TWI

Good morning, ladies and gentlemen, and welcome to the Titan International, Inc first quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. If you need assistance during the call, please press star followed by zero on your telephone keypad. It is now my pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Investor Relations for Titan. Mr. Snyder, the floor is yours.

Thank you. Good morning. I'd like to welcome everyone to Titan's first quarter 2026 earnings call. On the call with me today are Paul Reitz, Titan's President and CEO, and Tony Eheli, Titan's Senior Vice President and CFO. I will begin with a reminder that the results we are about to review were presented in the earnings release issued this morning, along with our Form 10-Q, which was also filed with the Securities and Exchange Commission this morning. As a reminder, during this call, we will be discussing certain forward-looking information, including the company's plans and projections for the future that involve risks, uncertainties, and assumptions that could cause our actual results to differ materially from the forward-looking information.

Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward-looking statements can be found within the safe harbor statement included in the earnings release attached to the company's Form 8-K filed earlier, as well as our latest Form 10-K and Forms 10-Q, all of which have been filed with the SEC. In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement but not be a substitute for the most directly comparable GAAP measures. The earnings release which accompanies today's call contains financial and other quantitative information to be discussed today, as well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures. The Q1 earnings release is available on the company's website.

A replay of this presentation, a copy of today's transcript, and the company's latest quarterly investor presentation will all be available soon after the call on Titan's website. I would now like to turn the call over to Paul.

Thanks. Good morning, everyone. Our first quarter marked a solid start to the year, with revenues and adjusted EBITDA near the high end of our guidance ranges. That result was well-earned, given the continued headwinds we see in our end markets, largely due in part to the geopolitical developments that are out there. For Titan, times like this are when we set ourselves apart from others. Our diverse product portfolio, strong global footprint, and our one-stop-shop distribution surrounded by the strength, the resilience of our One Titan team is our competitive advantage. While we cannot control cycles, we can control how we respond, and our response is clear. We fight for every opportunity, we earn every customer's business, and we continue to invest in innovation to make equipment perform better.

This past quarter, our results illustrate that our team continued to execute well and take operational, commercial, and organizational actions as needed. As our customers continue to contend with end market demand that is hard to predict, you know, the natural response is to limit downside exposure, with inventory being an area where many are hesitant to tie up working capital. That approach also limits their ability to respond to any instances of meaningful customer demand, and a result, this just-in-time inventory paradigm really becomes a self-fulfilling prophecy, where it's, "How soon can you get me this?" Which is the typical response to customer orders. Throughout this cyclical trough, though, we have prioritized our ability to be highly responsive to our customers.

With every sale and customer experience so vital for OEMs and our dealers, our value built on our global manufacturing footprint, our strong distribution channels, and the strength of our JV and third-party partners is how we help our customers serve their end markets and their end customers every single day. Flipping over to the market landscape, I think it's helpful to really look at that by segment. Let's start with ag. In the U.S., farmer incomes are currently expected to be relatively flat compared with last year. Those estimates were published around the same time as the Iranian conflict, there is the possibility that if input costs remain high, such as diesel, that will continue to be a drag.

You know, on a positive note, though, our sense is that most U.S. farmers had already bought fertilizer for the season, so the recent increases there should not be as big of a factor. Used equipment inventories have continued to come down, albeit as slowly as major OEMs have been making significant progress on finished goods destocking. Obviously been a topic spoken about quite extensively over the past year. We do believe, and we're seeing that sentiment is indicating a willingness to invest in the near future. We just need that catalyst that's gonna stoke that fire. Taken all together, the overall Ag current outlook for 2026 is pointing to a slightly down year, with many pointing to 2027 as the likely timeframe for that growth to return.

You know, conditions are improving around the margins, there really is just no clear signal right now for that timing of a rebound. We do believe that could come sharply, though, when that happens when you look at the length of the downturn, the age of the equipment, et cetera. For Titan, it's worth reiterating that during normal market conditions, our orders for OEMs are often a leading indicator. You know, we've mentioned that a number of times. You think about the ordering process for us to get raw materials in, especially on the wheel side. With inventories lean out there in the market, it is reasonable to think that we would see some ordering later this year ahead of the anticipated 2027 OEM deliveries.

That is all obviously a couple quarters away, but I wanted to highlight this point as it supports our full year guidance. In addition, the recent news from the EPA when it comes to renewable fuel standards looks like to be another one of those somewhat supportive regulations and things that we can point to for the future as that would clearly be a good move to change those minimal renewable fuel obligations and helps the overall demand picture for grains. Taking that all together again, we continue to view the environment as cyclical, not structural. The elevated interest rates, tighter credit and policy uncertainty have led to this cautious behavior that we've seen across the Ag sector. As we've noted before, a significant portion of our agriculture exposure is replacement driven, not discretionary.

Even in down cycles, equipment must stay operational and our products remain critical components of that equation. Lastly, what we're seeing is that signs in the Ag market is stabilizing after a multi-year reset rather than deteriorating further. While this is not a rapid recovery environment, early indicators, particularly in used equipment and farmer sentiment, suggest conditions are bottoming and normalizing gradually. That type of recovery path also aligns well with Titan's operating model. Importantly, we believe Titan is well positioned from a trade and supply chain perspective. Our U.S. manufacturing base combined with our global production footprint provides flexibility in an environment where tariffs and trade policy continue to influence costs and sourcing decisions. We are seeing that play out now in the European wheel market where our well-established, integrated and efficient operating model that we have over there is winning us Ag business at a healthy rate.

In summary, while Ag remains in a down cycle today, Titan is well positioned to remain resilient through that cycle and participate as conditions improve. We don't need a sharp rebound to perform. Incremental improvement combined with our disciplined execution supports our outlook. Moving on down to South America, Brazilian Ag has been contending with really an unfavorable political climate to kind of put that simply and nicely. That has depressed activity generally and as a result, we've seen some softening in our Ag Tires sales there. Unlike their U.S. counterparts, Brazilian farmers have generally not purchased fertilizer for the next growing season, so higher costs will have a bigger impact on their activity. Conversely, our ITM business in Brazil has been performing really well to start the year. In fact, that's surpassing our own expectations.

That segues nicely into our EMC business where if you look at our EMC business last quarter, that has reported, as was the case last quarter I should say, we once again reported the best growth of our three segments in EMC. Construction equipment demand in the U.S. has been a relative bright spot and looks to be well represented across a variety of end markets, giving us that confidence that demand will remain firm. Activity in Europe has gotten a little bit more muddled in terms of competitive dynamics, although the macro there continues to be supported by longer-term infrastructure investment. We have been winning business in the European construction wheel market, similar to what I noted about Ag. Now lastly, flipping over to our consumer segment, we are seeing some positive trends there in Q2.

We have some really nice wins coming from our team with a few different customers to start the year. We are seeing our consumer business growing over the course of the year when you look back and compare that to 2025. Overall inventory levels are healthy. Inventory sell-out, or overall sellout I should say, and sell-in appear good. We did see a small drop in Q1 as power sports equipment has been a bit softer with higher gas prices creating that headwind. However, business consumers in outdoor power equipment and turf, they are commercial driven, so they have inelastic demand and they need to continue to run their equipment to service their customers. We see that business holding up better in that sub-market. Again, I want to reiterate it for the full year in consumer, we expect to see revenue growth.

Looking ahead to Q2, included in our guidance is an approximately $3 million headwind in operating margins due to the impact of the war in Ukraine. This is coming from the sudden acceleration of many costs and the mismatch in the timing of price increases with OEM contracts. We've talked about that previously. Overall, these contracts do serve to protect us, but at times there can be a timing difference. On a longer-term horizon though, looking beyond Q2, we do expect the lion's share of the cost increases that will impact us in the second quarter to be directly offset with corresponding price increases. In summary, I want to leave with the overarching message that much as it was last quarter, it is ultimately consistent with our long-term focus and positioning. On a daily basis, we center ourselves and our business on servicing our customers.

That means having the products they need, where they need them, and when they need them. It also means a continued focus on innovation, which is guided by the ultimate question of how do we help our end market users. From farmers to miners to landscapers, we have the most diverse portfolio in our sector, and we want to see our customers get the most out of their machinery investments. That North Star, if you will, is guided by, helped guide the development of our LSW lineup, which has been a big win for Titan for a number of years. I've highlighted the benefits of LSW on many of these calls, but I want to emphasize it once again, the ability LSW has to help farmers reduce their fuel usage.

