syndicate Agreement as our adjusted excess availability plus eligible cash collateral (as defined in the Bank Syndicate Agreement) was not less than 15% of the total amount of the credit facility. Please refer to Note 8, Floorplan Payable/Lines of Credit, of the Notes to our Consolidated Financial Statement included in Item 8, Financial Statements and Supplementary Data, of this Form 10-K for further information regarding the Company's line of credit.

Our equipment inventory turnover decreased to 2.2 times for fiscal 2024 compared to 3.3 times for fiscal 2023. Our equipment inventory balance increased 104.4% from January 31, 2023 to January 31, 2024. The decrease in equipment turnover was primarily due to the increase in average equipment inventory in fiscal 2024 as compared to fiscal 2023 as we were coming off very low inventory levels in fiscal 2023, due to allocation restrictions implemented by our suppliers. Our equity in equipment inventory, which reflects the portion of our equipment inventory balance that is not financed by floorplan payables, decreased to 18.2% as of January 31, 2024, from 51.7% as of January 31, 2023. The decrease in our equity in equipment inventory is primarily due to the stocking of new equipment inventories as availability has improved, as well as drawing on our floorplan loan with the Bank Syndicate in conjunction with the O'Connors acquisition.

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Long-Term Debt Facilities

As of January 31, 2024, we had a $75.0 million working capital line of credit under the Bank Syndicate Agreement (the "Revolver Loan"). The Revolver Loan is used to finance our working capital requirements and fund certain capital expenditures, as needed. As of January 31, 2024, the Company did not have a need to utilize any of the Revolver Loan, as such the outstanding balance was zero. The Company works with various lenders to finance the purchase of real estate we currently lease or are acquiring through an acquisition. The Company may also decide in the future to finance a portion of our rental fleet as well as our capital expenditures using long-term debt from various lenders.

Adequacy of Capital Resources

Our primary uses of cash have been to fund our operating activities, including the purchase of inventory and providing for other working capital needs; meeting our debt service requirements; making payments due under our various leasing arrangements; and funding capital expenditures, including the purchase of rental fleet assets. The primary factor affecting our ability to generate cash and to meet cash requirements, is our operating performance as impacted by (i) industry factors, (ii) competition, (iii) general economic conditions, (iv) the timing and extent of acquisitions, and (v) business and other factors including those identified in Item 1A, Risk Factors, and discussed in this Form 10-K.

Our ability to service our debt will depend upon our ability to generate necessary cash. This will in turn depend on our operating performance, general economic conditions, and financial, competitive, business and other factors, some of which are beyond our immediate control, and future acquisition activity. Based on our current operational performance, we believe our cash flow from operations, available cash, and available borrowings under our existing credit facilities will be adequate to meet our liquidity needs beyond the next 12 months.

In fiscal 2024, we used $10.8 million in cash for rental fleet purchases and $51.5 million in cash for property and equipment purchases and financed $17.9 million in property and equipment purchases with long-term debt and finance leases. The property and equipment purchases in fiscal 2024 primarily related to improvements to, or purchases of, real estate assets and the purchase of vehicles. In fiscal 2023, we used $10.0 million in cash for rental fleet purchases, $27.2 million in cash for property and equipment purchases, and financed $6.4 million in property and equipment purchases with long-term debt. The property and equipment purchases in fiscal 2023 primarily related to the purchase of vehicles, trucks and real estate. We expect our cash expenditures for property and equipment, exclusive of rental fleet purchases, for fiscal 2025 to be approximately $50.0 million and expect cash expenditures for our rental fleet for fiscal 2025 to be approximately $10.0 million. The actual amount of our fiscal 2025 capital expenditures will depend upon factors such as general economic conditions, growth prospects for our industry and our decisions regarding financing and leasing options. We currently expect to finance property and equipment purchases with borrowings under our existing credit facilities, financing with long-term debt, with available cash or with cash flow from operations. We may need to incur additional debt if we pursue any future acquisitions.

There can be no assurances, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available under the credit facilities with the Bank Syndicate, CNH Industrial Capital and DLL Finance in amounts sufficient to allow us to service our indebtedness and to meet our other commitments. If we are unable to generate sufficient cash flow from operations or to obtain sufficient future borrowings, we may be required to seek one or more alternatives such as refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. There can be no assurances that we will be able to succeed with one of these alternatives on commercially reasonable terms, if at all. In addition, if we pursue strategic acquisitions, we may require additional equity or debt financing to consummate the transactions, and we cannot give absolute assurance that we will succeed in obtaining this financing on favorable terms or at all. If we incur additional indebtedness to finance any of these transactions, this may place increased demands on our cash flow from operations to service the resulting increased debt. Our existing debt agreements contain restrictive covenants that may restrict our ability to adopt any of these alternatives. Any non-compliance by us under the terms of our debt agreements could result in an event of default which, if not cured, could result in the acceleration of our debt. We have met all financial covenants under these credit agreements as of January 31, 2024. If anticipated operating results create the likelihood of a future covenant violation, we would seek to work with our lenders on an appropriate modification or amendment to our financing arrangements.

We enter into contractual obligations in the ordinary course of business that may require future cash payments. Such obligations include, but are not limited to, debt arrangements, leasing arrangements, and costs related to Information Technology ("IT"), including ERP expenses. The Notes to the Consolidated Financial Statements provide additional information in regard to Long Term Debt (Note 10) and Leases (Note 13). Other purchase obligations consist primarily of IT related expenses with estimated cash payments of $4.1 million for fiscal 2025, as well as a combined $0.7 million for fiscal 2026, 2027, and 2028.

