Titan Machinery Inc. (TITN) Q2 2026 Earnings Call Transcript

Greetings, and welcome to the Titan Machinery Inc. Second Quarter Fiscal 2026 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff Sonnek with ICR. Thank you, sir. You may begin.

Thank you. Welcome to Titan Machinery's Second Quarter Fiscal 2026 Earnings Conference Call. On the call today from the company are Bryan Knutson, President and CEO; and Bo Larsen, CFO. By now, everyone should have access to the earnings release for the second quarter ended July 31, 2025, which is also available on Titan's Investor Relations website at ir.titanmachinery.com. In addition, we're providing a supplemental presentation to accompany today's prepared remarks, along with webcast and replay information, which can also be found on Titan's Investor Relations website within the Events and Presentations section. We would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These forward-looking statements are based on management's current expectations and involve inherent risks and uncertainties, including those identified in the forward-looking statements section of today's earnings release and the company's filings with the SEC, including the Risk Factors section of Titan's most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These risks and uncertainties could cause actual results to differ materially from those projected in any forward-looking statements. Except as may be required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. Please note that during today's call, we may discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly comparing underlying results from period to period. We've included reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures in today's release and supplemental presentation. At the conclusion of our prepared remarks, we'll open the call to take your questions. And with that, I'd now like to introduce the company's President and Chief Executive Officer, Bryan Knutson. Bryan, please go ahead.

Thank you, Jeff, and good morning to everyone on the call. I'll start today by covering our performance for the quarter, followed by an update on our operational initiatives and focus points for the remainder of the year. I'll then discuss the current market environment and its impact on each of our operating segments before turning the call over to Bo for his financial review and comments on our fiscal 2026 modeling assumptions. Our second quarter results reflect the execution of our operational plan in what remains a challenging market environment. Six months into fiscal 2026, I'm pleased with the progress we've made. As we transition into the second half of the year, we're entering the next phase of our inventory reduction initiative with a heightened focus on optimizing our used equipment portfolio to ensure we're well positioned heading into next year. Consistent with our previously communicated expectations, our equipment inventory levels have remained relatively flat through the first half of the year, albeit we experienced a modest increase in inventory during the second quarter. The quarterly increase was largely due to the timing of OEM shipments ahead of deliveries to our end customers in the second half of this fiscal year. Not only do we remain confident that we will achieve our previously communicated inventory reduction target of $100 million for the full year, we are positioned to exceed it with the majority of that progress still expected toward the end of this fiscal year. As we continue down this path, we now expect our equipment margins to remain subdued through the rest of fiscal 2026, which is the primary variable that underpins the narrowed EPS guidance that we've updated today. This disciplined approach is fundamental to our plan of emerging from this cycle stronger and better positioned for fiscal 2027. Although we've been spending a lot of our time with you over the past several quarters talking about the cycle and its influences on inventory, I do not want to lose sight of our long-term effort to enhance the customer experience. Our customer care initiative continues to demonstrate its critical value during this equipment downturn. We focused on how to best leverage our scale and service capacity across our footprint, which is helping us maintain strong customer engagement even as equipment sales face cyclical pressure. Notably, our parts and service businesses together are generating well over half of our gross profit dollars through the first half of the year, while representing about a quarter of our revenue mix, providing valuable stability during the trough in this equipment cycle. Turning to our segments. In our domestic Agriculture segment, performance tracked within our expected range, though farmer sentiment remains very cautious given the low commodity prices our customers are facing. Exactly where net income comes in for the year remains heavily dependent on government support programs as the additional $20 billion to $30 billion in potential aid remains uncertain and will be important in determining the near-term trajectory of whole goods equipment demand. However, we've seen some encouraging developments with timely moisture across much of our footprint, which has improved crop health and yield outlook for the current growing season. Additionally, the reinstatement of 100% bonus depreciation is also a positive as it provides an offset opportunity for those growers who do find themselves in a taxable income position at the end of the year. All of that said, without an additional catalyst, we continue to expect industry volumes for large ag equipment to be at levels slightly lower than the trough of the prior down cycle. However, we remain very engaged with our customers and are poised to capture opportunities that may arise as the year progresses. Our Construction segment experienced weaker demand in the second quarter as customers took a more cautious approach to capital expenditures given the broader economic uncertainty. That said, infrastructure projects continue to provide a base level of demand that supports relative stability in this segment. Our European segment remains a bright spot with Romania continuing to drive strong performance as customers capitalize on EU stimulus programs before the September deadline. Absent this catalyst, the underlying demand would be much weaker, albeit more stable than we are experiencing domestically. Our Australia segment continues to track similarly to our North American Ag business with industry volumes somewhat below prior trough levels. However, the primary reason for our year-over-year decline in the second quarter was driven by the normalization of sprayer deliveries in fiscal 2026 after having caught up on a multiyear backlog of deliveries during fiscal 2025. Positively, we've seen some encouraging developments brought about by rainfall across much of our footprint, which has improved crop health and yield outlook for the current growing season. In closing, we're making solid progress on our inventory optimization initiatives, which will put us in a significantly stronger position as we enter fiscal 2027. I want to express my sincere gratitude to our entire team for their tremendous effort and disciplined execution over the past year, where we reduced inventory by approximately $365 million, which was no easy task. Their ability to maintain exceptional customer service while executing our strategic and operational initiatives continues to be a key differentiator for us, and we remain confident in emerging from this cycle as a stronger company. With that, I will turn the call over to Bo for his financial review.

