Yahoo Finance

Bryan Knutson

Thank you, Jeff, and good morning to everyone on the call. I'll start today by covering the significant progress we've made on our short-term goals with an emphasis on our inventory reduction efforts followed by our view of the current market environment and performance across each of our operating segments. I will then pass the call to Bo for his financial review and incremental thoughts on our modelling assumptions for fiscal 2026.
Let's start with inventory. I'm pleased to report that we significantly accelerated our pace of inventory reduction in the fourth quarter, achieving a $304 million sequential decrease, which brings our total reduction to $419 million since inventories peaked in our fiscal second quarter of this past year.
This is the direct result of decisive actions we took to significantly reduce incoming inventory as well as an aggressive approach to pricing and internally subsidized finance programs to capitalize on seasonal urine buying activity within our domestic footprint.
I'm very proud of how our entire team executed the plan, which significantly improved our position heading into this next fiscal year. While these collective actions further pressured equipment margins and eroded our profitability in the fourth quarter, it was a critical step that allows us to transition sooner to the next phase of our inventory initiatives.
Given the magnitude of the inventory reduction we achieved in fiscal 2025, our primary focus can now shift from general inventory reduction to one that further optimizes our inventory mix while proactively addressing the influx of used trade-ins.
More specifically, we are focused on select categories of slower turning equipment that are aging and require right sizing both domestically and abroad, while at the same time investing in other categories of new equipment that are projected to be below our targeted inventory stocking levels across our footprint.
Executing these initiatives throughout fiscal 2026 will position us in fiscal 2027 to operate in more alignment with market fundamentals and deliver more normalized profitability.
Turning to our domestic egg segment performance in the quarter, while overall equipment demand was subdued as a result of industry headwinds, we delivered continued growth in our service business, resulting in the same store sales increase of 8.2% for the full year.
This growth reflects the continued success of our customer care strategy and increased service capacity following our efforts to invest in our existing team members, as well as increase our overall service technician headcount, both of which we expect will continue to drive growth in the future.
Looking ahead, although our customers' input costs have come down, they have not decreased proportionally with the change in commodity prices, which has in turn resulted in lower overall net farm income over the past two years.
Farm cash receipts are expected to decline again in 2025. However, helping to offset this decrease is the potential of increased government assistance programs, which is the driver of the USDA's recent forecasted increase in net farm income.
With uncertainty in the timing and magnitude of government assistance, as well as potential impacts of the new administration's tariff policies, the expectation is that demand for new equipment will be significantly lower in calendar 2025.
Recent industry forecasts suggest that demand for large egg equipment in North America will be down approximately 30% versus the prior year, resulting in total industry volumes for high horsepower cash crop equipment that are expected to be similar to Cend years 2016 and 2017, which was the low point in the previous cycle.
While this sets up a very challenging demand backdrop for our industry, our team's execution this past year has us positioned to achieve our short-term initiatives in the year ahead. Now turning to our European operations, which were similarly impacted by lower commodity prices and sustained high interest rates which negatively impacted equipment demand.
However, this segment came in largely within our expectations for the fourth quarter as we diligently managed through very challenging conditions, particularly in Romania, where severe drought during the critical part of the growing season reduced crop yields to the lowest levels in over a decade.
With help from European subvention funds and the prospect for more normalized rainfall this upcoming growing season, we expect Romania to experience increased stabilization, if not an improvement, and as a result, we could see modest revenue growth in our European segment in FY26.
In Australia, our performance was also largely in line with expectations as we managed through a similar environment to our domestic egg segment. Australia, however, was further impacted by more challenging weather, including below average rainfall during the critical part of the growing season.
These conditions negatively impacted yields across key growing regions in the southeast part of the country, which makes up a large portion of our Australian footprint. We expect that the resulting lower profitability levels for our Australian customers this past growing season will restrict demand in FY26.
Finally, our construction segment finished the year relatively flat compared to fiscal 2024. We also made good progress reducing our construction equipment inventory in the fourth quarter, and the margin impact was not as significant as what we experienced in our domestic egg segment due to less severe headwinds on the construction side.
Our cleaner inventory position heading into fiscal 2026 will allow us to be more responsive to market opportunities in this segment.
We remain optimistic about construction's multi-year outlook as housing shortages in the federal infrastructure bill provide healthy support for the industry long term, while improved equipment availability and new product introductions from our suppliers provide additional near-term opportunities.
However, uncertainty around the economy has impacted construction activity, and as a result, we are expecting softening demand for construction equipment in fiscal 2026.
In closing, fiscal 2025 has been a pivotal year for Titan, marked by decisive action and intentional execution. The accelerated progress we achieved in our inventory reduction initiative, particularly in the fourth quarter, represents more than just operational capabilities. It demonstrates our ability to take bold action when opportunities arise, even amid challenging market conditions.
As we navigate this cycle, we see some important differences from previous cycles. Oleum production constraints driven by global pandemic limited industry volumes, and as such, the North American fleet Age continues to support replacement demand.
Replacement demand is bolstered by technology and precision advancements and is further supported by lower levels of lease returns and healthy customer balance sheets.
At Titan specifically, we've now strengthened our foundation through improved inventory management processes, stronger corporate controls, and a customer care strategy that continues building a more resilient recurring revenue stream with our parts and service businesses.
In closing, I'd like to express my sincere gratitude to our employees for their tremendous focus, hard work, and execution. Their ability to execute on our strategic initiatives while maintaining our high standard of customer service has been commendable.
While we expect market headwinds to persist in the near term, we believe the improvements we've made to our business combined with our decisive actions during fiscal 2025, position us to navigate the current cycle and emerge stronger as the industry advances through the cycle.
We remain confident in our ability to deliver long term value to our shareholders through our enhanced operational efficiency, strategic positioning, and continued commitment to our customers.
With that, I will turn the call over to Bo for his financial review.

