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Titan Machinery (NASDAQ:TITN)
Q3 2022 Earnings Call
Nov 23, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to Titan Machinery's third quarter 2022 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Mr. Jeff Sonnek of ICR.

Thank you. You may begin.

Jeff Sonnek -- Investor Relations

Thank you. Good morning, ladies and gentlemen, and welcome to Titan Machinery's third quarter fiscal 2022 earnings conference call. On the call today from the company are David Meyer, chairman and chief executive officer; Mark Kalvoda, chief financial officer; and Bryan Knutson, chief operating officer. By now, everyone should have access to the earnings release for the fiscal third quarter ended October 31st, 2021, which went out this morning at approximately 6:45 a.m., Eastern Time.

If you've not received the release, it's available on the investor relations page of Titan's website at ir.titanmachinery.com. This call is being webcast, and a replay will be available on the company's website as well. In addition, we're providing a presentation to accompany today's prepared remarks. You may access the presentation now by going to Titan's website at ir.titanmachinery.com.

The presentation is available directly below the webcast information in the middle of the page. You'll see on Slide 2 of the presentation our safe harbor statement. We would like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them.

These forward-looking statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the risk factors section of Titan's most recently filed annual report on Form 10-K, as updated, and subsequently filed quarterly reports on Form 10-Q. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Except as 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 comparing underlying results from period to period. We have 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 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, Jeff. Good morning, everyone. Welcome to our third quarter fiscal 2022 earnings conference call. On today's call, I will provide a summary of our results, and then Bryan Knutson will -- 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 2022 and provide an update to our full-year modeling assumptions. If you turn to Slide 3, you'll 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 26% increase in our consolidated revenue to $454 million in fiscal third quarter of 2022. The combination of our larger base of revenues, healthy inventory position, and lean infrastructure will offer powerful operating leverage that drove a 109% 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 7%, which is a record quarterly high watermark for the segment. Our construction and international segments are also generating strong gains in profitability, each producing another solid quarter and building upon the improvements made fiscal year to date. The contribution across all of our businesses allowed us to drive record third quarter adjusted diluted earnings per share of $0.96, which represents an increase of 81% compared to the prior-year period. 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 enabled us to continue to deliver strong top-line growth. 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 our momentum will continue through the important year-end tech selling season. We look forward to closing the previously announced Jaycox to Case IH three-store acquisition in December, and we remain confident that we will be able to sustain our increased sales momentum to continue achieving heightened levels of profitability that, we believe, will allow us to deliver a record year of earnings per share.

Now I will turn the call over to Bryan Knutson.

Bryan Knutson -- Chief Operating Officer

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 4 is an overview of our domestic agriculture segment.

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. Demand continues to outpace OEM production. And at this point, most production slots for model year 2022 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. 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 tasks. Our growers were able to complete timely fall fieldwork and receive much-needed replenishing fall rains, which further improve next year's spring planting conditions.

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 presold factory shipments. 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.

Turning to Slide 5. 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. 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.

With our Upper Midwest footprint, we are 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, feedlot operations, and material handling. 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 the CE business to stay healthy for the foreseeable future. On Slide 6, 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. 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.

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 and agriculture markets in Ukraine, Bulgaria, Romania, and Germany. 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. 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. With that, I will turn the call over to Mark to review our financial results in more detail.

Mark Kalvoda -- Chief Financial Officer

Thanks, Bryan. Turning to Slide 7. Total revenue increased 25.8% to $454 million for the third quarter of fiscal 2022. Our equipment business increased 36.9% versus prior year, which was driven by strength in our agriculture and international businesses.

Our parts and service business generated consistent growth, increasing 4.9 and 4.3%, 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 and service activity in our Western North Dakota and South Dakota Ag stores, as these locations were the hardest hit by drought conditions. Rental and other revenue decreased 7.1% 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 2021 divestiture of our construction stores in Arizona.

