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Titan Machinery Inc (NASDAQ:TITN)
Q1 2021 Earnings Call
May 28, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the Titan Machinery First Quarter Fiscal 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

I will now turn the conference over to John Mills with ICR. Thank you. You may begin.

John F. Mills -- Managing Partner

Great. Thank you. Good morning, ladies and gentlemen, and welcome to the Titan Machinery first quarter fiscal 2021 earnings conference call. On the call today from the Company are David Meyer, Chairman and Chief Executive Officer; and Mark Kalvoda, Chief Financial Officer.

By now, everyone should have access to the earnings release for the fiscal first quarter ended April 30th, 2020, which went out this morning at approximately 06:45 a.m. Eastern Time. If you have not received the release, it is available on the Investor Relations page of Titan's website at ir.titanmachinery.com. This call is being webcast, and a replay will be available on the Company's website as well. In addition, we're providing a presentation to accompany today's prepared remarks. You may access the presentation now by going to Titan's website at ir.titanmachinery.com. The presentation is available directly below the webcast information in the middle of the page.

You'll see on Slide 2 of the presentation our safe harbor statement. We would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These forward-looking statements are based upon current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan's most recently filed Annual Report on Form 10-K. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as 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'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 when comparing underlying results from period-to-period. We've included a reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measure in today's release.

The call will last approximately 45 minutes. At the conclusion of our prepared remarks, we will open the call to take your questions.

Now, I'd like to introduce the Company's Chairman and CEO, Mr. David Meyer. Go ahead, David.

David Meyer -- Chairman and Chief Executive Officer

Thank you, John. Good morning, everyone. Welcome to our first quarter fiscal 2021 earnings conference call. On today's call, I will provide a summary of our results and then an overview for each of our business segments. Mark will then review financial results for the first quarter of fiscal 2021.

If you turn to Slide 3, you will see an overview of our first quarter financial results. Our first quarter revenue was $310 million, which is a $32 million improvement over the prior-year period. Adjusted pre-tax income increased $4.2 million to $4.9 million, resulting in adjusted earnings per diluted share of $0.15.

Before my segment overview, I want to address a few high-level comments related to COVID-19. As I shared on our Q4 earnings call in March, we took the early COVID-19 guidance, potential risks, and most important, the safety of our employees and customers very seriously, have a very active employee and customer messaging, education, and putting the CDC recommended safety procedures in place. Fortunately, our employees stepped up, stayed healthy, and we were able to support our customers through the important and busy spring planting and construction season. As a result, we're able to deliver on a solid quarter, especially with our domestic ag equipment business.

We're in a critical and essential industry as we support our farmers, ranchers, and contractors, who build and feed the world. With that said, we have kept our employees fully employed, closed on our new bank syndicate credit facility, and have placed our Company in an excellent liquidity and financial position.

I will now provide additional detail for our three operating segments consisting of our domestic agriculture and construction segments, and our international segment. On Slide 4 is an overview of our domestic agriculture segment. With the late 2019 harvest, standing corn going into winter and cautious farmer sentiment due to the uncertainties with unharvested crops and commodity prices, we believe some of the new and used Q4 equipment business that would have taken place in a normal weather year moved into our fiscal 2021 first quarter. This also supported our parts and service business, as not only was corn being combined in February and March, but much of the equipment faced tough duty cycle through the late and wet harvest, requiring service and maintenance prior to this year's farming season.

In addition, the fleets continue to age, requiring additional progressive service and repairs. Mark will get into more detail on the double-digit increase of our domestic ag parts and service revenues, as this fixed cost absorption not only provides insulation in these down cycles, but is key to our long-term strategy.

As noted on the slide, crops in our southern ag footprint are in really good shape because of an ideal spring planting and growing conditions. On the northern end of our footprint, there are still some of last year's corn still is standing in North Dakota, along with wet fields causing delayed planting, or in some cases, farmers elect to receive a preventable plant payment as part of the multi parallel crop insurance program and situations in which land is too wet to farm this spring.

The biggest concern weighing on our farmer sentiment is the depressed commodity prices. According to the May 12th USDA WASDE Report, both corn and soybean acres and yields are forecast to increase, putting downward pressure on season average prices. WASDE has forecasted a year-over-year decrease of $0.40 on corn and $0.30 on soybeans. These are reductions from already low prices.

