Okay, thanks. Good morning, everybody. Welcome to Davidson's Friday, the Friday Power Conference. I'm Mike Shlisky. I'm one of the analysts here at D.A. Davidson, covering the industrial machinery sector. That's both the equipment as well as some of the suppliers out there. We are pleased to have with us today Titan International, a maker of wheels and undercarriage components for ag and construction equipment, among other things. We have with us Paul Reitz, the CEO. We have with us Dave Martin, he's the CFO. Thanks for joining us, guys.
Good. Thanks very much.
Good to be here.
We'll do a few questions. I got a couple of things to ask on my own, just to get everybody kind of familiarized with what Titan's all about, and then we'll open it up to you guys for questions if you, if you, have any. So let's kick it off, guys. What do you say?
Sounds good.
Yeah.
Let's roll.
All right. Well, first, you know, guys, maybe the first thing to do is just tell everybody here in the room and watching online what Titan's all about. Maybe that's the first way to... What's your main products, what do you do, and where do you sell?
We do off-road, wheels, tires, and undercarriage, and so that means generally it's gonna be big. So we got a tire and a wheel assembly that, I'm 6 foot 6, when I stand up, I can barely see over the tip of it. And then on top of it, it's about 4.5 feet wide. So that goes on, obviously, the world's largest agricultural equipment. It's a competitive advantage we have because we make the wheels and tires. We'll kind of hold off on that thought for now. But just envision big wheels and tires that's going into agriculture. We do make the smaller wheels and tire assemblies that go into what you'd see, they call them hobby farms, they're really not, more used in municipality type work, additional utility tractors at farms. But we get down into about 25, 30 horsepower.
Don't really do lawn and turf, anything smaller than that. So kind of think 25 horsepower, all the way up to 600 horsepower. We do construction and earthmoving off-road equipment as well. But primarily, when you get into construction, earthmoving, then you're gonna jump over to our steel track side of our business. That, that makes up the primary component that goes into that segment. So wheels, tires, undercarriage is, is what we do, generally all off-road. A little bit of what we do stays on-road, but generally it's gonna be all off-road.
And you talked about your wheels and tires go on these large machines. Can you share with us how much of it is a mix between built in the factory, you send it right to, let's say, Case or Deere or whoever?
Yeah
... and what is aftermarket? Tire gets worn out over a couple seasons, how much do you sell in replacement?
Yeah. We, we like both, and we like wearable parts. So you know, you look at our, our wheel business, let's start there. That's the easiest one to understand, 'cause primarily it's gonna be an OEM product. But a wheel, the one thing you may not see just from the outside, the exterior, you see the color, but you don't quite see that, that bolt, that hub hole, that hub and axle connection. So each wheel ends up being built almost like a, like a job order, customized for that manufacturer. So the wheel doesn't have an aftermarket, but it does have that customization element that goes into the design and the tooling required for a wheel. So really strong competitive advantage once you look at the arsenal of tooling that we have.
We've developed it over 30 years of being in the business, and we can make any type of wheel that's needed for the marketplace. You don't just jump in and say, "I'm gonna go make wheels," because, again, the complexity and the customization needed for a wheel. No aftermarket, but there's a really good customization that goes with OEM. You look at undercarriage, that business is a wearable part. Again, steel tracks are gonna be used in construction or earthmoving. In our case, about 25% of our business is aftermarket. Something Tony and David talk about a lot is there's an opportunity to continue to expand that. We see opportunities for additional distribution, geographical growth. That 25% number is... 30%, 40% is not out of bounds where we could be in the future.
And again, when you get that aftermarket business combined with a strong OEM business, you kinda countereffect the cyclical nature of selling just to OEMs. So our undercarriage, we sell to all the major OEMs that you can think of in that space. We don't sell to Caterpillar. Caterpillar does manufacture their own undercarriage, so think of everybody but Cat that makes any type of excavator, road-building type equipment. So good, solid business, primarily produced in Europe and South America, with a strong footprint as well in North America, presence in China. So good global footprint. Now we jump over to tires. Tires is where you're gonna get these nice wearable parts. About 50/50 is the balance we have between OEM and aftermarket.