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Cash Flow

Cash Flow (Used For) Provided By Operating Activities

Net cash used for operating activities in fiscal 2024 was $32.3 million compared to net cash provided by operating activities of $10.8 million in fiscal 2023. This decrease in operating cash flow was driven by an increase in inventories and partially offset by an increase in floorplan lines of credit from manufacturers, timing and collections of accounts receivable and higher net income for fiscal year 2024.

Cash Flow Used For Investing Activities

Net cash used for investing activities is primarily comprised of cash used for property and equipment purchases, including rental fleet purchases, and for business acquisitions.

Net cash used for investing activities was $163.4 million in fiscal 2024, compared to $134.1 million in fiscal 2023. The primarily driver was due to an increase of $25.2 million in cash used for purchases of property and equipment and increase of $7.1 million in acquisition activity compared to prior year.

Cash Flow Provided By Financing Activities

Net cash provided by financing activities was $188.6 million in fiscal 2024, compared to $22.0 million in fiscal 2023. the increase in net cash provided by financing activities was the result of increased non-manufacturer floorplan payables in fiscal 2024, as the Company drew on its Bank Syndicate Agreement floorplan loan in fiscal 2024, to finance higher inventory levels.

Critical Accounting Policies and Use of Estimates

In the preparation of financial statements prepared in conformity with U.S. generally accepted accounting principles, we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. While we believe the estimates and judgments we use in preparing our financial statements are appropriate, they are subject to future events and uncertainties regarding their outcome and therefore actual results may materially differ from these estimates. We describe in Note 1, Business Activity and Significant Accounting Polices, of the Notes to our Consolidated Financial Statements the significant accounting policies used in preparing the consolidated financial statements. We consider the following items in our consolidated financial statements to require significant estimation or judgment.

Revenue Recognition

Equipment revenue transactions include the sale of agricultural and construction equipment and often include both cash and noncash consideration received from our customers, with noncash consideration in the form of used, trade-in, equipment assets. The amount of revenue recognized in the sale transaction is dependent on the value assigned to the trade-in asset. Significant judgment is required to estimate the value of trade-in assets. We assign value based on the estimated selling price for that piece of equipment in the applicable market, less a gross profit amount to be realized at the time the trade-in asset is sold and an estimate of any reconditioning work required to ready the asset for sale. We estimate future selling prices of trade-in assets using various external industry data and relevant internal information, and consider the impact of various factors including model year, hours of use, overall condition, and other equipment specifications. Our estimates of the value of trade-in assets are impacted by changing market values of used equipment and the availability of relevant and reliable third-party data. In instances in which relevant third-party information is not available, the value assigned to trade-in equipment is dependent on internal judgments.

Inventories

New and used equipment inventories are stated at the lower of cost or net realizable value, determined for each piece of equipment (specific identification). Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The majority of our used equipment inventory is acquired through trade-ins from our customers and is initially measured and recognized based on the estimated future selling price of the equipment, less a gross profit amount to be realized when the trade-in asset is sold and an estimate of any reconditioning work required to ready the asset for sale. Subsequent to the initial recognition, all new and used equipment inventories are subject to lower of cost or net realizable value assessments. We estimate net realizable value using internal information, management judgment and third-party data that considers various factors including age and condition of equipment, hours of use and market conditions. Generally, used equipment prices are more volatile to changes in market conditions than prices for new equipment due to incentive programs that may be offered by manufacturers to assist in the sale of new equipment. We review our equipment inventory values and adjust them whenever the carrying amount exceeds the estimated net realizable value.

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Parts inventories are valued at the lower of average cost or net realizable value. We estimate net realizable value of our parts inventories based on various factors including aging and sales history of each type of parts inventory.

Impairment of Long-Lived Assets

Our long-lived assets consist primarily of property and equipment and operating lease assets. We review these assets for potential impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Recoverability is measured by comparing the estimated future undiscounted cash flows of such assets to their carrying values. If the estimated undiscounted cash flows exceed the carrying value, the carrying value is considered recoverable and no impairment recognition is required. However, if the sum of the undiscounted cash flows is less than the carrying value of the asset, the second step of the impairment analysis must be performed to measure the amount of the impairment, if any. The second step of the impairment analysis compares the estimated fair value of the long-lived asset to its carrying value and any amount by which the carrying value exceeds the fair value is recognized as an impairment charge.

When reviewing long-lived assets for impairment, we group long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Long-lived assets deployed and used by individual store locations are reviewed for impairment at the individual store level. Other long-lived assets shared across stores within a segment or shared across segments are reviewed for impairment on a segment or consolidated level as appropriate.

During our 2024 fiscal year, we determined that events or circumstances were present that may indicate that the carrying amount of certain of our store long-lived assets might not be recoverable. The events or circumstances which indicated that certain of our store long-lived assets might not be recoverable included a current period operating loss combined with historical losses and anticipated future operating losses within certain of our stores, or an expectation that a long-lived asset (or asset group) will be disposed of before the end of its previously estimated useful life. In light of these circumstances, we performed step one of the impairment analysis for these assets, which have a combined carrying value of $11.0 million, to determine if the asset values are recoverable. In all cases, our analyses indicated that the carrying values are recoverable based on our estimates of future undiscounted cash flows under step one of the impairment analysis.