With fuel prices currently high due to the conflict in Iran, our LSWs offer farmers an important tool to help mitigate some of that increased fuel costs. We do, and we will continue to prioritize our investments in R&D, continue to bring these value-added products to the market, and in doing so, further solidify our market-leading position in off-road wheels, tires and undercarriage. Over time, we've deliberately repositioned Titan into a more structurally resilient and strategically focused organization, capable of delivering through these evolving cycles. That includes maintaining a balanced cost structure, a broad product offering, and a global manufacturing and distribution footprint that's second to none. Strategic actions like the Carlstar acquisition further strengthen our ability to navigate these markets cycles with greater stability.

As we look ahead, we are confident in the durability of our business model, the diversity of our product portfolio, our global footprint, and most importantly, the strength of our people and our ability to continue delivering value to our customers. With that, I will turn it over to Tony.

Thank you, Paul. Good morning, everyone. Thanks for joining us today. As Paul noted, our results for the first quarter were solid, with revenues and adjusted EBITDA above the midpoints of our guidance ranges. There are some important financial metrics to highlight this quarter. First, sales grew 2.9% year-over-year. EMC segment sales led our growth, expanding 11%. Gross margins improved to 14.1%. Adjusted EBITDA grew to 31%-- sorry, grew to $31 million. Reviewing our business by segments, I'll start with EMC as it continued to lead our growth as construction remains strong. Segment revenues were up 11% to $160 million. Geographically, sales volumes had solid growth in both the Americas and the European Wheel business, driven by strong OEM demand.

As was the case last quarter, the EMC Segment enjoyed a nice contribution from foreign currency translation, which added 6.1% to the relative performance. While Ag Segment sales were relatively flat from the prior year and slightly down organically, we are encouraged by this, as we have had several years of double-digit Q1 sales reductions in the Segment. U.S. aftermarket sales were flat in the quarter compared to prior year, but more importantly, is expected to grow when looking ahead. We also saw an increase in LSW sales. Another positive note is that we had solid growth in our Europe wheel Ag business, driven by improved customer orders and are expecting to have a stronger year altogether in Europe. Our Brazilian Ag business continued to moderate as farmers in Brazil are still contending with higher input costs and high interest rates.

Governments in the region have been working to support their farmers by boosting renewable fuel production, thereby absorbing some of the grain supply. Altogether, we expect 2026 to remain challenging in the region. Lastly, in consumer, Q1 sales were down modestly from the prior year due to market conditions modulating due to tariffs and continued elevated interest rates. On a positive note, we saw improved demand from our OEM customers, which aligns with recent analyst and recent OEM earnings reports that pointed to tough exposed businesses being less cyclical and more resilient. Looking at margins by the segment in the quarter, EMC showed nice expansion as revenue growth allowed for better fixed cost leverage. EMC gross margin in Q1 was 11.3% versus 10.4% in the prior year.

Our gross margin was slightly lower compared to prior year at 12.1% versus 12.4%. Consumer gross margin improved to 19.9%, compared with 19.6% as cost reductions and productivity initiatives had a positive impact. Moving on to SG&A, if you followed our company for any length of time, you know that we maintain a lean organization that handles market ups and downs with more predictability. For the first quarter of 2026, SG&A, including R&D, was $57.7 million, compared to $54.4 million for the comparable period in prior year. Primarily due to foreign currency and general inflationary impacts, including healthcare. We continue to take actions to manage and reduce our costs.

Operating cash used during the first quarter was $47 million, which was consistent with our normal seasonal ramp in working capital, particularly accounts receivable, which increased concurrently with a sequential step-up of $95 million in sales. CapEx in the first quarter was $13 million compared to $15 million in the prior year period, as we continue to be prudent and make measured investments in our business. As a result, free cash flow was -$60 million with net debt at quarter end of $441 million and a leverage ratio of 4.3x. This usage of cash was in line with our expectations for the quarter, and we expect it to improve through the rest of the year.

Reducing our leverage remains a key goal as we progress through the year. Tax expense for the first quarter was $4.6 million, which was in line with our expectations. The effective tax rate of -23%, as we have previously explained, is a function of where our profits and losses are distributed geographically and the applicable tax laws in each of these areas are reiterated. As we see a rebound in market conditions domestically in the U.S., we expect to get back to normalized tax rate levels. For Q2 2026, we expect tax expense to be in the $4 million-$5 million range, which is similar on a sequential basis to Q1 this year and comparable to Q2 last year. A strategic event of note during the quarter was our decision to close our Jackson, Tennessee plant.

We recorded non-recurring restructuring expense of approximately $25 million associated with this decision. Of this $25 million, it is important to note that the vast majority, approximately $23 million, was non-cash. The plant closure was a long-term synergy that was identified at the time we closed the Carlstar acquisition, as we knew the combined business would have excess manufacturing capacity in the U.S. and that this decision would be accretive to our earnings. We expect to complete the closure by the end of October. An estimated total cash cost to close the plant to be approximately $7 million, while yielding annual cash savings of $5 million, which will accrue beginning next year.

Moving on to our financial guidance for Q2 2026. Our guidance for the quarter is revenues of $470 million-$490 million and adjusted EBITDA of $25 million-$30 million. Versus last year, that guidance implies some top-line growth along with modest reduction in bottom-line performance compared with last year's Q2. The primary factors driving the bottom-line reduction are OEM pricing pressure and additional cost pressure that Paul went through related to the Iran conflict. For fiscal year 2026, our financial guidance remains unchanged and is as follows: revenues of $1.85 billion-$1.95 billion and adjusted EBITDA of $105 million-$115 million. This guidance range is reflective of modest improvement compared to 2025 on both the top line and bottom line and reflects our belief that Titan should benefit from increased customer activity in the fourth quarter, supporting readiness for an expected Ag recovery next year.

On the whole, our end markets remain dynamic as equipment buyers contend with ever-changing and challenging market conditions. We at Titan have the financial discipline and are strategically well-positioned to navigate these conditions, serving our customers better than anyone else. Thank you for your time this morning. We would now like to turn it back over to the operator for the Q&A session.

We will now begin the question-and-answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your headset before pressing the keys. To withdraw your question, please press star, then two. Your first question comes from Mike Shlisky with DA Davidson. Please go ahead.

Hi, good morning. This is [Linda] on for Mike. Thank you for letting us ask questions. My first question is on Ag. I think in your Ag commentary, you highlighted challenges, particularly in Brazil. My apologies if I missed your commentary in Europe, but could you give us a little more detail on Ag markets in Europe and the rest of South America compared to North America?

Yeah. No, it's a good question. We are seeing some differences in those regions, and it has somewhat come on suddenly. There's always a number of different moving parts going on in the global marketplace. You know, starting more specifically in Europe, you know, we've seen that market just remain more stable through time. As the challenges in the world are out there, you know, Europe has remained more stable. What we're seeing in particular to Europe, though, is really getting some good wins. Our team is built a very well-established supply chain integrated network and an efficiently efficient working model. We've been able to pick up some nice-sized wins in that business, in that marketplace.

Specifically, my comments on Europe were more directed at what Titan has done specifically there to garner some new business. We'll see that impact through the course of the year, as Tony and I mentioned. You know, overall, the European market has just been less susceptible to the ups and downs. You flip over to Brazil, that is definitely not the case, where Brazil can swing in larger movements quite rapidly. What we're seeing there, you know, outside kind of what's going on with the global Ag marketplace, farmer incomes, et cetera, is just the politics in Brazil have gotten complicated and messy for them. You know, spending a lot of time with our team talking through that, it's just having an impact on business in the short term.

You know, again, overall, I think the dynamics of Brazilian agriculture are good and certainly they had a strong 2025. They are facing some political headwinds right now as they work through a presidential election that has some differing viewpoints on what's best for society and the economy there. That's where our comments are directed with Brazil, is that we are seeing some short-term impacts there, but again, remain positive in just the fundamentals of what's going on in Brazil. North America, I mean, there's been so much talk about North America.

