TITN - NASDAQ

Hello and welcome to the Titan Machinery first quarter fiscal 2023 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require Operator assistance, please press star, zero on your telephone keypad .As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Jeff Sonneck of ICR. Thank you, you may begin.

Thank you. Good morning and welcome to Titan Machinery’s first quarter fiscal 2023 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 first quarter ended April 30, 2022, which went out this morning at approximately 6:45 am Eastern time. If you have 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 when comparing underlying results from period to period. We’ve included 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’ll open the call to take your questions. Now I’d like to introduce the company’s Chairman and CEO, Mr. David Meyer. David, go ahead.

Thank you Jeff. Good morning everyone. Welcome to our first quarter fiscal 2023 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 first quarter of fiscal 2023 and provide an update to our full year modeling assumptions. If you turn to Slide 3, you will an overview of our first quarter financial results. Our momentum continued into the fiscal first quarter of 2023 with strong operating leverage across each of our segments which combined for a 24% increase in revenue to $461 million and a 66% increase in earnings per share to $0.78. At the segment level, our agriculture segment benefited from robust demand which was supported by an increase in equipment deliveries from our suppliers following a delay in fiscal fourth quarter 2022. Our construction segment continued to demonstrate improved levels of pre-tax profitability as we achieve operating improvements across our optimized footprint. While revenue growth in the international segment was negatively affected by the conflict in Ukraine, the impact on our operations is less than we originally anticipated. We are supporting our Ukrainian customers’ farming activities with equipment, parts and service to the extent possible. The resolve of our customers and employees has been nothing short of inspiring. More broadly, our business across the European footprint proved to be resilient to the conflict’s indirect effects, and we were able to generate an improvement in pre-tax income margins despite a slight decrease in revenue. In terms of M&A, on the domestic front we remain active with our pipeline of potential acquisition candidates as we seek to grow our business through quality acquisitions in addition to our continuous focus on same store organic growth. You saw this most recently with the closing of our acquisition of Mark’s Machinery in April, which followed our acquisition of Jaycox Implement in December of 2021. We were very pleased with our full integration, immediate accretion, and valuable contributions to the tech machinery team and store footprint. We remain positive on the broader environment despite some of the recent market turbulence. As a result, we are increasing our modeling assumptions which Mark will talk through in greater detail. We continue to expect an exceptional fiscal 2023 at Titan Machinery. Now I’ll turn the call over to Bryan Knutson.