Our impairment analyses require significant judgment, including identification of the grouping of long-lived and other assets and liabilities for impairment testing, estimates of future cash flows arising from these groups of assets and liabilities, and estimates of the remaining useful lives of the long-lived assets being evaluated. Our estimates inherently include a degree of uncertainty and are impacted by macroeconomic and industry conditions, the competitive environment and other factors. Adverse changes in any of these factors in future periods could result in impairment charges in future periods which could materially impact our results of operations and financial position.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of businesses acquired and is allocated to our reporting units at the time of the acquisition. We analyze goodwill on an annual basis and when an event occurs or circumstances change that may reduce the fair value of a reporting unit below its carrying amount. We have the option of first analyzing qualitative factors to determine whether it is more likely than not that the fair value of any reporting unit is less than its carrying amount. However, we may elect to perform a quantitative goodwill impairment test in lieu of the qualitative test. An entity must recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Subsequent reversal of goodwill impairment charges is not permitted.

When we perform a qualitative goodwill test, we analyze qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. If the qualitative test indicates there may be an impairment, we perform the quantitative test, which measures the amount of the goodwill impairment, if any. To perform the quantitative test, we calculate the fair value of each reporting unit, primarily utilizing the income approach. The income approach is based on discounted cash flow models that use reporting unit estimates for forecasted future financial performance, including revenues, margins, operating expenses, capital expenditures, depreciation, amortization, tax and discount rates. These estimates are developed as part of our planning process based on assumed growth rates, along with historical data and various internal estimates. Projected future cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated risk-adjusted weighted-average cost of capital relevant to each reporting unit.

We perform our annual goodwill impairment analysis as of December 31 and when an event occurs or circumstances change that may reduce the fair value of a reporting unit below its carrying amount.

In 2024, we elected to perform the qualitative test on all reporting units with the exception of our German reporting unit, which management decided to perform a quantitative assessment. Our test indicated that there is no goodwill impairment in any of our reporting units as of our annual assessment date.

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We had goodwill of $64.1 million and $30.6 million at January 31, 2024 and 2023, respectively.

Income Taxes

In determining our provision for income taxes, we must make certain judgments and estimates, including an assessment of the realizability of our deferred tax assets. In evaluating our ability to realize the benefit of our deferred tax assets we consider all available positive and negative evidence, including our historical operating results and our expectation of future taxable income, the availability to implement prudent tax-planning strategies, and the carryforward periods over which the assets may be realized. These assumptions require significant judgment and estimation.

The initial recognition of, and any changes in, a deferred tax asset valuation allowance are recorded to the provision for income taxes and impacts our effective tax rate. Our assessment of the need for, and magnitude of, valuation allowances for our deferred tax assets may be impacted by changes in tax laws, our assumptions regarding the ability to generate future taxable income and the availability of tax-planning strategies. Changes in any of these factors could lead to a change in the recognized valuation allowance which may impact our future results of operations and financial position.

New Accounting Pronouncements

Refer to Note 1, Business Activity and Significant Accounting Polices, of the Notes to our Consolidated Financial Statements for a description of new accounting pronouncements recently adopted or not yet adopted and the impact or anticipated impact of such pronouncements to our consolidated financial statements.

Information Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We include "forward-looking" information in this Form 10-K, including this Item 7, as well as in other materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us).

This Form 10-K contains forward-looking statements that involve risks and uncertainties. In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would," or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Our forward-looking statements in this Form 10-K generally relate to the following:

•our beliefs and intentions with respect to our growth strategies, including growth through strategic acquisitions, the types of acquisition targets we intend to pursue, the availability of suitable acquisition targets, the industry climate for dealer consolidation, and our ability to implement our growth strategies;

•our beliefs with respect to factors that will affect demand and seasonality of purchasing in the agricultural and construction industries;

•our beliefs with respect to our primary supplier (CNH Industrial) of equipment and parts inventory;

•our beliefs with respect to the equipment market, our competitors and our competitive advantages;

•our beliefs with respect to the impact of U.S federal government policies on the agriculture economy;

•our beliefs with respect to the impact of commodity prices for crops, fossil fuels and other commodities on our operating results;

•our beliefs with respect to the impact of government regulations;

•our beliefs with respect to our business strengths and the diversity of our customer base;

•our plans and beliefs with respect to real property used in our business;

•our plans and beliefs regarding future sales, sales mix, and marketing activities;

•our beliefs and assumptions regarding the payment of dividends;

•our beliefs and assumptions regarding valuation reserves, equipment inventory balances, fixed operating expenses, and absorption rate;

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•our beliefs and expectations regarding the impact of the Russia-Ukraine military conflict on our Ukrainian operations;

•our beliefs and assumptions with respect to our rental equipment operations;

•our beliefs with respect to our employee relations;

•our assumptions, beliefs and expectations with respect to past and future market conditions, including interest rates, and public infrastructure spending, new environmental standards, and the impact these conditions will have on our operating results;

•our beliefs with respect to the impact of our credit agreements, including future interest expense, limits on corporate transactions, financial covenant compliance, and ability to negotiate amendments or waivers, if needed;

•our beliefs with respect to the impact of increase or decrease in applicable foreign exchange rates;

•our plans and assumptions for future capital expenditures and rental fleet purchases;

•our cash needs, sources of liquidity, and the adequacy of our working capital.