Bo Larsen

Thanks Bryan, and good morning, everyone. Starting with our consolidated results for the fiscal 2025 4th quarter, total revenue was $759.9 million compared to $852.1 million in the prior year period, reflecting a 12% decrease in same store sales partially offset by contributions from the acquisition of Scott Supply in January 2024.
Gross profit for the fourth quarter was $51 million compared to $141 million in the prior year period. And gross profit margin was 6.7%. These decreases were driven primarily by lower equipment margins, particularly in our domestic ag segment, and resulted from our accelerated actions to manage inventory to targeted levels sooner, as Bryan discussed.
On a different note, the fourth quarters of fiscal 2025 and fiscal 2024 included benefits related to manufacturing incentive plans of $8.9 million and $7.8 million respectively. Operating expenses were $96.7 million for the fourth quarter of fiscal 2025 compared to $100.3 million in the prior year period. The year over year decrease of 3.6% was driven by lower variable expenses and cost savings initiatives.
As a reminder, the O'Connor's acquisition was consolidated into our operations in the fourth quarter of fiscal 2024, which provided a more consistent year over year comparison than in prior quarters. Floor plan and other interest expense was $13.1 million as compared to $9.3 million in the prior year period.
However, on a sequential basis, floor plan and other interest expense decreased 8.5%, reflecting our efforts to reduce interest bearing inventory in the fourth quarter. As we continue to make progress on inventory levels and mix optimization, we should continue to see floor plan interest expense decline throughout fiscal 2026.
Adjusted net loss for the fourth quarter of fiscal 2025 was $44.9 million or $1.98 per diluted share, which includes approximately $0.29 of benefits associated with manufacturer incentive plans. This compares to last year's fourth quarter net income of $24 million or $1.05 per diluted share. Which included approximately $0.26 of benefits associated with manufacture incentive plants.
Now turning to a brief overview of our segment results for the fourth quarter. Our agriculture segment realized a sales decrease of 13.8% to $534.7 million. Driven by a same store sales decline of 15.5%, partially offset by contributions from our acquisition of Scott supply in January 2024.
Agriculture segment adjusted pre-tax loss was $56.3 million compared to pre-tax income of $28.8 million in the fourth quarter of the prior year, resulting from softer retail demand and our accelerated inventory reduction measures, both of which impacted equipment margins.
In our construction segment, same store sales decreased 5.5% to $94.6 million. This was consistent with our expectation going into the quarter as timing differences caused variability in the third and fourth quarter year over year comparability. Similar to our domestic agriculture segment, our inventory reduction initiative weighed on equipment margin in this segment as well.
But we were pleased to maintain a segment equipment margin above 10%, which speaks to the more balanced inventory position. Adjusted pre-tax loss was $1.7 million compared to pre-tax income of $4.6 million in the fourth quarter of the prior year. In our European segment, sales increased 6.1% to $65.4 million.
Which reflects a same store sales increase of 5.7%. Partially offset by a 0.4% negative currency impact. On a constant currency basis, revenue increased $4 million or 6.5%. Pre-tax loss for the segment was $1.8 million compared to pre-tax loss of $0.6 million in the fourth quarter of the prior year.
In our Australia segment, sales were $65.3 million compared to $69.8 million in the fourth quarter last year. Driven by a same store sales decrease of 6.5%, partially offset by a 0.9% favourable currency impact. On a constant currency basis, revenue decreased $5.1 million or 7.3%. In addition to weather related impacts, this segment is facing very similar end customer dynamics as a domestic ag segment.
Pre-tax income for the fourth quarter of fiscal 2025 was $2.3 million compared to $4.1 million last year. Briefly summarizing our full fiscal 2025 results. Total revenue was $2.7 billion for fiscal 2025 compared to $2.8 billion for fiscal 2024.
Adjusted net loss for fiscal 2025 was $29.7 million or $1.31 per diluted share. This compares to the prior year's net income of $112.4 million or $4.93 per diluted share. Excluded from the adjusted results in fiscal 2025 is a $0.32 per share negative impact associated with our sales leaseback financing expenses. There were no adjustments in fiscal 2024.
Now on to our balance sheet and inventory position. We had cash of $36 million and an adjusted debt to tangible net worth ratio of 1.8 times as of January 31, 2025. Which is well below our bank covenant of 3.5 times. Regarding inventory, as Bryan discussed, we've made significant progress in the fourth quarter, reducing our inventory by $304 million sequentially.
This accelerated reduction brought our total decrease to $419 million since inventory levels peaked in our fiscal second quarter, which substantially exceeded our previous expectations for the year. The reduction was led by our domestic agriculture segment which saw a decrease of approximately $300 million since the end of the second quarter.
We have achieved the original $400 million targeted decline in equipment inventory that I discussed on our second quarter earnings call. However, given the expected further decline in retail demand, we are currently targeting another $100 million of additional equipment inventory reductions which would come from a mix across each of our segments.
Our targeted inventory for the end of fiscal '26 may adjust and will be dependent on how demand continues to evolve throughout the year. As well as how expectations for demand in fiscal 27 developed throughout the year. In addition to the $100 million targeted reduction, we are focused on optimizing the makeup of our equipment inventory.
