Benjamin Klieve • Lake Street Capital Markets

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Executive Bryan Knutson confirmed ongoing discussions with OEMs about levers like financing programs and incentives to bridge the current profitability gap for farmers. Executive Bo Larsen stated that guidance already assumes a level of OEM support consistent with their historical partnership. He clarified that additional support would be a net positive, potentially improving margins from their current floor and accelerating debt paydown, as the primary goal remains inventory reduction.

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Executive Bo Larsen stated that interest-bearing inventory was approximately $385 million, or 40% of total inventory, at year-end, with an optimal target closer to 25%. Larsen anticipates fiscal 2026 will be focused on optimizing inventory aging, setting the stage for a significant reduction in floorplan interest expense in fiscal 2027. Executive Bryan Knutson added that a focus on presales will also help lower interest costs.

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Executive Bryan Knutson acknowledged a near-term uptick in U.S. farmer sentiment and foot traffic due to better-than-expected yields, but noted long-term concerns remain over commodity prices. He contrasted this with tougher sentiment in drought-affected Europe and Australia. Regarding margins, Executive Bo Larsen explained that while it's difficult to precisely separate the causes, the decline to the 5-6% range from a historical 10% average for domestic Ag equipment is driven by both lower used equipment values and the company's aggressive, proactive inventory reduction strategy.

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Executive Bryan Knutson responded that margin compression is generally across the board but more aggressive in categories with excess inventory. He noted the service business remains strong as customers prioritize avoiding downtime, and that a tighter job market combined with Titan's internal programs has improved technician hiring. Executive Bo Larsen added that precision ag is a positive factor driving purchases.

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CFO William Heyburn quantified the repositioning headwind as a 'low to mid-single-digit' impact on revenue, noting it will always be part of the business but that the company will lap the major strategic shifts in H2 2025. CEO Robert Wiesenthal stated that macro factors and tariffs have 'no impact' on their aircraft acquisition thinking, as the medical business is non-correlated. He reiterated plans to be opportunistic in adding a low single-digit number of aircraft over the next 12-18 months.

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Founder & CEO Rob Wiesenthal described the Skyports partnership as a way to gather data on passenger flow and logistics to de-risk the future eVTOL transition, with Blade taking no economic risk. He noted it establishes Blade's presence at a third key Manhattan location. Regarding the Medical segment, Mr. Wiesenthal confirmed a 'great pipeline' that now includes two funnels: traditional logistics customers and customers from its TOPS organ placement service, citing a recent example of a TOPS customer converting to a full logistics client.

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CFO Thilo Wrede explained that the increase in store count was a technicality resulting from a switch in data providers from Nielsen to Circana, not from a significant increase in new doors. Regarding the Seymour facility, he acknowledged some tariff impact on imported equipment but stated that these costs are already factored into the existing capital expenditure guidance of $50-$60 million for the year.

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CFO Thilo Wrede clarified that the store count increase was a technical change resulting from switching data providers to Circana from Nielsen, not a fundamental gain in distribution. He also stated that while the Seymour project will see some tariff impact on imported equipment, the costs are already factored into the existing full-year CapEx guidance of $50-$60 million.

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President and CEO Russell Diez-Canseco expressed high confidence in a smooth integration of the new machinery without disruption, crediting proactive planning by the ECS leadership team. He also clarified that the company has had zero avian influenza outbreaks in 2025 and the single outbreak within the trailing twelve months occurred prior to the recent winter season.

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President and CEO Russell Diez-Canseco acknowledged that strong demand has led the company to exceed its own expectations, necessitating maintenance to sustain high operational tempo. He stated that while demand is robust, there are short-term limits to production upside. He clarified that maintenance in Q4 would be a consistent, planful approach similar to Q3, and these factors are already incorporated into the updated full-year guidance.

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President and CEO William Krueger acknowledged that the entire Western Corn Belt network, including Skyland, faced headwinds from a lack of trade flow but reiterated confidence in the long-term value and synergies of the acquisition. EVP and CFO Brian Valentine specified that Skyland's Q1 EBITDA was 'just slightly positive' and guided toward the lower end of the $30-$40 million annual run rate. Krueger confirmed that strategic investments, such as the Houston port expansion, are proceeding as planned, feeling the strategy is validated by potential growth in soybean meal exports.