If you look at us going back a few years ago, five years ago, that number would've been about 35% aftermarket. So really, what we've done over the last 5 years-6 years is transform our relationships with the dealers. We do that because we have great innovation, we have strong product base, and so by being able to go away from that 30, or move from 35% up to 50%, we move away from being totally reliant on OEMs. We've done that again through LSW. These products that make equipment perform better, we can sell those directly to the end users, we can sell them directly through the after market, and really what you see is that the farmers are pulling those products into the marketplace.
And so, we have a really good brand and a really good distribution network for our tires. But that's based upon having partners that have good service. We don't sell to wholesalers. We really work through partners that can take care of the farm equipment in the field. Your farm equipment breaks down, you need somebody that can stand behind it. So that's how we've built a really good reputation with our brand and our products, as well, also by having a good dealer network.
You had mentioned the acronym LSW.
Yeah.
I also wanna go into what your, what are your big- bigger technologies next. LSW is so connected to Titan, I almost think you should change your ticker from TWI to LSW. Let's maybe go over what LSW means, what it is, what it means to a farmer, and how it's been going, and what's been the advancement of that technology recently?
Let me take this one again, Dave, and then I'll let you jump in here in a minute. LSW is huge to us. It's because we make the wheel and the tire. Let's just start there with that basic premise, but it's really important to us because of how we built the brand around LSW. We were very patient. We deliberately worked with farmers and end users, and we got the credibility by demonstrating this product makes equipment perform better, makes your equipment perform more efficiently. It allows you to be able to farm in very difficult conditions in a tight window, planting and harvesting. No matter what you throw at a farm, LSW, rain, wet conditions, soggy bottoms, during that window where they have to be critically in the field operating, LSW allows you to do that.
On top of it, that giant tire I was telling you about, you can bring that PSI down to as low as 10, so you're protecting the soil. So the biggest investment, the biggest asset they have, we're also protecting it with LSW. And so, we took a very patient, deliberate process. So instead of running to the OEMs, chasing volume, we went to the aftermarket, we went to the end users, and we said, "Look, we have a better mousetrap. It's gonna bring value to you as a dealer. It's gonna bring value to the end user. It's gonna make their equipment perform better." So if you look back at LSW five years ago, it was 95% sold, sold directly through dealers and end users.
We've seen that mix as the OEMs pull it into the marketplace, that protects the margin and that premium value, so it's a win-win. Makes equipment perform better, but we're also able to protect the margin profile of LSW.
Just for those who are uninitiated, what does it stand for?
Before we go-
Yeah.
Further, I wanna just add to that. Again, that pull-through, we actually now see a pretty healthy balance between OEMs and aftermarket. There's been such growth in this product, and the second really important piece of that is we've gained credibility in the marketplace. When we bring other product innovations to the market, it gives us a lot more credibility.
Mm-hmm
... and a little bit faster ramp-up in our ability to serve the customer well.
Well, we should take just a quick half step back here. Not everyone knows what LSW stands for and what it actually is.
Uh-huh. Okay.
So let's just make sure we got that part first. I love it, by the way, but not everyone's aware, so let's-
Well, just imagine this: imagine a picture of a... You don't have to quite go back to the Dukes of Hazzard era, but go back 30 years ago to a pickup truck. The wheel and the tire are almost the same size. The aspect ratio was similar. So if you took that pickup truck, which was used primarily as a utility vehicle back then, the performance on road conditions are basically bounced. You have a huge air chamber in there, you bounce down the road, nobody cared. You're using it as a utility vehicle. You weren't transporting your family around, going long distances. If that tire wheel didn't change, we wouldn't be driving SUVs and trucks the way we do now.
Right.