While we believe that the forward-looking statements in this Form 10-K are reasonable, such statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the SEC and public communications. You should evaluate all forward-looking statements made in this Form 10-K in the context of these risks and uncertainties. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

•the impact of the Russian-Ukraine military conflict on our operations in Ukraine;

•assumptions regarding our cash needs and the amount of inventory we need on hand;

•general economic conditions and construction activity in the markets where we operate;

•our dependence on CNH Industrial, our primary supplier of equipment and parts inventory, and our relationships with other equipment suppliers;

•the terms of the CNH Industrial dealer agreements that subject us to restrictions that may adversely impact our business and growth;

•the risks associated with our international operations;

•risks resulting from the implementation or design of our new ERP system;

•risks resulting from the impact of the enactment of "right to repair" legislation;

•the impact of security breaches and other disruptions to our information system;

•our level of indebtedness and ability to comply with the terms of agreements governing our indebtedness;

•the risks associated with the expansion of our business;

•the risks resulting from outbreaks or other public health crises;

•risks related to our ability to attract, train, and develop key employees necessary for our success;

•the potential inability to integrate any businesses we acquire;

•competitive pressures;

•significant fluctuations in the price of our common stock;

•risks related to our dependence on our information technology systems and the impact of potential breaches and other disruptions;

•compliance with laws and regulations; and

•other factors discussed under Item 1A, Risk Factors, or elsewhere in this Form 10-K.

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You should read the risk factors and the other cautionary statements made in this Form 10-K as being applicable to all related forward-looking statements wherever they appear in this Form 10-K. We cannot assure you that the forward-looking statements in this Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, if at all. Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 8 of this Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the "Information Regarding Forward-Looking Statements" in this Item 7 and "Risk Factors" presented under Item 1A for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis in this annual report.

A discussion of changes in our Financial Results and Cash Flow Comparisons from fiscal year 2021 to fiscal year 2022 has been omitted from this Form 10-K, but may be found in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on April 1, 2022.

BUSINESS DESCRIPTION

We own and operate a network of full service agricultural and construction equipment stores in the United States and Europe. Based upon information provided to us by CNH Industrial N.V. or its U.S. subsidiary CNH Industrial America, LLC, collectively referred to in this Form 10-K as CNH Industrial, we are the largest retail dealer of Case IH Agriculture equipment in the world, one of the largest retail dealers of Case Construction equipment in North America and one of the largest retail dealers of New Holland Agriculture and New Holland Construction equipment in the U.S. We operate our business through three reportable segments: Agriculture, Construction and International. Within each segment, we have four principal sources of revenue: new and used equipment sales, parts sales, service, and equipment rental and other activities.

The agricultural equipment we sell and service includes machinery and attachments for uses ranging from large-scale farming to home and garden use. The construction equipment we sell and service includes heavy construction machinery, light industrial machinery for commercial and residential construction, road and highway construction machinery, energy, and forestry operations equipment. We offer our customers a one-stop solution for their equipment needs through:

•new and used equipment sales;

•parts sales;

•equipment repair and maintenance services; and

•equipment rental and other activities.

The new equipment and parts we sell are supplied primarily by CNH Industrial. According to its public reports, CNH Industrial is a leading manufacturer and supplier of agricultural and construction equipment based on the number of units sold, primarily through the Case IH Agriculture, New Holland Agriculture, Case Construction and New Holland Construction brands. Sales of new CNH Industrial products accounted for approximately 73% of our new equipment revenue in fiscal 2023, with our single largest manufacturer other than CNH Industrial representing approximately 4% of our total new equipment sales in fiscal 2023. We acquire used equipment for resale primarily through trade-ins from our customers and in some cases through selective purchases. We sell parts and provide in-store and on-site repair and maintenance services. We rent equipment and provide other ancillary services such as equipment transportation, GPS signal subscriptions, farm data management systems, precision farming equipment, and finance and insurance products.

Throughout our 42-year operating history, we have built an extensive, geographically contiguous network of 86 stores located in the United States and 35 stores in Europe. We have a history of growth through acquisitions, including over 55 acquisitions in 15 U.S. states and four European countries since January 1, 2003. We believe that there will continue to be opportunities for dealership consolidation in the future, and we expect that acquisitions will continue to be a component of our long-term growth strategy.

Certain External Factors Affecting our Business

We are subject to a number of factors that affect our business including those factors discussed in the sections in this annual report entitled "Risk Factors" and "Information Regarding Forward-Looking Statements." Certain of these external factors include, but are not limited to, the following:

Russia/Ukraine Geopolitical Conflict

Since the onset of the active conflict in February 2022, most of Titan Machinery Ukraine's customers have been able to continue their work, although at a reduced capacity and schedule. The Company's business systems in Ukraine have continued

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to function but have been, and could continue to be, negatively impacted in the future. Some of Titan Machinery Ukraine's back office employees have been able to relocate outside of Ukraine and continue to work for the Company, while the customer support and sales teams have remained in Ukraine. For the fiscal year ended January 31, 2023, Titan Machinery Ukraine's revenues are down approximately 40.5% from the prior fiscal year.

As of January 31, 2023, the Company had total assets of $27.4 million in Ukraine. The physical assets (e.g. inventory and fixed assets) are almost exclusively located in central and western areas of the country. Total Company assets in Ukraine as of January 31, 2022 were $32.7 million.

