Ag Growth International Inc.

Thank you for standing by. This is the conference operator. Welcome to the AGI Fourth Quarter 2024 Results Conference Call and webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star then one on your telephone keypad. As a courtesy to management and other participants on the call, please limit yourself to two questions and rejoin the queue if you have further questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star then zero. Before we begin, we caution listeners that this call contains forward-looking information and that actual results could differ materially from such forecasts or projections. Further, in preparing the forward-looking information, certain material factors and assumptions were used by management. Additional information about the material factors that could cause actual results to differ materially from the forecasts or projections and the material factors and assumptions used by management in preparing the forward-looking information are contained in our Fourth Quarter MDNA and press release, which are available on the AGI website. I would now like to turn the conference over to Paul Householder, President and CEO of AGI. Please go ahead, sir.

Thank you, operator. Good morning and welcome to AGI's Fourth Quarter 2024 Results Call. I'm joined today by our CFO, Jim Reddick. I'll start the call with a review of our results, then turn the call to Jim for additional commentary on the quarter. We will then open the call up for questions. As usual, I'd like to begin today's call with a few comments that highlight our ongoing commitment to safety at AGI. I'm pleased to announce that we continue to set new records for all our major safety KPIs across the company, as well as most of our facilities. With many of our safety KPIs showing significant improvement in recent years, we continue to prioritize near-miss reporting as a proactive approach to prevent work-related safety incidents before they happen. Our focus on safety is a cornerstone of our one AGI culture, ensuring that every employee returns home safely each day. Turning to our Fourth Quarter and full-year results, I'm pleased to report Fourth Quarter adjusted EBITDA of 78 million, up 7% -over-year, an all-time record Q4 result. Full-year adjusted EBITDA of 265 million represents our second-best year as a company. This performance is a testament of the resilience and strength of our diversified business model, which has allowed the company to continue to drive strong results despite challenging conditions across the North America farm market. For the Fourth Quarter, consolidated revenue was up slightly to 381 million, driven by strong growth in our commercial segment, particularly in international regions. Adjusted EBITDA margin expanded to 20.5%, reflecting a significant improvement in our operational efficiency and focus on controlling costs. Our full-year adjusted EBITDA margin of .9% was near the all-time record we achieved last year, which is notable to highlight considering the extent of headwinds we faced in the farm segment. Swift and significant actions were taken throughout the year across our entire integrated supply chain to reduce costs and align with market conditions, as well as internal adjustments to our cost structure inclusive of SG&A were critical in delivering another year of favorable margins. The success of our efforts in containing margin compression are particularly noteworthy when compared to some of our peers who experienced a more pronounced margin impact in 2024. The commercial segment continued to perform exceptionally well, with Fourth Quarter revenue increasing by 30% -over-year to 248 million. Our international regions, particularly Brazil and EMEA, drove this growth through the execution and delivery of several large-scale projects. The segment's adjusted EBITDA margin expanded to 21.6%, reflecting the successful execution of our operational excellence initiatives and the benefit of some higher margin turnkey projects. International commercial continues as a key focus for AGI, consistent with our strategy, as it offers a large total addressable market, including several high-growth emerging markets. Our increased capabilities, as enabled by product transfers and other growth initiatives, led to several large project wins throughout 2024, which are now a major contributor to our year-end record order book. The opportunity in international commercial is significant, and importantly, adds a critical diversification to our farm business, helping to stabilize overall results and provide differentiated growth opportunities for AGI. For greater context, I'd like to share a few more details on the type of projects and success stories we are seeing in our international commercial businesses. In 2024, we won 15 large-scale projects in international commercial regions with a total value of over $500 million and an average value of approximately $34 million. This is our Emerging Market Growth Strategy in action, where we focus on delivering differentiated value to our customers and cultivate long-term relationships as a strategic partner. As we execute and deliver these large turnkey projects, they often become valuable reference sites that support securing further sales. We have a significant quotation pipeline, which creates the potential for another strong year for commercial in 2025. Our farm segment faced notable market headwinds in the fourth quarter, with revenue declining by 29% -over-year to $134 million. The U.S. farm market remained challenging due to elevated dealer inventories, lower commodity prices, and cautious farmer sentiment. In Canada, farm segment revenue was relatively stable, supported by strong order intake received earlier in the year for permanent grain handling equipment. The industry-wide challenges felt across the North America farm segment partially offset AGI's growth in other segments. Acro-level data points on the farm market were generally weak through 2024, with crop prices largely below the cost of production and aggregate U.S. farm net cash income descending from a peak in 2022. While these indicators have begun to show the start of the year, we expect challenging conditions in the farm segment to persist through at least the first half of the year. We have made several operating adjustments to preserve margin and minimize expenses, including direct labor management, manufacturing optimization, SG&A streamlining, and new policies aimed at containing other administrative expenses. Our farm segment enters 2025 with a soft order book and slow order intake. The current situation provides limited visibility and an uncertain timeline for market recovery until possible catalysts emerge, such as a sustained rally in crop prices or in-season replacement demand. Further complicating this path towards a farm recovery are tariffs and trade-related actions. Turning to our order book, I'm pleased to report that our consolidated order book stands at a record level of 737 million, up 4% -over-year, and up sequentially 11% versus Q3. The commercial segment has been a critical contributor to this result, with a 46% -over-year increase, now representing more than 80% of the total order book. While the path and timing to a sustained recovery in the farm segment is uncertain, continued progress across international commercial is exciting. The resulting benefits of our diversified and resilient business model are clearly demonstrated in the strength and composition of our order book entering 2025. Now moving on to our 2025 guidance. Our initial outlook for 2025 includes full-year guidance of the first quarter adjusted EBITDA of at least 225 million and first quarter adjusted EBITDA in the range of 25 to 30 million. For the first quarter, the relative softness in farm versus 2024 is the key driver behind the guidance. Recall that in the first and second quarters of 2024, our farm segment entered the year with positive momentum, benefiting from a more normalized early order program and demand profile compared to the current situation and market conditions. Our overall full-year guidance is supported by significant strength in commercial and a record level order book. There is relatively good full-year visibility for our commercial segment, though it is tempered by limited visibility on the farm segment and an uncertain timeline towards recovery in the North America farm market. It is important to note our outlook does not include the impact of any tariff or trade-related regulations. For context, in 2025, AGI expects approximately 10% of revenue from trade between US and Canada, with the majority of revenue exposure concentrated on our portable grain handling equipment. The main participants in the US portable grain handling market are located in Canada and will be subject to the same tariff or trade-related regulations. We are reviewing and implementing options to mitigate tariff or trade-related actions, including inventory stocking, supply chain strategies, and manufacturing options, among other possible tactics. The situation is dynamic and evolving, and we cannot conclusively assess the ultimate extent of the impact of any tariff or trade-related actions. In addition, our markets, supply chain, customers, and competitors will need time to adjust to new trade regulations. As we move through the process, the total potential impact to AGI should start to become clearer. Our internal project teams are continually reviewing potential options and mitigation strategies. In closing, I would like to thank our exceptional global team for their hard work and dedication. With a strong 2024 result in the books, I look forward to tackling the challenges and opportunities that 2025 will bring and seizing some of the exciting growth initiatives we see, particularly in international commercial. I will now hand the call over to Jim for further commentary on our financial results. Jim, over to you.

