Titan Machinery Inc. (TITN) Q3 2022 Earnings Report, Transcript and Summary

00:03 Greetings and welcome to the Titan Machinery Third Quarter twenty twenty two Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. 00:24 I would now like to turn the conference over to your host today Mr. Jeff Sonnek of ICR. Thank you. You may begin.

00:31 Thank you. Good morning, ladies and gentlemen, and welcome to the Titan Machinery’s third quarter fiscal twenty twenty two earnings conference call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; Mark Kalvoda, Chief Financial Officer; and Bryan Knutson, Chief Operating Officer. 00:49 By now everyone should have access to the earnings release for the fiscal third quarter ended October thirty one, twenty twenty one, which went out this morning at approximately six forty five AM Eastern Time. If you’ve not received the release, it is available on the Investor Relations page of Titan's website at ir.titanmachinery.com. This call is being webcast and a replay will be available on the company's website as well. 01:13 In addition, we're providing a presentation to accompany today's prepared remarks. You may access the presentation now by going to Titan's website at ir.titanmachinery.com. The presentation is available directly below the webcast information in the middle of the page. 01:29 You'll see on slide two of the presentation our Safe Harbor statement. We would like to remind everyone that the prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. 01:49 These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties including those identified in the Risk Factors section of Titan's most recently filed Annual Report on Form ten K as updated in subsequently filed quarterly reports on Form ten Q. 02:09 These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as maybe required by applicable law, Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. 02:28 Please note, that during today's call, we'll discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into Titan's ongoing financial performance, particularly comparing underlying results from period-to-period. 02:49 We've included reconciliations of these non-GAAP financial measures to their most comparable direct GAAP financial measures in today's release. The call will last approximately forty five minutes, and at the conclusion of our prepared remarks, we will open the call to take your questions. 03:06 Now, I'd like to introduce the company's Chairman and CEO, Mr. David Meyer. Go ahead, David.

03:13 Thank you, Jeff. Good morning, everyone. Welcome to our third quarter fiscal twenty twenty two earnings conference call. On today's call, I will provide a summary of our results and then Bryan Knutson, our Chief Operating Officer, will give an overview for each of our business segments. Mark Kalvoda, our CFO, will then review financial results for the third quarter of fiscal twenty twenty two and provide an update to our full year modeling assumptions. 03:40 If you turn to slide three, you will see an overview of our third quarter financial results. The ongoing strength of the broader ag sector continues to fuel demand for equipment across our business and drove a twenty six percent increase in our consolidated revenue to four hundred and fifty four million dollars in fiscal third quarter of twenty twenty two. 04:01 The combination of our larger base of revenues, healthy inventory positioned and lean infrastructure will offer powerful operating leverage that drove one hundred and nine percent increase in pre-tax income for the quarter. At the segment level, this operating leverage is especially visible in our agriculture segment, which benefited from better than expected crop yields across our footprint and produced pre-tax margin of seven percent, which is a record quarterly high watermark for the segment. 04:34 Our Construction and International segments are also generating strong gains and profitability each producing another solid quarter and building upon the improvements made fiscal year to date. 04:45 The contribution of across all of our businesses allowed us to drive record third quarter adjusted diluted earnings per share of zero point nine six dollars, which represents an increase of eighty one percent compared to the prior year period. 05:02 While supply chains remain challenged, we are getting factory shipments, as well as leveraging our parts and equipment inventories collaboratively across our network of stores. This has allowed us to take care of our customers during the seasonally critical period, which enable us to continue to deliver strong top line growth. 05:22 We are excited about finishing the fiscal year on a strong note after a successful harvest and construction season and our updated modeling assumptions reflect an expectation that a momentum will continue to the important year-end tax selling season. We look forward to closing the previously announced line Jaycox Case IH three store acquisition in December and remain confident that we will be able to sustain our increased sales momentum and continue achieving heightened levels of profitability that we believe will allow us to deliver record year of earnings per share. 05:55 Now, I will turn the call over to Bryan Knutson.