You, as you look back to the beginning of last year and the expectations for when the rebound was gonna happen, a lot of thoughts were that that should have already taken place, and then some global disruptions have pushed it back. You know, we continue to see that mindset where around the margins things have continued to improve, however you wanna look at it from inventory, the age of equipment. I do believe what Secretary Vilsack has been saying about the administration support towards farmers is important. I think we're at a point where it will go up. It's just, again, that continuing question of when.

What our comments are directed at is at Titan, in order for the OEMs to fulfill their orders when demand picks up, we are a strong leading indicator for that, especially on the wheel side. What we are saying in our guidance is that with that belief that we support as well, that 2027 will be an uptick for agriculture, we expect to see some orders that would start coming in later this year to support that.

With the inventory positions in the marketplace, you know, we believe that, and the age of the equipment, you know, there's enough factors that if things do improve. You know, it can be a nice healthy improvement that kicks into gear, you know, in relatively short order because of the length of the downturn, which I believe we're kind of getting right on that 40-month mark, which is really long in duration. Hopefully I answered your question. I kind of touched all the key areas. If you have any follow-up, let me know.

That's very helpful. Yeah, thank you for the color. Sticking with Ag, with the commentary, what are you hearing, or what are the Ag OEMs telling you about 2027 at this point?

Yeah, it's tough. I mean, it's still a little bit early, especially when you throw in the Iranian situation and just the spike in energy prices and costs around the world. Little early to get those feelings for 2027. You know, we have seen, one of our major customers did put a little uptick in for the remaining forecast for the rest of 2026. Really if they did start giving us forecast for 2027, I'm not sure we would take a lot of action and spend a lot of time focused on it just yet. As we get past Q2 into the second half of the year, that's when we'll start having those serious conversations with our OEM customers about where 2027 is going.

Right now, the global disruption just makes 2027 pretty hard to talk about.

Yeah, no, that makes sense. Then switching to a different topic, have the Section 232 tariff changes that took effect in early April made any impact on your pricing and orders for 2026?

It, it will have an impact. It, it certainly will. It's kind of a balance between good and bad. We've spent some time really over the last week understanding that. Depending on which part of our business we're looking at, there may be some cost increases, but other parts of our business will see some benefits as the imported products will face some cost increases. My overall assessment in working with our team on the, on the Section 232 changes is that we will get some cost increases that we will be able to support through price increases. It is smaller than the amount of cost increases that our competitors will face with what's being imported.

Net-net, we should see a positive, again, assuming that our competitors are not just gonna eat those Section 232 cost increases and that they will have to pass most, if not all of that on to the end customer. The net-net balance to us would be positive from the Section 232 changes.

Thank you. That makes sense. Then my last question. I understand your rubber is sourced mostly from West Africa and not so much passes through the Strait of Hormuz. Do you have any of your chemicals or any, I don't know, other raw materials sourced, or passed through from that region?

The short answer is no. There's nothing we do that is directly impacted passing through there.

Good. Thank you for it.

Your next question comes from Steve Ferazani from Sidoti. Please go ahead.

Morning, Paul. Morning, Tony. Appreciate all the commentary this morning. You certainly addressed some of the main questions I had. Appreciate that. Paul, you know, it's been two years since we've had any company that we cover point to Europe as a strength. Do you wanna cover a little bit about what specifically? 'Cause I don't hear that a lot, so that's a nice surprise. Also in general, your thoughts on EMC. You know, obviously in your guide, you're assuming EMC remains very healthy. I mean, that was your best margin and revenue in that segment in it looks like seven quarters. What can hold that up, maintain it, versus what are the risks given all the geopolitical concerns?

Yeah. Yeah, no, it's good. You're right, Europe doesn't get mentioned often, and I guess that maybe says something about the continent and what's been going on there. For us, Europe, I'm gonna point to really the strength of Titan when I answer this. I mean, we play the long game with what we do. You know, we talk about that a lot with how we approach servicing our customers, how we look at this business where we wanna have the most diverse product portfolio. I mean, having that one-stop shop isn't just about distribution, it's a one-stop shop of having the products available for our customers. In Europe, we took an ultimate long game, started many years ago with different pieces.

As I look back a year, 10 years ago, excuse me, you know, building an integrated supply chain that used low-cost countries. You know, the problem with Europe is obviously the cost structure there is high. It's why the continent is not talked about in a positive way often. We built an integrated supply chain that started with a joint venture partner in China, that has performed tremendous. We're able to service a number of needs with finished goods in markets. A big part of that is we're able to service our own plants in Europe, with components that keep our cost structure better than the competition.

We also have a low-cost plant in Turkey that's fantastic, that we've continued to invest in, and we're able to take components from Turkey while servicing and being by far the dominant provider to the Turkish Ag market, which is, I still believe, the fifth largest Ag market in the world. We have a dominant market share there, where we have run a competitor out of business in Turkey. We're also again able to supply components from Turkey into our European Wheel business. With all that being said, it's really starting to pay off. I mean, our structure's better than anybody else's. Wheels are critically important. They're highly engineered products that require massive investments into not just plants and equipment, but in the tooling to service that.

We've really put the squeeze on our competitors there, and we're starting to win a lot of business. I think as the chaos goes on in the world, that's where these decisions that Titan has made over the long term can really pay off. Europe is a really good example of that. That's why today I've been highlighting Europe. It's become an important part of our message for this year. Like I said, we've been talking about how we run the business for a long time, and just wanna highlight that as a strength of us as it's starting to pay off. It is in some of our Q1 numbers. It will continue to be in more of our numbers throughout the course of the year.

Answering your question kinda EMC overall, Steve, I mean, it is clearly an area of strength just globally. You know, some of that maybe gets distorted on energy, AI center build, et cetera. But for us, it's performed well. I think typical to what we say about Titan, it's the diversity of where and what we serve with our products. We've picked up some strength in U.S. We're doing good in Australia. We're continuing to, you know, to see the aftermarket hold up as we reference quite frequently. I think the part that we kinda cautioned some of our comments with EMC, Steve, is just around the primarily the German OEMs. You know, they're facing some pretty intense competition.

I do think over time, Europe has got to wake up and put some regulations in place that I know they're doing some local content rules with autos, but the large equipment manufacturers there, I think something's needed as well. We've seen our German OEM forecasts have been more volatile this year, and for many years, they were just stable as could be. The one spot that we're keeping a close eye on is just what happens with some of the German OEMs that. Maybe our commentary is a little bit different than what you'll hear from some of the larger OEMs just talking about EMC in general.

Got it. Got it. Appreciate all the detail on that. You covered a lot of this, but I just want to make sure I have clarity on it in terms of your 2Q guide versus full year. Because it looks like, certainly sounds like lower than maybe what you were in margin-wise 2Q. A little bit lower than probably where you were internally, certainly lower than us. It sounds like you are addressing this as. I remember post-COVID, the inflationary period where you had to re-change some of your agreements with the larger OEMs where you would get to catch up on the inflationary pressures. There's a lag to that.

Is that what you're sort of pointing to in terms of 2Q versus the rest of the year, where the margins will be particularly pressured 'cause of inflation in 2Q, and then you catch up in the second half of the year? Is that what I was hearing?

Yes, it's timing, in a sense that when the costs take effect, like, you know, the pricing change is based on structured contracts that have specific times.

Yeah

Quarterly, some semi-annually. It doesn't happen the same time. We already have it in the contracts. What's different this time is we have to go renegotiate. It's already there. We're not renegotiating anything. It's gonna come through.

Right.

For the rest of the year, we don't expect to see much of an impact because we'd have had that price come through outside of Q2. At some point, we will actually get a benefit because of the hits we are taking in Q2 now. That's why we called out Q2, because it's just timing.

Okay. This is really, a lot of this is thanks to a lot of those agreements you worked on three, four years ago. You were ahead of this.

Yes.

Got it. That's very helpful. And then in terms, Paul, of your guides, you are indicating you do expect to see that recovery on Ag to at least some degree in 4 Q ahead of what we hope is a better recovery in 2027. What do you need to see over the next three to four months that would give you more or less confidence that that could be coming?

I think it's a common answer. It's just some stability in the world.