Thank you, Paul, and good morning, everyone. I'll touch on four areas, including a quick overview of our full-year results, an update on key balance sheet metrics, some comments on cash flow, and then a quick recap of our capital allocation priorities. On a consolidated full-year basis, revenues in adjusted EBITDA were down from our record 2023 result amid challenging conditions in the U.S. farm market. This was partially offset by the momentum in our commercial segment. Adjusted EBITDA margins of .9% were down just 40 basis points from the record 2023 result, despite a considerable shift in mix and market conditions in 2024. Activities, including restructuring certain groups and teams within AGI, adopting new cost control measures, and accelerating initiatives around supplier consolidation, all contributed to our ability to deliver a strong margin profile in a variety of operating environments. Our adjusted EBITDA for the fourth quarter includes approximately $30 million in transaction and transitional costs. There are three major buckets that contribute to this amount, including legal, restructurings, and external advisory fees. The legal expenses and accruals are primarily related to ongoing matters within our digital business. Restructuring expenses are customary, one-time expenses associated with headcount movement, restructuring, and facility consolidations. The external advisory fees are in relation to strategic initiatives and processes conducted throughout 2024. These three areas were all about one-third of the total fourth quarter transaction and transitional costs. Moving on to our balance sheet. Our net debt leverage ratio of 3.1 times held steady quarter over quarter. We continue to focus on managing cash flow and maintaining a tight discipline on any expenditures. Given our current outlook for adjusted EBITDA and increasing working capital needs in our commercial segment, our net debt leverage ratio may temporarily expand towards the 3.5 times level in 2025. We are now targeting to achieve our run rate net debt leverage ratio of 2.5 times after 2025. Looking now at cash flow. Over 2024, our free cash flow is approximately $79 million, roughly a 29% conversion against adjusted EBITDA, and a 62% improvement relative to 2023. The improvement is partially attributable to a significant cash outflow made in the comparable LTM period related to the resolution of large one-time warranty provisions. Overall, we are encouraged to see a clear uptrend in our free cash flow metric over recent years, with progress accelerating. Across 2025, free cash flow will be leveraged to support investment opportunities in the commercial segment, given the number of strategic project opportunities we anticipate coming together in that market. Cash flow is an area we are closely monitoring and will continue to provide updates on as the year progresses. And finally, an update on our capital allocation priorities, which generally remain consistent with prior discussions. One area we prioritized in the quarter, in addition to early 2025, was executing our share repurchase program. In the fourth quarter, we repurchased $11 million in shares, equivalent to approximately 200,000 shares, or 1% of total shares outstanding. The initial automatic repurchase structure we set up continued into the early part of 2025 and has since been completed. We are now reassessing further share purchase plans as we navigate through the first half of 2025. I'll now hand the call back to the operator and open up the lines for any questions.