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 equipment is the highest we’ve seen in decades, supported by ongoing momentum in commodity prices which remain at high levels through our first quarter. While it’s been a late and wet spring, there has been good planting progress in our markets in Iowa, Nebraska, southern Minnesota and southern South Dakota. Recent rainfalls have been very welcome in the drier western Dakotas and Nebraska territories and we expect planting to get into full swing as fields finally dry out in our North Dakota and northern Minnesota footprint. Our farm and rancher customers are seeing cost increases in farm inputs such as fuel, fertilizer, seed, and crop protection products. In spite of this, a recently published University of Illinois updated 2022 crop budgets report, which factored in recent crop inflation, estimated that per-acre profits for 2022 will be well above the 2011 peak. This report illustrates that current net farm income levels will support continued machinery investment. Again, this is attributable to the exceptionally strong commodity prices and to some extent steadily improving yields over the past decade. With the equipment supply challenges, we continue to focus on presales and procuring new equipment from our OEMs. Our parts and service customer support businesses continue to be a strong contributor to our bottom line and I’m happy to report our newly acquired Jaycox and Mark’s Machinery stores were both accretive to our first quarter earnings. This is a great time to be in the farm equipment business and we will continue to track the progress of our farmers’ crops as we get into the warmer summer growing months. 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 have 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, higher oil prices, infrastructure projects, and strong agricultural economics are all contributing to robust construction equipment demand which is reflected in our 25% CE same store sales increase in the first quarter. Similar to our ag segment, we are seeing equipment supply side challenges with tight inventories and long lead times, but we are continuing to receive equipment inventory in this high demand market and as a result, we anticipate a very successful year for our domestic construction segment. Before we turn to our international review, I will provide a brief update on our ERP phase-in plan. We have been successfully operating a pilot store in our newer ERP platform since July of 2020. We added three more stores this last December and again two more stores in April. Moving to Slide 6, we have an overview of our international segment which represents our businesses within the countries of Bulgaria, Germany, Romania and Ukraine. Our European customers are also benefiting from the higher global commodity prices and carryover from a good 2023 crop year which is creating strong demand for both new and used equipment. The overall growing conditions in our European footprint are for the most part favorable, although there are some areas of dryness developing and crops will need timely rains through the growing season to produce full yield potential. Europe, similar to our domestic business, is experiencing equipment supply side challenges, new equipment delays, and long lead times. With regards to our business in Ukraine, we have opened or partially opened all of our stores to support our customers for their equipment, parts and service needs during spring planting. According to Ukrainian sources, 77% of the arable acres in markets in which Titan has locations have been seeded compared to 72% for Ukraine as a whole. This speaks to Titan’s footprint in the central and western part of the country and demonstrates the resiliency of producers in those regions which have largely kept pace with seasonal farming activities. Although the conflict in Ukraine is extremely disruptive to our Ukrainian business, the impact has been less severe than projected in March as reflected in our updated modeling assumptions, which Mark will explain in more detail. I want to thank our European team for their solid first quarter performance in the face of the geopolitical uncertainties and ongoing conflict in Ukraine. Likewise, our domestic businesses are firing on all cylinders thanks to our very talented and dedicated team as they continue to support our customers in this dynamic environment. Now I will turn the call over to Mark to review our financial results in more detail.