Corn prices could be additionally challenged by the strong dollar and the impact from significantly lower ethanol production. Approximately 40% of the U.S. corn production goes into ethanol production. With the closing of schools and restaurants, the price of milk is down. Livestock producers have concerns with the lower prices due to the COVID-19 disruptions with slaughterhouses and meat demand channels.

On a positive note, recently announced was a $16 billion USDA Coronavirus Food Assistance Program, CFAP, providing direct payments to farmers and ranchers for drop in prices of commodities of livestock due to coronavirus. In addition, farmers are also experiencing and benefiting from lower fuel and propane costs, a low-interest rate environment and participation in the PPP program of the CARES Act. While the impact on commodity prices from Phase 1 of the U.S.-China trade agreement may not be realized until calendar year 2020 harvest, the signing of the USMCA trade agreement is viewed as a positive for our customers.

Replacement demand and precision technology are creating demand for new and late-model equipment, as we see the continued trend of improved yields and data-driven solutions. We closed on the acquisition of the HorizonWest three-store CaseIH complex in the beginning of May, and we believe we will have additional domestic ag acquisition opportunities as the year progresses.

Turning to Slide 5, you'll see an overview of our domestic construction segment. With a strong economy in February, the first month of our quarter, our construction equipment business had a solid start, only be tempered by the economic impact of COVID-19 and extreme decline in oil prices. Even though we are in a central industry and our contractor customers are experiencing a lower interest rate environment, there have been some disruptions from COVID-19 business closings and state shutdowns. We continue to experience some level of construction activity as we stay focused on the aftermarket parts and service business along with rental. We believe that our recent operational improvements position us well to be profitable in the construction equipment business when the industry returns to normal.

On Slide 6, we have an overview of our international segment, including our markets within the countries of Bulgaria, Germany, Romania, Serbia and Ukraine. Similar to our experience with the CE segment, our international segment started the year very strong with some pullback, as the countries we do business in reacted to the COVID-19 pandemic.

While our stores in Europe were deemed essential, business has been impacted by border shutdowns, timing of equipment shipments and in-country regulations. Farmers continue to plant their crops, creating demand for parts and service. There are pockets of very dry conditions in the Balkans, Ukraine and Black Sea regions. And there are reports of winter wheat and rye crops being destroyed or bailed for feed in Romania due to the excess heat and lack of moisture.

We have the fundamentals in place to be successful and profitable in these developing countries. We will continue to focus on the parts and service business and manage our new and used equipment inventories as we support our end-user customers through the challenges with dry weather and depressed commodity prices.

Before I turn the call over to Mark, I want to thank all our employees for their efforts in staying safe and supporting our customers during this very challenging COVID-19 crisis, and at the same time, producing some excellent financial results. I wish all our employees, customers and suppliers, along with their families, all the best as we come out the backside of the COVID-19 pandemic.

Now, I'll turn the call over to Mark to review our financial results in more detail.

Mark Kalvoda -- Chief Financial Officer and Treasurer

Thanks, David. Turning to Slide 7. We generated total revenue of $310.2 million for the fiscal 2021 first quarter, which was an increase of 11.5% compared to last year. Our parts and service business continued to generate solid results in the first quarter, increasing 9% and 12.1%, respectively. Agriculture segment led the way with another quarter of double-digit growth compared to the prior-year quarter. Our focus in this area continues to be complemented by an aging customer fleet and the addition of the Northwood location also added to the year-over-year results. International parts and service also performed well, but was offset by the softness we are seeing in our construction segment, as a result of the pandemic.

However, the upside for the quarter was largely driven by our equipment business, which increased 12.7% versus prior year. Equipment growth was driven by our agriculture segment, where we believed delayed fourth quarter sales were realized in the first quarter as farmers were late harvesting last year's crop. In addition, we aggressively moved some used agricultural equipment during the quarter.

Rental and other revenue was essentially flat versus prior year. The dollar utilization of our construction segment rental fleet declined 160 basis points to 18.9% for the current quarter, compared to 20.5% in the same period last year. The lower utilization was the result of the weaker end-market conditions in oil and construction that David spoke to earlier.

On Slide 8, our gross profit for the quarter increased 8.4% to $58.4 million, due to the increased sales. The decrease in gross profit margin was partially due to revenue mix in two ways; first, equipment revenues made up a larger portion of overall revenues relative to the higher margin parts and service business; and second, our total equipment sales mix was more weighted to agriculture, which generally experiences lower equipment margins than equipment sold in our construction and international segments. Finally, our ag used equipment margins also decreased over the prior year, as we accelerated efforts to sell this inventory. Our operating expenses were nearly flat versus prior year, increasing by $500,000 to $53.1 million for the first quarter of fiscal 2021.