Thank you. We will now begin the analyst question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. As a reminder, please limit yourself to two questions and rejoin the queue if you have further questions. We will pause a moment as callers join the queue. The first question comes from Steve Hansen with Raymond James. Please go ahead.

Good morning, guys. Thanks for the time. Just a quick question on the margin profile. It actually looked quite good in the period. Just trying to reconcile some of the pressures we're seeing in international markets like Brazil on margins, one of your larger competitors, relative to your margin profile. Is there specific regions that you can attribute the nice gains you've been seeing?

Thanks, Steve, for the question. I really appreciate the focus on our margin profile. Obviously, that is a continued area of focus for us. We're quite pleased with both the Q4 results as well as the full year results. Certainly a testament to the outstanding work of our entire team. In terms of margin profiles across various regions, Steve, you did note Brazil in particular. We're actually very impressed with the Brazil result in Q4 as well as the margin profile that we received. We saw pretty good margins down in our Brazil business. That was largely supported by some of these exciting large commercial turnkey projects that were signed in Q3. We actually executed a good portion of those projects across Q4. Due to our percent of complete policy, we were able to recognize some of the financial performance of those. The particular projects that I referenced are quite attractive margins. That did provide an uplift to our margins in Brazil and as well supported that overall increase in our margin for our commercial business. That was quite a positive and it offset some of the headwinds that we saw from a declining North America farm market. As you know, Steve, that North America farm market is our higher margin business. We did have a negative mix occurring and then the positive results down in Brazil and across commercial work to offset that. Net net, a good performance for Q4 margins and a pretty good performance for overall fiscal year margins.

That's helpful. Thanks. Just focusing on the US farm business for a moment. I understand a lot of manufacturers have been moving product across the border in anticipation of tariffs. That's a really logical move, frankly, but it also sets the stage for potentially a lot of excess inventory sitting across the border and waiting. Maybe just describe what you've been doing and how you see that lingering effect playing out here through the first half. Just as a derivative of that is what you've been doing to your production rates.