Thanks Bryan. Turning to Slide 7, total revenue increased 23.7% to $461 million for the first quarter of fiscal 2023. Our equipment business increased 29.1% versus prior year, which was driven by strength in our agriculture and construction businesses and further supported by contribution from our Jaycox and Mark’s Machinery acquisitions, which were not in the prior year’s first quarter results. Our parts and service business generated growth, increasing 9.5% and 6.6% respectively. Despite the later start to planting this season as compared to last year’s early and efficient planting season, I would anticipate more favorable quarter-over-quarter results in our parts and service business in the second quarter. Rental and other revenue increased 2.5% versus prior year with dollar utilization of our construction segment rental fleet increasing to 24.5% compared to 19.2% in the prior year quarter. This material improvement in utilization allowed us to grow revenues on a notably smaller fleet which in turn drove strong margin expansion. On Slide 8, our gross profit for the quarter increased 25% to $89 million and gross profit margin increased by 20 basis points, primarily driven by the expansion of equipment, parts and rental margins. This was partially offset by a shift in sales mix and lower service margins. Equipment margins continued to be supported by very good end market conditions and healthy inventories. Operating expenses increased $7.7 million versus the prior year to $64.2 million for the first quarter of fiscal 2023. This increase was more than offset by revenue growth and led to 120 basis points of operating expense leverage compared to the prior year, reducing our operating expenses to 13.9% as a percentage of revenue from 15.1% in the prior year period. As we have mentioned, operating expenses have been increasing due to higher sales volumes, inflationary cost pressures, and the build-out of our ERP system, which is in the early stage of rollout. It is important to note that despite these cost pressures, we have been able to consistently grow our absorption rate since fiscal year 2018 from under 70% to over 80% in our trailing 12-month period, which is driven by gains across all three of our segments that we expect will continue. To frame this up, at the segment level our agriculture business is delivering about 90% absorption today and construction is at about 80%. While opportunity remains for further improvement within ag and construction, we think this really demonstrates the opportunity in our international business, which is currently approximately 55%. Our success in ag and construction was a direct result of our unwavering focus on parts and service growth, dollar utilization improvement in our rental fleet, footprint optimization in our construction segment, and overall expense discipline. Our goal is to bring that same focus to our international segment and generate steady long term improvement on this important operational metric. A chart reflecting this annual progress can be found in the appendix to this slide presentation. Floor plan and other interest expense remained relatively flat at $1.5 million compared to the prior year period. In the first quarter of fiscal 2023, our adjusted net income increased 71.2% to $17.8 million. Our adjusted earnings per diluted share for the quarter was $0.79 and compares to last year’s $0.46 performance. Adjusted EBITDA increased 52.4% to $30.2 million compared to the first quarter of last year. You can find a reconciliation of adjusted net income, adjusted earnings per diluted share, and adjusted EBITDA to their most comparable GAAP amounts in the appendix to this slide presentation. On Slide 9, you will see an overview of our segment results for the first quarter of fiscal year 2023. Agriculture segment sales increased 38.8% to $318.5 million and helped drive nice operating leverage, resulting in segment adjusted pre-tax income increasing 46.6% to $16.4 million, which represents a pre-tax income margin of 5.2%. This is very solid margin performance despite the quarterly headwinds on parts and service due to the late planting. Turning to our construction segment, revenue decreased 2.4% to $67 million compared to the prior year period due to the lost sales contributions from the company’s recent divestitures in this segment. On a same store basis excluding the divested stores in the prior year period, revenues were up 24.9% for the quarter. Pre-tax income improved significantly to $3.2 million compared to $100,000 in the prior year period. Even after excluding the $1.4 million gain associated with the sale of a single store location in North Dakota during the quarter, this segment is showing strong improvement in pre-tax income margin versus the prior year quarter. Our international segment generated revenue growth of 1.3% to $75.5 million despite the disruption in our Ukrainian market caused by the conflict with Russia. Our other markets, particularly in Romania and Bulgaria more than offset the business challenges in Ukraine and generated a 72.4% increase in adjusted pre-tax income to $4.6 million, which represents a solid margin of 6.1%. These pre-tax results include a charge of $700,000 for estimated bad debts in Ukraine which is primarily related to the ongoing conflict in this region. On Slide 10, we provide an overview of our balance sheet highlights. We had cash of $147 million as of April 30, 2022. Our equipment inventory at the end of the first quarter was $387 million, an increase of $64 million from January 31, 2022 reflecting the net effect of a $66 million increase in new equipment partially offset by a $2 million decrease in used equipment. Strong sales and lower inventory levels continues to drive equipment inventory turns higher, which increased to 3.5 versus 2.3 in the prior year. I will provide a little more color on our inventory on the next slide. Parts inventory increased to $104 million at the end of the first quarter of fiscal 2023 from $96 million at the end of fiscal 2022. This higher level of parts inventory is the result of a concerted procurement effort to better ensure parts availability as well as the first quarter acquisition of Mark’s Machinery. The increased parts availability for our customers is critical given the global supply chain challenges and a compressed planting season. Our rental fleet assets at the end of the first quarter increased slightly to $67 million compared to $65 million at the end of fiscal 2022. We still anticipate our fleet size at the end of the fiscal 2023 to be around $70 million. On our March call, we provided some context around assets in our Ukraine business. Currently our total assets in this business decreased to $33 million from about $39 million in March, and our in-country assets and customer receivables have decreased to $24 million from $28 million previously. More importantly, however, we have improved the positioning of our assets within the country to more secure and less risky locations which are primarily in the western regions. In addition to moving our assets, the military’s ground activities are now farther away from our primary operations as they have shifted focus to the east and southeastern regions of Ukraine. As I mentioned earlier, we did increase our reserve for bad debts by $700,000 in the first quarter as an estimate of uncollectable accounts primarily due to the conflict; however, to date we have had no material loss or damage to our inventories or dealership locations. Turning to Slide 11, the amount of new and used equipment inventories are reflected in the size of the blue and red bars on this slide. We are very pleased with the level of inventory shipments received from our suppliers during the first quarter. The receipt of these orders generated the higher sales performance and are reflected in the $66 million increase in new equipment inventory in the quarter. At the end of the first quarter, we drove another sequential improvement in inventory turns to 3.5 times. Given the favorable industry conditions, health of our inventory and ongoing supply chain challenges, I expect we will continue to operate at higher turn levels throughout the year. Slide 12 shows our updated fiscal 2023 annual modeling assumptions, which we are raising today. While our business continues to perform well amid a strong agriculture industry backdrop, the environment remains fluid. Supply chains have yet to recover, inflationary pressures continue to intensify, and the situation in Ukraine could quickly change, thus please keep in mind that there is a higher degree of uncertainty in these assumptions compared to a normal operating environment. For the agriculture segment, we are increasing our revenue growth assumption to up 27% to 32% from up 22% to 27%. As a reminder, the assumption includes a full year revenue contribution from our Jaycox acquisition that closed in December 2021 as well as partial year revenue contribution from the Mark’s Machinery acquisition which closed in April 2022. For the construction segment, we slightly increased our assumption for revenue to improve from a range of down 12% to 17% to our current assumption of down 10% to 15%. Impacting this assumption is the divestment of our five construction equipment stores in Montana, Wyoming, and North Dakota in January and March of calendar 2022, which accounted for approximately $73 million of combined revenue. Excluding these revenues from the prior year base, our assumption equates to same store sales growth of up approximately 10% to 15%. For the international segment, we are increasing our revenue growth assumption to down zero to 5% from down 8% to 13%. Our improved forecast is supported by the demonstrated resiliency of our customers in Ukraine, our dedicated Titan team that is servicing those customers, and the transition of the direct ground offensive out of Titan’s footprint, particularly the Kyiv region. We are now modeling Ukraine revenues to be down approximately 50% versus 75% previously, which would result in an associated loss of approximately $0.15 per share versus $0.25 per share previously. As I mentioned earlier, we are also seeing more strength in other international markets than originally anticipated, particularly in Romania and Bulgaria. Given the improved modeling assumptions across all three segments of our business, we are increasing our diluted earnings per share assumption by $0.30 at the midpoint to a new range of $2.85 to $3.15 per share for fiscal 2023. This concludes our prepared remarks. Operator, we are now ready for the question and answer session of our call.