Our operating expenses as a percentage of revenue decreased from 18.9% in the first quarter of last year to 17.1% in the first quarter of fiscal 2021. Despite the additional year-over-year costs associated with our new Northwood store, expense growth was limited due to specific expense control efforts, such as overall salary and overtime reductions, as well as COVID impacted expense areas, such as fuel and travel expenses. This expense control combined with higher revenues resulted in much improved operating expense leverage. Floorplan and other interest expense decreased 15.9% to $2.1 million in the first quarter of fiscal 2021 compared to $2.5 million in the same quarter last year. The decrease was due to lower interest expense resulting from the May 2019 retirement of the remaining balance of the Company's convertible notes.

In the first quarter of fiscal 2021, we realized a $2.9 million increase in our adjusted net income to $3.4 million. This adjusted figure for first quarter fiscal 2021 excludes $1.1 million of adjustments, net of taxes related to ERP transition costs, impairment charges and Ukraine remeasurement costs resulting from the recent devaluation of this currency to the U.S. dollar. This compares to the prior year, where we excluded $900,000 of similar adjustments net of taxes.

Our adjusted earnings per diluted share for the quarter was $0.15 compared to $0.02 in the first quarter of last year. For the first quarter of fiscal 2021, adjusted EBITDA increased 76.1% to $11.1 million, compared to $6.3 million in the first quarter of last year. You can find a reconciliation of adjusted net income, adjusted income per diluted share, and adjusted EBITDA to their most comparable GAAP amounts in the appendix to the slide presentation.

On Slide 9, you will see an overview of our segment results for the first quarter of fiscal year 2021. Our agriculture segment drove solid overall top and bottom-line results in the first quarter. We do not feel the effects of the pandemic are fully reflected in these results. More on this and future expectations in a few minutes.

Our agriculture segment had a strong quarter with total sales increasing 25.9% to $193.6 million, driven by strength in equipment sales and supported by ongoing momentum in parts and service revenue. The significant sales growth, coupled with moderate increases in operating expenses, created significant operating leverage at the segment level. For the quarter, adjusted pre-tax income increased to $6.2 million, compared to $1.9 million in the prior-year period.

Turning to our construction segment, revenue decreased 15% to $60.1 million, compared to the prior-year period. The decrease in revenue was primarily the result of lower equipment demand, due to macroeconomic challenges and uncertainty, which also impacted parts, service and rental to a lesser extent. The segment's adjusted pre-tax loss widened by $600,000 to $2.7 million in the first quarter, despite reductions in operating expenses. In the first quarter of fiscal 2021, our international segment revenue increased 5% to $56.5 million.

However, strong early first quarter results have been largely offset by late quarter weakness, which we are seeing continue into our second quarter. Nonetheless, equipment, parts and services revenues were all up, compared to the prior-year first quarter and drove a $300,000 increase in adjusted pre-tax income.

On Slide 10, we provide an overview of our balance sheet highlights at the end of the first quarter of fiscal 2021. We had cash of $50.8 million as of April 30, 2020. Our equipment inventory at the end of the first quarter was $501 million, a decrease of $15 million from January 31, 2020, reflecting a $12 million decrease in new equipment and a $3 million decrease in used equipment. Equipment inventory turns were 1.6 versus 1.8 in the prior-year period. I will provide a little more color on our inventory on the next slide [Phonetic].

Our rental fleet assets at the end of the first quarter increased slightly to $104.9 million, compared to $104.1 million at the end of fiscal 2020. We still anticipate our fleet size will decrease to about $100 million by the end of fiscal 2021. As of April 30, 2020, we had $378.3 million of outstanding floorplan payables on $762 million of total floorplan lines of credit.

On April 3rd, 2020, the Company entered into a new five-year amended and restated credit agreement maturing April 2025, replacing the previous credit facility scheduled to expire in October 2020. The new facility provides for an aggregate $250 million financing commitment by the lenders, consisting of floorplan capacity of $185 million and working capital financing capacity of $65 million. Floorplan facility features improved flexibility with higher advanced rates on new and used inventory, and the working capital facility provides for a greater breadth of assets that can be utilized in the borrowing base, such as vehicles and real estate, in addition to higher advanced rates compared to the prior facility. The amended and restated credit agreement does not obligate the Company to maintain financial covenants, except in certain circumstances with terms that are similar to those in the previous credit facility.