Simply put, we are focused on reducing pockets of aged inventory and moving to an optimal mix of high demand new and used equipment. This will have the additional benefit of further reducing floor plan interest expense as we work toward our objectives. With that, I'll finish by sharing our fiscal 2026 full year guidance.
Starting with our top line modelling assumptions across our segments. For the domestic a segment, we expect revenue to be down in the range of 20% to 25%. Reflecting the previously discussed industry outlook.
North America large ag volume is expected to be down approximately 30% year over year, and that is consistent with the midpoint of our expectations for equipment revenue. However, we expect flat to modest growth across our parts and service businesses which make up about 25% of the revenue mix and well over 50% of our gross profit dollars in this year's guidance.
Drilling down a layer deeper on domestic ag wholegoods revenues, fiscal 2025 started out relatively strong and got weaker throughout the year. So while the guidance for the full year contemplates a 30% decline, We expect the year over year comparable to be less challenging as we progress through the year.
More specifically, we expect whole good revenue to be down more like 40% to 45% year over year in Q1 and by the time we get to Q4, that comparison is expected to be down more like 20% year over year. Please note Q1 results may vary depending on the timing of our delivery of pre-sold equipment to our customers, which by itself would not impact our overall expectations for the full fiscal year.
The construction segment is expected to be down in the range of 5% to 10%. As Bryan touched on earlier, the Federal infrastructure bill continues to provide healthy support for industry fundamentals over the next few years, but we expect near term uncertainty about the economy to impact construction activity in fiscal 2026 and have worked that into the guidance.
Our European segment is expected to be flat to up 5%. Driven by severe drought in Eastern Europe, it already experienced a revenue decline of 16.3% for full fiscal year 2025. And expectations are that industry volumes will be flattish to down 5% across Europe, although that varies from country to country.
Given the drought-driven significant pullback in our Romanian business this past fiscal year, we anticipate a more stable environment with opportunity for modest growth year over year. For our Australia segment, we expect revenue to be down in the range of 15% to 20%.
Reflecting similar market dynamics to our domestic ag segment. However, Australian industry volumes were already significantly depressed in fiscal 2025. So in addition to persistently soft demand, our expected reduction in revenue is led by the normalization of self-propelled sprayer deliveries, which are a higher ticket item.
Given supply chain constraints, it wasn't until fiscal '25 that our Australian business was able to catch up on about 3 years' worth of sprayer backlog and is headed into fiscal '26, executing on annual retail demand for that equipment, thus providing a difficult year over year comparison.
From a margin perspective, our fiscal '26 assumptions contemplate consolidated full year equipment margin to be approximately 7.7%. Which compares to fiscal '25's full year consolidated equipment margin of 6.7%. This includes fairly consistent year over year equipment margins for the construction, Europe, and Australian segments.
As for our ag segment, this includes a full year equipment margin of approximately 5.4%, which compares to fiscal '25's reported full year equipment margin of 4.6%. We anticipate a segment equipment margin will likely be lowest in the first half of fiscal '26, with the first quarter equipment margins being around 4.5%. From there we anticipate gradual margin improvement with equipment margins of around 6% in the back half of the fiscal year.
The 6% assumption will still remain well below Titan's historical targets as we focus on optimizing our product mix throughout the full fiscal year.
The primary goal being to exit the year in a position where we can return to more normalized margin levels relative to the demand environment that exists in fiscal '27. Operating expenses are expected to decrease year over year but reflecting the lower revenue base are expected to be approximately 17.3% of sales.
This reflects prudent expense management measures while maintaining our continued investment in service technician headcount and other strategic initiatives supporting our customer care strategy which continues to drive growth in our parts and service businesses.
Moving to floor plan interest expense, the accelerated reduction of interest bearing inventory we achieved in fiscal '25 positions us to begin realizing benefits from lower interest expense, particularly in the second half of fiscal '26.
Overall, our fiscal '26 assumptions contemplate a year by year reduction of floor plan related interest expense of approximately 15% to 20%. While inventory levels have decreased, we need to optimize the aging profile before we begin to see more significant reductions in low plan interest expense.
Executing on our inventory optimization initiatives will yield a more significant decrease in floor plan interest expense in fiscal '27. In addition to floor plan interest expense, we have about $12 million of annualized interest expense related to the financing of facilities and vehicles.
Bringing it all together, we are introducing a fiscal '26 modelling assumption range of an adjusted loss of $1.25 to $2 per diluted share. While we will be working hard to minimize this loss, we believe it is prudent to set conservative expectations in this fluid environment where demand is expected to be near historic lows. Our aim is to ensure that we are well positioned heading into the fiscal '27, where we expect to drive toward more normalized levels of profitability relative to the demand environment at that time.
This concludes our prepared comments, operator, we are now ready for the question-and-answer session of our call.