The situation in Ukraine is highly complex and continues to evolve. If the Company cannot provide efficient and uninterrupted services to its customers, this could worsen the conflict's adverse effect on the Company's operations and business in Ukraine. In addition, the Company's ability to maintain adequate liquidity for our operations in Ukraine is dependent on a number of factors, including Titan Machinery Ukraine's revenue and earnings, which have been and could continue to be, significantly impacted by the conflict. Further, any major breakdown or closure of utility services, any major threat to civilians in our footprint, disruption of commodity exports from Ukraine, or international banking disruption could materially impact the operations and liquidity of Titan Machinery Ukraine.

Supply Chain Disruptions

Equipment availability continues to be challenging as supply chain disruptions throughout 2021 continued throughout 2022, along with increased domestic and global demand for equipment inventory, have caused many manufacturers to be unable to produce enough equipment to meet demand. The timing of the completion of equipment and the resulting delivery to the end customer can shift from quarter to quarter or in some cases, year to year, thereby potentially impacting when we are able to receive the inventory, enter into sales transactions with our customers, and recognize the revenue. These supply chain issues have been further complicated by labor shortages as well as the announcement by CNH Industrial that it will be implementing an equipment allocation methodology to determine production slots for calendar year 2023. All of these factors may limit our ability to match customer demand on certain products in fiscal 2024. We will continue to work with our manufacturers to source future inventory to fulfill as much customer demand as possible.

Macroeconomic and Industry Factors

Our Agriculture and International businesses are primarily driven by the demand for agricultural equipment for use in the production of food, fiber, feed grain and renewable energy. Agriculture industry factors such as changes in agricultural commodity prices and net farm income, have an effect on customer sentiment and their ability to secure financing for equipment purchases. Macroeconomic and industry factors that affect commodity prices and net farm income include changing worldwide demand for agriculture commodities, crop yields and supply disruptions caused by weather patterns and crop diseases, crop stock levels, production costs, and changing U.S. dollar foreign currency exchange rates. Based on U.S. Department of Agriculture ("USDA") publications, the most recent estimate of net farm income for calendar year 2022 increased 15.5% compared to calendar year 2021 due to U.S. crop production and increased commodity exports and partially offset by a reduction in U.S. Federal government's direct farm program payments. Based on its February 2023 report, the USDA projected net farm income for calendar year 2023 to decrease 15.9%, as compared to calendar year 2022, but still remain above historical levels.

Our Construction business is primarily impacted by the demand for construction equipment for use in private and government commercial, residential, and infrastructure construction; demolition; maintenance; energy and forestry operations. Industry reports show that demand for construction equipment in our markets is driven by several factors, one of which is public infrastructure spending, including roads and highways, sewer and water. Any growth in federal allocations to public infrastructure spending over the next few years should positively impact our future results of operations. Likewise, any decline in federal allocations to public infrastructure spending over the next few years should negatively impact our future results of operations.

Seasonality & Weather

The agricultural and construction equipment businesses are highly seasonal, which causes our quarterly results and our available cash flow to fluctuate during the year. Our customers generally purchase and rent equipment in preparation for, or in conjunction with, their busy seasons, which for farmers are the spring planting and fall harvesting seasons; and which for Construction customers is typically the second and third quarters of our fiscal year for much of our Construction footprint. Our parts and service revenues are typically highest during our customers' busy seasons as well, due to the increased use of their equipment during this time, which generates the need for more parts and service work. However, weather conditions impact the timing of our customers' busy times, which may cause greater than expected fluctuations in our quarterly financial results year over year. In addition, the fourth quarter typically is a significant period for equipment sales in the U.S. because of our

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customers’ year-end tax planning considerations, the timing of dealer incentives and the increase in availability of funds from completed harvests and construction projects.

Seasonal weather trends, particularly severe wet or dry conditions, can have a significant impact on regional agricultural and construction market performance by affecting crop production and the ability to undertake construction projects. Weather conditions that adversely affect the agricultural or construction markets decrease the demand for our products and services.

In addition, numerous external factors such as credit markets, commodity prices, and other circumstances may disrupt normal purchasing practices and buyer sentiment, further contributing to the seasonal fluctuations.

Dependence on our Primary Supplier

The majority of our business involves the distribution and servicing of equipment manufactured by CNH Industrial. In fiscal 2023, CNH Industrial supplied approximately 76% of the new equipment sold in our Agriculture segment, 76% of the new equipment sold in our Construction segment, and 60% of the new equipment sold in our International segment, and represented a significant portion of our parts revenue. Thus, we believe the following factors have a significant impact on our operating results:

•CNH Industrial’s product offerings, reputation and market share;

•CNH Industrial’s product prices and incentive and discount programs;

•CNH Industrial's supply of inventory and ability to meet delivery timelines;

•CNH Industrial's implementation of an equipment allocation methodology for use in determining production slots in calendar year 2023;

•CNH Industrial's offering of floorplan payable financing for the purchase of a substantial portion of our inventory; and

•CNH Industrial's offering of financing and leasing used by our customers to purchase CNH Industrial equipment from us.

Credit Market Changes

Changes in credit markets can affect our customers' ability and willingness to make capital expenditures, including purchasing our equipment. Tight credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity markets have the potential to adversely affect our business. Such disruptions in the overall economy and financial markets and the related reduction in consumer confidence in the economy, slow activity in the capital markets, negatively affect access to credit on commercially acceptable terms, and may adversely impact our customers' access to credit and the terms of any such credit. However, if retail interest rates continue to rise, our business may be negatively affected by customers who find financing purchases of our equipment less attractive due to higher borrowing costs.

Our business is also particularly dependent on our access to credit markets to manage inventory and finance acquisitions. We cannot predict what future changes will occur in credit markets or how these changes will impact our business.

