Corteva, Inc.

Judd O'Connor, Executive Vice President, Seed Business Unit, and Robert King, Executive Vice President, Crop Protection Business Unit, will join the Q&A session. We have prepared presentation slides to supplement our remarks during this call, which are posted on the investor relations section of the Corteva website and through the link to our webcast. During this call, we will make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including but not limited to those discussed on this call and in the risk factor section of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements. Please note, in today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in our earnings press release and related schedules, along with our supplemental financial summary slide deck available on our investor relations website. It's now my pleasure to turn the call over to Chuck.

Thanks, Kim. Good morning, everyone, and thanks for joining us. I hope your year is off to a great start. There are several key points I'd like to share with you today, including a perspective on our Q4 results. an overview of current market fundamentals with a closer look at what that might mean for us in 2025 and how to connect all of that to our 2027 financial framework that outlines our path to sustained value creation over the next three years. Let me start by saying that we finished 2024 almost exactly as we thought we would. The ag fundamentals have continued to improve more so than over the past two years. So our 2025 guidance reflects that. Our portfolio of advanced seed and crop protection technologies is in high demand, and we feel good about our path to delivering the 2027 financial framework, which we announced in November. Coupled with productivity and cost improvement initiatives, a central pillar of our business strategy, we delivered 20% operating EBITDA margins for the first time in 2024. all while maintaining operating EBITDA, which ended up being about flat year over year in less than ideal market conditions. To ensure we had good momentum coming into 2025, it was important that we finish the year strong, which we did, particularly in crop protection, where we drove double digit organic sales growth and 800 basis points of margin improvement in the fourth quarter, which was largely attributable to demand for our technology in Brazil. Our seed business consistently delivered in 2024, with Pioneer maintaining its rank as the number one corn and soybean brand in the US. We gained corn market share in North America, coupled with solid pricing. This was quite an accomplishment given the reduction in corn planted area. Enlist E3 Soybeans, the number one selling soybean technology in the US, has reached 65% market penetration, thanks to so many other companies licensing Enlist traits for their own products. The Enlist system, including our herbicide offerings, reached $1.9 billion in sales in 2024, still growing despite a well-supplied market. On the crop protection side, new products in Spinosans delivered double-digit volume gains in 2024, and on biologicals, mid single-digit volume increases in 2024 are expected to continue to strengthen in 2025 due to ongoing demand recovery and continued penetration across all regions. Between strong demand for our innovative seed technology, cost and working capital discipline, as well as healthier farmer income levels in North America, our operating free cash flow in 2024 improved by almost $500 million. coming in at about $1.7 billion. We also returned approximately $1.5 billion to shareholders via dividends and share repurchases for the full year. We are committing to another $1 billion in share repurchases in 2025. So in summary, 2024 was a year of progress in less than ideal conditions. FEED continues to deliver great growth as we transition to a net technology seller. And although the crop protection industry had another down year, the strength of our portfolio in our fourth quarter performance in Brazil gives us confidence that things are moving in the right direction. Now let's take a step back to discuss the current macro environment before diving into the specifics for Corteva in 2025. As I mentioned, overall ag fundamentals remain constructive, as evidenced by record global consumption of both corn and soybeans. Large global crops enjoyed record demand for grains, oilseeds, and biofuels in 2024, and the demand outlook in 2025 indicates that growth will continue for livestock feed, biofuel, and food consumption. Strong production has helped farm sector income. We had record corn yields in the US and expect to see the same in Brazil, which allows farmer margins in both of those key markets to improve meaningfully. While grain prices are on the rebound and US farmers posted back-to-back record corn yields the past two years, more notable is the fact that the corn market is tight. Measured by global stocks to use ratios, it's the tightest they've been globally in over a decade. And if you exclude China, it's the tightest we've seen in three decades. And with on-farm demand remaining strong overall, seeing signs of stabilization in the crop protection industry. For example, pricing for products coming out of China has been stable over the past few months and channel inventory levels around the world are more in balance. For Corteva, improvement has come in the shape of three consecutive quarters of volume gains. This all gives us confidence in our 2025 assumption of a flattish market with low single-digit volume gains offset by low single-digit pricing headwinds. With regard to 2025, although our operational plan remains intact, today we are refining our preliminary 2025 view to reflect additional currency headwinds, namely the Brazilian real and to a lesser extent the Canadian dollar. The strong U.S. dollar will impact the agricultural economy throughout 2025, and due to the crops and geographies in which we participate, will impact our U.S. dollar reported results. However, we are still expecting another year of top and bottom line growth and meaningful margin expansion with continued laser focus on controllables, including the initial tranche of feed cost deflation. You might recall that in our third quarter earnings call, we pointed to $550 million in gross costs and sales improvements in 2025, and that assumption remained. benefits from our self-help actions, including an