Yeah

The farmer income, you know, that gets beat up all the time. Clearly that it's getting enough government support that I'm not concerned about farmer income, but clearly some stability. I think it kind of comes down to psychology and sentiment, really. I think farmers are wanting to purchase. They got equipment that's aging. Inventories at the most levels look okay. It's just getting that psychology and that sentiment to kick into gear and say, "Yeah, now is a good time to buy." It's just that confidence. I'm of the belief that the world is gonna get more stable versus more complex, even though some days that's hard to see that. I think we're on a path where that could happen.

You know, we believe that there is some uptick coming later in the year. Also we are getting some wins kind of scattered across different parts of our business. That's also implied in the guidance. You know, it's tough to see when you're in a flattish type environment. You know, there are some good things going on and some good projects that we're winning. We're not really spending a lot of time highlighting a ton of that. I talked about Europe, there's some one-offs that have been going our favor as well. That's built into the guidance as well. I think it's two things that are realistic and attainable. We're not shooting for the stars when we say that.

I do believe, again, Ag's got to kick into somewhat of a more positive gear. Like we said in our comments, Steve, it doesn't have to be, you know, shooting to the moon. It just needs to get a little positive sentiment. I think that recovery will happen in 2027.

Great. Thanks, Paul. Thanks, Tony.

Thanks, Steve.

Thank you.

Your next question comes from Joe Gomes with NOBLE Capital. Please go ahead.

Good morning. Thanks for taking the questions.

Good morning, Joe.

First just kind of technically, any more restructuring or impairment charges you're going to be taking in the second quarter?

Yes. Not impairment, just restructuring expenses related to moving, relocation costs and all that. You know, like I said in my script, it's a total cash cost of $7 million. We've taken a piece of that this quarter or, you know, in Q1. We'll take the remaining, you know, through the rest of the year. There's no other non-cash impairments happening.

Okay. Thanks. Thanks for that. The R&D expenditure was a little bit higher than I think the consensus view in year-over-year. You know, Paul, may, you know, you just give us a little idea of what you guys are looking investing in on the R&D side these days. What can we looking forward to coming out here from the labs, so to speak?

That's it's a good question, and we actually were just talking about it yesterday. Looking back on the quarter, all the announcements that we've put out on products. For us, we see a lot of excitement in where we can use the Goodyear brand in our consumer segment. We have a tire coming out, or it is out, just saw it in our plant actually on Tuesday, where you can use it in the consumer segment and run it with no air at all. It's not even just a run flat where you have to put in air to start with.

We can compete against some of those higher priced products in that segment that have a tendency to degrade over time, whereas we believe ours is going to hold up. By putting that Goodyear brand on there, feel like we can get the attention of the marketplace really quick. We've seen a lot of excitement in our consumer division on product development. You know, just like I was referencing being with that team on Tuesday at our plant. I think the words they said were, "We have introduced and will be introducing more products in the next year" or if you take last year and this year, than they did in the 10 years prior to Titan owning that consumer segment. It's great to see the excitement that, you know, we're having.

A lot of that is just our team is got products and well-positioned in the marketplace already. Don't wanna make it seem like we're reinventing the wheel. We are making that wheel and that tire better, and that's what we're good at. The Goodyear brand is a nice way to do that. You know, along with that, we're always looking for other ways to continue to invest and improve our product portfolio. We at Titan, you know, Dave, Tony, and I have always said, you know, when it comes to product development, we will support that investment, and we do. That's the engine of our company. I'm just overall really excited about what our teams are doing, what they're coming out with.

I think that's one product I would highlight, is just what we can do with the Goodyear brand on the consumer division.

Okay. Thank you for that. One more, if I may. I mean, there's some, you know, reports out there about a broadening recovery and, you know, mining/construction equipment demand that the channel to destocking has run its course there. You know, it sounds like, you know, Europe, you know, and your EMC division is doing well. Just Pardon me. Just wanted to, you know, double-check with you. You know, you're hearing and seeing the same things as we're seeing in the broader reports out there on the construction to mining markets?

I would say so. I mean, our business does move in a few different directions than what the global OEMs report. There's not just an easy comp where you can say, "Okay, this is how Titan's business is gonna perform." You know, we at Titan, you know, where our success comes from is just having that diversity of our geographical footprint and our product portfolio. We do some things that are different. You know, we have a foundry that can get us into the aftermarket in pretty unique ways so we can, as aftermarket remains as a more stable place than OEMs over the long run, we can service that. You know, for OEMs, you know, we are seeing good orders.

I think there's a lot of support out there in the infrastructure side, government investment, data centers, et cetera. You know, I think on a global basis, we're able to ride that as well. You know, as I mentioned earlier, probably the only thing that we're watching a little bit closely is kind of where things go in Germany. You know, it's a big customer base of ours with our strong European manufacturing footprint we have there. We're watching that closely. You know, Joe, I would just characterize it. I mean, we try to be as diversified as we can in everything we do and touch as many different corners as we can. Sometimes it's a little bit tough to just catch an OEM report and say, "Okay, well, that bellwether's just.

Let's go match it up to what Titan does. We want to be successful over the long run and I think there's some good short-term trends in EMC. We've seen it in our numbers and, you know, for the year, we got a good outlook of that continuing.

Great. Thanks for that. I'll get back in queue. Thank you.

Thanks, Joe.

Your next question comes from Kirk Ludtke with Imperial Capital. Please go ahead.

Hello, Paul, Tony, Alan. Thank you for the call.

Kirk.

I was just curious if maybe, we've talked about U.S. farm incomes a bit. I know that that's a, you know, an important metric for your business. Have you been hearing anything about additional farm subsidies to help U.S. farmers offset the impact of the conflict?

Yeah. I had a chance to hear Secretary Vilsack speak to a small group two weeks ago. Look, when you, when you hear him talk on TV, he always mentions the farmer. He's good at that with his background with the South Dakota farms that he had in his family. I believe he's divested them now. He understands the economics of farming very well. In the comments I heard from him two weeks ago, again, small group, wasn't public, he does continue to bring up the importance of farmers to our society, our economy, the struggles they have been having. I point that as a leading indicator. You know, it's hard to take that and run to the bank with it.

I do believe he's one of the most powerful people in our administration. He's an incredible guy. He's done an incredible job. When he says something, I think it's important. I put a lot of my weight in that, Kirk, with some of the comments I made today, that he just continues to reinforce the importance of making sure the farmer's taken care of. It's kind of hard to tell the impact of the farmers right now. You know, where's oil going to go? It just continues to gyrate. You know, I think as we noted and you know, I mean, the fertilizer costs are fairly locked in for the first part of the year as they got to continue to make more expenditures. You know, do they need more support or are they going to need less? It's really tough to tell right now.

I think just look at the overall broad support that Secretary Vilsack has continued to say will be there is a strength, a confidence that, you know, again, I rely on and I put a lot of faith in that. For us, I mean, as Tony mentioned in his comments, we've seen an increase in LSW sales. We gotta continue to market that. You know, one of the things David was working on when he was, you know, transitioning from CFO to CTO that we're continuing to work on is just how we can ensure we're getting LSWs into as many hands as we possibly can. You know, do we need to look at how we finance them to get into the market? Rent-to-own, whatever it may be.

These LSWs do save on fuel. It's been proven. It's not our studies, it's theirs. As fuel costs do go up, it does give us an advantage to sell more LSWs. You know, the one comment I'm gonna make, I'm sorry, I got a lot of thoughts in my head. I'm gonna say one more thing. When we keep talking about Ag, the one thing that I think has been overlooked is when's the last time we've had a weather disruption for Ag? You know, one of the things that drove the farmer income and commodity prices over a long period of time is that there was weather disruption somewhere in the world, you know, every few years. We haven't really seen anything for, you can tell me.

It's been, seems like it's been six, seven years. I think at some point something happens and when that does, that can change commodity prices really fast. You know, it's like with everything when, you know, you extrapolate what you see today too long into the future and then something changes and you have to change, you know, your models. I think we're looking at models that are just assuming there'll never be weather disruptions again. I just don't know if that's gonna be the case.

Got it. Thank you for the color. I appreciate it. With respect to Brazil, you mentioned the politics are messy. I believe that election you're referring to is in October.

Yeah.

You know, you know, politicians say a lot of things. It's hard to know what actually happens once they're elected. Is there anything in that election that you think might fundamentally change the outlook for your Brazilian business?