The way they did it on-road is they shrunk the sidewall. So low sidewall, you bring the sidewall up, you reduce that air cushion, you put more of the distribution of the weight on the sidewall by shrinking it. You improve the performance of the tire and the wheel. So we took, because we make the wheel and the tire, we took that same technology and brought it to farm. Now, keep in mind, though, it's not something everybody can do. On-road, your tire is this big, your wheel, you know, it's... Ours are 5 feet wide and 5 feet high. You need 5,000-ton presses, you need 130-inch presses for tires with 400 pounds of air pressure to cure it.
And so we have, we had the capability in our plants with moderate investment, versus somebody walking in, it would take massive investment to get the presses, both tire and wheels, needed to do that. So that's the difference between... It's the concept has been proven on-road. We took it off-road to agriculture, but the capability to do it is something that is, at this moment, very unique to Titan.
The key is, if I'm wrong here, correct me, the less of the tire actually touches the crop and doesn't crush.
Yeah, so you're flattening out the surface.
You're flattening out.
You're flattening out, widening it out.
It keeps it from weighing it down, and it's crushed, and it doesn't bounce back or come back again.
I would look at it this way-
Is that the right way?
You know, I'm 6 foot 6. If you took my heel with these shoes on there, because I have size 13 shoes, and I press down, that weight's being dispersed. If you take somebody that's 5 foot 5, a lady wearing high heels, and she steps on your foot, you'd much rather have me do it. And it's the same concept because the weight's being dispersed over size 13 shoes versus going through that point. So if you think about a tire, you used to run duals or triples that were this wide, so that weight's going through this point here, whereas now we're spreading the dispersion of that weight across a wider base at a lower, lower pressure. So the soil is being protected versus those pinch points that used to go straight into the ground.
Not just damaging the seed and your output, but damaging your crop, your soil and your potential crops for the future.
Got it. And then, so when you have less compaction in the soil-
That's right
... there's less carbon issues, better, better, there's less fertilizer needed, things like that. All these things kind of add up-
All that works together.
You got it.
Plus, it's a good-
So-
... it's a good ride for the farmer, and-
Yeah
... all those things that, you know, helps them out.
Gotcha.
Yeah, now they just sit in the cab with the technology. They just play on their phone. Now, the ride is smooth. I mean, life is good.
Yeah.
It needs to drive themselves.
Yeah.
Yield goes up.
Yield goes up.
They make more money.
That's what it's all about, right? And then so, beyond LSW, there are other things that you're working on. What are the other key technologies that are in some of your wheels and undercarriages and tires?
And tires.
Well, I mean, our premise is: What does the end user need? And we have production capabilities that are u- I don't wanna say unique, but they're strong for our industry. Wheels and tires for LSW are unique, but if you look across the board, wheels, tires, undercarriage, we have capabilities better than the competition. So the question becomes, how do we connect to the end user? So what we're doing with undercarriage is we're putting sensors in the track. It's giving us real-time information that will help us with what they need, how our products are being used, and also giving them real-time information that will allow their equipment to perform better... same as always going on with tires as well.
You know, tires, what we've done, you kinda, it used to be good, you know, cha- remember snow tires? How many... Some of you may still have them.
I've heard of them.
Yeah, it's, it's, it's long gone, but actually, in municipalities for utility tractors, snow tires were still a thing. You get, in parts of the, of, of this country and up into Canada, you're switching your tires constantly. You would go from what you need for pavements in the summer, you know, doing light utility construction work, but also doing fields and, and, and mowing. The winter would come, and you need something that allows you to get into difficult conditions. We came out with the tires called the R14. We blended all that together. Instead of a municipality, a utility tractor operator having to change their tires multiple times, we have one tire that they can use in any condition.
If you wanna go mow a softball field, you wanna go clear snow at a parking lot, or you wanna go do light construction work, we have one tire that'll meet all those needs. Again, we're able to do that because of the wheels and tires, but more importantly is we understand what the customer needs. So we... Through LSW, David mentioned this earlier, we've developed that connection to the end user. We have the production capabilities, but now we can react a lot quicker and constantly keep up with, how can we make equipment perform better? How can we reduce their costs? How can we make them more money?