Inflation

Inflationary pressures have led to rising inventory and supply costs as well as increased labor costs. To date, in those instances in which we have experienced cost increases, we have been able to increase selling prices to offset much of the increases and expect to continue to do so in the future.

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Significant Items Impacting Our Financial Position and Results of Operations

Heartland Acquisition

On August 1, 2022 we acquired all interests of three entities, Heartland Agriculture, LLC, Heartland Solutions, LLC, and Heartland Leveraged Lender, LLC, (collectively referred to as "Heartland Companies"). The acquired business consisted of 12 CaseIH commercial application agriculture locations, in the states of Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota, Washington, and Wisconsin. Our acquisition of these entities provides the Company the opportunity for synergies due to overlap of our footprints, which allows us to package deals that will include both commercial application equipment as well as other agricultural and construction equipment to commercial customers within our core footprint. Total cash consideration paid for the business was $94.4 million, which was financed through available cash resources and line of credit availability. The locations of the 12 Heartland Companies are included within our Agriculture segment.

Mark's Machinery Acquisition

On April 1, 2022, we acquired certain assets of Mark's Machinery, Inc. The acquired business consisted of two agricultural equipment stores in Wagner and Yankton, South Dakota. Total cash consideration paid for the business was $7.7 million which was financed through available cash resources. In conjunction with the acquisition, we purchased the real estate for $2.5 million which was financed with available cash and long term debt. The two Mark's Machinery locations are included within our Agriculture segment.

Fargo Tractor Divestiture

On March 1, 2022, we divested our consumer products store in Fargo, ND. The sale of this location resulted in a $1.4 dollar gain which is included in fiscal 2023 consolidated operating expenses. The gain on the sale is included in the Construction segment.

Montana and Wyoming Divestiture

On January 24, 2022, we divested four dealership locations in Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming. The sale of these locations resulted in a $5.7 million gain which is included in fiscal 2022 consolidated operating expenses. The gain on the sale is included in the Construction segment.

Jaycox Acquisition

On December 1, 2021, we acquired certain assets of Jaycox Implement ("Jaycox"). The acquired business consisted of three CaseIH agriculture dealership locations in Worthington and Luverne, Minnesota and Lake Park, Iowa. Total cash consideration paid for the business was $28.2 million which was financed through available cash resources. In conjunction with the acquisition, we purchased the real estate for $5.5 million which was financed with available cash and long term debt. The three Jaycox locations are included within our Agriculture segment.

Key Financial Metrics

In addition to tracking our sales and expenses to evaluate our operational performance, we also monitor the following key financial metrics. The results of some of these metrics are discussed further throughout the Management's Discussion and Analysis of Financial Condition and Results of Operations section of this Form 10-K.

Inventory Turnover

Inventory turnover measures the rate at which inventory is sold during the year. We calculate it by dividing cost of sales on equipment for the last twelve months by the average of the month-end balances of our equipment and parts inventories for the same twelve-month period. We believe that inventory turnover is an important management metric in evaluating the efficiency at which we are managing and selling our inventories.

Same-Store Results

Same-store results for any period represent results of operations by stores that were part of our Company for the entire comparable period in the preceding fiscal year. We do not distinguish relocated or newly-expanded stores in this same-store analysis.

Absorption

Absorption is an industry term that refers to the percentage of an equipment dealer's operating expense covered by the combined gross profit from parts, service and rental fleet activity. We calculate absorption by dividing our gross profit from

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sales of parts, service and rental fleet by our operating expenses, less commission expense on equipment sales, plus interest expense on floorplan payables and rental fleet debt. We believe that absorption is an important management metric because during economic down cycles our customers tend to postpone new and used equipment purchases while continuing to run, maintain and repair their existing equipment. Thus, operating at a high absorption rate enables us to operate profitably throughout economic down cycles.

Dollar Utilization

Dollar utilization is a measurement of asset performance and profitability used in the rental industry. We calculate the dollar utilization of our rental fleet equipment by dividing the rental revenue earned on our rental fleet by the average gross carrying value of our rental fleet (comprised of original equipment costs plus additional capitalized costs) for that period. While our rental fleet has variable expenses related to repairs and maintenance, its primary expense for depreciation is fixed. Low dollar utilization of our rental fleet has a negative impact on gross profit margin and gross profit dollars due to the fixed depreciation component. However, high dollar utilization of our rental fleet has a positive impact on gross profit margin and gross profit dollars.

Adjusted EBITDA

EBITDA is a non-GAAP financial measure defined as earnings before finance costs, income taxes, depreciation and amortization and is a metric frequently used to assess and evaluate financial performance. Management uses Adjusted EBITDA as a measure of financial performance, as a supplemental measure to evaluate the Company's overall operating performance and believes it provides a useful metric for comparability between periods and across entities within our industry by excluding differences in capital structure, income taxes, non-cash charges and certain activities that occur outside of the ordinary course of our business. We calculate Adjusted EBITDA as our net income (loss), adjusted for net interest (excluding floorplan interest expense), income taxes, depreciation, amortization, and items included in our non-GAAP reconciliation, for each of the respective periods. Adjusted EBITDA should be evaluated in addition to, and not considered a substitute for, or superior to, any GAAP measure of net income (loss). In addition, other companies may calculate Adjusted EBITDA in a different manner, which may hinder comparability with other companies. Refer to the Non-GAAP Financial Measures section for a reconciliation of Adjusted EBITDA to net income.