[Operator instructions] Our first question today is coming from Steve Dyer from Craig Hallum. Your line is now live.

Thanks, good morning guys. A couple quick ones from me. First off, when you guys last reported here about 60 days ago or so, I think you were relatively concerned or cautious on inventory availability, and it seems like you got a lot more a lot quicker than you thought you would. How do you expect the inventory to flow throughout the remainder of the year? I know at one point, you kind of hoped it would get a little bit better in the second half, but it seems to have already gotten better, so maybe help us how you think about that this year.

Yes, thank you Steve, this is Bryan. I’ll talk to a little bit of the flow here, then Mark can chime in as well. Yes, as you mentioned, it has been coming in nicely here and we feel good about the flow here throughout the remainder of model year ’22. We presold a lot of that equipment into last year. We’re communicating with all our suppliers on a daily basis and have good visibility to the order boards. As you know, very dynamic environment though, so definitely counting on and plan to experience potential movement within quarters where we are seeing continued shipping delays, and then--you know, a good supply of it coming in, though, and then as you saw in the increased amount of inventory we’ve got on hand, which is largely a function of which day you take the snapshot and a lot of that stuff is sold, so it’s really a function of how quickly we can get it through our shops and then out to the customers, and then occasionally waiting on a component on our end to finish off as well, you know, a retrofit or technology that way as well. Mark, anything to add?

No, I think that’s good.

Okay, thanks. Just on Slide 14, you talked about operating expense absorption kind of nicely above that 80% mark. Is that a sustainable level for the remainder of the year, sort of based on what you see?

Yes, those absorption rates are trailing 12 months, so yes, I think year-over-year we’ve got some expense pressures that we talked about with inflationary pressures, but I do think we continue to make good efforts on our parts and service business. I think international is doing a nice job particularly this year on that with some expanded margins, so yes, I think overall we could continue to see some into the foreseeable future, where we can grow all those absorption numbers in each of our segments and therefore on a consolidated basis overall.