Thanks. Steve, outstanding question. Obviously, the tariff situation that we're facing right now is rather complex, dynamic and evolving. We'll continue to monitor that over the next several weeks with the expectation that we'll get a little more clarity on how this is going to unfold for 2025. But Steve, specific to your question, yes, absolutely. In anticipation of the tariffs coming into play at the beginning of this month, we ramped up our manufacturing production in Canada over the past several months. We produced quite a lot of product and proactively moved that across the US-Canada border. We biased a lot of our order intake and order fulfillment to the US side versus Canada so that we did have a reasonable inventory position in advance of the tariffs going into play. That was all quite strategic. It was very well managed, I would say. We had a good feel for what our order intake has been. Run rate has been over the first few months of this year. We balanced that out to make sure we had the appropriate amount of inventory in our stocking points in the US. That would enable us to slow down the amount of product that is moving across the border, say, over the first few weeks of the tariff implications so that we can mitigate that the best we can. In summary, Steve, yes, we did ramp up manufacturing production so that we could proactively move finished goods across the border to take a reasonable stocking position at our US warehouses.

Okay, that's great. Just the last one. Do you think the Q1 numbers are achievable? It appears you set the bar at a reasonable threshold. I just want to get your confidence sense for the first quarter guidance in particular.

Thanks. Yes, Steve, for sure. First quarter guidance, full year guidance, that's absolutely our intention is to set reasonable guidance across both of those periods. The direct answer to your question is yes, we believe our Q1 guidance is reasonable. The team is and remains focused on executing, operating the business, and delivering to that result.

Okay, thanks, Hunter. I appreciate it.

Yeah, appreciate it, Steve. Thank you.

The next question comes from Michael Topholm with TD Cowan. Please go ahead.

Thank you. Good morning. Hey, Michael. Paul or Jim, can you talk about your consolidated EBITDA margin expectations for 2025 when we look at the full year EBITDA guidance of at least $225 million that you provided?

Yeah, absolutely, Michael. I love all these questions on our margins. Obviously, this is something that we work very hard at. We're quite clean with the roughly 400 basis point margin expansion that we've seen over the past two years and that we were able to largely hold across 2024 amidst those challenging market conditions. We continue to talk about maintaining a margin profile, EBITDA margin profile, in that 18 to 20% range. That's ultimately where we see the business performing under reasonably normal operating conditions and how we look to manage the business going forward. Now, to your question, Michael, we obviously have our expecting continued softness in the North America farm market. This is our largest margin business, so that continued softness does create a headwind on margin mix. We will continue to look to offset that with operational excellence initiatives as well as making sure that we've got the right cost structure in place that is aligned with our market and revenue realities. That said, we do anticipate some margin pressure. Perhaps this year we're operating instead of in an 18 to 20% range, we're in a 17 to 19% range or somewhere in there. Our goal is certainly going to be to finish the year at an EBITDA margin level that is within the range of how we finished 2024.

Okay, so maybe just to clarify there, to the extent that you see any pressure year over year in terms of the full year margin versus what you did in 2024, should we think about that entirely being driven by farm but instead kind of holding in commercial, but the farm is what pulls that down? Is that kind of how to think about the various components there?

Yeah, Michael, you got it spot on. That's exactly how to think about it. We remain very excited about our international business, our international commercial business, quite pleased with the Q4 results. The order book is quite strong. Heading into 2025, there's a lot of momentum there. I would just like to further comment. Our pipeline and quotation activity on that international commercial side remains robust and the mix of projects that we're quoting on and both that reside in our order book have a margin profile pretty consistent with what we saw, say, in the second half of Q3 and Q4. So we do see the potential for the margin profile across the commercial business to remain across 2025 and yes, margin pressure largely from a softening North America farm market. Spot on, Michael.

Okay, perfect. And then second question, I guess you were already asked about Q1's guidance of $25 to $30 million in the conference there. I guess just two questions about that specifically. So can you maybe help us understand how that breaks down across farm and commercial? I mean, clearly farm is the area that you see the weakness, but just trying to understand what the composition of that is and the contributions from each of your segments. And then separately, I mean, we're obviously already into March here and the tariffs just came into effect. You've done some prepositioning as far as inventory to try to put yourself in the best position possible, initially at least. But to the extent that there is any kind of an impact here from tariffs, which is not built into your guidance, like could we see tariff related impacts actually hurt you in Q1 and cause you to come in below that $25 to $30 million or is the concern around tariff related impacts something for future quarters if in fact something comes from those?

