This article first appeared on GuruFocus .
-
Total Revenue:$496.4 million, down from $546.4 million in the prior year period, reflecting a 6.2% decrease in same-store sales.
-
Gross Profit:Essentially flat at $92.4 million, with gross profit margin expanding 150 basis points to 18.6%.
-
Equipment Margin:Improved 190 basis points year-over-year to 8.5%.
-
Operating Expenses:$94.1 million, up modestly year-over-year.
-
Floorplan and Other Interest Expense:Decreased 30% to $8.1 million from $11.5 million in the prior year.
-
Net Loss:$9.2 million or $0.40 per share, compared to a net loss of $6 million or $0.26 per share in the prior year period.
-
Adjusted EBITDA:$4.6 million compared to $5.6 million last year.
-
Domestic Ag Segment Sales:$310.2 million, with a same-store sales decrease of 8.4%.
-
Domestic Ag Segment Pretax Loss:Improved by $9 million to $3.3 million versus the prior year period.
-
Construction Segment Sales:Same-store sales increased 9.2% to $78.6 million.
-
Construction Segment Pretax Income:Improved to $0.4 million compared to a pretax loss of $1.2 million in the prior year.
-
Europe Segment Sales:Declined to $66.1 million, with a constant currency revenue decrease of approximately 34%.
-
Europe Segment Pretax Loss:$1.3 million compared to pretax income of $5.1 million in the prior year.
-
Australia Segment Sales:Increased 36% to $41.4 million, with constant currency revenue up 22.5%.
-
Australia Segment Pretax Loss:$3.4 million compared to a pretax loss of $2.1 million in the prior year.
-
Total Inventory:$931.5 million at quarter end, a modest increase of $28 million compared to year-end.
-
Cash:Approximately $30 million as of July 31, 2026.
-
Adjusted Debt to Tangible Net Worth Ratio:1.6 times, well below the bank covenant of 3.5 times.
Release Date: August 27, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
Consolidated gross margin expanded by 190 basis points year-over-year, driven by improved equipment margins and a higher mix of parts and service revenue.
-
Domestic Ag segment pretax loss improved by $9 million year-over-year, reflecting successful inventory reduction initiatives and stronger equipment margins.
-
Construction segment performed well, with same-store sales up 9.2% and pretax income turning positive, supported by infrastructure and data center projects.
-
Floorplan and other interest expense decreased 30% year-over-year due to significant reduction in interest-bearing inventory levels.
-
Australia segment saw strong growth, with constant currency revenue up 22.5%, benefiting from the addition of the New Holland brand and improved customer sentiment from healthy rainfall.
Negative Points
-
Europe segment results came in below expectations, with constant currency revenue down approximately 34%, due to challenging market conditions, geopolitical uncertainty, and weaker farmer sentiment.
-
Consolidated net loss widened to $9.2 million from $6.0 million in the prior year, with adjusted EBITDA declining to $4.6 million from $5.6 million.
-
Domestic Ag same-store sales decreased 8.4%, and equipment revenue was down 13.5%, reflecting continued soft demand in the agricultural market.
-
Australia segment reported a pretax loss of $3.4 million, wider than the prior year's loss, due to softer equipment margins and ongoing work to clear aged inventory.
-
The company expects headwinds in the back half of the fiscal year due to a pull-forward of equipment deliveries, with Domestic Ag equipment sales projected to decline about 20% in the second half.
Q & A Highlights
Q: How is the turmoil in the Black Sea region impacting your markets, and what is the outlook for the Agriculture segment given recent commodity price movements? A: Bryan Knutson (President and CEO) noted that the Black Sea conflict is heavily impacting grain movement for customers in Ukraine, leading to careful inventory management there. Conversely, it is a positive for US and Australian markets, with anticipated increases in wheat and other small grain prices. Regarding farmer purchasing, he clarified that while corn futures are around $5.50, the local cash price is lower due to basis differences (ranging from $0.30 to over $1.00 depending on location). The recent rally in commodity prices, driven by weather and global events, is encouraging for farmer profitability in 2026. If these prices sustain, allowing farmers to forward contract for 2027, a material impact on equipment buying could be seen then.