Thanks, Bryan, and good morning, everyone. Starting with our consolidated results for the fiscal 2026 second quarter. Total revenue was $546.4 million compared to $633.7 million in the prior year period, reflecting a 14% decrease in same-store sales driven by the factors that Bryan discussed earlier. Gross profit for the second quarter was $93.6 million compared to $112.4 million in the prior year period, and gross profit margin was 17.1% as compared to 17.7% in the prior year. These decreases were driven by lower equipment margins, particularly in our domestic Ag segment, resulting from softer retail demand and our continued efforts to manage inventory to targeted levels. Operating expenses were $92.7 million for the second quarter of fiscal 2026 compared to $95.2 million in the prior year period. The year-over-year decrease of 2.6% was led by lower variable expenses associated with the year-over-year decline in revenue as well as our expense reduction efforts. Floorplan and other interest expense was $11.5 million as compared to $13 million in the prior year period, reflecting our continued efforts to reduce interest-bearing inventory over the past year. In the second quarter of fiscal 2026, net loss was $6 million with a loss per diluted share of $0.26, compared to adjusted net income of $4 million or adjusted diluted earnings per share of $0.17 for the same period last year. Now turning to a brief overview of our segment results for the second quarter. Our domestic Agriculture segment realized a same-store sales decrease of 18.7% to $345.8 million. Segment pretax loss was $12.3 million compared to adjusted pretax income of $6.7 million in the second quarter of the prior year, reflecting softer margins due to weak retail demand while continuing our efforts to manage inventory to targeted levels. In our Construction segment, same-store sales decreased 10.2% to $72 million, which was driven by lower equipment sales. Pretax loss was $1.2 million compared to adjusted pretax income of $0.2 million in the second quarter of the prior year. In our Europe segment, same-store sales increased 44% to $98.1 million, which includes a $4.1 million positive foreign currency impact. Net of the effects of these foreign currency fluctuations, revenue increased 38.1%, which was primarily driven by Romania, which was bolstered by EU stimulus programs. Pretax income for the segment increased to $5.1 million compared to pretax loss of $2.3 million in the second quarter of last year. In our Australia segment, same-store sales decreased 50.1% to $30.6 million, which included a 1.4% negative foreign currency impact. As Bryan mentioned, this decrease was driven entirely by the normalization of sprayer deliveries in fiscal 2026. Industry volumes were already at trough-type levels in Australia last year. So in this segment, we are seeing generally flattish sales, excluding this normalization of sprayer deliveries. Pretax loss was $2.1 million compared to pretax income of $1.4 million in the second quarter of last year. Now on to our balance sheet and inventory position. We had cash of $33 million and an adjusted debt to tangible net worth ratio of 1.8 as of July 31, 2025, which is well below our bank covenant of 3.5x. Regarding equipment inventory, as Bryan mentioned, we experienced a modest increase during the second quarter to $954 million, bringing our 6-month inventory levels to essentially flat compared to fiscal 2025 year-end. Our cumulative equipment inventory