06:03 Thank you, David. Good morning, and good afternoon, everyone. I will first provide an update on our domestic agriculture segment and then follow with some additional color on our construction and international business segments. On slide four is an overview of our domestic agriculture segment. 06:23 Demand for new and used farm equipment remains strong due to the combination of continued high commodity prices and better than expected crop yields. Further bolstering demand, our Section 179 tax incentives and the yield improvements attributed to the increased productivity farmers are seeing with the precision technology in today's newer equipment. 06:45 Demand continues to outpace OEM production and at this point, most production slots for model year twenty twenty two units are now full. In the face of increased farmer input costs such as crop protection products, fertilizer, seed and fuel, an increasing number of growers are locking in prices for next year's crops. 07:09 We are currently wrapping up harvest and fall soil preparation in the last areas of our footprint and overall the harvest went extremely well with minimal drying costs. Our growers were able to complete timely fall field work and received much needed replenishing fall rains, which further improved next year's spring planting conditions. 07:31 In summary on ag, we are optimistic for a solid Q4 as we are seeing continued strength in the used equipment market and with high demand for new equipment, we expect to continue to sell through existing new inventory and should continue to receive scheduled pre-sell factory shipments. 07:49 In addition, we believe our successful off season machine inspection program will continue to drive parts and service revenues through the upcoming months. Overall, our Ag segment drove outstanding Q3 results, and we are looking forward to an exciting Q4 and a strong finish. 08:09 Turning to slide five, you will see an overview of our domestic construction segment. As we have discussed in previous calls, the operating improvements we've been implementing in our construction equipment stores over the last several years are resulting in significantly improved bottom line results. 08:26 The economic backdrop of increased construction activity, low interest rates, higher oil prices, robust new housing starts and a recently signed infrastructure bill supports strong demand for construction equipment. 08:42 With our upper Midwest footprint, we're also benefiting from the current Ag economy as Farmer/Rancher customers and Ag retailers purchased construction equipment such as excavators, wheel loaders, skid steer loaders, and forklifts for land improvement, feed lot operations, and material handling. 09:03 Similar to our ag segment, we are seeing supply side challenges with tight inventories and long lead times, but are continuing to receive equipment inventory in this high demand market. With the improved economy, stimulus, and infrastructure spend, we expect to see business to stay healthy for the foreseeable future. 09:26 On slide six, we have an overview of our International segment, which represents our business within the countries of Bulgaria, Germany, Romania, and Ukraine. Our European customers are also benefiting from the higher global commodity prices and experienced favorable yields from both the early season grain crops and the fall row crops. 09:48 We continue to manage through COVID, border lockdowns, and supply side issues, but new and used equipment demand is more than offsetting these challenges. We continue to drive operational improvement efforts and initiatives to further increase our parts and service revenues and as we continue to further – the further execution will provide more long term sustainability for our international segment through the cycles. 10:16 And finally, I'd note that we successfully closed on the sale of our Serbia store in Q3, which going forward will afford us increased focus on our production agriculture markets in Ukraine, Bulgaria, Romania, and Germany. 10:30 Before I turn the call over to Mark, I want to thank all our employees both domestically and abroad for your continued efforts and tremendous contributions to the first three quarters of our fiscal year. 10:42 It is great to see the bottom line contribution coming from all three of our business segments, and I'm confident in continued success as we close out the year. 10:52 With that, I will turn the call over to Mark to review our financial results in more detail.