Q: Can you provide more detail on the equipment margin performance and the outlook for the second half of the fiscal year? A: Robert Larsen (CFO) reported that Domestic Ag equipment margins were 6.7% in the first half, a significant 360 basis point improvement from the 3.1% seen in the prior year period. He expects full-year Domestic Ag equipment margins to be around 6.9%, implying a slower pace of improvement in the back half. He reiterated that the normal range for these margins is 8% to 12%, and while the company is pleased with the progress, reaching the lower end of that range will require a lift in industry volumes, which are currently at half the historical average.
Q: How should we think about the revenue cadence between Q3 and Q4, and what is driving the differences? A: Robert Larsen (CFO) explained that the company expects Q4 to be slightly stronger than Q3. He highlighted a key timing shift in Domestic Ag, where first-half equipment sales were down 13.5%, but the full-year guide implies a steeper decline of about 20% in the back half. This is due to earlier-than-anticipated shipments of presold equipment from factories, which pulled deliveries into the first half and creates a tougher comparison for the second half of the year.
Q: What are the moving pieces behind the losses in the Australian segment, and what needs to happen to reach breakeven? A: Robert Larsen (CFO) attributed the current losses to softer equipment margins as the company works through its aged inventory, a process that is behind the US in timing. While farmer sentiment was weak in the first half, recent healthy rainfall is expected to produce good yields and improve demand. The company expects a full-year pretax loss in the low single digits for Australia but anticipates the profitability profile to improve next year as the inventory work is completed.
Q: Is the geographic expansion into Europe and Australia an asset, or would refocusing on the US and Canada generate better returns? A: Robert Larsen (CFO) defended the international footprint, calling Australia a "strong asset for the future" despite the unfavorable timing of the market downturn. He emphasized that the company is focused on divesting underperforming locations, like Germany, and concentrating on density in the Upper Midwest. While M&A in the US is considered the most impactful use of capital, the company remains committed to its Australian operations and expects them to generate shareholder returns as industry conditions normalize.
Q: Can you clarify the earlier-than-anticipated shipments and how the recent improvement in farmer economics is affecting inventory management and year-end buying? A: Bryan Knutson (CEO) explained that the early shipments were due to factory lead times fluctuating by a month or more, and since customers want equipment as soon as possible, the company delivered it immediately. Robert Larsen (CFO) added that the company is not changing its inventory strategy based on the recent commodity price rally, as year-end buying decisions are typically made in late November and December. He highlighted that year-to-date, used equipment inventory is down $40 million, new equipment is up $60 million, and total Domestic Ag inventory is down $16 million, reflecting a focus on improving mix and reducing aged stock.
Q: What are you seeing in terms of pricing for new and used equipment? A: Bryan Knutson (CEO) stated that new equipment pricing is relatively flat, with list price increases generally offset by promotional programming. On the used side, he noted that values are stabilizing and finding a bottom, which is ending the divergence between new and used prices. However, the spread has not yet converged. He believes that as other dealers finish cleaning up their aged inventory, used prices will firm up further, which should support increased trading activity and industry volumes next year.
Q: What are your current thoughts on the US ag market heading into next year, and are you seeing similar trends to what the OEMs have commented on? A: Bryan Knutson (CEO) confirmed that the company is seeing similar trends to the OEMs, with early order books for seasonal equipment like planters and sprayers moving in the right direction. He reiterated that the long-term structural fundamentals are positive, including aging fleets, strong livestock markets, and growing demand for biofuels. He believes that if commodity prices can sustain their recent gains, it could provide a significant boost to farmer profitability and equipment demand heading into fiscal 2027.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