Yeah, that's the hard part. We, we don't know. If you, if you, if you look at Brazil, you know, things happen there and they don't blink an eye. If things happen here in the U.S. or Europe, it would be like a asteroid just hit the planet and we're all gonna turn to vapor. It, it's incredible how resilient the Brazilians are. I mean that in the highest regard. What they've seen is a market that was running really fast, all of a sudden because of the elections and, and their political elections, you think ours are volatile, theirs are a different level. They could sway the economy in ways that maybe we're not as used to in the U.S.

Just in talking with our team, in fact we'll be making a trip there in just about three weeks. Just in talking with our team, it's moving and gyrating quite rapidly. They don't quite know what it's going to mean, but for right now, it's created uncertainty, and uncertainty creates pullback in orders. You know, we're seeing the OEMs take some weeks out of their schedule in their, in their recent forecast. Does that continue the rest of the year all the way until October? It's, it's really tough to tell. Things in Brazil change fast. You know, what we do, Kirk, with our team in Brazil, what I think is one of our strengths, I mean, they've been together with us for a decade plus. They're incredibly good at managing this.

The way we can shift our cost structure, the way we can adjust volumes and what our team does to handle this volatility is. I say it many times, but, you know, I think our results prove it. I mean, the strength of our team is our competitive advantage. These things that go on that, you know, maybe we talk about in the U.S. are just crazy, they're used to the craziness and they do a really good job responding effectively and quickly. You know, again, I'll be down there in a few weeks, maybe pick up a little more as to what we see for the back half of the year. You know, just in working with them through the first quarter, just had a call with them last week.

It's just tough to predict the back half of the year right now. Just sort of dealing with what we got in front of us today and it's become volatile and the election's been the primary driver of that.

Got it. No, I appreciate it. Thank you. Yeah, Ag exports are critical to their economy. That's not gonna change.

Exactly.

Is that fair to say?

Yeah, exactly.

Got it. I appreciate it.

Exactly. You bet. Thank you, Kirk.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Reitz for any closing remarks.

Well, thank you. I appreciate everybody's attention. Of course, I really appreciate what the Titan team did this first quarter. I look forward to talking to everybody again next quarter. Have a great rest of your week. Thank you.

Thank you for attending today's presentation. The conference call has now concluded.

Good morning, ladies and gentlemen, and welcome to the Titan International, Incorporated Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to Alan Snyder, Vice President, Financial Planning and Investor Relations for Titan. Mr. Snyder, the floor is now yours.

Thank you and good morning. I'd like to welcome everyone to Titan's Fourth Quarter 2025 Earnings Call. On the call with me today are Paul Reitz, Titan's President and CEO; and Tony Eheli, Titan's Senior Vice President and CFO. I will begin with a reminder that the results we are about to review were presented in the earnings release issued this morning along with our Form 10-K, which was also filed with the Securities and Exchange Commission this morning. As a reminder, during this call, we will be discussing certain forward-looking information, including the company's plans and projections for the future that involve risks, uncertainties and assumptions that could cause our actual results to differ materially from the forward-looking information. Additional information concerning factors that either individually or in the aggregate could cause actual results to differ materially from these forward-looking statements can be found within the safe harbor statement included in the earnings release attached to the company's Form 8-K filed earlier as well as our latest Form 10-K and Forms 10-Q, all of which have been filed with the SEC. In addition, today's remarks may refer to non-GAAP financial measures, which are intended to supplement, but not be a substitute for the most directly comparable GAAP measures. The earnings release, which accompanies today's call contains financial and other quantitative information to be discussed today as well as the reconciliation of the non-GAAP measures to the most comparable GAAP measures. The Q4 earnings release is available on the company's website. A replay of this presentation, a copy of today's transcript and the company's latest quarterly investor presentation will all be available soon after the call on Titan's website. I would now like to turn the call over to Paul.

Thanks, Alan, and good morning. Before getting into our results, I want to take a moment to congratulate Tony Eheli on his promotion to CFO and having him today on his first earnings call. Tony has been a key member of our management team since joining Titan in March of 2021. Our ability to promote from within our organization is really a major plus and a sign of the talent we have on our team. Therefore, this is making for a seamless transition. I'm really enthused to see Tony taking charge as CFO and real proud of what he has done at Titan. I also want to thank David for his accomplishments as CFO. Note that he is hard at work. He's got a new role as Chief Transformation Officer. It's great that we have the depth on our team to make this transition to put David in that CTO role and believe it will bring value to our shareholders. We look forward to sharing more about David's efforts in coming quarters. But let's turn over to our results now and take a look at 2025. We concluded the year with another positive quarter as our Q4 exceeded prior year in revenue, gross margin and adjusted EBITDA. These results are ahead of our revenue guidance and also better than our adjusted EBITDA expectations. As I look back at 2025, this was a year where the diversity and breadth of our business from a product and geography standpoint combined with our new product introductions, our one-stop shop distribution capabilities and the strength and commitment of our team enabled Titan to weather a formidable storm in the ag sector and deal with the evolving trade policies. I'll touch on that point again later into my comments. Broadly speaking, the ag market had a bumpy tough year. It's really due to a number of factors that were weighing on demand. I do want to note that we are optimistic that the resulting OEM finished goods inventory destocking has largely run its course. We've seen that in our internal dealings and then we've all heard it recently from leadership at OEMs. While none of the major OEMs are forecasting any meaningful overall ag growth in 2026, we nonetheless think the bottom is behind us as equipment inventories stabilize, equipment keeps running and aging and the government continues with its support to farmers. Additionally, we are optimistic that trade policy will get a bit more settled in '26 and interest rates do look to be holding steady. This all leading to -- hopefully, leading buyers to start buying more equipment and feeling confident about their purchase decisions this year. With that being said, we do have guarded optimism for the year that's illustrated in our guidance that expresses some growth over 2025. So let's start by taking a deeper look into each of our segments beginning with ag. At a higher level, livestock producers enjoyed a good '25 while row crop farmers had a more difficult time. I want to note that because row crop farmers raising commodities such as corn and soybeans are natural buyers of larger horsepower equipment from tractors to combines and sprayers. Depressed grain prices, higher input costs have weighed on their P&Ls resulting in a reduction in demand for new equipment. The government programs have been really strong in '25 to support the liquidity and balance sheets of farmers and that government support is expected to continue along with hopefully some policy actions to drive biofuels to provide some tailwinds for the farming sector. Of course it also bears repeating that as long as those farmers run their equipment, they continue to need replacement tires to keep their tractors rolling. On the other hand though you got livestock producers. They tend to utilize mid- to smaller -- midrange to smaller equipment and with their operations enjoying better profitability in '25, the resulting demand for their equipment has fared better than row crop. The net result was the market for smaller equipment performed better than large and is forecasted to continue on that path again this year. I do want to note that Titan has a strong business in the smaller equipment sector as we can provide complete wheel tire assemblies to OEMs that they can simply bolt on to equipment thus greatly improving their supply chain and inventory management processes. Moving over to the EMC segment. That enters 2026 as our end market with the most optimism. The end markets we serve such as construction and earthmoving are generally in a good place right now, maybe not the same type of robust growth that we reported in Q4, but they are in good shape nonetheless. Activity in this segment is well supported by infrastructure spend and demand for minerals, which will be a benefit for our aftermarket mining sales. A good portion of our EMC sales are tied to the European construction market and the EU seems to be prioritizing investment in infrastructure. So our business there is well positioned. Moving over to consumer segment. We are optimistic as recent reports from leading powersports equipment OEMs are pointing to dealer inventories having reached a state of equilibrium. So that hopefully means any return to demand will drive production and thus a need for tires. I'll also reiterate that aftermarket sales constitute a significant portion of our consumer segment sales and there is less cyclicality to that part of the business. It's been an important part of how we've been able to drive continued strong margin results through the cyclical trough this time around. Before I hand it off to Tony, I do want to close with some comments on our business and tariffs. Obviously there are a lot of unprecedented global macro issues right now, but I want to emphasize that our end markets are overwhelmingly composed of end buyers that depend on their equipment to make a living. That could be farmers planting and harvesting crops, contractors building roads, miners extracting minerals or residential landscapers mowing lawns. That all equates to very durable long-term demand for our products. In the short term, we've seen a lengthy over 30-month downturn in ag as end buyers defer purchasing new equipment and move towards a philosophy of new to me in the form of used equipment. Even when this is the case, the continued usage of existing equipment in all of our segments drives demand for replacement tires, including our LSWs that make used equipment perform better and undercarriage parts that need to be replaced. At the same time, the equipment those tires and parts are fitted to continue to experience wear and tear driving up demand for new replacement equipment at some point. For Titan, that means we can win now and also win later and the way we maximize that opportunity is by continuing to innovate, expand our product line and stay close to our customers. And finally, regarding tariffs. I've expressed optimism throughout 2025 regarding the long-term benefits to Titan from the implementation of tariffs. My viewpoint was based on a number of factors, but first and foremost were the 3 favorable rulings that Titan received from the International Trade Commission over the past 15 years. In those cases, the ITC ruled that Titan's primary foreign competitors operated unfairly. We felt confident that was happening and that's why we brought the cases forward and that was deemed to be the case in the rulings in favor of Titan. It is clear to us that the administration was also targeting unfair trading practices with our IEPA-based tariffs. However, the implementation of these tariffs in a constantly evolving manner resulted in uncertainty and I know I'm stating the obvious with that. In our industry, there was a surge of imported tires before the tariffs went into effect, especially we saw that in ag. This story is not unique to Titan. It is being played out in many industrial companies similar to us. We also saw many of our import tire competitors absorb most of the remaining tariff cost throughout 2025. They have gone on record stating that. In essence, the potential positive impact from the administration's policies were neutralized in our sector during the past year. I want to note though we still achieved a solid performance in 2025 despite the volatility caused by tariffs. It does look like that tariff uncertainty is going to continue into '26 especially given the recent Supreme Court decision. Even so, we still believe that in the long term, tariffs are important to our industry to mitigate unfair trade practices that have taken place for many years. It is becoming more clear that the administration has options to improve trade policy that go beyond tariffs. That includes quotas, embargoes. These could be useful tools to support U.S. manufacturing as well. Titan has proven for decades and most recently during the pandemic, the resulting post-pandemic supply chain shock and now the evolving tariff situation in 2025 that no matter what may happen in the world, we are very well positioned to serve our customers with our geographical footprint, our network of joint ventures and strategic sourcing partners and our one-stop distribution and dealer network. In closing, I want to reiterate our optimism that we believe '25 was a trough year and with that behind us, we are hopeful to continue to make gains and improvements in 2026. With that, I will hand it off to Tony.