The interest rate for borrowings under the credit facility will be equal to LIBOR plus an applicable margin, based on the Company's liquidity position. Overall, our borrowing costs under this facility should decrease by at least 50 basis points compared to the prior facility. Our total liabilities to tangible net worth ratio is a healthy 1.9 compared to 2.1 in the prior-year period. As of the first quarter, we are now back to an apples-to-apples comparison, given the effects on the ratio from the adoption of the new lease accounting standard that went into effect on February 1, 2019. Importantly, the ratio is well below 3.5, which is the leverage covenant required for our most restrictive bank facilities.

Turning to Slide 11, the amount of new and used equipment inventories are reflected in the size of the red and blue bars on this slide. We are pleased to finish the first quarter with a $15 million reduction in inventory versus fiscal-year end levels, which demonstrates early progress in our plan to drive inventory turns higher in fiscal 2021 through prudent inventory management.

Historically, we have increased our new equipment inventory levels in the first quarter, which can be seen in the prior year. Solid equipment sales and lower procurement levels of new equipment allowed us to decrease our inventories and slightly increase our turns to 1.6 from 1.5 for the rolling four quarters ended April 30, 2020 and January 31, 2020.

The overall quality of our inventory remains healthy with 40.3% of our inventory under non-interest bearing terms, which can be seen by the gray bar on the slide. This is a good percentage, but it's below the prior-year comparable quarter percentage of 47.4%, as we had a lot of new inventory stocking in that quarter, which carried new non-interest bearing terms.

Slide 12 provides an overview of our cash flows from operating activities for the first three months of fiscal 2021. The GAAP reported cash flow use for finance -- for operating activities for the period was $5.4 million, compared to cash provided by operating activities of $2.9 million in the first quarter last year. As part of our adjusted cash flow provided by operating activities, we include all our equipment inventory financing, including non-manufacturer floorplan activity and adjust our cash flow to reflect a constant equity in our equipment inventory, allowing us to evaluate cash flows exclusive of changes in equipment inventory financing decisions.

After applying these adjustments, our adjusted cash used for operating activities was $3.6 million for the three-month period ended April 30, 2020, compared to $37.4 million for the same period last year. The much lower use of cash in the first quarter versus prior year was due to the substantially lower equipment stocking I referred to on the previous slide, combined with the stronger bottom-line results.

Consistent with our practice thus far in fiscal 2021, we are not providing modeling assumptions due to the continued uncertainty in our business as a result of the COVID-19 outbreak. That said, I'll provide some updated color on a few noteworthy items for you to consider as you look at our business for the balance of fiscal year 2021. As you may recall, in mid-March, we began restricting customer access to our stores amid COVID-19 concerns. As of a couple of weeks ago, we began allowing customers back in our facilities with safety protocols in place. We felt very good about the uninterrupted service levels provided to our customers during that time.

Regarding our agriculture segment for the remainder of fiscal 2021, we do not believe our solid first quarter results are a good proxy for the rest of the year. As I mentioned earlier, we believe our first quarter equipment results were lifted by some delayed customer purchases and some aggressiveness on our part to -- in selling used equipment.

Our first quarter results far exceeded total U.S. industry retail sales, which is down year-to-date through April. Overall, COVID-19 has created industry challenges and uncertainties in areas such as ethanol, livestock and international trade, which we believe will put pressure on equipment sales and push them lower than the prior year. It is difficult to know the extent however, given all the variables and uncertainties. We still feel good about the potential parts and service opportunities for the year, but will likely not be able to sustain the growth we achieved in our first quarter. May results are already showing parts and service well off the pace [Technical Issues] the first quarter.

Additionally, please remember to account for a full-year contribution from our recently acquired Northwood, North Dakota location, which closed on October 1, 2019, as well as HorizonWest acquisition that closed on May 4, 2020. Both of these acquisitions -- both of these businesses had revenues of approximately $25 million in their most recently completed full fiscal year.

Within our construction segment, we expect continued headwinds to persist, but the magnitude and duration are difficult to predict, given the overlap we have with the energy markets. All revenue categories were impacted in this segment, and we expect this to continue while macro-economic stress and uncertainties persist.

