AGCO Corporation

Good day, and welcome to the AGCO third quarter 2025 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. In consideration of time, please limit yourself to one question and one follow-up. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Greg Peterson, AGCO Head of Investor Relations. Please go ahead.

Thanks, Gary, and good morning. Welcome to those of you joining us for AGCO's third quarter 2025 earnings call. We will refer to a slide presentation this morning that's posted on our website at www.aggocorp.com. The non-GAAP measures used in the slide presentation are reconciled to GAAP metrics in the appendix of the presentation. We will make forward-looking statements this morning, including statements about our strategic plans and initiatives, as well as our financial impacts, demand, product development, and capital expenditure plans, and timing of those plans and our expectations concerning the costs and benefits of those plans and timing of those benefits. We'll also cover future revenue, crop production, farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates, and other financial metrics. All of these forward-looking statements are subject to risks that could cause actual results to differ materially from those suggested by the statements. These risks are further described in the safe harbor included on slide two in the accompanying presentation. Actual results could differ materially from those suggested in these statements. Further information concerning these and other risks is included in AGCO's filings with the SEC, including its Form 10-K for the year ended December 31st, 2024, and subsequent Form 10-Q filings. ECHO disclaims any obligation to update any forward-looking statements except as required by law. We'll make a replay of this call available on our corporate website later today. On the call with me this morning is Eric Hansodia, our Chairman, President, and Chief Executive Officer, and Damon Adia, our Senior Vice President and Chief Financial Officer. With that, Eric, please go ahead.