Question and Answer Session

Operator

(Operator Instructions) Ted Jackson, Northland Securities.

Ted Jackson

Well, good morning, thanks for taking my questions.

Bryan Knutson

Morning, Ted.

Ted Jackson

So, my first question is just a little nitpicky on the quarter, the service margin was, I just say well below what I would have expected and I just wanted to get a little color in terms of, what was going on in that and I'm kind of assuming that that that doesn't carry forward into the next fiscal year. That'd be question number one, and I'll follow up after that.

Bo Larsen

Yeah, I mean, big picture wise, I'll start with the end there, and we're actually expecting equipment margin to increase a little bit year over year. This past year we added a significant amount of our stores onto our new ERP system, and there's a little bit of a transition there and a little bit of inefficiencies that will get worked out. So year over year we're prescribing that to go up on a consolidated basis, a little less than 100 basis points from 1/4 quarter perspective and compared to year over year, it really just comes down to a lot of different factors in terms of how much of it was for work for customers, how much of it was on equipment that was getting delivered.
I, and again, yeah, I would, there, there's nothing else there to really call out and like I said, I'd expect it to increase somewhat next year.

Ted Jackson

So and then I thanks both and then I actually I have two more questions, just another one that's just a little kind of tiny one with the reduction in inventory which was impressive and congratulations on doing that because in the longer term it's really a great move on your part were you able to accomplish that through your own.
Dealers network or did you actually end up having to go to auction to clean some of that out?

Bryan Knutson

Yeah, our focus is on keeping those units local to our customers, Ted, and getting a future installed parts and service out of them and so, yeah, almost all within our own network from time to time select units certainly, certain aging profile, depending on when the time you have another option maybe we'll work with some of those partners but so. We did auction a few, but very much by and large is through our own network, and that's how we plan to continue going forward.