Got it.
They both get charged at a premium. R14s, the LSWs, we're able to share in that benefit with better margins.
Maybe one more question on the technologies front. You know, the tractors, the dozers are all evolving in their technology, what they're doing. You're seeing more electrification-
Mm-hmm.
... a lot more autonomy, a lot more subscription services that need some precision starting and stopping, things along those lines. So what does Titan's products have to say and have to contribute to those changes, and what you do in supplying those, machines?
Well, a lot of times it can mean more weight.
More weight.
You know, when you're starting to put batteries, starting to put technology onto equipment, it does equate to more weight. There's not the difference that you would think from our perspective when it comes to that. We have to have tires and wheels and undercarriages that can handle the weight and the needs of the equipment. If anything, it puts more pressure and importance on us being able to design the durability and the quality needed to support this technology. There's a, you know, I will look at another technology that's coming into the marketplace, central inflation system. Its ability to keep your tire pressure basically constant, as you're, or... I'm sorry.
Instead of having your tire pressure be constant, have it adjust based upon the needs and the operation conditions of what that equipment's being used for. That just means we have to redesign our wheel. So the technology that you're seeing, whether it be precision ag or what you mentioned in the construction space, it makes the equipment perform better, but it doesn't change the fact that our wheels and tires and undercarriage have to do more. And we haven't seen that really. Technology hasn't made the demands for our products any less. If anything, it's made it more important.
At the same time, we're able to do things that do take weight out-
Yeah
... to compensate for weight in other areas of the equipment, at the same time, strength and durability, as he just mentioned.
So maybe let's turn to. We're just starting the harvest season right now, and a lot of the corn and soybean fields out there across the country, getting towards the end of the year, combines have probably been delivered for the most part at this point. People are thinking about next year-
Yeah
... and the ag space. You know, you, you supply a good number of the tractor makers out there. If you, if you can think of the name, they probably supply at least some of the wheels and tires, if not a whole, large share of them. Give us your thoughts, broadly speaking, on the ag market, the state of things today, and tractor or combine demand, and kinda what you're thinking, what direction things may go next year or so.
You look at the farmer sentiment index, it's got a lot of emotion tied to it, and generally speaking, in societies right now, emotionally, a lot of people are concerned about this or that. Whether it's politics, whether it's the, you know, spending levels, recession, there's all kinds of things that you could see impacting the farmer sentiment index. That's really what's not important to our industry. What's important to our industry is farmer income. Farmer income's still good. Farmer income is still well above historical averages. It's down from last year, but it's significantly above historical averages. Combine that with the fact that the demand for corn, soybeans, and wheat is extremely high. I don't see that changing, 'cause a lot of corn and soybeans go into protein production.
They don't go into direct uses, so when you put it into production for protein, it has a multiplier effect. So for poultry, it's 2x or 3 x. For hogs, it's 4-5. For cattle, it's 8-10. So with that multiplier effect, as diets change, protein consumption goes up, that's gonna increase the demand that is gonna be needed. And then you throw on the supply side of the equation, there's some sort of disruption every year, weather-related somewhere, whether it's Argentina, Brazil, it's here in the U.S., it's in Europe. You can almost count on, and I'm not trying to make some statement about the, you know, the climate, but you can almost count on some sort of weather disruption. So you take that and go, the demand-to-supply equation is a lot different than what it was 30 years ago.
Everybody likes to point back to the '80s and go, "Well, you know, we could go back to the '80s." Not really. Balance sheets are strong with farmers, supply-demand is completely different, plus it's global, plus corn is being used in ethanol, plus protein consumption is way up from where it used to be. Middle class is rising. I think the floor on farmer income is a lot higher than what it's ever been. So we're well above historical averages. The floor should be, and is, a lot higher than what it used to be. So you look at the sentiment indexes and go, "Who in the world today is happy?" ... maybe you are. I don't wanna, you know.