Thank you, Paul. Good morning, everyone, and thanks for joining us today. I want to take a moment to thank everyone for their well wishes. I am certainly excited to be in the role of CFO. And as I have noted in conversations I have had with many of you over the last 2 months, we have an excellent team with a well-developed plan. As Paul noted, our results for the fourth quarter were solid with revenues at the top of our guidance range and adjusted EBITDA a bit better than we predicted. There are some important financial metrics to highlight this quarter. Sales grew 7% year-over-year. EMC segment sales were a particularly bright spot growing 21%. Gross margins expanded modestly to 10.9%. Adjusted EBITDA grew 17% (sic) [ 18% ] to $11 million. Unpacking our business by segment, I'll start with EMC as it was our best performer. Segment revenues were up 21% from a particularly weak fourth quarter last year to $141 million. Globally, construction and mining continue to be active end markets underpinning demand for both new equipment and replacement parts. Geographically, the growth was strong in Europe, which is the largest market for the segment sales while the U.S. also delivered solid growth from OE demand in light construction products. The EMC segment also enjoyed a nice contribution from foreign currency translation, which added 5.6% to the relative performance. As a reminder, a significant portion of our EMC revenues are in markets outside the U.S. so a weakening dollar can be a tailwind for the segment. Ag segment revenues were up 2.6% from prior year driven by FX tailwinds, which had a positive impact on the segment adding 3.3%. Digging a bit deeper into the ag segment in the U.S., we are starting to see some variability in demand and volumes as a function of equipment size. Through 2025, much attention was given to the struggles of corn and soybean farmers and how that weighed on demand for larger tractors and combines. On the other hand, farmers raising livestock had a good 2025 and their finance is in a better position on the whole. Demand for mid- and small-sized equipment suited to the operations fared better. Our ag business in Brazil saw activity moderate a bit after being a source of strength in late 2024 and the first part of '25. Broadly, farmers in Brazil are contending with higher input cost and high interest rates coupled with declining market prices for their grains. An upcoming election cycle is also weighing on demand there as people wait for clarity on policy direction. Lastly, in consumer, Q4 revenues were up 1.5% from the prior year as activity was generally slow in the non-specialty part of the segment while the specialty business held up well. Entering 2026, recent commentary from leading off-road vehicle OEMs has pointed to dealer inventories being at desired levels. With that, a resumption of end market demand should flow through to demand for manufacturing inputs as wheels and tires. At the same time, we don't see any reason to expect a decline in usage thereby supporting solid aftermarket tire demand. After all, people will still need to mow their lawns and off-road enthusiasts will still need to ride their ATVs. Looking at margins by segment in the quarter. EMC showed nice expansion as revenue growth allowed for better fixed cost leverage. EMC gross margin in Q4 was 9.3% versus 5.9% in the prior year. Ag gross margin was level to prior year at 9.1%. Consumer gross margin slipped to 15.6% compared with 18.1%. The year-over-year decline in the consumer gross margin was due primarily to the product mix and reduced leverage. Moving on. Our SG&A including R&D expenses for the fourth quarter of 2025 were $52.8 million compared to $55.7 million for the comparable period in the prior year primarily due to lower legal cost benefit and insurance costs. For the full year '25, excluding the impact of the additional 2 months of the Carlstar acquisition, SG&A including R&D expenses increased under $1 million or just 0.3% year-over-year. Operating cash flow in the fourth quarter was $13 million while CapEx was $18 million. For the full year, CapEx was just below $55 million and down substantially from $66 million in 2024. Q4 free cash flow was negative $5 million and was comparable to prior year. We ended the year with net debt of $383 million and a leverage ratio of 3.8x. Managing working capital and CapEx will continue to be a key priority in 2026. During the quarter, we recorded valuation allowances against certain deferred tax assets totaling $40 million. While our long-term strategy and market outlook remain positive, recent cumulative losses and market conditions have required us to have a more conservative view on our accounting guidance. We have commented on our taxes in recent quarters and I'll reiterate as we see a rebound in market conditions, we expect to get back to normalized tax rate levels. We anticipate taxes in Q1 '26 to be in the $4 billion to $5 billion range similar to Q1 '25. On tariffs, as Paul noted, we believe that well-implemented tariffs in the long run are a benefit to Titan and the recent approach to implementing tariffs have not been beneficial to Titan. However, we have still managed through this and protected our bottom line from the impact over the past year by taking appropriate actions to mitigate tariff cost amidst the frequent changes. We expect that our multi-sourcing strategy will continue to provide a competitive advantage as we manage through the fluid nature of the tariff policy. Now moving on to our financial guidance for Q1 '26. Our guidance for the quarter is revenues of $490 million to $510 million and adjusted EBITDA of $28 million to $33 million. Both of those ranges imply relatively flat performance compared with last year's Q1. We are reintroducing fiscal year guidance for 2026 as we believe we have reached the trough in most of our markets. Revenues of $1.85 billion to $1.95 billion and adjusted EBITDA of $105 million to $115 million. This guidance range is reflective of improvement compared to 2025 on both the top and bottom line. We are confident our sectors are starting to move past the cyclical trough. The extensive destocking we saw across our end markets have supply chains fairly tight and this gives us some optimism that an uptick in end market demand will flow through to us. Thank you for your time this morning. We would now like to turn it back over to the operator for the Q&A session.

[Operator Instructions] Our first question comes from Mike Shlisky from D.A. Davidson.

Tony, I appreciate your comments here on the guidance for 2026. Could you give us maybe some just broad directional thoughts on each segment's top line and bottom line? It just seems like in the last quarter we had such a different direction and trajectory between construction, ag and consumer. I'd be curious if you could give us some broadly who's going to outperform, who's going to underperform from a segment perspective in 2026.