Key Financial Statement Components

Revenue

•Equipment: We derive equipment revenue from the sale of new and used agricultural and construction equipment.

•Parts: We derive parts revenue from the sale of parts for brands of equipment that we sell, other makes of equipment, and other types of equipment and related components. Our parts sales provide us with a relatively stable revenue stream that is less sensitive to the economic cycles that affect our equipment sales.

•Service: We derive service revenue from repair and maintenance services to our customers' equipment. Our repair and maintenance services provide a high-margin, relatively stable source of revenue through changing economic cycles.

•Rental and other: We derive other revenue from equipment rentals and ancillary equipment support activities such as equipment transportation, GPS signal subscriptions and reselling financial and insurance products.

Cost of Revenue

•Equipment: Cost of equipment revenue is the lower of the acquired cost or the net realizable value of the specific piece of equipment sold.

•Parts: Cost of parts revenue is the lower of the acquired cost or the market value of the parts sold, based on average costing.

•Service: Cost of service revenue represents costs attributable to services provided for the maintenance and repair of customer-owned equipment and equipment then on-rent by customers.

•Rental and other: Costs of other revenue represent costs associated with equipment rental, such as depreciation, maintenance and repairs, as well as costs associated providing transportation, hauling, parts freight, GPS subscriptions and damage waivers, including, among other items, drivers' wages, truck depreciation, fuel costs, shipping costs and our costs related to damage waiver policies.

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Operating Expenses

Our operating expenses include sales and marketing expenses, sales commissions (which generally are based upon equipment gross profit margins), payroll and related benefit costs, insurance expenses, professional fees, property rental and related costs, property and other taxes, administrative overhead, and depreciation associated with property and equipment (other than rental and trucking equipment).

Floorplan Interest

The cost of financing inventory is an important factor affecting our results of operations. Floorplan payable financing from CNH Industrial Capital, the Bank Syndicate Agreement, DLL Finance and various credit facilities related to our foreign subsidiaries represent the primary sources of financing for equipment inventories. CNH Industrial regularly offers interest-free periods as well as additional incentives and special offers. As of January 31, 2023, 82.4% of our floorplan payable financing was non-interest bearing.

Other Interest Expense

Interest expense represents the interest on our debt instruments, other than floorplan payable financing facilities. This includes long-term debt used to finance the purchase of real estate and vehicles.

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Results of Operations

Comparative financial data for each of our four sources of revenue for fiscal 2023 and 2022 are presented below. The results include the acquisitions made during these periods. The year-to-year comparison included below is not necessarily indicative of future results. Information regarding segment revenue and income (loss) before income taxes is presented for each fiscal year following our discussion of the consolidated results of operations. Additional information regarding our segments is included in Note 21 of our consolidated financial statements.

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The following table sets forth our statements of operations data expressed as a percentage of revenue for the fiscal years indicated.

Fiscal Year Ended January 31, 2023 Compared to Fiscal Year Ended January 31, 2022

Consolidated Results

Revenue

The increase in total revenue for fiscal 2023, as compared to fiscal 2022, was primarily the result of Company-wide same-store sales increase of 22.4% over the prior fiscal year and our acquisitions of Jaycox Implement, Mark's Machinery, and the Heartland Companies, completed in December 2021, April 2022, and August 2022, respectively, which was partially offset by the divestitures in Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming, in January 2022, and Fargo, North Dakota in March 2022. The strong same store sales increase was primarily driven by agriculture equipment sales, which benefited from high demand levels that were supported by higher commodity prices and higher net farm income.

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Gross Profit

Gross profit increased 32.2% or $107.1 million from fiscal 2022 to fiscal 2023, primarily due to higher revenue and gross profit from our equipment and parts business. Gross profit margin increased from 19.4% in fiscal 2022 to 19.9% in fiscal 2023. The increase in overall gross profit margin was primarily due to stronger equipment margins, which were positively impacted by favorable end market conditions.

Our Company-wide absorption rate declined to 82.7% for fiscal 2023 as compared to 84.6% during fiscal 2022. The absorption rate in both years was favorably impacted by gains recognized on divestitures in our Construction segment. There was a gain of $1.4 million recognized on the divestiture of our consumer products store in North Dakota in the fist quarter of fiscal 2023, and a $5.7 million gain recognized on the divestiture of one Wyoming and three Montana stores in the fourth quarter of fiscal 2022. Excluding these divestiture related gains, absorption was flat at 82.2%.

Operating Expenses

Operating expenses for fiscal 2023 increased $60.5 million, as compared to fiscal 2022. The increase in operating expenses was primarily due to variable expenses associated with increased sales as well as acquisitions that have occurred in the last fourteen months. In fiscal 2023, operating expenses as a percentage of revenue decreased to 13.6% from 14.1% in fiscal 2022. The decrease in operating expenses as a percentage of total revenue was due to the increase in total revenue in fiscal 2023 compared to fiscal 2022, which positively affected our ability to leverage our fixed operating costs.

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Impairment Charges

During fiscal 2023, the Company did not recognize any impairment charges. In fiscal 2022, the Company recognized $1.5 million of impairment charges related to certain intangible and long-lived assets, in our International segment.