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President and CEO William Krueger explained that while farmers holding old crop is common in turning markets, the current slow selling of new crop creates a strong inventory position for Q4 and 2025. He expressed confidence in the Skyland acquisition, citing the strength of its employees and the synergies available by applying The Andersons' merchandising, nutrient, and risk management expertise. Regarding the Houston port, Krueger noted the company's existing domestic soybean meal trading and DDG export experience, stating the investment will upgrade the facility to capture export opportunities for excess meal produced in the Western Corn Belt.

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Brandon Gall, Interim CEO & CFO, stated the CEO search is a top priority for the Board and is still underway, noting such searches can take time. He emphasized that the company is not waiting and is moving forward decisively with its strategic initiatives. He highlighted his pride in the team's cross-functional alignment and action-oriented approach during this period, stressing that they 'don't have a choice' but to execute now.

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Mark Davidson, VP and Corporate Controller, broke down the 2024 gross profit decline, citing the B Starch credit, incremental disposal costs, and costs to operate the new ProTerra facility. Brandon Gall, Interim President, CEO, and CFO, added that the ProTerra facility's drag on the P&L will be much less in 2025. He confirmed that the loss of Japanese business was economic (FX-related), not functional, and interest is returning as the U.S. dollar has weakened, given the proprietary nature of MGP's Arise products.

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CFO Brandon Gall explained that the high-margin specialty protein business has faced significant export headwinds, particularly in Japan, due to the strong U.S. dollar. To counteract this, the company is successfully onboarding new domestic customers. He noted that the long sales cycle caused two large anticipated domestic sales to be pushed from Q3 into Q4, which impacted third-quarter results but provides optimism for a rebound in the fourth quarter.

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James Leddy, CFO, and Christopher Pappas, Founder, Chairman and CEO, clarified that the potential attrition of this low-margin, non-core business was anticipated and factored into the initial guidance range. They explained that while the exact timing is hard to predict, their forecasting process accounts for such potential losses and gains. Mr. Pappas added that exiting this business frees up capacity for more profitable, core business, which is a key part of their post-acquisition strategy.

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CFO Jim Leddy stated they don't break out the exact impact but confirmed it contributes to both weaker top-line growth and stronger gross margins. CEO Chris Pappas added that while the philosophy hasn't changed, the 'reality' of higher operating costs has reinforced their discipline. He stressed that they must get paid for their high-touch service model and cannot chase low-margin volume, making them more committed to their strategy than ever.

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Executive Stephen Barnard and CFO Bryan Giles explained that the smaller Mexican crop necessitated higher co-packer usage, a situation expected to ease with new supply from California and Peru. Giles noted the working capital build is seasonal and should reverse in the second half of the fiscal year. Executive John Pawlowski added that while tariff talks caused some market choppiness, the company's supply chain proved resilient in meeting customer commitments.

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CFO Bryan Giles explained that the outperformance versus the pre-release was driven by stronger-than-anticipated results in the farming and blueberry segments. Regarding facility closures, CEO Stephen Barnard and CFO Bryan Giles noted the move eliminates unprofitable operations with minimal shutdown costs and will generate long-term savings. For the International Farming segment, Giles expressed optimism for a return to historical EBITDA levels as weather normalizes. On potential tariffs, CEO Stephen Barnard and President & COO John Pawlowski highlighted the company's ability to manage supply chain disruptions and noted strong consumer resilience.

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CEO Stephen Barnard and CFO Bryan Giles clarified that the Peruvian harvest was complete and that while volumes were lower due to El Niño-related heat, higher market prices provided an offset. President and COO John Pawlowski, along with Barnard and Giles, explained that the record California market share was a result of a strategic pivot to secure larger local crops amid supply challenges in Peru and Mexico, leveraging deep grower relationships and early market intelligence. Regarding capital allocation, Pawlowski stated that priorities remain focused on debt reduction and strengthening the balance sheet, with no major changes to the planned step-down in CapEx or M&A strategy despite the strong cash position.

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