Got it, and then lastly for me, floor plan interest has been fairly de minimis for a long time, just given your equity and inventory and rates. From a modeling perspective, do you expect that to move higher here with rates or are you going to kind of do some things to keep it low?

I think it’d just be a very small level of increase because of rates .Most of our floor plan, just about all--pretty much all domestically, our floor plan is non-interest bearing at this point, so until we utilize all our cash and get into more of the bank syndicate line that we have, there should be minimal impact on the floor plan interest expense.

Okay, thanks guys. Good luck.

Thank you. The next question today is coming from Daniel Imbro from Stephens. Your line is now live.

Yes, good morning guys, and congrats on the quarter. I wanted to start on the profitability side. Mark, this marks the third quarter of equipment margins above 12% and rental margins in the high 30s. On equipment, can you parse out new and used - are both strong, are you seeing particular strength in one or the other, and then can you talk about the outlook for the gross profit line here? Are these sustainable run rates for these parts of the P&L, just given the consistency we’ve seen in recent quarters?

With the equipment mix that we have in the first quarter, we did anticipate some level higher. As you recall, last quarter in the modeling assumptions when asked, I think I indicated 12% overall for the year, which would have been similar to last year if you take out those manufacturing incentives at the end of the year. First quarter we expected better, but it continued to be better than even what we had expected, so I think at the 12.9 it’s going to be hard to sustain, especially as we get out into the fourth quarter unless we achieve those manufacturer incentive again - generally that’s higher priced ticket machinery that carries a little bit lower margin to it. That being said, I think we’re at that, I’d say, a solid 12, maybe just over 12 for the year is kind of how we’re looking at it today.

Got it, that’s helpful.

Oh, sorry - Dan, you did ask about new and used, and we’re still seeing strength on both sides of those, particularly used with the supply shortage out there, the tight inventory supplies out there, so we are seeing it on both sides.

Yes, thank you. Then it’s good to hear Europe holding in better than expected, but David, I think the last sentence in the release, you did note there was some recent market turbulence. Was that comment to indicate anything has changed here in the last few weeks, kind of second quarter to date, or how should we interpret that comment just as we think about your visibility in the European segment?

I think what I’d talk about probably overall--the noise out there in the macro, you know, total market, I think more so than our specific. I think if you look at the industry, we’re doing business in build and feed the world. I think we’re in a really good spot right now, maybe a little bit different than the overall macro backdrop.

Perfect, perfect. Then last one from me, David, on Slide 5 you mentioned the potential for higher crop prices to support construction sales, particularly for land upgrade in the farm economy. I feel like that’s been an opportunity for at least the last year just given the stronger earnings for farmers, so I guess is this happening yet, and what do we need to see or what needs to happen to really capture this opportunity and drive those construction sales in those markets?

Well, I think the one good thing that we’ve got going for us, if you look at our construction footprint, you know, upper midwest, some of the rural midsized markets, some of these regional trade centers, and if you go across and look at a lot of the farms, you’re going to see definitely skid steer loaders and forklifts because a lot of that--you know, I guess if you look at the palletized, whether it’s seed or chemicals all coming in palletized, so the feed lots are--you know, big pay loaders are going from--you know, the big pay loaders in the--from the farmer’s standpoint, there’s a big return on investment over buying new land, it’s improving your existing land, so removing trees growing on the farm, removing farmsteads, putting in tiling, irrigation, so all those things have a huge return on them, so if you look at the farms, there’s skid steerers, there’s forklifts, there mini excavators, there’s excavators, there’s large wheel loaders, you know, loader backhoes across the board, so we continue to--and I mean, we’re in a good footprint for this, so we’re continuing to see that. Especially that’s a good spot for some of the late model used construction equipment, so all in all I just think it’s a--and at these commodity prices and the shortage of some of the new ag equipment, farmers are going to say, hey, good time to buy that wheel loader or that excavator or that loader backhoe or that forklift or that skid steerer, so that’s what we’re seeing out there.