reduction from peak levels in Q2 of the prior year stands at $365 million. Given the progress we have made on our inventory initiatives and the programs we have in place to continue to drive sales in the back half of the year, we have increased confidence in our ability to exceed the $100 million inventory reduction target we set at the beginning of the fiscal year. I'm pleased with the full team effort we have had on this important initiative and what it should mean in terms of improved inventory profile, increased equipment margins, and lower floorplan interest expense next fiscal year. We are seeing that our proactive approach to optimizing inventory is helping drive equipment sales amid a weak demand backdrop. That is giving us confidence in achieving our inventory reduction targets and is also reflected in our improved revenue outlook, which I'll cover by segment in a minute. However, further progress during this challenging environment requires the continuation of pricing concessions, and we believe this will hold equipment margins at lower levels through the balance of the year. As such, from a margin perspective, our fiscal 2026 assumptions for consolidated full year equipment margins are now approximately 6.6%, down about 100 basis points from our previous expectation. Turning to the domestic Ag segment specifically. Equipment margins for the first half of fiscal 2026 came in at 3.1%, and we now expect full year domestic Ag segment equipment margins to be approximately 3.8%. This implies less of an improvement in the back half of the year than previously expected but reflects our commitment to achieving our inventory optimization goals as we exit the year. Taking a step back, historic domestic Ag segment equipment margins have averaged nearly 10% with a normal range from approximately 8% on the low end to 12% on the high end, depending on where we are at in the cycle with equipment demand and where we and the industry are at in terms of inventory health. Our goal is to work back toward that range as quickly as possible, and we like the progress we are making, which should put us in an improved position heading into next fiscal year. Based on our year-to-date performance, we are refining our segment revenue expectations for the year. We are raising our assumptions for each of the domestic Agriculture, Construction, and Europe segments while keeping Australia consistent. So we are now expecting domestic Agriculture to be down 15% to 20%, Construction down 3% to 8%, and Europe to be up 30% to 40%, while our expectation for Australia remains down 20% to 25%. Consistent with our prior expectations, operating expenses are expected to decrease year-over-year on an absolute basis and with the revised revenue guidance translates to approximately 16% of sales. Floorplan and other interest expense is expected to continue to decline as we make additional progress on inventory reduction and mix optimization, building toward a more meaningful decrease in floorplan interest expense as we progress into fiscal 2027. Factoring in the modified assumptions that I just walked through, we are narrowing our adjusted diluted loss per share guidance to a range of $1.50 to $2. Given the challenging agriculture industry backdrop, we are pleased with the progress we have made at the midway point of the year. We'll stay focused on our initiatives and look forward to providing another update on our progress in November. This concludes our prepared remarks.