Bo Larsen

Yeah, a nice thing about that and keeping that equipment, in our footprint is we can earn the right to provide parts and service on that going forward as well.

Ted Jackson

Well that's the answer I wanted to hear, so I'm glad. And then my last question because I know you're playing more, is, given what's going on with the administration and you know the potential of all these tariff wars and you know you are, the largest dealer for CNH equipment and you have operations on three continents.
How do you see that playing out, across your business, both through kind of How it impacts, CNH and then also just how it impacts, just you. I mean, is there anything that we should be paying attention to on that front as analysts? I mean, is there any, part of your playbook that's worth discussing there?

Bryan Knutson

We're watching the tariffs closely, Ted, right now like everybody else, and I, CNH does a lot of production domestically here. The largest chunk of our revenues come domestically as well, especially in the cash crop sector, yeah, so I, we'll continue to just monitor that. We've dealt with.
Inordinate price increases before as recently here shortly after COVID with some of the supply chain issues and pass those through, then the question always becomes what does that do to demand, especially with the tougher backdrop that we have right now and I think it's no secret that, any material price increases would likely further.
Decrease demand or put more pressure on demand, but you know I setting that you also have. The government payments that there's some $10 billion in farm assistance and the commodity assistance that applications are going in right now and they're looking to get those payments pretty quickly to customers and then another $20 billion that's potentially out there in terms of again economic relief, disaster relief, etc.
And we'll just see how that flows through throughout the rest of the year here. I haven't talked to a lot of growers that are banking on that or certainly factoring that into any of their equipment purchasing decisions at this point, and likely that'll be much later in the year here as we see how those flow through. But one of the other positives with those payments is, that's not like crop that can sit in the bin or defer to next year.
They need to spend that money, and they often use that money to, help bolster their operations, so. So, there is a lot going on between both the general economy and the tariffs and the government assistance and the farm bill discussions and so we'll certainly be monitoring all of that closely as we progress throughout the year.
All right.

Ted Jackson

All right. I'm going to step out of line, and I might jump back in if no one asks some of my other questions. Thanks.

Bo Larsen

Thanks.

Operator

Mig Dobre, Baird.
Hey, good morning, guys. I want to, I want to pick up where Ted lets off here with the discussion on government assistance. Just looking back at the first Trump administration, I think the cumulative payments to farmers were something close to $80 billion so even sort of more significant than what's being contemplated right now.
And you know we all kind of remember how that played out, right? I mean like demand has remained weak, really all we didn't see a recovery until 2021 when commodity prices move higher. So I guess my question to you is, if you're sort of looking at these government payments coming to farmers now, do you have any reason to believe that behaviour this time around is going to be different than what we have seen during that 2018 through 2020 time frame?

Bryan Knutson

I think a few of the differences this time, last time, as the trade tariff talks and so on with China, they were right in the middle of rebuilding their herds and, out of that did come the most purchases they've done with the phase one and phase two agreements there. Of soybeans from us and so, will those stocks resume and get them back purchasing to that level again of soybeans from the US, which remains to be seen how those negotiations pan out, in any given year 2020 would have been. The peak, I believe, and I think it was about $32 billion in change that the total of government assistance was. And keep in mind, you've got the food assistance, food stamps, all those programs are within that.
And so you know that the most that I've heard here is potentially $45 billion but looking more like that $30 billion. So it would be in line with the 2020 time frame, 2019 numbers and I would say it was a good spark, all if you really let the dust settle on all that, the way I've really looked at talking with our grower customers, it helped essentially offset the impact to commodity prices that happened during some of those trade discussions and got the farmers made back whole again it was, essentially.
Almost a buck on corn and about $2 on soybeans is really roughly what that shook out to and then you know that led to, like you said, following that was some better increases in industry volumes and uptake in purchases in the subsequent years to follow in '21, '22 and '23.
So, I actually look at that somewhat as a potential positive here depending on how all this plays out and, so again we'll continue to monitor that really closely.

Mig Dobre

Well, to be clear, the equipment purchases have not improved until commodity prices improved. It was not government payments that have driven down absolutely agree.