Yes. By segment like we saw in Q4, EMC was the outperforming segment. We expect that to continue into 2026. Ag we expect to be flattish and that's because while we see improvement in small ag, we are yet to see that improvement in large ag. And then for our consumer segment, we also expect improvement both on a lesser note relative to EMC and that's on the top line. Bottom line, we expect improvements in both EMC and consumer. On the ag side, we see more OE pricing pressure there and so that will not have as much improvement as the other segments would.

Outstanding. And then just looking at the ag segment on a quarterly cadence basis, you've been positive for a few quarters now in ag. Would you say that ag will have a better second half compared to the first? That's where the OEMs are kind of pointing. And perhaps there's positive, but relatively low growth rates in the first 2 quarters and some better growth in the back half of the year. Is that the right way to look at it for ag for '26?

Yes, that's right. You're right on that, Mike. We expect the first half of the year really to be somewhat what we're seeing already flattish. Later in the year we're expecting growth. We're expecting some recovery given what the OEs are saying and that's been hopeful that we will see some recovery on the large ag front.

Great. And then lastly, I wanted to inquire about the South America JV and the situation in South America broadly. We've heard some mixed comments from the OEMs. You've got a JV rolling out. Just some thoughts as to how that's been going from your perspective and from a broader market perspective.

Yes. It's a good question, Mike, on Brazil and South America generally. I mean Brazil gets all the conversation with the emphasis they have on ag. The political turmoil, I would say, is kind of front and center there and when you talk to the Brazilians, it's unfortunate they lived through way too much of that and it's coming to life again. So we have seen the OEMs pull back on their production schedules to start the year coming off a really strong '25 as Tony noted in his comments. So we're watching that closely. But from Titan's perspective, I mean the JV has given us that boost of additional confidence and strength in the marketplace. Our strategy that we've seen play out very successfully for decades in North America with the wheel tire combination is what we're replicating in Brazil. It's obviously early days of that, but the teams on both sides are really in a good position within the marketplace. So it's how do we capitalize on the strength of our 2 positions together. We're starting to see some of that come together. I think it's something that will play itself out more in the back half of the year, again in the early parts of the year with the market conditions. What we don't believe in is using price as a weapon to go chase volume. We have 2 good businesses again in both wheels and tires there to do that. But we are seeing the wheel business gain some momentum by being associated with Titan. Certainly the OEMs like the position that we bring to them. So we'll give you more updates on that as the year progresses, but feel really good about where we're at. And just to note, I mean these 2 companies, us and Rodaros, have known each other for a number of years. So these aren't 2 strangers that just decided to form a joint venture and a partnership. We've been working together for a number of years so great to see it be formalized into a joint venture.

Our next question comes from Derek Soderberg from Cantor Fitzgerald.

Just wanted to start on consumer gross margin. I'm wondering how we should think about gross margin for that segment in '26. And I don't know if you can talk about some levers you can pull on this year to bring that margin back up.

Thanks for that question. We're expecting some improvement in the gross margin for consumer as I had mentioned earlier and we are also winning new business with the initiatives we're driving that we know would improve the margin. So yes, it will be some incremental margin, something reasonable, but we expect it to stay in a decent range of where it's been with some improvement there.

Got it. And then just in the EMC segment performing pretty well, can you sort of detail which specific end markets and geographies you expect to sort of perform well in '26? Just talk about kind of what's going on there and what we should expect for this year.

From an EMC standpoint, as you will recall, Europe is a big piece of our business in EMC and the construction there is driven by infrastructure and so we are seeing -- we will be seeing a lot of good performance there from our Europe business. But like I also said, also in North America and the U.S. we've seen light construction as well and that's also improving as well. So it's across our geographies that we are seeing this positive momentum on EMC. Now with the exception of Brazil, which we've heard things about in Latin America and the elections coming up in Brazil and all that, so maybe not so much. They've had such a wonderful year in the last -- the last year was really solid in Brazil so things have softened a bit there. But outside of Brazil, we're expecting that growth to be across the regions.

Got it. That's super helpful. And then just 1 quick final question. Just anything we should be looking out for on the R&D front this year? Where is sort of the priority when you look at the product portfolio? Anything you're working on to sort of capture additional aftermarket share adding to some new technologies? Anything on the R&D front that you guys are prioritizing this year?

Yes. Derek, I mean it's become really the backbone of who we are. So even circling back to your question on consumer margins, one of the ways we have added value to the Carlstar acquisition, which we now call our Specialty division, is by bringing innovation into play. We have significantly increased the amount of new products that they've introduced. We're putting the Goodyear brand on a number of products in that segment. And so when we do that, we're increasing margins. So part of our levers that we're pulling for the margin improvements in consumer are really through the product innovations and R&D. So tying that together to your question, we're looking at 15% of our '26 sales are going to come from new products that we've introduced in the past 3 years. So again this is the backbone of who we are. What we -- where we see that coming into play, we encourage it to be across all of our business. So we got a new Titan forestry line coming out to continue to innovate with deep drop wheels. Our ACES brand we continue to launch and develop further. We have a really cool VPO product that can run without air in the outdoor power equipment segment. So you're competing with airless tires there at a much lower price point. Again as I mentioned earlier, what we can do with just our branding is add value and every time we put a new product into the marketplace, it makes equipment perform better. So it's a win for the end user. And a lot of times we can do redesigns that improve the efficiency in the operations and the construction of those products as well. So again 15% of our sales in '26 are coming from R&D. We don't look to have to spend more to achieve that. So I think the run rate you saw in '25 is where we'll be. But again just in that consumer segment, what we can bring to that acquisition another year behind us, we'll just continue to improve the strength of that business through our R&D efforts.

Our next question comes from Steve Ferazani from Sidoti.

Welcome to the call, Tony. Look forward to further conversations with you. Paul, the striking number to me was the real strength in EMC this quarter. I think we discussed this last quarter with the expectation that there might be divergent paths. But even with FX, still surprised by how strong in the seasonally slower, how quickly were you able to meet demand given we didn't see the normal downturn? And if you could just generally give some color around that. I know so much of that's your European undercarriage business. But if you can sort of break that out for us, how quickly you're able to meet demand and where you really saw it.

Yes. I mean it's one of the challenges that we had throughout '25, but it's also the strength of Titan that when demand surges, business gets complex and chaotic, we do well. That's how we -- I kind of mentioned that in some of my comments during these periods we've seen over the last 5 years. And I continue to believe and we continue to see that's a strength of ours. So when demand surges like it did, as Tony mentioned with EMC in Europe, our aftermarket mining business it continues to perform well. But as demand surges, which you could say with EMC was at a lower level in the prior year. That's why we made the comments about the run rate going into '26, maybe Q4 isn't indicative of that. But nonetheless, it's still in a very good position. But to answer your question, Steve, I mean I expect our team to be able to handle surges and our customers count on us. That's the outline strategy of who we are. We need to stay close to our customers and continue to be able to service them and part of that is an environment where forecasts are tough to necessarily get accurate all the time. We can't expect them to be and so we need to be there when our customers step up. So in a quarter like that where you do see a big surge in EMC, I think it points to the strength of Titan, how we can take care of our customers. We don't turn away from that business. We don't run from it. We figure out how to get it done and that's how we approach. Going into '26, I think you're going to see fits and starts of pockets that are going to outperform and you see some that are still stuck, but we don't sit still when those outperformance opportunities come. That's again what we continue to do. That's who we are and that's what we must continue to be. But I think EMC is a really good example of that coming off a lower level, we saw a nice surge in '25. And again, as Tony said, see that as a really good growth opportunity to continue in '26.

That's helpful. The operator had cut me off for a little bit so I apologize if these questions were asked when I was cut off. But on the consumer segment, you noted the softer margins and it seems like it was even lower than what we would expect on throughput. I know you have that rubber mixing business thrown in there and that can be lumpy. Did we see an impact in 4Q that might be onetime given the lumpiness on rubber mixing or was this something else?

Yes, Steve, that's right. The rubber mixing business, that was the impact we saw in Q4 that impacted the margins. We had very good margins in that business. The volumes were down in that business and that was the impact we saw. So you're right, it's one-off. It's happened and so we move on from there. We expect the other parts of our business to be accretive in terms of margins and so that's why we expect improvement going forward.

Was that a lumpiness issue or a loss of business issue that may not come back?