Our first question comes from Ben Klieve with Lake Street Capital.

Congratulations on progress here in the quarter. First one for me, Bo, you alluded to the historic equipment margin range in the 8% to 12% range from sub-4% this fiscal year. I'm wondering if you can elaborate a bit on what conditions you think need to exist for that, even the low end of that range to get hit? I mean, absent some kind of meaningful improvement in the grain complex, export markets, any kind of macro condition having any material improvement. What do you think can happen to really drive gross margins up to that range in the foreseeable future?

I will discuss those building blocks shortly. To provide some perspective, looking back over the past decade, particularly with regards to domestic agricultural equipment margins, the only times we've experienced equipment margins below 8% were in fiscal years 2016 and 2017, which represented the core of the previous cycle, as well as the current fiscal year. Aside from those periods, margins had generally remained within the range we previously described. For us to return to that range, we have some key elements that will contribute to our margin recovery. Firstly, mix optimization is crucial. This involves completing our $100 million inventory reduction to address the aging profile and ensure a correct mix. We believe we will exceed this goal by the end of the year, as mentioned earlier. Secondly, pricing discipline is important for both us and the industry; as inventory levels improve, we'll move away from aggressive pricing strategies to a more normalized approach that reflects the healthier inventory situation. Stability in used equipment values is also significant. There has been a considerable drop in used equipment values over the past 18 months. If you compare the values from early calendar 2025 to now, there have been rapid declines over the last fiscal year, but this year has shown more stability. While the current values are lower than ideal, they are more stable compared to the previous fluctuations, which is beneficial for forecasting future values. Geographic optimization is another focus area for domestic agriculture. We operate 92 locations across the Midwest and are committed to redistributing equipment to ensure availability in demand areas without surplus in any particular region. We are making strides in this area. Additionally, we are working with OEM partners on targeted programs for specific categories to enhance the health of the channel. Improving our cost structure will also aid profitability. As we enhance our aging profile and reduce floorplan interest, there will be significant benefits to our profit and loss statement. We have a high degree of confidence regarding our current margins, which are below 4%, and the implied margins for the latter half of the year expected to fall between 4% and 4.5%. I anticipate notable improvements as we move through fiscal 2027. While I won’t provide specific guidance for fiscal 2027, we are optimistic about gradually improving our position, assuming we achieve the initiatives we've outlined. We feel good about the progress in these areas. It’s important to underscore our focus on controlling inventory to operate in a more normalized environment in the upcoming fiscal year.

Ben, this is BJ. I want to emphasize that beyond net farm income, which is our main focus, it's crucial to remember that it derives from yield, price, and some government payments. Farmers prefer not to rely on those payments, and we will see how they turn out for the rest of the year. The crop appears to be quite strong. I urge everyone to continue exploring more uses for our crops and to promote the benefits of ethanol, sustainable aviation fuel, and biodiesel. Our growers have become very efficient, which enhances productivity and illustrates the advantages of growing crops rather than extracting resources from the earth.

I wholly take your point there, BJ, and completely agree. I appreciate the comments from both of you on this. You got a couple of other questions I had. So I'm in good shape for now. We'll leave it there. Congratulations again on a good quarter.

The next question comes from Mig Dobre with Baird.

I mean we're throwing some margin sort of commentary around a little bit. And I just want to make sure that I'm clear here relative to your reported segments, right? So in your equipment segment, did I understand correctly that you expect 6.6%, 6.7% margin for the full year?

Yes, I appreciate the opportunity to clarify. So we are talking about consolidated total equipment margins. So yes, directly with a total global equipment, that's the 6.6%. Separate from that, I drill down on specifically domestic Ag equipment margins, and that's where I said in the first half of the year, it was 3.1% and for the full year, 3.8%. So that domestic Ag 3.8%, is part of what makes up the total global consolidated 6.6%.

All right. All right. Okay. Well, then if I'm sort of looking as to what the back half guide implies relative to what you've done in the first half, margins are not terribly different in your equipment reported segment. So if margins aren't really changing all that much, what exactly is it that's driving the increase in your revenue guidance?

Looking at the first half of the year, revenue has been stronger than we anticipated, and we expect this trend to continue. This is primarily driven by the used equipment sector, which boosts our confidence in surpassing the $100 million target. Essentially, it’s just a continuation of what we observed in the first half.

Right. Because I guess my interpretation would have been just based on how I read your press release that you're using pricing as a tool to accelerate your inventory destocking, which translates into maybe better revenues than you initially forecasted, but that should have a negative effect on margin. And I guess this is where my confusion lies, that I'm not really seeing that embedded in your equipment margin outlook for the back half, unless, of course, you're expecting better margins than what you're currently guided to.