Helping to offset these factors was a higher dollar utilization of our construction segment rental fleet, which improved nicely to 31.4% for the current quarter, compared to 25.7% in the same period last year. The improved utilization helped increase margins in this revenue category. On Slide 8, our gross profit for the quarter increased 27.5% to $92 million. Our gross profit margin increased by 30 basis points, primarily due to stronger equipment margins, but also due to improved margins across all categories of revenue.

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. Operating expenses increased $8.8 million versus the prior year to $62.9 million for the third quarter of fiscal 2022. This increase was more than offset by revenue growth and led to 110 basis points of operating expense leverage compared to the prior year, reducing our operating expenses to 13.9% as a percent of revenue, compared to 15% 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. Floorplan and other interest expense decreased 21.6% to $1.3 million in the third quarter of fiscal 2022 compared to the same quarter last year due to lower floorplan borrowings. In the third quarter of fiscal 2022, our adjusted net income increased 80.8% to $21.7 million, which accounts for $2.6 million of impairment costs, net of tax in the prior-year period. Our adjusted earnings per diluted share for the quarter was a record $0.96 and compares to last year's $0.53 performance.

And adjusted EBITDA increased 42.1% to $35.3 million compared to the third 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 third quarter of fiscal year 2022. Agriculture segment sales increased 27.6% to $281.5 million, helping to drive a significant increase in segment-adjusted pre-tax income of 42% to $19.6 million.

This equates to a pre-tax income margin in the third quarter of 7% and demonstrates the extensive improvements we've made to our operations over the course of this last cycle. Turning to our construction segment. Revenue increased 0.9% to $79.7 million 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 11.1% for the quarter.

We are pleased with the continued improvement in this segment's adjusted pre-tax income, which improved nearly 150% to $3.6 million, compared to $1.4 million in the prior-year period. Our international segment also benefited from the improved agriculture market conditions and generated revenue growth of 51.5% to $92.7 million. The combination of strong equipment sales and margins, coupled with solid growth in our higher-margin parts and service businesses, yielded a $5.9 million improvement in adjusted pre-tax income to a positive $6.1 million, which compares to $200,000 in the prior-year period. Turning to Slide 10.

You see our first nine-month results. Total revenue increased 23.6% compared to the same period last year. Year-to-date equipment sales increased 32.7%, parts increased 7%, service revenue increased 6.1%, and rental and other revenue decreased 16.3%. The nine-month dollar utilization of our dedicated rental fleet improved to 25.8%, compared to 22.2% in the same period last year.

Turning to Slide 11. Our gross profit for the first nine months was $238.5 million, a 23.1% increase compared to the same period last year. Our gross profit margin was relatively flat, with a 10 basis point decrease versus prior year at 19.8% for the first nine months of fiscal 2022. The impact that revenue mix is having on overall gross profit margins is largely being offset by higher equipment margins.

Our operating expenses increased by $16.2 million or 10.1% for the first nine months of fiscal 2022 to $176.5 million. This increase was more than offset by revenue growth and led to 170 basis points of operating expense leverage compared to the prior year, reducing our operating expenses as a percent of revenue to 14.7%. Impairment expenses decreased from $2.8 million in the prior year to $1.5 million in the current nine-month period. Floorplan and other interest expense decreased 24.2% to $4.3 million in the first nine months, primarily due to overall lower floorplan borrowings.

Our adjusted diluted earnings per share doubled to $1.98 for the first nine months of fiscal 2022, compared to $0.97 in the prior-year period. Our nine-month adjusted EBITDA increased 52.1% to $78.6 million, compared to $51.7 million in the prior year. On Slide 12, we provide our segment overview for the nine-month period. Overall, our adjusted pre-tax income was $59.3 million for the first nine months of fiscal 2022, compared to $31.3 million in the same period last year.