10:59 Thanks, Bryan. Turning to slide seven. Total revenue increased twenty five point eight percent to four fifty four million dollars for the third quarter of fiscal twenty twenty two. Our equipment business increased thirty six point nine percent versus prior year, which was driven by strength in our agriculture and international businesses. 11:25 Our parts and service business generated consistent growth increasing four point nine percent and four point three percent respectively compared to the prior year period. We didn't see much as much growth this quarter, due to a tougher comp from the prior year. We also saw less parts in service activity in our Western North Dakota and South Dakota ag stores as these locations were the hardest hit by drought conditions. 11:55 Rental and other revenue decreased seven point one percent versus prior year due to a decrease in inventory rentals, a smaller rental fleet in our current construction footprint and a reduced fleet due to the January twenty twenty one divestiture of our construction stores in Arizona. 12:16 Helping to offset these factors with a higher dollar utilization of our construction segment rental fleet, which improved nicely to thirty one point four percent for the current quarter compared to twenty five point seven percent in the same period last year. The improved utilization helped increase margins in this revenue category. 12:38 On Slide eight, our gross profit for the quarter increased twenty seven point five percent to ninety two million dollars. Our gross profit margin increased by thirty basis points, primarily due to stronger equipment margins, but also due to improved margins across all categories of revenue. 12:58 Equipment margins were supported by good end market conditions and healthy inventories. The higher margins were partially offset by a shift in sales mix toward equipment revenue this year versus higher margin parts and service revenue as compared to the third quarter of the prior period. 13:19 Operating expenses increased eight point eight million dollars versus the prior year to sixty two point nine million dollars for the third quarter of fiscal twenty twenty two. This increase was more than offset by revenue growth and led to one hundred and ten basis points of operating expense leverage compared to the prior year. 13:40 Reducing our operating expenses to thirteen point nine percent as a percent of revenue compared to fifteen percent in the prior year period. Although expenses are trending well as a percentage of revenue, we are realizing inflationary cost pressures in areas like fuel, wages, and employee benefits and expect those pressures to intensify in future quarters. 14:06 Floorplan and other interest expense decreased twenty one point six percent to one point three million dollars in the third quarter of fiscal twenty twenty two, compared to the same quarter last year due to lower floorplan borrowings. 14:21 In the third quarter of fiscal twenty twenty two, our adjusted net income increased eighty point eight percent to twenty one point seven million dollars, which accounts for two point six million dollars of impairment costs net of tax in the prior year period. 14:38 Our adjusted earnings per diluted share for the quarter was a record zero point nine six dollars and compares to last year's zero point five three dollars performance. And adjusted EBITDA increased forty two point one percent to thirty five point three million dollars compared to the third quarter of last year. 14:58 You can find a reconciliation of adjusted net income, adjusted income per diluted share and adjusted EBITDA to their most comparable GAAP amounts in the appendix to the slide presentation. 15:11 On Slide nine, you will see an overview of our segment results to the third quarter of fiscal year twenty twenty two. Agriculture segment sales increased twenty seven point six percent to two hundred eighty one point five million dollars helping to drive a significant increase in segment adjusted pre-tax income of forty two percent to nineteen point six million dollars. 15:37 This equates to a pre-tax income margin in the third quarter of seven percent and demonstrates the extensive improvements we've made to our operations over the course of this last cycle. 15:50 Turning to our Construction segment. Revenue increased zero point nine percent to seventy nine point seven million dollars compared to the prior year period. Despite the January divestiture of two stores in Arizona, on a same store basis, excluding those stores, revenues were up eleven point one percent for the quarter. 16:14 We are pleased with the continued improvement in this segment's adjusted pre-tax income, which improved nearly one hundred and fifty percent to three point six million dollars, compared to one point four million dollars in the prior year period. 16:30 Our International segment also benefited from the improved agriculture market conditions and generated revenue growth of fifty one point five percent to ninety two point seven million dollars. The combination of strong equipment sales and margins coupled with solid growth in our higher margin parts and service businesses yielded a five point nine million dollar improvement in adjusted pre-tax income to a positive six point one million dollars, which compares to two hundred thousand dollars in the prior year period. 17:07 Turning to slide ten, you see our first nine month results. Total revenue increased twenty three point six percent, compared to the same period last year. Year to date equipment sales increased thirty two point seven percent. Parts increased seven percent. Service revenue increased six point one percent, and rental and other revenue decreased sixteen point three percent. 17:33 The nine month dollar utilization of our dedicated rental fleet improved to twenty five point eight percent compared to twenty two point two percent in the same period last year. 17:46 Turning to slide eleven, our gross profit for the first nine months was two hundred and thirty eight point five million dollars, a twenty three point one percent increase, compared to the same period last year. 17:59 Our gross profit margin was relatively flat with a ten basis point decrease versus prior year at nineteen point eight percent for the first nine months of fiscal twenty twenty two. The impact that revenue mix is having on overall gross profit margins is largely being offset by higher equipment margins. 