No, no. Breaking it down a bit, the mix is a bit more challenging for you. From an overall equipment margin perspective, we've reduced our expectation by about 100 basis points. Specifically for domestic agriculture, we've actually lowered it even more. However, we anticipate Europe will grow by 30% to 40%, with strong equipment margins and less compression than what we're experiencing domestically. Overall, equipment margins are decreasing by 100 basis points, with U.S. agriculture declining more significantly, somewhat offset by strength in Europe, particularly Romania. We have made some adjustments, and while there is more revenue, we are ending with a similar earnings per share perspective, although we are tightening that range slightly and looking at the positive side of everything.

I see. Okay. That's helpful. when you sort of think about your inventory reduction goals, and you were clear about the fact that you're confident that you'll be able to exceed that $100 million target. I guess I'd be curious by how much do you think you're going to be able to exceed it? Is it just modestly? Is it maybe more meaningful? And then as you think about your fiscal '27, if indeed your inventory is normalized to your target, what's the right way to think about your margin structure? And I guess this goes to the previous question that was asked in terms of the path to margin normalization. If we're done destocking, can we start thinking that your margins are going to be normalized gross margins on equipment?

Yes. Mig, this is Bryan. I'll address the first part and then pass it to Bo for the second part. Regarding how much we expect to exceed the $100 million goal, that's what we are publicly stating. However, Bo and I, along with the team, have set our internal targets significantly higher. There are various factors that will influence our performance for the rest of the year, and how these factors unfold will largely determine our outcomes. For now, I can say that internally, our aspirations are much greater than the publicly stated goal.

Yes. And then from a follow-up on the margin question. Again, what we're trying to do is provide some historical context. And I guess I'll just kind of go back to that, right? What I'm essentially saying is in the 4 years in the last decade plus that we saw equipment margins, including this year, sub 8% were the years where we were doing the significant work on inventory. Even if you look at like in FY '18, which was clearly not a mid-cycle type environment because we had gotten work done in '16 and '17, we had seen that equipment margin recover kind of those normal ranges. So I would expect that we're approaching that normal range, certainly as we work through next year. And again, logically to me, based on what we're seeing and still what we have ahead of us, I would see that it's going to kind of sequentially improve as we work through the year toward that normalized range.

Understood. Last question for me. As we think about calendar year 2026, maybe your fiscal '27, the OEMs are dealing with cost pressures, right, tariffs and such. And I'm curious for model year 2026, what are you seeing from a pricing standpoint from the OEM? And in terms of the orders that you're taking for calendar 2026, are you able to pass through those OEM price increases? Or is this something that you have to accommodate for with either discounts or essentially items that impact your margin as a dealer instead?

Yes, Mig, I understand you were at the Farm Progress Show and spoke with the OEMs. Generally, they are mentioning a 2% to 4% price increase, which aligns with what many of our suppliers are reporting. There are various incentive packages that may be structured to make deals work for the grower, and we are collaborating closely with our suppliers on each deal in a highly targeted manner. As you noted, we are still early in the presale programs for 2026, so it's too soon to assess the results. We will also need to monitor interest rates and commodity prices, as well as the potential large crop yield. The return of bonus depreciation is certainly a positive development, and we are excited about that. Our margins reflect our commitment to inventory reduction and optimization, although this approach could impact our margins and our ability to fully pass costs through. The same applies to the OEMs, and we are working together to take a tailored approach to each deal.

Yes. And maybe just really tangent to that and stating the obvious. With weak commodity prices where we're at today and pressuring farmer profitability, further cost increases are going to be really challenging and ultimately probably lead to some level of demand destruction, right? So what we're trying to do in terms of new deals as we think about presales is maintain discipline in terms of what kind of margin we need to expect so that we can get back towards normalization. And if that means that there's not as much demand for equipment, then that's going to put pressure on the volume that's out there. And that's our stance, and that's kind of our view on things. So we're partnering with the OEMs and clearly going to need to work hard to see what can shape up for the first half of next year.

The next question comes from Ted Jackson with Northland Securities.

Congratulations on the quarter. My first question is about inventories. Can you provide some insight into the mix of inventories between new and used equipment, and within used equipment, could you discuss the mix between newer and older used equipment?