Every day is different.
Every day is different. So we look at more farmer income, to answer your question. That's, it's a big driver of things, and that's in a good place.
Things okay with you. Got it. Got it. I wanna ask about construction, but first, just wanna talk about how your company approaches the ag market. Again, the sales that your company is making isn't necessarily the same exact time as the tractor is sold.
Right.
They're buying inventory, some of these tractor OEMs, they keep 'em on site, they'll, they'll install them. The dealer might buy them in advance for the season in case someone needs one. It's not quite the same timing. Tell us a little about inventory trends with the OEs or the dealers, and how you've dealt with that recently, and where that might be going in the next couple of quarters.
Yeah. Yeah, the last couple of years with the constraints that were in the market, we experienced very high growth, right? We, the OEMs were demanding quite a bit from us, and we were a very good supplier to them. Throughout 2022, we saw where production was not necessarily keeping up with how our products were being put into it. We knew something was coming in terms of some destocking efforts that were probably needing to take place. We've been moderating our production this year to try to meet that, so it means we're down, but overall, you know, we're still performing at a very high level.
And so we're going through that kind of normalization effort in 2023, particularly in the second half of the year. It doesn't change actually the true demand in the market. And I'll distinguish between large ag and small ag. Large ag is, you know, they still are behind the curve in terms of being able to produce the large equipment and combines and so forth, so it's not quite getting into the market yet. But medium and small ag is a little bit more impacted by that. And so, as we progress through this year, we see that normalization, and we'll see a more normalized condition for us next year in a market where OEMs may say whether they're gonna be flat to up or something like that.
We're looking at our ability to continue to serve the customer really well, trying to gain that transparency, and produce it at the right time. So I think we put ourselves in a really good position because we serve the customer well through it, we're managing the short-term impact, and it should be good for us next year.
So to summarize your answers together there, what we see on, in your guidance, or your outlook, or your thoughts, isn't necessarily the same as the outlook for what farmers are seeing and what they might be buying. Over time, that all-
Right
... it all balances out.
Yeah, that, that's right.
You're seeing bullish demand, it might be tough to get the inventories correct, but once it's right, you'll both be on the same page, OEM and supplier.
Yeah, we believe it'll get more even keeled. Yeah.
Got it. Got it. Let's turn to construction. Kinda the same question. You do sort of play in those customers, not Cat undercarriages, but other folks. How do you feel about that business going late this year into 2024?
The spending bills help there. I mean, with our business, we're not really exposed to residential. More of it's gonna be driven by non-resi, infrastructure spending related to road building and more mega projects. So I think it provides a better base in North America and Europe with the government spending, that I think that's pretty solid. Government's gotta continue to spend, and they will continue to spend, and so it fits good with our business, and again, provides a stronger base for, you know, as we look towards the future. Residential just has a small impact on our business. So I'm personally, from our standpoint, we're less concerned about residential.
Got it. Just so I know, the inventory situation on that one, is it similar to the ag?
No. No, not really.
Okay.
No, it's pretty isolated to, well, I would say North and South America, and agriculture, so.
Our business is different there because, you know, wheels and tires could be stored a lot easier than giant steel undercarriages that are really heavy and massive. So we, our business in particular, we did not see that overstocking and the destocking this year.
Gotcha. Gotcha. And I've been talking with you and your predecessor and visiting with Titan for years now, and it's been an evolution, I would say. Tell us a little about the evolution when you arrived, Paul. A couple of years back, things were a certain way, profitability was a certain way, the way the company reacted to certain end-market developments was a certain way. Tell us a little about what's changed over the last couple of years as far as operating practices, margin profile, maybe go over the balance sheet, too, if you could.
Yeah.
Just a little bit of history there.