This 89.8% increase was generated as a result of strong improvement in performance across all three segments of our business. On Slide 13, we provide an overview of our balance sheet highlights at the end of the third quarter of fiscal 2022. We had cash of $91 million as of October 31, 2021. Our equipment inventory at the end of the third quarter was $323 million, a decrease of $15 million from January 31, 2021, reflecting the net effect of a $44 million decrease in used equipment, partially offset by a $29 million increase in new equipment.

Strong sales and lower inventory levels continued to drive equipment inventory turns, which increased to 3.1 versus 1.6 in the prior year. I will provide a little more color on our inventory on the next slide. Our rental fleet assets at the end of the third quarter increased slightly to $82 million, compared to $78 million at the end of fiscal 2021. We still anticipate our fleet size to be around $80 million by the end of fiscal 2022.

As of October 31, 2021, we had $175 million of outstanding floorplan payables on $753 million of total floorplan lines of credit, which leaves us with considerable capacity in our credit lines to handle our equipment financing needs. Our adjusted debt-to-tangible net worth ratio was 0.7 at the end of the third quarter compared to 1.0 at the end of the third quarter of fiscal 2021 and is well below 3.5, which is the leverage covenant requirement of our two largest floorplan facilities outside of our bank syndicate credit agreement. Turning to Slide 14. 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. At the end of the third quarter, we drove an inventory turn of 3.1 times and anticipate this to continue to move higher through the end of the fiscal 2022, given current inventory levels and end-market conditions. We believe our equipment orders, delivery schedule, level of presales, and equipment inventory have us positioned to meet our current revenue modeling assumptions for fiscal year 2022. The overall quality of our inventory remains very healthy.

Our inventory under noninterest-bearing terms, which can be seen by the gray bar on the slide, ended the third quarter at 45.5%. Slide 15 shows our updated fiscal 2022 annual modeling assumptions. Ongoing top-line strength in our agriculture and international segments, coupled with anticipated -- 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. This revenue growth, combined with stronger margin performance across all three segments, also translated to a raise in expectation for our diluted earnings per share range.

For the agriculture segment, we are increasing our revenue growth assumption to up 23 to 28% from up 18 to 23%. The fiscal 2022 growth range includes the full year revenue contribution from our HorizonWest acquisition that closed in May 2020, as well as anticipated revenue from the Jaycox acquisition. For the construction segment, we are maintaining our revenue assumption of up two to 7%. As a reminder, this assumption includes the divestment of our two construction equipment stores in Arizona at the end of fiscal 2021, which accounted for approximately $27 million of combined revenue.

Excluding these revenues from the prior year base, our modeling assumption equates to a same-store sales range of approximately up 10 to 15%. For the international segment, we are increasing our revenue assumption to up 35 to 40% from up 27 to 32%. 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. From an earnings per share perspective, we are increasing our diluted earnings per share assumption by $0.40 at the midpoint to a new range of $2.40 to $2.60 for fiscal 2022. As a reminder, this range includes all ERP implementation expenses. This concludes our prepared remarks.

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

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from Mig Dobre with Baird. Please proceed.

Mig Dobre -- Robert W. Baird and Company -- Analyst

Thank you for the question, and good morning, everyone.

Mark Kalvoda -- Chief Financial Officer

Good morning, Mig.

Mig Dobre -- Robert W. Baird and Company -- Analyst

I guess my first question, you commented earlier on your North American Ag business that, at this point, the production slots for calendar '22 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 '21? I mean what sort of volume growth for this presold equipment do you have visibility into at this point?

Bryan Knutson -- Chief Operating Officer

Yes, Mig, this is Bryan. And just to clarify, it was for model-year '22, so would cover the first few quarters based -- or the -- of the year there. So yeah, the 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 talked about in the prepared comments in regards to the cash crop equipment.

And so generally, there are some product categories that are still open for model-year '22 production. But for the most part, we're into the -- starting to sell into model-year '23 here in certain cash crop categories.