Yes. One thing to note is the relevance of inventory. We have charts, particularly on Page 15 of the earnings presentation, that detail the breakdown of new and used equipment, turnover rates, and both noninterest-bearing and interest-bearing inventory. Notably, the amount of interest-bearing inventory has remained relatively consistent over the past few quarters. I've mentioned before that we believe we've made progress in reducing the total value of aged inventory, which we expect peaked in the third quarter and should now start to decline, leading to lower floorplan interest expenses. Our used equipment inventory decreased by about $50 million for the first half of the year, while new equipment increased by approximately $75 million, reflecting the timing of when equipment was received and some international foreign exchange effects. We've observed a decrease in the total value of used equipment and a steady amount of interest-bearing inventory, which I believe will begin to decline as we move into the next quarter, showing a downward trend in absolute dollar value. Overall, we are seeing the progress we anticipated, and our confidence in achieving our goals in this area is increasing. For those interested, I wanted to highlight these details as represented in the slide in the earnings presentation.

One of the OEMs at the Farm Show mentioned that they are experiencing a tougher market for newer used equipment while seeing more demand for older used equipment. Newer refers to equipment that is 2 to 3 years old, while older is considered to be over 8 years old. They are implementing incentives for their dealer network to encourage customers with older equipment to trade in for newer used options, as this makes it easier for both parties to make the exchange. Is this a trend you've noticed in your own operations? Are you implementing similar strategies? Is this part of your current programs aimed at reducing equipment inventory? That's what I wanted to ask first. I have another question as well, but I'll wait to let you address this one.

Sure, Ted. Yes, absolutely, that's a piece or an ingredient in our recipe that we use all the time as well. We've used that on the last couple of downturns as well. So it's certainly something we're doing. Every time there's a downturn, the late model used is always the biggest problem area. It's always the glut. And so to work that stuff through and work it down is kind of a historical lever that we and our fellow dealers have traditionally pulled. So we've certainly had a focus on that and been having quite a bit of success in doing that.

And then I'll ask one more and then I'll get out of line. Going back into inventories and such is, another comment that came out of those meetings was that there were instances where dealers were actually not willing to do trade-ins because they didn't want to bring the used equipment into their yards and that was leading to an opportunity to pick up market share by this particular OEM's channel being a little more aggressive. And so I guess my question would be sort of on 2 fronts. I mean one front is, is there ever instances where you guys actually don't take a sale because you don't want the used equipment? And then if I think about that from another perspective, if you do take the sale, is there an opportunity for you to pick up market share, if you would, in your regions by taking these deals where dealers from a competing OEM perhaps were not willing to do the trade-ins. So sort of a 2-part question there. And that's my last.

Yes, we've noticed some of that occurring. However, many factors influence a grower's decision to switch brands, along with the support package that comes with it. We encourage our sales team to quote everything and never walk away from a deal because it's all about the numbers. Understanding these numbers is crucial, and every deal can be made to work at some level. However, the trade-in value might not match what the customer prefers, or the trade difference and annual payments may be higher than expected. Our professional back-office team excels in evaluations and monitoring the used market, utilizing predictive analytics alongside current data. It's essential to accurately assess the costs involved in reconditioning the trade to ensure it can be marketed appropriately. The only times deals fall through are when mistakes occur in managing these factors or if anyone loses sight of the numbers. We have taken on some of these deals and seen customers switching brands. It's important to note that growers weigh multiple factors when deciding to make a switch, including the support they expect. Additionally, both our dealers and Deere dealers have been proactively moving late-model used equipment to these customers instead of leaving them untouched, which has created good opportunities in that segment.

So part of that math that he's describing is, of course, factoring in how many months supply you have, right? So that's what goes into it. It's where is the market, where is the market going, but also how many months supply do you have, what kind of terms are you trying to achieve, the higher month supply, the lower that we're going to be able and willing to pay for a trade. You quote the deal and then it either works or it doesn't. And that's been our consistent approach.

The next question comes from Laura Maher with B. Riley.

My question is just with different OEMs having varying exposure to tariffs based on their supply chains, how is this affecting your floor-planning arrangements and allocation strategy?