Other Income (Expense)

The increase in interest and other income (expense) compared to fiscal 2022 is primarily the result of a strengthening U.S. dollar relative to the Euro thus creating foreign currency gains in fiscal 2023. The increase in floorplan interest expense for fiscal 2023, as compared to fiscal 2022, was primarily due to increased interest-bearing borrowings. The increase in other interest expense in fiscal 2023 is the result of an increased amount of long term debt resulting from real estate purchased via acquisition or the buyout of previously leased facilities in fiscal 2022 and 2023.

Provision for Income Taxes

Our effective tax rate increased from 24.0% in fiscal 2022 to 24.7% in fiscal 2023. The effective tax rate for each of the years ended January 31, 2023 and 2022, is subject to variation due to factors such as impact of certain discrete items, mainly the vesting of share-based compensation, the mix of domestic and foreign income and the impact of valuation allowances on certain of our foreign deferred tax assets.

See Note 14 to our consolidated financial statements for further details on our effective tax rate.

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Segment Results

Agriculture

Agriculture segment revenue for fiscal 2023 increased 48.8% or $525.0 million compared to the same period last year. The higher revenue was driven primarily by an increase in same-store sales of 29.3% for fiscal 2023, as compared to fiscal 2022, as well as the acquisitions of Jaycox Implement, Mark's Machinery, and the Heartland Companies in December 2021, April 2022, and August 2022, respectively. The same-store sales increase was driven by increased demand for equipment due to higher commodity prices and higher net farm income.

Agriculture segment income before income taxes for fiscal 2023 improved by $42.2 million or 69.6% compared to fiscal 2022. The improvement in segment results was primarily the result of higher equipment revenue along with stronger gross profit margin on equipment driven by increased demand.

Construction

Construction segment revenue for fiscal 2023 decreased 2.7% or $8.7 million compared to fiscal 2022. However, when accounting for the divestitures of the Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming stores in January 2022, and the North Dakota consumer products store in March 2022, same-store sales increased 25.7%. Higher same-store sales were driven by increased construction activity throughout our footprint.

The Construction segment income before income taxes was $18.6 million for fiscal 2023 compared to income of $15.5 million for the prior year. The improvement in segment results was primarily due to increased construction activity within our footprint and an increase in rental fleet utilization. The dollar utilization of our rental fleet increased from 26.5% in fiscal 2022 to 30.2% in fiscal 2023. The prior year benefited from a $5.7 million gain on the divestitures of the Billings, Great Falls, and Missoula, Montana and Gillette, Wyoming stores in January 2022.

International

International segment revenue for fiscal 2023 decreased 5.9% or $18.9 million compared to fiscal 2022. The decrease in revenue was primarily due to a 10.9% devaluation of the Euro, the functional currency in much of our international footprint, but was partially offset by higher commodity prices which drove demand for equipment sales, in fiscal 2023. Revenue, net of the effect of foreign currency fluctuations, was up 4.2% or $13.3 million compared to fiscal 2022. The segment was also negatively impacted by a 40.5% decrease in revenues from our Ukrainian subsidiary due to the Russia-Ukraine conflict, compared to fiscal 2022.

Our International segment income before income taxes was $20.2 million for fiscal 2023, compared to $12.6 million for fiscal 2022. The higher segment results were primarily the result of improved gross profit margin for our three main revenue streams, equipment, parts, and service. There were no fixed or intangible asset impairment charges recognized in fiscal 2023, while $1.5 million of charges were recognized in fiscal 2022 related to the impairment of certain intangible and long-lived assets of our German subsidiary.

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Shared Resources/Eliminations

We incur centralized expenses/income at our general corporate level, which we refer to as “Shared Resources,” and then allocate most of these net expenses to our segments. Since these allocations are set early in the year, and a portion is planned to be unallocated, unallocated balances may occur and cause a difference in reported shared resource expense. Shared Resource loss before income taxes was $6.3 million for fiscal 2023 compared to $1.8 million for fiscal 2022. Aside from the allocation difference, the lower shared resources results were driven by $1.1 million of acquisition related expenses incurred for the Heartland Companies acquisition.

Non-GAAP Financial Measures

To supplement our net income and diluted earnings per share ("diluted EPS"), both GAAP measures, we present, and our management utilizes, adjusted net income, adjusted diluted EPS, and adjusted EBITDA, all non-GAAP financial measures. Generally, these non-GAAP financial measures include adjustments for items such as impairment charges and foreign currency remeasurement gains/losses in Ukraine. Furthermore, we calculate adjusted EBITDA as our net income (loss), adjusted for net interest (excluding floorplan interest expense), income taxes, depreciation, amortization, and the adjustments included in our non-GAAP reconciliation as described above, for each of the respective periods. We believe that the presentation of adjusted net income, adjusted diluted EPS and adjusted EBITDA is relevant and useful to our management and investors because they each provide a measurement of earnings on activities that we consider to occur in the ordinary course of our business. In addition, our management uses adjusted EBITDA, as a supplemental measure of financial performance, to evaluate the Company's overall operating performance and believes it provides a useful metric for comparability between periods and across entities within our industry by excluding differences in capital structure, income taxes, non-cash charges and certain activities that occur outside of the ordinary course of our business. Adjusted net income, adjusted diluted EPS, and adjusted EBITDA should be evaluated in addition to, and not considered a substitute for, or superior to, the most comparable GAAP financial measure. In addition, other companies may calculate these non-GAAP financial measures in a different manner, which may hinder comparability of our results with those of other companies.

The following tables reconcile net income and diluted EPS, GAAP financial measures, to adjusted net income, adjusted diluted EPS, and adjusted EBITDA, all non-GAAP financial measures.