additional $50 million related to royalty improvement, gives us the ability to continue to invest in R&D and future innovation. Our plan reflects about 10% EBITDA growth and about 100 basis points of margin improvement. We foresee another year of strong cash flow generation and plan to execute $1 billion in share repurchases over the course of 2025. now let's spend a few minutes on key themes and market assumptions for this year to set the stage think about strong demand for crops improving farmer margins good on farm demand for seed and crop protection and more corn area in the u.s the farmer is responding to positive relative economics and 25 is setting up to be the year of corn in the ag markets We expect our seed business to have another strong year as farmers continue to look to effective technology to boost yields while offsetting the effects of volatile weather and increasing pest pressures. It should also be a standout year for seed margin improvement, driven by mixed uplifts, royalty income improvements, and cost-to-sales benefits, including productivity and deflation. We plan to launch another 300 new seed hybrids and varieties Our seed pipeline is the best in the industry. The incremental yields from the advanced technologies in our portfolio allow us to continue our longstanding price for value strategy. Our strategy of selling technology is visible and the opportunity set there is significant. The big question is what assumptions did we make for crop protection? Well, the short answer is that the midpoint of our range assumes a flattish CP market. We have seen volume trending in the right direction. It comes down to when the pricing environment will stabilize. Given what we know today, this seems to be the most reasonable assumption for the time being, and we'll continue to update the market as conditions evolve. For our crop protection business, we're expecting mid-single-digit organic sales growth overall, led by new products and spinosans, as well as biologicals double-digit growth. If you recall, we're targeting a billion in biologicals revenue by the end of the decade. Geographically, Brazil will remain a key growth market for us in 2025 for both businesses. On top of our existing strong corn market share, it will be another important year for us to continue to make inroads with Conquesta on the soybean side. And for crop protection, we have a robust plan for more biologicals expansion and strengthening our commercial presence. Before I turn the call over to David, let me remind you about the announcements we made at our November Investor Day, where we introduced a new straightforward framework to create value through 2027. Recall, we're targeting a billion in incremental net revenues over the 25 to 27 period from three growth platforms, increased out licensing income, continued ramp up of CPU products, and biological growth. We're making investments in other growth areas, but these are the three that will provide the most significant incremental value capture in the midterm. Second, we laid out phase two of our controlling the controllables program that entails a billion in gross productivity cost and deflation benefits across seed and crop protection, as well as managing SG&A. Next, as part of our ongoing commitment to commercial execution, we're targeting about 100 basis points of EBITDA margin growth per year. That works out to be over 900 basis points of improvement versus where we began in 2019. So if you play all this forward to 2027, we're expecting EBITDA growth of a billion dollars over three years, which is a 9% CAGR with EBITDA margins of 23 to 24% at the midpoint. We are energized by this plan and our first task is to execute a strong 2025. With that, I'd like to turn the call over to David.

Thanks, Chuck, and welcome everyone to the call. Let's start in slide seven, which provides the financial results for the fourth quarter and full year. Briefly touching on the fourth quarter, organic sales were up 13% compared to prior year, with seed up 16% and crop protection up 11%. Pricing for the quarter was down 4%, as expected, largely driven by competitive pressure in Brazil in both seed and crop protection. Pricing was positive in every region, excluding Latin America. Fourth quarter volume was up 17% every prior year. Seed volumes were up 19% driven by an expected increase in Brazil's safrania corn area. Crop protection volumes were up 16%, led by Latin America and EMEA. Volume of crop protection new products were up more than 20% in the quarter compared to prior year. Full year 2024 organic sales were up 1% versus prior year, with higher volume partially offset by lower price. Seed organic sales were up 4% for the year, with pricing up 3%, with gains across the portfolio. Volume was up 1%, with planted area increases in Brazil corn and North America soybeans. offsetting lower corn planted area in North America, EMEA, and Asia Pacific. Crop protection organic sales were down 2% versus prior year, with volume gains offset by price decline. Full year price was down 5%, largely driven by competitive market dynamics in Latin America. Crop protection volume was up 3%, with gains in Latin America and Asia Pacific, partially offset by declines in EMEA, driven by residual destocking and unfavorable weather, and North America, driven by just-in-time purchasing behavior. Operating EBITDA of approximately $3.4 billion for the full year 2024 is essentially flat versus prior year, with an operating EBITDA margin of 20% or more than 30 basis points higher. Moving on to slide 8 for a summary of the full-year operating EBITDA performance, Seed price gains were offset by lower prices in crop protection, while volume was higher in both seed and crop protection, led by Latin America on higher expected planted area and demand for new products. Transitioning the costs, we delivered nearly $500 million in self-help benefits with $155 million in lower net royalty expense and $220 million benefit from raw material deflation and productivity action. These gross cost benefits more than offset cost headwinds from higher seed commodity and other costs. SD&A costs were modestly higher, as expected, given the full year ownership of the biological acquisitions and normalized bad debt levels. R&D expense was in line with expectations and just over 8% of sales for the full year. Together, this translates to 20% operating EBITDA margin which is impressive given the market dynamics. With that, let's go to slide nine and transition to the guidance for 2025 and the key metrics which we are tracking. We provided an early view of 2025 back in November, but based on 2024 results and the stronger US dollar, we're updating the guidance ranges. 