Yes. It's an unpredictable business. We don't necessarily have contracts in how we service that marketplace and so I don't think as their volumes go down, we lose that business. But we -- actually there was just an article a couple of weeks ago in one of the trade rags that talked about our custom mixing business. And so we have a lot of strengths. We need to kind of reposition that in the marketplace to win back that business. So to answer your question, Steve, it's not like we lose it. It just goes away because of the volumes of the customers going down and so that's why it is lumpy. We got some hopeful trends we're starting to see in '26 that hopefully will materialize.

Got it. That's helpful. Just on, I don't know if you provided it, I missed it, CapEx guidance for '26. Given your EBITDA guide is a little bit better, do you have hope that you can be cash flow breakeven or would that be a little too early for '26?

We continue to drive and strive for improvements in our cash flow. Getting to a breakeven just given the moderate top line that we're expecting to see and the requirements for working capital, I think it may be a little bit of a stretch to say we'll exactly get there, but we expect an improvement from '25.

Okay. What is your expectation for CapEx in '26? I'm sorry if I missed it.

$55 million.

Okay. What do you consider maintenance CapEx for you now?

It's somewhere in the $30 million to $35 million range.

Okay. So the additional investments are going where?

We are having some growth investment initiatives, new products -- support new products, support our plant efficiencies as well. We're also investing in those areas. So these are critical areas that we believe we have to invest in so that when the market comes back, we'll take advantage of it.

Makes sense. Paul, any color on -- I always like to ask you what should we be looking for to see a more stronger recovery in ag? Is it continued focus on crop prices when we see them move, that's when we can expect your business to pick up? Is that reasonable or any different, any changes?

Yes, it is reasonable. But kind of looking through that a little bit, input costs moderating. I think that's been a little bit of a surprise to everybody how input costs remain elevated. Looking at the amount of crops that get put into storage is a big driver for obviously pricing. Some favorable trends in inventory and equipment aging as we've talked about. I think that's all coming together, Steve. I really do as you've heard from others. It's been a tough downturn when you look at the length and the duration of it. So we remain prepared to adjust as needed when that uptick comes. But yes, I think you're right. I think the government support though -- I got one more thought though. I mean government support and kind of the timing of it has made it a little bit confusing to start this year. What maybe thought was going to come last year wasn't coming to this year. So hopefully, we get all this stuff behind us, get some moderation and farmers start putting a little more money in their pocket as they should be, whether it comes from government support, input prices coming down and the costs coming down or prices going up. But I certainly believe that the trough is here and behind us and some brighter days ahead.

Our next question comes from Kirk Ludtke from Imperial Capital.

Tony, on the guidance, can you maybe give us a little color as to how -- what you've assumed for Brazil? Is it at least maybe just directionally up, down sideways?

Yes. Brazil on the guidance, that's going to be somewhat flattish. But from a quarterly perspective, at the earlier part of the year it's going to be softer, but we expect it to come back in the latter part of the year.

Got it. And I missed the cash taxes for the full year.

$20 million.

$20 million for '25 or '26 rather?

Yes, similar to '25.

Got it. And working capital source or use? Sounds like it might be a use.

Well, because when we think about growth especially in the latter part of the year, Q4 and you think about inventory, your inventory you carry at the end of the year is actually towards the subsequent period, the prospective period. So if our customers are saying this is a trough year, which means there should be growth in '27 for them, we expect to be carrying a little bit more working capital at the end of the year to support that growth next year. But with that, we're still going to manage through for efficiency.

Got it. And you may have mentioned this, but which businesses did you take the tax allowances for?

Two pieces of our business, the U.S. and our Luxembourg business. Luxembourg is actually the holding company in Europe for us. And the U.S., like you know, it's primarily because we carry the debt in the U.S. -- the main debt in the U.S. So that's been the situation with the U.S.

Okay. So it's across all the business segments?

No, it's not across business segments. Like I said, it's primarily first of all, interest debt driven the cost we have in the U.S. And so that's the big piece of it, not really in the businesses.

[Operator Instructions] We have our next question from Alexander Blanton from Clear Harbor Asset Management.

Paul, you talked earlier about the tariff situation in terms of the tariffs that are charged on foreign competitors who are dumping product into the U.S. I would like to ask about the -- and these are input costs that you mentioned being up. How much of those input costs are tariffs that are charged to you on imported raw materials, if any?

Yes. The answer to that, Alex, has a lot of different dimensions. So let me try to streamline the thoughts in my head and give you a concise answer to that. I mean first, my points about our past with the ITC and understanding unfair practices is just to illustrate that this has been going on in our industry for 15 years and we have cases that have been brought in front of the commission that prove that our industry has unfair practices. So our basis for supporting tariffs is really grounded in facts that have gone in front of a panel of judges and proved to be the case. And so we look at it from the overarching premise of that along with a diversified business that can take care of our customers and we got to be well positioned for whatever goes on in the world and we've done a good job with that. However, in '25, to get to your question, what we saw is that the chaotic nature of how tariffs were implemented creates a lot of discrepancies on the cost or the prices of raw materials and other inputs that goes into our products based upon where you are in the world. Now that at a high level what we read in the media is one thing and what takes place in the real world is something different meaning there's ways to get around tariffs depending on how you switch the location of a company, how you label a product. So we really don't always get clear indication of what a cost is going to be so it gets difficult to price. Now we do believe we have good pricing power in the marketplace. I think that's supported in the margins in the financials we reported for '25. But my point is the tariffs were very chaotic not just in the things that you see with the implementation of tariffs, but how that impacts raw materials getting to your questions. And so the price of steel for example, it used to be a commodity that had more consistent pricing on a global basis. Well, now clearly with tariffs, pricing of steel is all over the map and there's no guarantee that the steel getting into the U.S. is going to face a consistent tariff. Regardless of what the administration tries to say, that is not reality. There are ways to avoid tariffs and we have seen that, we've seen our competitors admit to that. And so we have to just stay close to the marketplace, understanding what is going on in the market, the needs of our customers, price our products accordingly and at the end of the day have a strategy that can be diverse, it can be fluid and it can take care of our customers. But I do believe that the Supreme Court ruling will make the tariffs more stable as far as the nature of how they are implemented and we do look forward to a day that we can answer your question a little easier as far as what the input prices are -- input costs are for the raw materials because right now that is something that the tariffs had a pretty significant impact on. And again you don't read about that in the media because a lot what we call manufacturing in the U.S. is just assembly of finished goods or components and there's less converting raw materials into finished goods like Titan and other industrial companies do. So again it's been a chaotic period in '25 with the tariffs. But my closing thought on it, like I said in my prepared comments, is the Titan team has done a really good job handling that. We have a good strategy to get through that and I think the results are indicative of that.

Well 2 of your customers, Caterpillar and Deere, both have published an estimate of what the full year 2025 tariff.

They're assemblers, Alex. It's what I just said. They're assemblers. They don't convert raw materials into finished goods. They are assemblers that assemble components and sell it to their dealer network. We are not that.

Right. But I was just thinking have you a similar number? What's the impact on your earnings of the tariffs that you're paying on imported goods?

Right. The nature of our company is different than that. Well, just stop for a second. They assemble components so they pay a price for a component and they know what that component costs and what the tariffs were. We are buying raw materials of all different natures from synthetic to natural rubber to chemical to carbon black to steel to all different forms of steel and we're doing that on a global basis in different currencies. And so us being able to quantify it like Deere and Caterpillar do, it's a completely different business not to mention we're not the size of them. I need my financial team focused on how to make our business perform better and take care of customers. And so what we look at is what is the pricing in the marketplace and how can we make sure we have enough pricing power and that's how we look at it. Again we are converting raw materials all over the world on a given daily basis thousands of different SKUs being produced and hundreds of different raw materials being put into those SKUs. We're not buying finished components and assembling them together. So they are 2 different business models. And in the U.S., we have a tendency to read all the headlines from those companies and think that's manufacturing. That's assembling, that's not manufacturing. They're not converting raw materials.

We currently have no further questions. So I'll hand back to Mr. Paul Reitz for closing remarks.

You bet. Well, thank you, everybody, for your participation in today's call. And I want to end by thanking the Titan team for the strong performance in '25 and where we look to be going in '26. So thanks again, everybody.

This concludes today's call. Thank you all for joining. You may now disconnect your lines.