18:21 Our operating expenses increased by sixteen point two million dollars or ten point one percent for the first nine months of fiscal twenty twenty two to one hundred and seventy six point five million dollars. This increase was more than offset by revenue growth and led to one hundred and seventy basis points of operating expense leverage, compared to the prior year, reducing our operating expenses as a percent of revenue to fourteen point seven percent. 18:53 Impairment expenses decreased from two point eight million dollars in the prior year to one point five million dollars in the current nine month period. Floorplan and other interest expense decreased twenty four point two percent to four point three million dollars in the first nine months, primarily due to overall lower floorplan borrowings. 19:16 Our adjusted diluted earnings per share doubled to one point nine eight dollars for the first nine months of fiscal twenty twenty two compared to zero point nine seven dollars in the prior year period. 19:31 Our nine month adjusted EBITDA increased fifty two point one percent to seventy eight point six million dollars, compared to fifty one point seven million dollars in the prior year. 19:44 On slide twelve, we provide our segment overview for the nine months period. Overall, our adjusted pre-tax income was fifty nine point three million dollars for the first nine months of fiscal twenty twenty two compared to thirty one point three million dollars in the same period last year. This eighty nine point eight percent increase was generated as a result of strong improvement in performance across all three segments of our business. 20:14 On slide thirteen, we provide an overview of our balance sheet highlights at the end of the third quarter of fiscal twenty twenty two. We had cash of ninety one million dollars as of October thirty one, twenty twenty one. 20:28 Our equipment inventory at the end of the third quarter was three hundred and twenty three million dollars, a decrease of fifteen million dollars from January thirty one, twenty twenty one, reflecting the net effect of a forty four million dollar decrease in used equipment, partially offset by a twenty nine million dollar increase in new equipment. 20:52 Strong sales and lower inventory levels continue to drive equipment inventory turns, which increased to three point one versus one point six in the prior year. I will provide a little more color on our inventory on the next slide. 21:09 Our rental fleet assets at the end of the third quarter increased slightly to eighty two million dollars, compared to seventy eight million dollars at the end of fiscal twenty twenty one. We still anticipate our fleet size to be around eighty million dollars by the end of fiscal twenty twenty two. 21:30 As of October thirty one, twenty twenty one, we had one hundred and seventy five million dollars of outstanding floorplan payables on seven hundred and fifty three million dollars of total floorplan lines of credit, which leaves us with considerable capacity in our credit lines to handle our equipment financing needs. 21:50 Our adjusted debt-to-tangible net worth ratio was zero point seven at the end of the third quarter, compared to one point zero at the end of the third quarter of fiscal twenty twenty one and is well below three point five, which is the leverage covenant requirement of our two largest floorplan facilities outside of our bank syndicate credit agreement. 22:16 Turning to Slide fourteen. The amount of new and used equipment inventories are reflected in the size of the blue and red bars on this slide respectively. As we've discussed during the past couple of quarters, our inventory turns have accelerated due to the combination of increased customer demand and a tighter industry supply of equipment. 22:40 At the end of the third quarter, we drove an inventory turn of three point one times and anticipate this to continue to move higher through the end of the fiscal twenty twenty two given current inventory levels and end market conditions. 22:57 We believe our equipment orders, delivery schedule, level of pre-sales, and equipment inventory have us positioned to meet our current revenue modeling assumptions for fiscal year twenty twenty two. The overall quality of our inventory remains very healthy. Our inventory under non-interest bearing terms, which can be seen by a grey bar on the slide ended the third quarter at forty five point five percent. 23:28 Slide fifteen shows our updated fiscal twenty twenty two annual modeling assumptions. Ongoing top line strength in our agriculture and international segments coupled with the anticipated addition of the Jaycox three-store acquisition in early December causes us to raise our revenue growth modeling assumptions for these two segments. 23:53 This revenue growth combined with stronger margin performance across all three segments also translated to a raised in expectation for our diluted earnings per share range. For the agriculture segment, we are increasing our revenue growth assumption to up twenty three percent to twenty eight percent from up eighteen percent to twenty three percent. 24:17 The fiscal twenty twenty two growth range includes the full-year revenue contribution from our HorizonWest acquisition that closed in May twenty twenty, as well as anticipated revenue from the Jaycox acquisition. 24:33 For the Construction segment, we are maintaining a revenue assumption of up two percent to seven percent. As a reminder, this assumption includes the divestment of our two construction equipment stores in Arizona at the end of fiscal twenty twenty one, which accounted for approximately twenty seven million dollars of combined revenue. 24:54 Excluding these revenues from the prior year base, our modeling assumption equates to a same store sales range of the approximately up ten percent to fifteen percent. For the International segment, we are increasing our revenue assumption to up thirty five percent to forty percent from up twenty seven percent to thirty two percent. 25:17 The strong year to date performance combined with the good crop conditions in our international footprint and a strong global ag commodity prices led to this significant increase in expectations. As Bryan indicated earlier, we sold our single store Serbian business during the third quarter. The small impact of this divestiture is also reflected in this revised revenue range. 25:45 From an earnings per share perspective, we are increasing our diluted earnings per share assumption by zero point four zero dollars at the midpoint to a new range of two point four zero dollars to two point six zero dollars for fiscal twenty twenty two. As a reminder, this range includes all ERP implementation expenses. 26:07 This concludes our prepared remarks. Operator, we are now ready for the question and answer session of our call.

