CNH Industrial

Hello and welcome to the CNH Industrial. My name is Caroline and I will be your coordinator for today's event. Please note the call is being recorded and for the duration of the call your line will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand over the call to your host, Jason Omerza, Vice President of Investor Relations, to begin today's conference. Thank you.

Thank you, Caroline. Good morning and good afternoon to everyone. We would like to welcome you to the webcast and conference call for C&H Industrial's first quarter results for the period ending March 31, 2023. This call is being broadcast live on our website and is copyrighted by C&H Industrial. Any other use, recording, or transmission of any portion of this broadcast without the express written consent of C&H Industrial is strictly prohibited. Hosting today's call are C&H Industrial's CEO, Scott Wine, and CFO, Adone Anchiza. They will use the material available for download from the C&H Industrial website. Please note that any forward-looking statements that we might be making during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor Statement included in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission and the equivalent reports and filings with authorities in the Netherlands and Italy. The company presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP financial measures, is included in the presentation material. I will now turn the call over to Scott.

Thank you, Jason, and thanks everyone for joining our call. With record first quarter margins in both agriculture and construction, we had a solid start to the year. Robust demand for large agricultural equipment continues, especially in North America. In construction, we benefited from better capacity utilization and higher volumes in North America and Europe. The margin growth in both businesses reflects our progress, and I am increasingly encouraged by the resilience of our end markets. Our lean manufacturing and strategic sourcing programs are introducing simpler, more efficient processes across the company. The teams are doing a lot of foundational work right now, and we will accelerate these results along the way as we implement these multi-year margin improvement plans. We are successfully employing a variety of approaches to develop our tech stack, and the benefits to our customers and business will be significant. In addition to our R&D and capital expenditures, we also announced three key acquisitions bolstering our strong precision agriculture and alternative fuel portfolios. With increased volumes and continued price realization in both agriculture and construction, revenues were up 15% in the quarter. Industrial EBIT was up 29%. with a margin of 11.6%, up 130 basis points over the first quarter of 2022, and also up sequentially from Q4 as supply chain improvements allowed our manufacturing teams to be less encumbered by fleet inventory completion. And as it should, all of this translates into higher bottom line results, visible in our solid year-over-year EPS increase. Derek Nielsen's Ag Team is laser-focused on delivering for customers, reflected in net sales of agriculture rising 16% with growth across all regions. Ongoing industry demand, especially in North America row crop market, strong year-over-year pricing, and a favorable mix all contributed to the higher sales. Rebounding retail sales in Brazil led to decreased dealer inventories for our brands from the end of 2022 so we are well positioned to compete and win in that market. Healthy construction demand is leading us to increase production on certain products, as Stefano Pompiloni and his team continue to align our portfolio with customer needs. At ConExpo, we previewed innovative new products like the L100 mini track loader, which was developed in conjunction with our Sampiriana team, and Case's E-Series wheeled excavators. By focusing on premium capabilities and operator experience, we continue to break new ground for our customers. With interest rates rising and banking challenges increasing, it is imperative that we have a healthy captive finance to serve our dealers and end customers. Adone and his financial services team have decades of accumulated experiences leading this business. Many of them even successfully fought through the 2008 financial crisis. It is reassuring to have a sound and conservatively managed finance business where the portfolios continue to grow, even as interest rates temporarily pressure margins. And for a great example of winning the right way, in February, CNH Industrial received the highest score in our industry from the 2023 S&P Global Sustainability Yearbook, which puts us in the top 1% of all companies and industries. Our company strategy is centered around five key pillars, customer-inspired innovation, technology leadership, brand and dealer strength, operational excellence, and sustainability stewardship. In operational excellence, we reaffirm our annual savings target of $550 million by 2024 year-end when compared to our 2021 baseline. Tom Verbotten's team is driving our strategic sourcing initiative, and by the third quarter of this year, They will have visited and vetted about 450 vendors around the world to ensure we select the best suppliers for our needs. This program will transform our supply chains to sustainably improve quality delivery and cost in 2024 and beyond. We are ramping up our CNHI business system where CVS roll out across the company. To date, we have trained over 2000 employees on how to apply lean principles at their locations and more are trained each week. We are increasing the pace of Kaizen events. By the end of the first quarter, we have already surpassed 60% of our events held last year. I also want to highlight accomplishments in two other pillars today. CNH is committed to building technology that continuously improves productivity and field experiences for farmers and builders. We constantly break new ground with the goal of marrying great iron and great technology. Last year, we revealed our high horsepower, medium heavy duty tractor platform, which combines best in class technology with premium comfort. The T7 and Optum tractors are leveraged across New Holland and Case IH respectively, sharing common componentry while retaining brand specific features. We designed this tractor to provide a full suite of benefits requested by farmers. In its first full year in the market, it is receiving excellent quality ratings leading to low warranty cost, and we are gaining market share in this important segment. This customer-inspired design approach is a win-win because delighted buyers meet improved gross margins that drive a high return on investment. We are continuously working to become a technology leader, spurred by significant investments. Our goal is to accelerate adoption of ever better precision solutions, thereby bringing additional value to farmers and builders. From 2022 to 2024, we are committed to nearly doubling our R&D and CapEx investments versus the prior three years, building out our tech stack and launching new tech-enabled products. Some of the latter will arrive in 2023 and 2024, but from 2025 on, the pace will dramatically increase. Since our acquisition of Raven, we have hired over 500 tech engineers who are developing the next-generation precision solutions that will seamlessly integrate with our great irons. We also recently announced two acquisitions that will further propel our technology innovation, and a third that advances our alternative fuel solutions. First, we purchased Augmenta, whose technology on our tractors and sprayers increases yield, boosts sustainability, and reduces application time, effort, and input cost. Augmenta will operate within Raven. Secondly, we announced our agreement to purchase Hemisphere, a global leader in high-performance satellite positioning technologies. Hemisphere's capabilities will allow us to rapidly develop automated and autonomous solutions for both agriculture and construction. We expect to close in the third quarter. For more than two decades, we've been at the fore of alternative propulsion, exploring innovative offerings that support farmers and advance our strategic priorities. During the quarter, we took a controlling stake in Benemin, whose methane capture capabilities are paving a path towards a carbon-negative future on farms. further cementing our sustainability stewardship with a platform that is poised to deliver value and growth. We are making judicious and promising strategic investments to grow and innovate our brands. Our team is demonstrating how we can provide value in any economic environment, and we remain focused on executing our growth strategy. I will now turn the call over to Adoni to take us through the financial results. Thank you, Scott, and good morning, good afternoon to everyone on the call.