Mig Dobre -- Robert W. Baird and Company -- Analyst

Right. But my question still stands in terms of where we should be thinking in terms of additional volume of incremental volume in '22 relative to '21. Because I mean, look, you're -- I understand that you're not providing guidance for your fiscal '23, but there's one quarter left. And I think the big question all of us sort of have is, OK, you've had a really strong '22.

What could then -- what could next year look like? And at least for the portion of the business, where you do have visibility because of the presold 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.

Bryan Knutson -- Chief Operating Officer

Mig, I'd go back to our guidance and maybe a little sensitive here with the timing, too, for forward-looking. But yeah, we've -- the supply chain, as you know, is going to be a crapshoot next year. We feel good about our allocation and our orders at this point. We've got a lot of our orders in early.

We've -- our salespeople have been out there doing presales 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.

Mig Dobre -- Robert W. Baird and Company -- Analyst

OK. 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 overtime on the technology back end -- 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 and the tightness of supply relative to the structural improvements that you guys have been making to the business? Thank you.

Mark Kalvoda -- Chief Financial Officer

Yeah. Mig, I think -- yes, so first of all, at 3.1 right now, given the tightness of supply that we talked about, and a lot of these are presold 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, it could be, I would say, easily around that 3.5 is where we could see it, maybe even a little bit higher than that, definitely driven, in a large part, by what we're talking about here is 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's -- what we're achieving in equipment margins. So even coming into the stronger cycle, we had very healthy inventory conditions with aging of inventory being down and fresh inventory out there. As far as driving more, I think we're -- it's running pretty efficient at this point that, call it, a run rate of kind of mid-three, three and a half.

So we don't have a lot of interest-bearing inventory out there. Our margins are very strong, 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.

Mig Dobre -- Robert W. Baird and Company -- Analyst

Yep, I would agree with that. Thanks for taking my question.

Mark Kalvoda -- Chief Financial Officer

Thanks, Mig.

Operator

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

Larry De Maria -- William Blair and Company-- Analyst

Hi, thanks. Good morning, everybody. Just following up on the last one, last question about presale into next year. Can you talk about, what is the average price increase on new equipment for next year? If the year is obviously already presold, 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.

Bryan Knutson -- Chief Operating Officer

Yeah. Good morning, Larry, this is Bryan. Thank you for the question. Yeah.

So we've had price increases here with the model-year '21 and now again into the model year '22s, 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 the -- where you'll continue to see us do.

Larry De Maria -- William Blair and Company-- Analyst

OK. So of being equal, if you sold the same amount of equipment, your sales go up probably five to 10 and then you're capturing some incremental margin on the new equipment as well as on the used. Is that fair to say?

Bryan Knutson -- Chief Operating Officer

Yeah. Mix will play into there a little bit as well, but generally, yes.

Larry De Maria -- William Blair and Company-- Analyst

OK. And then secondly, as we think about a lot of next year being presold moving into 2023 calendar, at what point is this too long and we risk cancellations? I'm kind of curious about what protection you have. And secondly, how are we handling trade-ins? Because a lot of what you sell, 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 when it's done? Or is there any protection for you or the customer on the value of trade-in that might not happen for another year from today?

Bryan Knutson -- Chief Operating Officer

Yes. So that's one of the benefits for the customers of presales. They can lock in their production slot. They can lock in their pricing, and from our end, locking the deal with us.

So we spend a lot of time researching, forecasting used equipment values. And when we do those presale deals, I'll put our anticipated value on the trade-in at the time that we'll receive it. And so there's generally a little risk there. Sometimes the market has come up a little bit, sometimes down a little bit on the trade-ins.

But again, we anticipate the used values. And again, some of -- those are some of the benefits for the customers as well with the presale on their end.

Larry De Maria -- William Blair and Company-- Analyst

OK. So the deal is done at the time, and there's really no modification from it then -- 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 that's -- and I'll move on.

Thanks.