Well, we did need to transform. I mean, our business, the basis behind our business was strong and is strong. It's serving a market that's fairly niche with these off-road products. We do and can have the ability to service the market and make equipment perform better. That whole premise was the same 30 years ago as it is today. It's along the way where we kinda lost our direction, and that happens. I mean, we were founded by, he is a personality, you know, not everybody runs for president, dynamic guy. He's a brilliant, creative mind, but let's face it, we all have our weaknesses. If you're a creative mind, you're probably not necessarily as focused on execution. You're focused on creating.
And so really what was going on with Titan for a period of time is it was all focused on the creating. So we started with a base, we created it, we did very well. We then started to get really creative and add on to that base, and so really what the transformation was about: Let's get back to what we're good at. Let's get back to where we can add value to the end users. You got customers you sell to in the in between, but if we can take care of the end user, then we're gonna be in good shape, and that's what we've done. And so with that, we've restructured operations. If we're losing money-...
We've either, again, going back six, seven years ago, if we were losing money, we've either sold that business or we restructured that business, and some of it's been restructured by changing the product mix. Also along the way, you know, that's the get rid of the business unit, improve the profitability of your plants. We've also looked very carefully at our portfolio, making sure that what we produce is what the market needs, and we can do it efficiently, we can make money doing it. We've looked at our pricing strategy, and we've really changed the culture of the company to say, in order to service the global market and customer base we have, we've gotta work together.
There's not one person that can have the solution, and when you're run by a founder, kind of that at times can become your guiding light, and you can get overexposed to look for the solutions that way. Instead, we've built a very strong team. We've been very fortunate this transformation took place before the pandemic. The team we've had in place has been the same since, like, 2019, and when the pandemic came, we'd already accomplished a lot of our transformation. We really did a great job servicing our customers during a very difficult period, and we have a good base. I think the message to investors is that we've transformed the company, we've gotten rid of some of these, you know, these losses that existed in our operations that were being buried elsewhere.
I'll let David talk about the balance sheet in just a second, but with that, the floor for our performance has gotten higher. We're in cyclical businesses, we're not gonna change that, but the floor for our performance and how we get there is a lot different now than what it used to be.
It's significantly different in terms of that uplift to where we have. From a balance sheet perspective, a couple things happened. We're not in a defensive posture. We paid down quite a bit of debt. We have stability in that part of our capital structure. We have strong cash flow. We have cash on the balance sheet. We're-- we have a good, strong discipline in how we manage working capital, so we can create stability with that, and having the right inventory at the right time. All that creates a lot of flexibility in how we operate the business. On the second end of it is how we invest. We're gonna continue to invest in our plants to drive, you know, efficiency, productivity, and all that.
Continued really strong product development, a lot, lot to come. Lastly, where are the growth opportunities for us in the future? Now, Paul talked a little bit about the fact that we had to get back to our focus and our, and our core from some acquisitions that we made over time. So people get nervous about acquisitions, but the way we look at it today is a lot different in terms of what is it we can add or amplify to our existing product portfolio, where our footprint is, how we increase our distribution of those products, and a very focused and selective M&A strategy. It could be sometimes light from a capital standpoint with respect to JVs that could be put together to help advance our distribution.
And again, across the key things that we're really good at, and where we can create value within the future, so.
Yeah.
We have a balance sheet that's supportive of that, but at the same time, we're gonna maintain a posture where we can deliver value, so.
Now my favorite question to ask of a relatively new CEO. What has changed culturally since you arrived?
I've been in. This is year seven.
Not that new.
Year seven, by the way.
But the old guy was so different-
In dog years, that's like 50 years I've been doing this.
But the old guy was such a
Yeah, yeah
... what's the word? His imprint was very much on the organization when, I'm sure, when you arrived.
Absolutely.
What has changed?
Yeah.
It could take seven years for things to actually change. So what has changed culturally when you arrived to where things stand today?
Just built it around the team. Yeah, I will say, you know, Maury's still the chairman, and it's very seldom to see a transformation take place like this, where the incoming CEO taking over for the founder has a strong relationship seven years later with the chairman. I mean, Maury and I have an exceptional relationship. Maury's relationship with the entire management team is strong. There's a lot of respect going both ways, so in no way did the relationship dissolve or fragment because of it. It's became an emphasis on the team. Our businesses are complex, our customers are complex, the products we serve are complex. No longer... And we face competition, so we gotta be able to be better than the competition. We gotta be taking care of these complex needs of the end users.