Well, so when I hear floorplan, I think about floorplan interest expense. And that, I guess, long and short would be that, that hasn't really impacted it, right? Overall, even outside of tariffs, what we're trying to do as we continue to leverage our scale more and more is minimize our stock inventory and drive higher levels of presale. Now that happens to also fit when you're talking about increased costs, whether it's because of tariffs or otherwise. But our objective, I guess, remains the same there. Get lean and mean on stock levels of inventory that in itself helps your terms and lowers your floorplan interest expense, focus on those presales, making sure that we're doing everything we can via how we incentivize our team, but also how we make presales the best deal for customers to drive more and more behavior in that direction so that there's less of that risk that sits on our balance sheet.

The next question comes from Steve Dyer with Craig-Hallum.

This is Matthew Raab on for Steve. Maybe 2 for Bo. What's the line of sight to OEM incentives in the second half? And then I guess with that, any sort of cadence you can give us on Q3 versus Q4 and how that might compare versus last year?

I appreciate the opportunity to discuss this. Regarding incentives related to presale activity for the second half of the year, those details are already available. We are continuing to work collaboratively to finalize deals, and our guidance reflects clarity in this area. In terms of comparing Q3 to Q4, we expect total revenue to remain consistent, but there will be a change in mix. Last year, parts and service in Q4 saw a sequential decline of 30% compared to Q3, and we anticipate a similar trend this year. This means Q3 will likely show greater gross margin and profitability compared to Q4, as our focus in Q4 will shift toward fulfilling presales before year-end, which limits our attention on parts and service. Additionally, another factor to note this year is the situation in Europe, particularly Romania, where certain funding will expire at the end of September. We experienced significant growth in Europe in the second quarter and expect about 100% year-over-year growth in the third quarter. However, heading into the fourth quarter with the return of those funds, we're projecting a 20% year-over-year decline in Europe. These dynamics, while affecting a smaller segment of our overall business, will contribute to different profit outlooks between Q3 and Q4 despite similar total revenue.

Okay. That's great. And then just quick on parts and service, maybe I missed it, but are we still expecting relatively flat revenue there for the full year versus last year?

Yes. Yes, exactly. So parts flattish. The changes that we have implied in the guidance are really all reflective of what we're expecting from an equipment perspective.

The last question comes from Ted Jackson with Northland Securities.

I wanted to ask about the pending farm bill and the types of support for farmers. Can you share what you are hearing will be included? Also, could you give an overview of what seems likely to happen with that as it approaches?

Yes, there's a lot of debate around that right now, Ted. But certainly, the biggest thing that the growers are lobbying for is more permanent support in there. It's been a long time since we've had a new farm bill here. We keep getting the continuation of the old farm bill. And then we've most recently here had put in a lot of elements of it put into the big, beautiful bill, which, hey, there was a lot of positives in there. So we certainly like that. But a permanent farm bill has been close to getting across the finish line here several times now. So that's what we're certainly lobbying for is just to see that done once and for all. And then just something lately that I've been talking about that I mentioned at the beginning of the call on a personal level with growers is really just that price support. And coming more in the form of organically, as I mentioned, just when you look at the stocks-to-use ratios or supply and demand and just continuing to find more uses for crops. There was a recent study that just came out of Nebraska that showed on more recent vehicles, the mileage was almost the same with 1 mile per gallon less with E15 vehicles or usage. And actually, on the slightly older vehicles, it was 1 mile per gallon better. And so the state of Nebraska did a test with 100 of their own vehicles. And so we got to get that word out better. There's so much opportunity here for increased independence and diversity of our resources by leveraging ethanol better and by leveraging soybeans better. And just so many more products out there that we can make with soybeans as just one example. So funding for research in those areas is also a less talked about previously, but it's certainly an area that I can tell you we're pushing for on our end.

Thank you. At this time, I would like to turn the call back over to management for closing comments.

Thank you for your interest in Titan, and we look forward to updating you with our progress on our next call. Have a great day, everyone.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.