Thanks, Greg, and good morning to everyone joining the call today. We delivered a strong third quarter performance, underscoring the effectiveness of our strategic execution and the resilience of our global team. While macro conditions continue to be volatile, we benefited from a more favorable regional mix and stayed laser focused on what we can control. Our disciplined approach to production and cost management continues to position us well in this environment. Thank you to the entire AGCO team for their continued focus in these two areas. We remained agile in the face of a complex and evolving landscape, and our people have been instrumental in helping us navigate this uncertainty, maintaining our momentum, and continuing to put farmers first. Net sales were $2.5 billion, down approximately 5% year over year, or up nearly 6% when excluding grain and protein business divested last year. Strong growth in EEN led to quarter, which continues to be our largest, most stable, and most profitable region. Near record global crop production in 2025 is leading to an elevated grain inventories and putting pressure on commodity prices. While farm income is being supported by increased government assistance in the US, crop margins are still tight and farmers around the globe remain cautious on capital spent. During this industry downturn, we are staying focused on executing our strategy, supporting our dealers and customers, and investing in technologies that will drive long-term growth. We also continue to look for every opportunity to limit the impact of tariffs on our farmers. We are closely monitoring evolving tariff policies and government support programs around the world while continuing to engage with suppliers and adjust our supply chain. We continue to assess and implement price increases where appropriate and feasible. For the quarter, consolidated operating margins were 6.1% on a reported basis and 7.5% on an adjusted basis. Our results reflect strong execution by our teams. We maintained solid margins through disciplined operational performance, favorable regional mix, and continued progress on our restructuring initiatives. This consistency underscores the effectiveness of our strategy. and our commitment to delivering long-term value. Notably, we achieved these margins despite another quarter of significant production cuts in North America as part of our ongoing efforts to destock the dealer channel. When comparing third quarter of 2025 to the same period last year, production was down nearly 50% in North America. Production levels are actually down nearly 70% from 2023. In addition to making further progress on reducing dealer inventories, we've also decreased company inventories. This continued discipline is reflected in our working capital improvements and free cash flow generation during the nine months of the year, which was approximately $453 million up compared to the same period in 2024. Slide 4 provides an overview of industry unit retail sales by region for the first nine months of 2025. The global farm equipment market continues to face significant headwinds. Brazil remains slightly up compared to the third quarter of 2024, driven primarily by demand for smaller and mid-sized tractors coupled with favorable trade dynamics. Despite record soybean harvests and potential trade benefits, demand for larger equipment has yet to show meaningful improvement. High financing costs and political uncertainty are expected to continue, constraining demand in 2025. But the early signs of recovery point to a modest increase in 2026. In North America, tractor sales declined 10% in the first nine months of 2025 compared to the same period in 2024, with the steepest drops occurring in the high horsepower categories. Driving this behavior is the significantly lower grain export demand. global trade uncertainty, and continued high input costs. We expect these pressures to persist, particularly with the demand for larger equipment. Recent announcements of government support are expected to support net farm income, which may help unlock future equipment investments. There are also potential upsides if further progress can be made on top of the trade agreement that was announced earlier this week between the U.S. and China. For Western Europe, tractor sales were down 8% during the first nine months of 2025, compared to the same period one year ago. The industry experienced double digit percentage decreases across most markets. Demand and mix are expected to remain soft through the remainder of the year, as lower income levels weigh on arable farmers and correspondingly large tractors. As AGCO's largest and most strategically important region, Europe continues to deliver stable demand that is less cyclical than other markets with strong and consistent operating margins. Its performance provides valuable balance to our global portfolio, helping us to offset fluctuations in other markets, including those influenced by evolving U.S. trade dynamics. We remain confident in the region's ability to support our long-term growth, especially as precision ag grows there. Combined sales continue to decline across all three regions, with North America experiencing the largest year-over-year drop at 29%. Amid industry-wide pressures, AGCO is performing more resiliently than in previous downturns and remains well-positioned for the long-term growth. Looking ahead to 2026, current commodity prices and fundamental uncertainties continue to impact the global ag industry outlook. Positive market factors, including livestock and dairy prices, the replacement cycle, and and government payments are being offset by geopolitical tension, tariff impacts, and difficult farm economics, which include elevated borrowing costs and rising input costs. Given the combination of all of these factors, there's increasing likelihood of markets being relatively flat in 2026, with North America and large ag down, and Europe and South America modestly up. This view confirms our assessment that the global industry is at the trough. Slide 5 outlines AGCO's factory production hours. To ensure year-over-year comparability, we've excluded grain and protein production hours from the 2024 baseline. Third quarter production hours were up approximately 6% year-over-year, driven by a favorable comparison in Europe, where quarter three 2024 was impacted by the prolonged factory shutdowns, as well as increased output in South America. In contrast, North America production was down over 50% again this quarter, reflecting our continued focus on reducing dealer inventories in response to soft market demand. And as I mentioned, production levels are actually down nearly 70% from 2023. Looking ahead, we now expect full-year 2025 production to be down approximately 15% versus 2024. A slight revision from our prior estimate of down 15% to 20%, primarily due to stronger quarter three output in EEM. Right-sizing inventory in North America remains a top priority, while Europe and South America will continue to see production effectively aligned with retail demand. Looking at regional inventory breakdown, in Europe, dealer inventory is now just over three months, slightly below our target. Fent is below this average, while Massey Ferguson and Valter are just above. Europe's near target inventory levels are encouraging, particularly given our strong exposure to the region. In South America, dealer inventory ticked up to around four months, slightly above our three-month target and quarter two levels, given the decline in demand for low and medium horsepower tractors. The increase in inventory reflects mainly a more cautious industry outlook, given the demand changes in quarter three, which led us to adjust our forward sales expectations. In North America, we continue to make meaningful progress, reducing dealer inventory from nine to eight months. While still above our target, the reduction reflects the success of our disciplined production cuts, with units being reduced almost 13% in the quarter. Our three high margin growth drivers, globalizing and expanding our Fendt product line, growing precision ag, and increasing our parts business, remain central to our strategy. To unlock the full potential of these growth levers and transform AGCO into a higher-performing company throughout the cycles, there are five major strategic shifts we've just made in the past two years that position us for significant earnings growth. Let's start with a significant update regarding our resolution with TAFE. We recently announced the sale of our ownership interest in TAFE, generating approximately $230 million in after-tax proceeds. For the first time under my leadership, we now plan to move forward with a $1 billion share repurchase program, reflecting our confidence in the business and our commitment to shareholder returns. We plan to begin purchasing $300 million of shares in the fourth quarter. Turning to other key elements that are meaningfully reshaping our company, the creation of our PTX business is the most critical to helping us achieve our vision to be the trusted partner for industry-leading smart farming solutions. By combining precision planting, the ag assets of Trimble, and six additional tech acquisitions over the last five years, plus doubling our engineering budget, we've built a $900 million platform with a path to $2 billion in precision ag revenues as synergies and scale take hold. As we strengthened our high-margin, high-growth portfolio, we exited the lower-growth, lower-margin business of grain and proteins. which lacked alignment with our core machine and technology products, as well as our distribution strategy. Project Reimagine is a company-wide restructuring effort focused on automating, standardizing, simplifying, centralizing, and in some cases, outsourcing work. With over 700 active projects, we are driving efficiency, lower costs, and most importantly, improving the outcomes for our dealers, farmers, and employees, enabled by AI. This initiative is expected to reduce our cost base by $175 million to $200 million. Finally, FarmerCorps is unique in our industry and is transforming our go-to-market strategy. We're taking service and support right to the farmers, online and on the farm, by investing in digital tools and enabling dealers to shift from brick and mortar to mobile service models. This is about servicing the farmer, not just the product. We're making meaningful progress in North and South America with expansion to other markets planned in the future. Together, these five strategic shifts are shaping the AGCO we've envisioned. More focused, more agile, and better positioned to deliver sustainable high margin growth. The results include margins at this trough that are comparable to the company's margins at the previous cycle's peak. AGCO is delivering higher margins through the business cycle driven by these structural changes to the company's portfolio and value proposition. Going deeper into precision ag, slide seven showcases two major innovation milestones that reflect AGCO as a leader in smart farming solutions. We've launched phase one of FarmEngage, our new mixed fleet digital platform designed to deploy work plans, track field work, and collect task data from all machines on the farm, regardless of brand. This retrofit-first solution enables AGCO equipment to seamlessly integrate with existing Trimble technology, while also supporting interoperability with non-AGCO fleets. Looking ahead, Phase 2 will consolidate features into a unified platform experience, and Phase 3 will complete the full farm operations cycle, delivering an end-to-end solution for planning, execution, and optimization. Together, these phases position farm engaged as an absolute cornerstone of our smart farming strategy. As you know, our goal is to be autonomous across the crop cycle by 2030. We are accelerating this journey, and at a recent tech day in Germany, we unveiled the latest outrun autonomous solution for tillage and fertilization. Tillage is now in beta testing, and fertilization is in alpha. These build on the success of our outrun autonomous grain cart solution, which is already in production. These innovations offer autonomous capabilities for Fent and competitive machines in three of the five major stages of the crop cycle, making us one of the industry leaders in this transformational technology. This progress reflects our commitment to delivering practical, scalable technologies for the mixed fleet that reduce labor dependency, improve efficiency, and help farmers operate more profitably. On that exciting note, I'll hand it over to Damon for a deeper dive into the financials.