Bryan Knutson

Just saying that that was a some certainly would argue that the government assistance that helped position the US for those negotiations that led to more purchasing that then impacted the supply and demand curves and brought up commodity prices then triggered the equipment purchases. But again, some would argue that was the beginning of when we saw commodity prices start to come up in 21' there and certainly not the only factor, of course, of whether, global weather and things, many other factors were involved, as you know.

Mig Dobre

Understood. I want to talk about inventories as well, and I echo the congrats on the very good progress that you have made here, but, I guess.
As we look forward, I'm curious to learn how you think about the optimal amount of inventory that you should have given where demand is. Is there a way to frame it in terms of inventory turns and exactly what this guidance contemplates as the year progresses, because candidly, I'll tell you another $100 million of inventory reduction, well great.
To me at least, does not seem to fully factor in the erosion in demand that you're anticipating in fiscal '26. I would think that there would be room to do a little bit more, maybe another 100 to maybe even up to $200 million more. So, tell me how you think about it and why that's the right figure.

Bo Larsen

Yeah, and I mean that's to start with, right? And I think in my initial comments we'll continue to see how the year plays out and I'd say even more importantly than that, what we're looking for as we get closer to what next year is going to look like and a little bit more specifics on that.
I would say that a big portion of that reduction will come more in the back half of the year. We have a lot of optimizations work to get done. And as you know we've talked about in our comments and as we as we project forward through this year, even with these lower demand levels there are areas where we're going to be getting thin on that we're going to need that to backfill.
Our strategy, and we are, largely a large egg company, high horsepower, cash crop equipment.
To focus on pre-sales with customers and over time we'd like to see that continue to increase and what we want to do is leverage our footprint to the highest extent that we can right and having a really efficient level of stock inventory and then focus on that pre-sale equipment and that's where we're going and we continue to make progress on that.
Every month, every quarter this year to get to your comments, yeah, if you want to play the math out right, this really implies an inventory turn of about 1.6%, and that's certainly below where we would want to be.
But if you project forward, let's fast forward to next year, and this is just an illustrative purpose. Nobody's providing guidance here, right? Have you assumed that there's a 10% rebound on industry volumes and you keep that, $825 million flat throughout that year turns there about 1.9% to %2, and that's really at the bottom end of the range that we'd like to see.
Historically we've seen it get as high as 3.5 times and that was. Due to the global supply chain constraints and really, there are some in availability problems there. So realistically, at the bottom of a cycle, things turn quickly if you can still manage to keep that at 2.
On the top end somewhere around 3 and averaging 2.5 for us that's a bit of a sweet spot in terms of inventory availability, opt optimizing floor plan interest expense, etc. So that's what we're going towards, right, and putting a lot of effort into ensuring that we can manage it closer to that 2 in the bottom of a cycle, and these numbers kind of project to that 2-ish level next year, assuming at a base case that we're still well below, longer term mid-cycle averages.

Mig Dobre

Okay.
And I don't know if you're going to be able to answer this question. I mean, I'm hoping that you can. I, there's moving pieces here, maybe more than normal, if I'm comparing where you are inventory wise now versus, for instance, the prior cycle, pre-COVID.
Because you know by my math you have quite a bit of growth in store count you know you've got something like 38% more stores than you did exiting your fiscal 20% pricing is significantly higher on new equipment, maybe like 35% higher pricing.
So in many ways, the dollars that are on your balance sheet of inventory have sort of been distorted a little bit by the fact that you have more storage and the pricing in units is higher.
So if we're trying to think about how many units you actually have per store, are you able to talk a little bit about that and sort of say, hey, listen, this is kind of what would be normal for us in terms of units per store, and this is kind of where we are today and this is where we're hoping to exit in fiscal '26.
Sorry for the long question. I'm just trying to clarify this.

Bo Larsen

Yeah, no, I mean, I'll just kind of adding on to the thought process that you're going with there. That's something that we talked about. I can't remember if it was last quarter or the prior quarter. You're absolutely right. Since FY14, for example, a 4-wheel drive tractor is about 80% higher, so not quite double. So while our inventory balance in dollars was a little bit higher than it was in say FY14, realistically our units was quite a bit lower, not quite half, but directionally speaking, a lot closer like that.
And if you look at the last cycle in terms of what we were able to do, it took about 2 years to see a $350 million decrease from FY14 to FY16. We did about a $400 million decrease in the last six months again.
Less units to get that done, but in a much shorter time frame. So we're really happy about what we're doing there from a number of units perspective, I mean that's obviously going to vary by store and it's based on their volume.
We have a pretty wide range in terms of our largest stores and the amount of revenue and the number of units that they're selling versus some of our smaller stores that. We're going to continue to grow over time, and I think that that process also continues to evolve, right?
I think that as we look at driving efficiency levels, I want to see lower levels of stock inventory and more of the inventory that's on the balance sheet at any given point. Is pre-sold equipment, waiting for our PDI work and then getting delivered to customers.