2025 operating EBITDA is expected to be in the range of 3.6 and 3.8 billion, or approximately 10% improvement over prior year at the midpoint. Meaningful margin expansion is expected to be driven by price and product mix, together with benefits from improved net royalty expense, cost deflation, and productivity actions. Operating EPS is expected to be in the range of $2.70 to $2.95 per share, an increase of 10% at the midpoint, which reflects higher earnings growth and lower average share count, partially offset by higher net interest expense. Free cash flow to EBITDA conversion rate is expected to be in the range of 40% and 45%, which is in line with the 2023 and 2024 average. The change from 2024 is driven by higher earnings, offset by normalized use of working capital. Turning to slide 10, you can see operating EBITDA bridge for 2025 growing from approximately $3.4 billion in 2024 to $3.7 billion at the midpoint for 2025. Total company pricing is expected to be flat to up below single digits with pricing gains in seed partially offset by declines in crop protection. While crop protection prices are beginning to stabilize, We still expect prices to be down low single digits for the year in 2025. We're expecting volume growth in both seed and crop protection. Seed volume gains are expected to be driven by more corn acres in North America and share gains in key markets. Crop protection volume is expected to be up mid single digits, driven by demand for new products and biologicals, which are expected to outperform the rest of the portfolio. We expect approximately $50 million improvement in net royalty expense, driven by increased out-licensing income as we continue to ramp up the licensing of Concussa E3 soybeans and Pyrecor Enlist corn. We are on track to deliver approximately $400 million of net cost improvements in 2025, driven by lower seed commodity costs, crop protection raw material deflation, and productivity gains, including benefits from crop protection footprint optimization. SG&A and R&D as a percentage of sales are expected to be relatively flat with 2024 levels, implying a modest increase in spend. Like many USD reporting companies, we are expecting a large currency headwind now than we previously forecasted. The currency headwind is largely driven by the Brazilian real, Turkish lira, and Canadian dollar. The stronger US dollar is expected to translate to a low single-digit headwind on net sales and approximately $275 million headwind on operating EBITDA. Together, this translates to approximately 10% operating EBITDA growth at the midpoint and 100 to 150 basis points of margin expansion. Regarding the timing of sales and earnings in 2025, we're expecting about 60% of sales and roughly 80% of EBITDA to be delivered in the first half of the year. We also expect to see a timing difference between the first two quarters versus prior year. This is largely due to timing of seed deliveries in Latin America and EMEA after both regions delivered record volume in fourth quarter 2024. For the first quarter 2025, we're assuming a normal delivery pattern in Northern Hemisphere which could shift significantly between first and second quarter, depending on weather conditions. Let's go to slide 11, which presents the factors which could drive the guidance to the lower and upper end of the range. As seen on the previous slide, our current forecast includes a significant currency headwind to operating EBITDA. We will continue to look for opportunities to mitigate additional volatility through pricing and other means. If the dollar continues to strengthen, we expect there would be some additional headwinds. Assumed in the midpoint is relatively flat global planned area with increased corn area in North America, low single-digit increase in Brazil, Safrania, and relatively flat area in other regions. A big question is how much growth we'll see in crop protection given the current market dynamics. On-farm demand remains relatively stable, and we're expecting the traditional crop protection market to be essentially flat in 2025. Corteva's new products and biologicals are expected to drive much of the volume growth, while prices across the portfolio are expected to remain under pressure, although at a lower level than prior year. We expect to deliver meaningful cost improvements in seed and crop protection from input cost deflation and productivity action. and that our midpoint assumption includes SG&A and R&D as a percentage of sales to be relatively consistent with 2024 levels. We're not considering any impacts from trade policy in the midpoint of guidance. Without details on scope, duration, or affected industries, it's too premature to provide details about the potential impacts. This situation is very fluid and changes daily. so we will continue to evaluate the impact as specifics become known. Together, these are a balanced set of assumptions, which gives us confidence in our ability to grow sales and operating EBITDA in 2025. With that, let's go to slide 12 and summarize the key takeaways. First, Q4 operating EBITDA, while in line with expectations, was a record performance for the company. Crop protection fourth core results, including double-digit volume growth and significant operating EBITDA margin expansion is a positive sign our portfolio strategy is working and the industry is starting to stabilize. The strength of our seed portfolio drove full-year sales and EBITDA growth for the business through price and mix improvement, market share gains, and a meaningful improvement in net royalty expense. And, driven by working capital, We delivered $1.7 billion in free cash flow, a 50% conversion rate on EBITDA. Balance sheet flexibility and ability to generate cash supports our track record of returning cash to shareholders, including $1.5 billion in 2024. Finally, the 2025 guidance that we shared today reflects sales, earnings, and margin growth, much of which is in our control and supports the three-year framework we presented in November. With that, let me turn it back to Kim.