26:15 Thank you. [Operator Instructions] Our first question comes from Mig Dobre with Baird. Please proceed.

26:48 Thank you for the question and good morning, everyone.

26:51 Good morning, Mig.

26:55 I guess my first question, you commented earlier on your North American Ag business that, at this point, the production slots for calendar twenty two are full, I'm looking to maybe get a little more perspective on that. Since, apparently, you have good visibility here, how are those production slots looking relative to say calendar twenty one? I mean, what sort of volume growth for this pre-sold equipment do you have visibility into at this point?

27:35 Yeah, Mig, this is Bryan. And just to clarify, it was for model year twenty two, so would cover the first few quarters based – of the year there. So, yes, CNH has come out earlier in respect to the demand that's out there. With the programs, order boards filled up a little earlier than last year as well, but – and that's especially as I touched upon the prepared comments in regards to the cash crop equipment. 28:13 And so, generally, there are some product categories that are still open for model year twenty two production, but for the most part, we're into the, starting to sell into model year twenty three here in certain cash crop categories.

28:35 Right. But my question still stands in terms of where we should be thinking in terms of additional volume of incremental volume in twenty twenty two relative to twenty twenty one? Because I mean, look, you're – I understand that you're not providing guidance for your fiscal twenty twenty three, but there's one quarter left and I think the big question all of us sort of have is, okay, you've had a really strong twenty two, what could next year look like? And at least for the portion of the business where you do have visibility because the pre-sold equipment, can you kind of help us out a little bit to understand the, kind of growth that we might be looking at next year?

29:30 Mig, I go back to our guidance and maybe a little sensitive here with the timing to for forward looking, but, yes, we've – the supply chain as you know is going to be a [crap shoot] [ph] year, we feel good about our allocation and in our orders at this point. We've got a lot of – our orders in early. 30:02 Our sales people have been out there doing pre-sells with customers. So, hesitant to talk to the exact percentages as far as next year at this point, we could share some additional color next quarter on that.

30:25 Okay. Then my final question is on inventory turns. Really strong performance this year and maybe Mark, can you kind of give us a sense for how you see this metric evolve on a go forward basis, is there additional efficiency that you think you can get out of this metric? And how does the various investments, I think that you've made over time on the technology backend, not just the ERP, but inventory management tools. How has that kind of played out into driving this metric higher? Basically, I'm trying to understand how much of this in your view is driven by the market itself in the tightness of supply, relative to the structural improvement that you guys have been making to the business? Thank you.