Yeah, thanks for the question, Michael. A couple of parts to it. Let me make sure I hit each of them. Q1 guidance composition, the soft guidance in Q1, particularly relative to prior year, is solely a factor of softness across our North America farm market. Across 2024 in the second half, we did see some softness, particularly in the US. As we enter 2025, we do see some softness in Canada. You know, I do want to note that across Q4 and the first two months of Q1, we have seen signs of market stabilization, which is encouraging our order intake has remained fairly consistent across that period with some aspects of our North America farm order intake actually kicking up a bit, which is also encouraging our order book in North America farm. Increase rather substantially, sequentially Q3 to Q4, still remaining far off of prior year levels. So just to give you a little bit of insight into what we're specifically seeing, obviously uncertainty in the farm market still remains in the second half of the year. But Michael, composition, it's largely softness in the North America farm market that is impacting that Q1 guidance. Relative to tariffs, I mean, yes, you are correct. There's still three weeks left in the quarter. Tariffs went into effect earlier this week. There's still conversations going on on the full extent of those tariffs, which I'm sure Michael, you are aware of. We did look to minimize the impact of tariffs in Q1 by the proactive steps that we took in the beginning part of the quarter. So while there could be some impact of tariffs to our Q1 guidance, I wouldn't say that there's zero risk. We would expect those to be largely minimized. The majority of the tariff related impacts would be in the outward quarters, Q2, Q3 and Q4, obviously depending on the ultimate outcome of where tariffs land. Perfect. Thank you for the time. Now you got it, Michael.

The next question comes from Krista Friesen with CIBC. Please go ahead.

Hi, thanks for taking my question. I was just wondering, as we think about your guidance for 2025, can you talk about what expectations you have baked into that 225 number specifically for North American farm and kind of how you're thinking about it throughout the remainder of this year?

Yeah, absolutely, Krista. Obviously we gave our 2025 guidance quite a lot of consideration. The major element that was factored into our guidance was the North America farm market. As mentioned, if you go back to 2024, we started to see that market soften in Q2. That softness then accelerated in the second half of the year, particularly across Q4. And we do expect that the North America farm market to be soft across the first half of 2025. That combined with the fact that at this point there really is limited visibility to the second half of the year for North America farm. So the combined expected softness in the first half of the year with the limited visibility towards the second half of the year were absolutely factors that went into our full year guidance. Now, just building on that limited visibility on the second half of the year, there's a number of factors that will ultimately impact how the second half of the year unfolds for the North America farm market. We referenced a couple of these in our prepared marks, noting commodity prices, farmer input costs, both of which would ultimately impact farmer income and farmer sentiment to making capital equipment purchases. I would say, Krista, another element to watch are farmer-related government subsidies, which could come into a pack and be a nice boost to overall farmer sentiment in the second half of the year. All of those items will have an impact on how the second year unfolds for North America farm. So a big element of our guidance was looking to get a read on the North America farm market with a bias of being a bit conservative, given the uncertainty to the second half of the year. On the other side of it, the international commercial business, we're quite pleased with how that is performing. We're coming up a strong Q4 result. Our order intake was obviously robust across Q3 and Q4, leading to that record-level order book for the company. Order intake continues to be good. Quotation activity continues to be good. So we're pretty excited, and we see the potential for our international commercial business to have quite a strong year. So you factor all of that in. We came up with our guidance. I would say there is upside potential to our guidance that is largely going to be dictated by that potential recovery in the North America farm market in the second half, which we would expect to have ability on as we get close to and into Q3.

Okay, great. Maybe just to dig in there. So the back half of the year for North America farm, what you're assuming for this guidance is, I guess, kind of continued weakness, or are you baking in any sort of green shoots in that 225?

Yeah, well, thanks for the further question there. So to be more specific, what we have not assumed in our full-year guidance is a pronounced recovery in the North America farm market. So we have good visibility to the softness in the first half. We did not bake in a strong recovery in the second half of the year. So to the extent that the recovery comes in better than we anticipated, that then would lead to some of the potential upsides that was referenced.

Okay, great. Thank you. I'll jump back in the queue.

Thank you.