Mig Dobre

Understood. Last question for me, is on your STNA line item, and I know you know you have not provided specific comments for this, but I, but I'm wondering, this came in, call it $390 million in fiscal '25. What's contemplated in guidance for fiscal '26, I'm presuming lower, but not much lower, and maybe you can comment first half versus second half as well.
Thank you.

Bo Larsen

Yeah, I mean, what's contemplated in the midpoint of our guidance is it's about $380 million and that gets you to about the 17.3% of sales, which is also the midpoint of guidance, from a cadence perspective.
Certainly, lower in the first half versus the second half, that's an obvious statement because about 10% of our expenses are commission based, which is ultimately very with equipment sales and we're kind of back half-witted from an equipment sales perspective, from a one perspective of that $380 million I've got it at around $94 million. And that is an area obviously the 380 that we build ground up thinking about everything we're trying to achieve, where can we pull back on spend, we'll continue to assess that, but you know that I think is the prudent landing spot to start with and we'll continue to see how the year evolves.

Mig Dobre

All right, thanks, take some questions.

Bo Larsen

Yes.

Operator

Ben Klieve, Lake Street Capital Markets.

Ben Klieve

All right, thanks for taking my questions. I've got a couple on the floor plan payable first, just a clerical one, can you, tell us what the level of, interest bearing, debt outstanding under that plan was versus non-interest bearing ending the year?

Bo Larsen

Yeah, and this is something that is super relevant, I think, probably for investors. I just want to call out for the broader community, in our earnings deck on slide 15, there's an equipment inventory slide. We break out new and used. We also break out interest bearing, non-interest bearing, and equity and inventory. So from an inventory financing perspective, and granted you wouldn't have perfect numbers there, but interest bearing was about $385 million to end the year.
You know that had come down about $150 million given the reduction in inventory in the fourth quarter, which implies about, 50% of that reduction was on interest bearing units. So that number, puts us at about 40% interest bearing across our $925 million of inventory.
Big picture, optimal inventory, that number should be more like 25%, and that's certainly something that we're working towards.

Ben Klieve

Okay, yeah, thanks, about that so you kind of got to my next question is, where this shakes, where that number shakes out, over the next, I don't know, 12 to 18 months, I don't think there's any expectation that you're able to get back to the glory days of fiscal '22 or that was a $30 million dollar balance, but do you have a kind of line of sight into the levels, pre-pandemic where that was in the kind of $150million to $200 million dollar range. It sounds like from your comment right there that you think you do.

Bo Larsen

Yeah, I think as we get into next year, so this year, and again I'm really proud of the work that we've done, we since about this time last year when we had our call we kind of prescribed a two year journey to get inventory to where we want it to be. Again, really accelerated some of that, but still playing out from an optimization perspective taking through FY26. So, you know we're still working on aging and that aging profile. So a lot of this year is going to feel a bit more in a static perspective but really set us up well for next year where we get a lot closer to the levels that you were just mentioning there.
So yeah, if I would just play this out, you could think about more of floor plan interest expense getting cut directionally in half next fiscal year as long as we continue to execute on the plan that we've laid out.

Bryan Knutson

And Ben, this is Bryan. I just go back to two of Meg's inventory questions that he planned out are exactly in line with what we're doing here. So as Bo mentioned, the $100 million, that that's as we get now very prescriptive cleaning up our specific pockets of aging and certain specific seasonal product categories.
And to really get our inventory dialled in this year, but as far as that $100 million number, yeah, it's likely more just like Meg mention, but as Bo said, just for illustrative purposes and that's predicated on the minimum with where we think the industry is headed, but we will absolutely work the levers accordingly and if things get worse here like Out of the gate, early in January and February, a lot of time to recover yet, but the volumes have been down even more than the 30% that, the OEMs and others have predicted so far. So, we'll see how that recovers throughout the year.
We're monitoring and adjusting that on a monthly basis. And you know you could see another $150million or $200 million reduction here throughout the year. That's what we believe is needed. And again, as we look to FY27 as Bo mentioned earlier as well. And then also as Meg mentioned, I was glad he pointed that out in terms of a unit basis versus dollar basis because over the last 10 years, even 5 years, prices have changed so incredibly much here that We do an extremely prescriptive bottom up plans with every one of our branches and so you know it is really more about the number of units.
And finally, the more we drive presal, which is a big initiative of ours, the lower the interest cost starts to come down and again the quicker the turns come up. And so that's something as a company we're going to continue to push and you saw some tailwinds that we got, as you mentioned in FY22 that gave a glimpse of what those numbers can look like when you're really executing on pre-sale.