31:21 Yeah. Mig, I think, yes, so first of all, at three point one right now, given the tightness of supply that we talked about and a lot of these are pre-sold at this point, so when they're coming in, they're going out right away. I certainly see this metric increasing by the end of the year, could be I would say easily around that three point five is where we could see it maybe even a little bit higher than that. 31:49 Definitely driven in a large part by what we're talking about here as far as demand and supply chain, but yes, we've made a lot of good inventory management improvements over the years. And I think that is helping our margins today, what we're achieving in equipment margins. So, even coming into this stronger cycle, we had very healthy inventory conditions with aging of inventory being down and fresh inventory out there. 32:24 As far as driving more, I think it's running pretty efficient at this point that call it a run rate of, kind of mid three, three point five. So, we don't have a lot of interest bearing inventory out there. Our margins are very strong. It might be some smaller level of improvement on each of those, but I think at this point with where we're at in the cycle and how we're running in this area, we’re pretty darn efficient at this point.

32:57 I would agree with that. Thanks for taking the questions.

33:01 Thanks Mig.

33:01 Our next question comes from Larry De Maria with William Blair. Please proceed.

33:07 Hi thanks. Good morning everybody. Just following on the last one, last question about pre-sell into next year, can you talk about what's the average price increase on new equipment for next year, if the year is obviously where you pre-sold? A lot of it we should know that. And does any of that price drop down to you? Or do you have to obviously get your price spread on the used equipment? That's the first question.

33:38 Good morning, Larry. This is Bryan. Thank you for the question. Yes. So, we've had price increases here with the model year twenty ones and now again into the model year twenty twos, pretty in line with the competition in terms of the price increases. And we have been passing that on to the customer as well. In fact, I think that reflects thus far in our margins and anticipate that's what you'll continue to see us do.

34:21 Okay. So, off the equal, if you sold the same amount of equipment, your sales go up probably five to ten and then your capturing some incremental margin on the new equipment, as well as on the used, is that fair to say?

34:35 Yes. Mix, will play into there a little bit as well, but generally yes.

34:41 Okay. And then secondly, as we think about a lot of actually being pre-sold, moving into twenty twenty three calendar, at one point is this too long and we risk cancellations, and I'm kind of curious about what protection you have? And secondly, how are we handling trade-ins because a lot of what you feel obviously comes to trade-in and that's where you guys make a lot of money. Are we doing a deal and that's the deal done or is there any protection for you or the customer on the value of a trade-in that might not happen for another year from today?

35:16 Yes. So, that's one of the benefits for the customers at pre-sells, they can lock in their production slot. They can lock in their pricing and from our end lock in the deal with us. So, we spend a lot of time researching forecasting, used equipment values and when we do those pre-sell deals, player anticipated value on the trade-in at the time that we'll receive it. 35:48 And so, there's generally a little risk there. Sometimes the markets come up a little bit, sometimes down a little bit on the trade-ins, but again we anticipate the used values. And again, those are some of the benefits for the customers as well with the pre-sell in their end.

36:11 Okay. So, the deal is done at the time and if – the no modification from then whether used pricing was up or down? And then, I think that's what you said. And then last question, did everybody get what they needed through harvest or is there any major issues or were you able to secure more or less all the equipment you needed at that time and it was ordered or was there any slippage and I’ll move on? Thanks.

36:36 Yes. It went pretty well Larry. Overall, there was a lot of headaches along the way. I want to thank our team. Tremendous effort from everyone on our team, as well as our manufacturers we work with. It was incredible amount of work behind the scenes right now and a lot of extra busy work, if you will, that we don't traditionally have in order to find the missing component or get things shipped and get them here, but just in time delivery, right in this day and age. So, everything went pretty well from that regard, but again it takes some doing on everybody's part.

37:18 Okay. Thank you.

37:22 [Operator Instructions] Our next question comes from Rick Nelson with Stephens. Please proceed.

37:31 Thanks. Good morning, guys.

37:34 Good morning, Rick.