Yes, and Dan, this is Bryan. I’ll just add in, you know, we have been seeing that, to your point, and expect to continue to see it. In addition to what David said, the old saying, the agriculture dollar turns eight times over in the community, and so with our footprint in the upper midwest and the agricultural economics have a large impact on the Midwestern economy, so that money tends to get spent on a lot of things like building grain bins or even on the housing side as well, so a lot of other impact that way too.

Okay, great. Good luck going forward, guys.

Thank you. The next question is coming from Mig Dobre from RW Baird. Your line is now live.

Hey, good morning guys, it’s Joe Grabowski on for Mig this morning.

Good morning Joe.

Good morning. I guess I’d like to build upon a couple previous questions, starting off in North American ag. You raised your revenue outlook by five percentage points. How do you kind of think about that increased outlook? Is it a function of more product availability from the OEM, better end user demand, better realized pricing? How does that break down versus 60 days ago?

Yes, I think the big thing for us was the inventory availability. Late in our first quarter, we did receive a good amount of shipments in - that’s reflected in the sales number in the build of that new inventory, so compared to fourth quarter--and that’s where some of this came from, right? We had that shortage in the fourth quarter, some of that ended up here in the first quarter, but there was a nice catch-up if you will from our perspective on the deliveries of some of those inventories, so that is the main driver of that.

Got it, okay. Thank you. Then switching to the outlook in Ukraine, 60 days ago you thought your revenue would be down 75%, now you think revenue is going to be down 50%. Was the March outlook a worst case scenario and what are the conditions on the ground that are built into the assumption for revenue being down 50%? Is there a chance for additional upside there?

Yes, I think it was relative--I think we were a month in at the time when we had our call into the conflict starting. A number of our stores still weren’t fully open. There was a lot of military ground activity right around one of our bigger hubs over there in Kyiv, around the Kyiv area - Kyiv oblast, so some of the bigger changes for us is that ground military offensive that was taking place there is no longer there - as you know, it’s much more in the east and southeast now, located there. We really only have one of our locations, that location is still open now, all locations are open, but that location has some ground activity around it in the Kharkiv region but otherwise, all of our stores are pretty much fully functioning. I think those are some of the big differences from when we spoke a couple months ago. As far as upside, yes, there definitely could be upside if the conflict ends tomorrow or ends soon, or starts phasing down, certainly that would help the overall atmosphere over there for agriculture and our customers’ business, and therefore affecting us. I would say there’s certainly some room for upside, but it could also go the other way if the conditions over there go the other way as well. It’s tough to estimate, right, but this is our best estimate at this time.

Yes, that makes sense. Final question from me, international margins were really good, were really strong, and if you exclude the $700,000 charge, it might have been the best margins ever in international despite everything that’s going on. Maybe just talk a little bit about what’s driving the good margins and is this sustainable.

Yes, we were very pleased, especially in the first quarter here because historically it’s not the strongest the quarter. You get into that second, third quarter, it generally strengthens. A couple things I would point out is just--again, I mentioned it on the call, but Romania and Bulgaria were very much strong results and good from a margin perspective, good from bottom line-top line perspective. That more than offset what happened in Ukraine. Ukraine was still a drag year-over-year, of course, but Romania and Bulgaria were very strong in the revenue--from a revenue standpoint, and margins--and I would say margins kind of across the board in equipment, parts, service, and--you know, for parts and service, I think they’re getting closer, and I think this is a longer term trend but I think they’re getting closer to the margins that we’re seeing in the business over here domestically. Equipment margins, I think that’s a little bit more of a--you know, with the supply shortage, that type of thing where there is some strengthening margins in the quarter, that showed up there, but I think the parts and services is more longer term sustainable.

Great, thank you for taking my questions.

Thanks Joe.

Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over to Mr. Meyer for any further or closing comments.

Well, thank you everybody for participating on the call today, and we look forward to talking to you next quarter. Have a great day.