Ben Klieve

Very good. I appreciate the call. Thanks to you both for taking my questions.

Bo Larsen

Thanks Ben.

Operator

Ted Jackson, Northland Securities.

Ted Jackson

Thanks. I just have one final question. I wanted to talk just about cadence of demand and not even about the outlook in directly, but just sort of as we have gone into the first part of 2025 and I guess what I'm asking is you're, for lack of a better term, kind of late in the reporting cycle for, putting your numbers out because of the way your fiscal year ends up. And I've just noticed over the course of this reporting cycle that the companies that I talked to that reported later in the cycle generally commented that the tenor of demand going into calendar '25 changed noticeably as they got to the back part of January and specifically in response to the Trump administration's.
Moves on tariffs and government downsizing, and many of them, basically found that their pipelines of business kind of dried up, that they had business that orders where they had deferrals. I mean, I know with the ag business that the first quarter is probably not a good you know.
Period, kind of base the rest of the year on, but just out of curiosity, as you've gone through the year-to-date, have you seen a change in, kind of the macros of your, the demand of your business relative to what you saw as you're going into the year like some of these other companies that I cover and communicate with? That's my last question.

Bryan Knutson

Yeah, for us, Ted, on the construction side of our business, we've seen a little bit more of that that you're describing at the same time, many optimistic points of view out there amongst our clientele about where the economy could be headed and less regulations and so on. On the egg side for our grower customers, nothing is more impactful than commodity prices and yields.
I mean, it just always boils down to those two things. Certainly inputs come into play there, but, we'll, they're going to, we're going to see how, moisture shapes up here and weather conditions throughout the growing season, especially the critical parts of the growing season in each of our markets and then we'll continue to see what commodity prices do, especially that June time frame is always an important time of year, that's often when we get to get a better visibility on where it was.
He reports looking and how crop is progressing again and all that. So for sure those are the biggest two factors outside be well beyond anything else on the egg side for our growers.

Bo Larsen

Yeah, and May is just reiterating what he was just saying that it's certainly way too early from an ag side because you know Q1 for us is about delivering on purchase decisions that they made quite a while ago. You really got to get into the end of Q2, and then we're talking about how we feel like the demand is looking for this year, and that kind of speaks to what I was talking about before.
So yeah, I think it's relevant in topical on construction for us it'd be too early to speak about that and how it would apply for the full year. Okay. All right, thanks very much.

Operator

Steven Dyer, Craig Hallum.

Matthew Raab

Hey, thanks guys. This is Matthew Rabb on for Steve. Can you just talk a little bit about parts and service, how, how's traffic been holding up given the macro and have you noticed any notable movements across the footprint? Maybe if you could touch on kind of traffic versus ticket, that'd be great, thanks.

Bo Larsen

Yeah, so a couple comments on that. I mean, from a full year perspective, we're kind of getting flattish on parts and service for Q1 specifically, we're expecting that to be down a bit. A part of that was, if you looked at Saints do growth last year in Q1 for Ag, it was up like 22%, just really hot, a lot of activity. So, kind of pull back on that. And yeah, in general I think we are seeing a little bit slower activities to start the year, plenty of time to make up for it. Got a lot of initiatives behind it. A lot of momentum behind us ourselves again, a full year, same story. Last year was 8.2. So, coming out of the gate a little bit slower, expecting it to look flattish, definitely throwing a lot of effort at it and feeling good about our long-term trajectory and averaging kind of mid-single digits over a longer period of time. But to start the year we're seeing a little bit of slowness there.

Matthew Raab

Thanks guys appreciate it.

Operator

I would like to turn the floor over to management for closing remarks.

Bryan Knutson

Thank you everybody for your interest in Titan machinery, and we look forward to updating you on our Q1 earnings call.

Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your line.