Keep in mind the first quarter was only partially impacted as COVID-related shutdown started occurring in mid-March. We expect to continue to achieve some offset to the lower revenues through reduced expenses. Additionally, as we referenced during our fourth quarter call, please consider the January 2020 divestiture of our Albuquerque, New Mexico store, which generated approximately $8.5 million of revenue in fiscal 2020.

With regards to our international segment, we witnessed a good start in the first two months of our first quarter, and then experienced deterioration in April results. April revenues were 20% to 25% below the prior year. We're also seeing parts and service being impacted in these markets in current months.

As David mentioned earlier, in addition to the COVID-19 challenges and uncertainties, our European customers are currently facing difficult growing conditions. We believe these factors will weigh on future quarters. Expense controls will help mitigate pressured revenues, but this segment has less in the way of variable expenses, such as our domestic equipment commissions and overtime, which are not as prevalent in Europe.

This concludes our prepared comments. Operator, we are now ready for the question-and-answer session of our call.

Questions and Answers:

Operator

Thank you. [Operator Instructions]

Our first question is from Steve Dyer with Craig-Hallum. Please proceed.

Steve Dyer -- Craig-Hallum -- Analyst

Thanks. Good morning, guys. Hope you're well. Just, as it relates to the first quarter, it sounds like within ag there were some -- I guess, some things moving around, that maybe not indicative of the rest of the year. How much of the strength you feel like was just sort of a crop still standing and a push from Q4 versus maybe government programs or some of these other things? Just trying to get some sense as to the -- what drove, how much strength in the quarter?

David Meyer -- Chairman and Chief Executive Officer

Well, yeah, I think it was a little of all that combined, Steve. It's all -- like I would say, there is about 40% of that corn still standing at the end of the year and especially, in North Dakota. So there is definitely a delay there. That fourth tranche of that market facilitation program, that 25%, that has actually started going out in February. It also -- I think that helped a little bit. So -- but a lot of our growers with all the uncertainties at the end of the year and some of the normal equipment purchase just didn't happen, but then they took place into the first quarter.

Steve Dyer -- Craig-Hallum -- Analyst

Got it. Okay. And then, since you've reopened some of the stores and things like that, have you noticed any change, sort of, in behavior? I mean, it sounds like on the whole, it's softer than the first quarter, but the first quarter only really had, probably, half a quarter of COVID impact. But what have you seen since some of the stores have reopened to customers?

David Meyer -- Chairman and Chief Executive Officer

Well, most of our customers, they're busy trying to get their crops in right now, and the contractors are busy on the job site. So there's a little less floor traffic. But I think, overall, with all our employees, there is a -- definitely a safety concern. The ones -- and so they're being pretty careful. And I -- we let our stores open up. Each market is a little bit different. So we kind of let them make the decision when they were going to open up. But I know it's just -- people are being careful, people are being safety, and they're trying to be smart about what they do. And like I say, this time of the year is probably less customer traffic, because they all are out there and trying to get their work done. But then it's going to start moving back toward the normalism, but I'd say a little bit of a tentativeness and sense of caution.

Steve Dyer -- Craig-Hallum -- Analyst

Got it. And then, I guess, just given the challenges that you guys are seeing, well, most people are seeing here going forward, does that change your thinking on M&A strategy? Does that make some of these dealers more apt to sell? And sort of what's your view on how aggressive you want to be there? That's it for me. Thanks.

David Meyer -- Chairman and Chief Executive Officer

Yeah, I'd say, even before the COVID-19, Steve, you could see we were starting to be pretty active with the Northwood. The HorizonWest happened before the COVID-19. So there was already some motivated sellers, and so I see that going to continue, and this might even accelerate at some point.

Steve Dyer -- Craig-Hallum -- Analyst

So from your perspective, you remain very interested in active buyers kind of through this? Is that -- that remains the same?

David Meyer -- Chairman and Chief Executive Officer

Yeah, definitely. Especially, I think we like Upper Midwest, CaseIH, good quality, successful accretive-type acquisitions. And I -- there is a number of those potential candidates out there.

Steve Dyer -- Craig-Hallum -- Analyst

Primarily on the ag side?

David Meyer -- Chairman and Chief Executive Officer

Yeah, primarily on the ag side, the CaseIH, right.

Steve Dyer -- Craig-Hallum -- Analyst

Yeah. Okay. Thank you.