Bryan Knutson -- Chief Operating Officer

Yeah. It went pretty well there overall. There was a lot of headaches along the way. I want to thank our team a tremendous effort from everyone on our team as well as our manufacturers we work with.

There's an incredible amount of work behind the scenes right now and a lot of extra busywork, 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 did take some doing on everybody's part.

Larry De Maria -- William Blair and Company-- Analyst

OK. Thank you.

Operator

[Operator instructions] Our next question comes from Rick Nelson with Stephens. Please proceed.

Rick Nelson -- Stephens Inc. -- Analyst

Thanks. Good morning, guys. Two follow-ups on the equipment margins, very strong, better than expected. Is that -- is it used? Is it both? And how sustainable do you think those margins are?

Mark Kalvoda -- Chief Financial Officer

Yep, 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 adjustment.

So that's -- and that's primarily on the used side once in a while and age 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.

Certainly, the other thing, and I've mentioned this before, but with the strong same-store sales 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. So from -- as far as sustaining this, for the next quarter, I don't see it. I 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 in 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 at kind of, call it, lower 11s instead of the -- I think we're at like 12.1% 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.

Rick Nelson -- Stephens Inc. -- Analyst

I'd catch up. So I'd like to get an update on the acquisition environment, Jaycox implement that's going to close very shortly. If you could speak to that and some color around there, the multiples that you're paying these days.

David Meyer -- Chairman and Chief Executive Officer

Yeah, we're pretty excited because, on the Jaycox, it's contiguous to our marshall and pipelines locations. Those locations were Vern, Minnesota and we're into Minnesota, then on one location in like Park, Iowa, just off to the border. So really good farmland, predominantly court be a little bit diversified livestock also. So it really fits into our -- not only contingent to our footprint, but similar products, really quality workforce, really strong aftermarket parts and service support, good culture.

So yes, it's a really good -- we're really excited about this one. And I think when we come with our year-end numbers and stuff, you'll see a little bit more of the detail in the economics on that. I can say we close in December. So we don't want to get ahead of ourselves here.

At the same time, modeled really well, it's going to be positive to our byline out right after the get-go, well managed, good group of employees. So you're going see we're pretty excited about it.

Rick Nelson -- Stephens Inc. -- Analyst

And is there more in the pipeline at present in your appetite, I guess, to do more acquisition? Is that --

David Meyer -- Chairman and Chief Executive Officer

Yeah. We've got -- balance sheet is really strong. We're not even into some of our bank syndicate and all right now. We want to deploy some capital on more acquisitions.

And I'd say the pipeline, the more interest right now is the strongest it's been in a number of years right now. So some motivated sellers or in communications, and we want to just bring -- try to get some more deals done and bring one on a timely basis and to be a little bit of space to clean 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.

Rick Nelson -- Stephens Inc. -- Analyst

Great. You used equipment market, do you think that tight supply on new is driving people into the used market? If you can comment on pricing. And are you seeing any pushback from your customers to the higher pricing unused?

Bryan Knutson -- Chief Operating Officer

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 used, 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 it's been in a couple of decades. So growers can also upgrade quite a bit even on a used piece of equipment. And then also the Section 179 and the tax benefits also pertain to the used. So we are seeing nice used equipment pricing.

I think it's carried up similar in line percentage basis with the new equipment. 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 our customers.

Rick Nelson -- Stephens Inc. -- Analyst

That's great. Thanks for the help and good luck as we push forward.

Bryan Knutson -- Chief Operating Officer

Thanks, Rick.

Operator

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.

David Meyer -- Chairman and Chief Executive Officer

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.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Jeff Sonnek -- Investor Relations

David Meyer -- Chairman and Chief Executive Officer

Bryan Knutson -- Chief Operating Officer

Mark Kalvoda -- Chief Financial Officer

Mig Dobre -- Robert W. Baird and Company -- Analyst

Larry De Maria -- William Blair and Company-- Analyst

Rick Nelson -- Stephens Inc. -- Analyst

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