That requires a damn good team around the world, and so one of the first things we put in was just the concept of One Titan and the premises behind it. I know when I put it out, I didn't ask for approval from the board. I did it, and Maury said I should have done this 10 years ago. You know, and it... But for me, it wasn't a yes, no question. We were gonna do this. If Maury said, "We're not gonna run the business under the concept, the premise that you have," then I wouldn't be here seven years later. I would've left after year two.
Yeah.
There was a good balance between understanding what we need to do differently, 'cause we had some problems, but taking that base of what we did do very well, and there was a way I wanted to do it. I'll be honest with you, Maury's been very supportive of it. With that, Maury can take and layer on his ideas, but the premise of how we run the company is, quite frankly, it's our management team's idea, and that's how we transformed it. It wasn't a yes, no question.
Got it. We have a few minutes left. I wanted to make sure the audience, if they have any questions, has a chance.
I do-
I have more questions.
I do apologize. I have to get on a call at 10:45.
Oh, okay.
I know that's odd-
That's fine
... to get up and leave in the middle of it.
That's okay.
Um.
All good.
It's the latest I could possibly move this call back.
Okay.
I'm gonna let David do the questions.
That's fine.
Tony, you can jump up here if you want. All right.
That's all right.
I apologize.
Thank you very much, Paul.
All right, sorry about that, Mike.
We have, like, 5 minutes left.
We've got it. Yeah.
So feel free to-
Take any more questions we got? Yeah.
... sure.
Can you talk a little bit about the raw materials for stock and the supply chain? Mm-hmm. Yeah, very fortunately for us, we have good supply chain teams around the world. We never really saw any real strong disruption in any of the supply that we have, and call it, you know, chemicals, rubber, fabric, steel, whatever it might be, across all of the business. It's been really good. Now, we've seen some volatility, obviously, in terms of pricing, and that we've been able to manage pretty well as well. Steel's really been the primary volatility, so it's been up and down, particularly here in the U.S. Keeping that alignment on price versus cost has really been important, too.
So right now, I would say the market is in a stable mode versus, like, the last few years, where there's been a lot of movement up and down. We're in a pretty good position, and we have, with our largest OEM customers, we have good, solid pricing mechanisms for pass-through of that volatility. So it's pretty good.
Anybody else? I'll throw one last one out there. We touched on it briefly about machines going electric.
Yeah.
I just saw, started seeing some of Deere's first electric tractors. Case had some nice ones at the Farm Progress Show, not too far from your headquarters, a few weeks ago.
Yeah.
I've seen EV cars. The tires do cost a lot more money, and I'd be curious-
Mm-hmm, mm-hmm
... if we see a shift to electric, do you have a big price shift, pricing shift, and is it a good margin mix for you over a period of time?
Yeah, again, the customers are asking us for, you know, the products the same way they always have. But, you know, looking at, you know, a bit of evolution and how we are—'cause it's a heavier piece of equipment, so therefore, we need to be able to carry that load and be able to continue to make that piece of equipment as efficient as possible. So when we do that, when we have those kinds of things and the things we innovate, it helps drive our pricing in a better way. We have a little bit of leverage in that regard. So we think that that's very valid as we move forward. Margin profile's pretty good.
As they also make other things, like the Central Tire Inflation, we have the ability to adapt our products to make that happen as well. And again, EV tractor weighs more than a traditional tractor as well, so we've been able to take kind of weight out of our products, retaining the strength and durability, and that's. That innovation has helped drive our market share with our customers.
Got it. Got it. Well, if that's all we've got, David, appreciate you joining us today.
Thank you.
We'll thank Paul again later.
Yeah, you can do that later.
Thanks for all of you here in the audience. Appreciate it.
We appreciate your time.