Operator

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

Mig Dobre -- Baird -- Analyst

Yes, good morning. Thank you. So I guess, my question, I'm trying to understand how you're thinking about the business, your core ag business in North America on a go-forward basis. I recognize that you're not providing guidance. But at the same time, you're quite clear about Q1 trends not being sustainable for the rest of the year. Can you maybe give us a little bit of context in terms of how demand trended in April, maybe similar to what you talked about in your international segment? And I'm curious as to what you're seeing in the month of May that informs or frames your view for the rest of the year?

David Meyer -- Chairman and Chief Executive Officer

So Mig, if you look at April industry numbers, combines down 10%, forward drive is down 7%. So from an industry standpoint, April continued down. And I think, as you're aware, there's a direct relation between commodity prices and industry retail levels. So as our -- these commodities stay on these depressed levels, and if what the USDA WASDE reports true, if they're going to drop another $0.30, $0.40, that average selling price as the year progresses, it's going to be difficult for these customers to really -- to pull the plug on these $500,000, $600,000, $700,000 high horsepower equipment purchases. So we are a little bit tentative. And I think we really need that it's going to be a function of the commodity prices and our end-market farmer customers' ability to cash fall our operations and still acquire this equipment.

Now the offset to that is replacement demand. And when they start looking at they could be making payments within this low interest rate environment on a new tractor combine rather than that $50,000, $60,000, $70,000 repair bill, that could motivate them and their bankers to make those equipment purchase. So I think you're going to see industry levels down at these lower comps, at the lower end of the spectrum. But there will be some amount of business. But it's going to be -- unless these commodity prices get a little bit better, it's going to be a little bit difficult.

And if you remember a year ago, if we're going to look at year-over-year industry comps, there was a good spike in commodity prices toward the end of June and early July, where corn at the elevator got up over $4 and soybeans up over that $9 mark. And a lot of the growers sold their carryover stocks. They contracted the 2019 crop rate. I know even some guys contracted some of this year's crop during that time period. We may not see that this year. So when you look year-over-year, I think that's why we're just a little cautious in what we think those industry numbers are going to be going ahead.

Mig Dobre -- Baird -- Analyst

Well, I appreciate that, all the macro relationships that you discussed. I mean, I think we all understand that. What I'm trying to understand is what you're actually seeing in your business today, right, throughout the month of May. Is there a way to frame that? Maybe put differently, is -- are your forward expectations simply based on your view of commodity prices and future behavior? Or have you actually started to see some softness in May that leads to this more cautious outlook?

Mark Kalvoda -- Chief Financial Officer and Treasurer

Yeah, Mig, Mark here. So you, kind of, asked about April and how April trended. April still looked good from ag. April is a very critical month for our ag business, where February and March is not as high of expectation months. April came through and looked good. Some of our cautious tone is what we're seeing in May. There was a definite difference in the amount of, like parts and service coming through in May. Some of that, and we're still like sorting out. There's a definite difference in the timing of the planting that's going on in our footprint between the north and the south and sorting through some of that. So we'll see how that goes. But definitely, there is a difference in the trend on the parts and service in ag.

And then equipment sales, it's difficult to say at this point. I think up to this point, it's -- there hasn't been as much activity as certainly what we saw last month. But there are a few days left in the month. And as you know, in this business, the last week of the month tends to grab the largest percentage of the equipment revenue for the month. So there is -- there are -- there is a definite noticing of a difference that we're seeing here between the months of April and May.

Mig Dobre -- Baird -- Analyst

Okay. You also talked about used equipment having been more aggressive in maybe getting rid of some of this equipment through the quarter. Can you maybe help us understand how the magnitude of what you've done in the quarter was maybe different than normal or maybe what you've done last year? And I'm also curious in terms of how used equipment prices are holding up, especially as you're trying to move more of that inventory?

Mark Kalvoda -- Chief Financial Officer and Treasurer

I think as we moved -- so this was later in the quarter as well. But I think just given the environment and maybe some of the risks out there for the year, we just thought it prudent to get ahead of the game a little bit on some of that used. So we did push more out there. It's hard to -- I think, overall, I think we were up like 25%. I think our used was up a similar amount, maybe even a little higher than that for the quarter to help give you the [Technical Issues]. As far as pricing goes, I think outside of some of the aggressiveness that we had, I think pricing remains similar to where it had been. So we did take a little bit in margin compression here to move additional amounts of volumes through it. But outside of that, I think our overall pricing seems to be hanging in there on the used side for ag.