37:35 [Indiscernible] to follow-up on the equipment margins very strong better than expected that, is that new, is it used, is it both? And how is it sustainable do you take those margin are?

37:56 Yes. Rick, Mark here. They have been better than even what we expected than what we kind of modeled, did come in strong again for the quarter. We're seeing it still mostly on the used side, but a big thing that we're experiencing is very little if any kind of write downs that we have on a monthly basis when we do our lower of cost or market adjustments. And that's primarily on the used side once in a while, on aged new we'd have that as well. But that is historically very low today. We're at very low levels of that. So, that's certainly helping. 38:37 Certainly, the other thing and I've mentioned this before, but with the strong same store sale growth or overall sales growth in international. They are predominantly new equipment and that higher margins over there. So that mix with International is helping us, as well as helped in the quarter quite a bit. 38:58 So from – as far as sustaining this for the next quarter, I don't see it. I’ve talked about it earlier. That fourth quarter, we generally have some of those higher ticket items. We also have a greater mix of domestic ag and the other segments, particularly less in international. So, if all that holds true and everything else kind of remains the same, I'd expect it to be, call it lower elevens instead of the, I think we're at like twelve point one percent year to date here. So, I do expect it to come down and that's what's kind of baked into the modeling assumptions that I provided.

39:46 Okay. So, like to get an update on the acquisition environment, [trade-tax] [ph] implement, that's going to close here shortly. If you could speak to that and some color around the multiples that you're paying these days?

40:08 Yes we're pretty excited because Dave – on the Jaycox it is [contiguous] [ph] to our Marshall and Pipestone, and Minnesota locations and those location will [indiscernible] Minnesota and Worthington, Minnesota then in one location and like Park Iowa just also the border. 40:28 So, really good farmland. Predominantly [indiscernible] is a little bit, the diversified livestock also sort of really fits into not only our contiguous to our footprint, but similar products, really quality workforce, really strong aftermarket parts and service support, you know good cultures. 40:48 So yes, it's kind of really good – we're really excited about this one. And I think when we come with our year-end numbers and stuff, you will see a little bit more of the detail in the economics. I could say, we close in December. So, we don't want to get ahead of ourselves here. 41:09 At the same time, modelled really well, It is going to be positive [indiscernible] after to [get going] [ph], it’s well managed on good group of employees. So, we're going to say, we're pretty excited about it.

41:26 Is there more in the pipeline at present and your appetite, I guess to do more acquisitions in the current?

41:39 Yeah, we've got a – you know balance sheet is really strong. We’re not even in the, some of our bank syndicate and also right now we wanted to deploy some capital on more acquisitions and I'd say the pipeline, the amount interest right now is as strong as been a number of years right now. 42:00 So, more of sellers, we're in communications and we just want to bring – probably get some more deals done and bring them on a timely basis and to be a little bit of space between them, but we're pretty excited about what we think we're going to be able to do in the near term on the acquisition front.

42:18 Great. The used equipment market, do you think the tight supply on new is driving people into the used to market? If you can comment on pricing, and are you seeing any pushback from your customers to the higher pricing on used?

42:45 Hey, Rick, this is Bryan. Yes, the short supply definitely is also driving the used equipment sales as well. Bigger contributors would be the late model use the growers can still upgrade and get a lot of benefits to the newer technology. Also the fleet is really aged out there. As you know, it's about the oldest that’s been in a couple of decades. 43:11 So, growers can also upgrade quite a bit even on a used piece of equipment. And then also the section one hundred and seventy nine and the tax benefits also pertain to the used. So, we are seeing nice used equipment pricing, it's carried up similar in-line percentage basis with the new equipment. 43:36 And then we're passing that through to the customers and the net farm income is supporting it and the used is provide some nice upgrades for customers.

43:52 Okay. That's great. Thanks for the help. And good luck as we push forward.

43:59 Thanks, Rick.

44:02 Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Mr. David Meyer for closing remarks.

44:10 Thank you everyone for your time this morning and your interest in Titan Machinery, and look forward to updating you on our progress on our next call. Have a good day.

44:21 This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.