Mig Dobre -- Baird -- Analyst

That's great. Last question, on International. First, I guess, when I'm looking at this segment, you're up 5% revenue-wise in spite of a very weak April. So I'm sort of surprised as to the variability month-to-month. I mean, that would basically imply your first couple of months being extremely strong in International. So I'm kind of curious as to what maybe drove that outsized strength? If you have any color on that early on. And then my -- the second part of my question is really on margins here. If -- let's assume that down 25%, is a trend that kind of sticks through next quarter, how should we think about your breakeven levels or segment margins within that kind of volume decline context? And that's it for me. Thank you.

David Meyer -- Chairman and Chief Executive Officer

Yeah. I can talk, Mig, a little bit about what was going on in Europe, and then I'll let Mark answer the second part of your question here. But -- so all these individual countries in Europe, the -- we have border closings and we actually had shipments. We couldn't get across the borders because of the bordering. So that delayed some of the things. At the same time, a lot of regulations within countries. There is curfews, there is times you could be on the street or you couldn't be on the street. Our employees getting to work and getting out with the customers. You had to be back before sunset. Some things like that or before 06:00 o'clock. I mean -- so all these things took quite a bit of a toll over just the way to do business. Like I say, they're developing countries, developing markets, probably not quite the level of maturity we see domestic United States business. So that impacted the business in Europe.

Mark Kalvoda -- Chief Financial Officer and Treasurer

Yeah. As far as how International may play out and what that level of reduction that I mentioned in April, what that would have -- we wouldn't see -- I don't think we would see that for the whole rest of the year, at least we would hope it wouldn't stay that negative as we get further along and things open up more over there. But I think with those type of numbers for the next quarter, maybe quarter and a half, something like that, and some adjustments to expenses. I think I mentioned on the call as far as us being able to adjust those expenses naturally just through variable expenses coming down. It's not as easy to do that over there -- as natural over there as it is over here with some of the different expenses that are in our model over there, our business model. But overall, I think with this level of decrease for the next quarter, quarter and a half, you're probably looking at around a breakeven, similar to last year, maybe just a little bit lower if things continue for that long.

David Meyer -- Chairman and Chief Executive Officer

And Mig, too, you really need to watch out those weather situations over there. You're seeing pictures of big cracks in the ground in the Ukraine. Some of the rivers are down to the lowest levels in decades. Some of them are even drying up. I saw pictures of Romania where they're bailing up the wheat crop for feed because -- so definitely, there's a huge pocket in the Black Sea region, the Balkans, somewhat in the Ukraine, even touching in Germany a little bit. So really, really dry conditions. So we need to track that too internationally.

Mig Dobre -- Baird -- Analyst

Right. But just to confirm, Mark, you think you're able to remain above breakeven with those kinds of volume declines? Because looking at Q1, you were barely positive from an income standpoint on what really was kind of a nice quarter.

Mark Kalvoda -- Chief Financial Officer and Treasurer

Well, yeah, so a couple of things. First of all, seasonally, Q1 is more difficult. Q2 and Q3 is typically where we make the money in International. I think just to qualify what David was talking about, too, if it continues -- if the weather continues to stay this bad over there as well, it would be -- it will definitely be difficult to be at a breakeven. I think things could trend down from there. But just -- I'm just saying, I think, yes, we could stay about breakeven, right around breakeven. If we just had, call it, the next quarter of three, four months of some lower levels of revenues and then it picks back up later in the year.

Mig Dobre -- Baird -- Analyst

Okay. Thank you.

Operator

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

Larry De Maria -- William Blair -- Analyst

Hi. Good morning, everybody.

David Meyer -- Chairman and Chief Executive Officer

Good morning, Larry.

Larry De Maria -- William Blair -- Analyst

Hi, guys. A question, have there been any cancellations? And what does availability look like for your large ag products in terms of both, I guess, the COVID disruptions to the supply that's coming to you, but also just based on your orders and when you can accept delivery? I'm just kind of trying to understand how far out you have visibility for the level of cancellations that may or may not have occurred?

David Meyer -- Chairman and Chief Executive Officer

On the ag side of the business, you'll -- very minimal on the cancellation side. That was all working pretty. We did a little bit -- and this is probably more had to do with that decrease in oil prices that we did see a little bit on the -- on our construction side of the business earlier due to the oil piece. Now as you're aware, we started off the year pretty strong on high horsepower equipment from an inventory standpoint. So we think we're in good shape, and all the factories that are all up and going now. And we think that right now, we've got the lead time stuff in order to meet our customer demand with our current inventory and what's coming out of the plants, we think we're in good shape.

Larry De Maria -- William Blair -- Analyst

And the availability of equipment and your -- kind of your own internal order boards and dealer wants and also customer wants, does that put you out a few months from now if somebody walks in? Or do you have -- that inventory you have sufficient to continue to satisfy...

David Meyer -- Chairman and Chief Executive Officer

Yeah. I'd say we definitely have equipment to take us into the third quarter. And then right now, inventory, we've got some open slots available in Q4. So I think we're in good shape.

Larry De Maria -- William Blair -- Analyst

Okay. That's good to hear. Can you discuss take rates on precision ag products? What would be the main ones, and how maybe they're trending year-over-year?

David Meyer -- Chairman and Chief Executive Officer

Well, it seems like there is a real interest in the customers for equipment that's this technology -- technically advanced equipment, whether it's planters or it's tractors, that's what the customers are really looking for right now. So all the products, then our aftermarket, like, say, for precision planting equipment on our aftermarket, last year, that business was double. So that continues, like I say, in all the -- the harvesters, tractors, our combines, planters, sprayers, that technically advanced equipment, definitely what the growers are looking for right now.

Larry De Maria -- William Blair -- Analyst

And they're paying up for maybe a software -- premium software packages and things like that?

David Meyer -- Chairman and Chief Executive Officer

Yeah, it doesn't seem like the prices -- if you've got what they want, and you've got the stuff that works, and yeah, it's -- price does not seem to be quite the object -- with all the value added.

Larry De Maria -- William Blair -- Analyst

Okay. I have two more quick ones. First, what would the comparable tractor would be to the 8R that Deere has? Because that seems to be pretty well adopted or starting to be well adopted into new product for the industry. Is that a near-term risk? Or how do you combat that new product by them with your own IH [Phonetic] product?

David Meyer -- Chairman and Chief Executive Officer

Yeah. That's our Magnum tractor. I mean, that's a tractor that just really had some great heritage and legacy behind it, really high performing, high horsepower row crop tractors. And the new model that came out now, it's called the AFS Connect Magnum, with all the bells and whistles, the connectivity, the telematics. So that is a comparable model then to the 8R.

Larry De Maria -- William Blair -- Analyst

Okay. You wouldn't expect a material shift I suppose? And then if I could ask one last question. Obviously, I'm curious about the digital tools you're really using to employee service. If those are working out, what you're doing differently to get the service, given that some of the -- obviously, growers are in the field, stores have been closed for internal traffic, etc.? And what's going on now? Does that make you rethink your footprint at all in terms of maybe less square footage, less service or more distributed service? Or is it probably most likely business usual as things return toward normal?

David Meyer -- Chairman and Chief Executive Officer

No. I think, definitely, our customers are using technology, e-commerce from -- we had drop boxes, curbside pickup where some of our salespeople were delivering parts. So that's going to continue. A lot of our growers have really nice shops. And we have a lot of big field service trucks and that's going to continue. But there again, I think with the size of this equipment and some of the things we do -- need to do in our service locations, they're going to exist.

But three years ago, we made some major footprint changes and stuff. So now we're servicing bigger markets and bigger territories. And I think we'll continue to -- I think the industries are going to be some level of consolidation that all the -- that's going to happen. But I think we're -- we learned a lot from this, and it's really nice that we could produce this type of aftermarket support for the parts and service support with Kohl's, front doors and be able to use technology and really smart about how we did business. It's really good to see we could deliver these type of results under the whole COVID-19.

Larry De Maria -- William Blair -- Analyst

Okay. Thank you, guys, and good luck.

Operator

This does conclude our question-and-answer session. I would like to turn the conference back over to David Meyer, CEO, for closing remarks.

David Meyer -- Chairman and Chief Executive Officer

Okay. Thanks, everybody, for your time this morning and your interest in Titan Machinery. I look forward to updating you on our progresses on our next call. [Operator Closing Remarks]

Duration: 52 minutes

Call participants:

John F. Mills -- Managing Partner

David Meyer -- Chairman and Chief Executive Officer

Mark Kalvoda -- Chief Financial Officer and Treasurer

Steve Dyer -- Craig-Hallum -- Analyst

Mig Dobre -- Baird -- Analyst

Larry De Maria -- William Blair -- Analyst

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