The next question comes from Tim Monticello with ATB Capital Markets. Please go ahead.

Thanks for taking my questions. How are you doing, Tim? I'm doing pretty well. So the guidance for Q1, 25 to 30 million, and then 225 for the rest of the year for the full year, I would assume on an average basis, the back half around 65 million of EBITDA. And the remaining three quarters, I mean. So is that uptick that you expect from Q1 to the remaining three quarters primarily a function of the commercial order book execution and scheduling, or are you seeing something changing in U.S. farm from Q1 to Q2?

Hey, Tim. Yeah, good call out there. So as we, Paul talked about our order book being predominantly commercial based and extremely strong versus prior year. You know, the commercial part of our business is doing extremely well. And so we've got good visibility to that for at least the first half of 2025 and actually ongoing in through the rest of the year. And so when you do the analysis, if you factor in our Q1 guidance and overlay that to our full year guidance, you know, what we're expecting is commercial business to grow in the year. But we have been very cautious about farm and expecting North America farm to be down. And that's not unusual. So as you look at some of the ag peers in the industry, they're calling for 2025 to be down approximately 20% in the farm business. And so we have not veered too much away from that expectation. Great.

And so do you expect the commercial order book execution and sort of the cadence of revenue coming through commercial to be relatively flat quarter to quarter? Is there some variability that we should be aware of?

So when you say flat during the quarter, so one thing of note, you know, we do adopt like a construction company, the percentage of completion approach. So as we produce and set up and make the items for the projects, we are recognizing revenue contractually. And so that will create a more steady flow of the business throughout the year. Unlike years past where it could be a little bit more lumpy based on when it was shipped. Now we have better visibility into and I guess more predictability of that commercial business.

You think

Q1

was a high watermark

for the next

couple

quarters for commercial in particular? For Q1 2025? Sorry, Q4, I meant. My apologies. So yeah, we had a very strong Q4. I think that, you know, there is always some seasonality in our business, whether it's farm or commercial. Q1 historically has always been lower in terms of volume for various reasons, mostly weather related on site construction, getting equipment there and actually getting work done. So Q1 is always a bit lower. But in terms of if you're going to have a run rate for commercial, you know, Q4 was definitely very strong. Q1 will be strong, but lower than Q4. But then as weather picks up, as construction projects go into more full force, we expect more steady commercial business Q2, Q3 and Q4 in 2025.

Got it. And then second question, just on the free cash flow outlook for 2025. You had $30 million of transactional and transitional costs in Q4. I assume part of that was probably to right size the US farm business. There's more work to be done there. What do you think on sort of one time-ish costs that we should expect at least through the first half of 2025? And how should we think about working capital investment in 2025, just given the strong commercial order book?

Okay, so a couple things there. First, I heard you talking about the one time costs, the transaction and transitional costs that we called out. Yes, they were high in the quarter. We definitely understand the frustration with these costs. Just further color on those costs, though, about two thirds of those costs were related to either what we call historical issues. So primarily the legal costs on our digital or bin incident areas that we inherited legacy challenges. And then another third was related to advisory fees related to the process run in 2024. Those costs should not reoccur. Those should be behind us. However, there is an amount that we have been incurring that likely will continue for a bit of time that relate to the work we're doing with restructuring activities. These are activities that we've been doing for the past few years to consolidate facilities, to improve operations, to really help drive the improvement in margins that we've been seeing. And so there is still some activity that we expect in 2025 to happen, but significantly lower amounts than what we saw in 2024. Your next part of your question I heard was on the working capital investment in 2025. Very good call out. So as our business in 2025 shifts more to the commercial side, there are some pretty exciting growth opportunities that we will take a more balanced approach at managing the capital allocation approach, meaning we will be comfortable investing in some of the working capital needs for the next year. For these large projects, the commercial growth opportunities in parts of the world, whether it's in Brazil or in particular. And so that will be a priority for our free cash flow. As you noted, we do generate strong free cash flow that's now improved from earlier years. $79 million last year that's up significantly from the year before. We'll continue to generate strong free cash flow and we'll take a more balanced approach at the use of that free cash flow. And in 2025, there will be an investment in working capital for some of those commercial opportunities.

Okay, I appreciate the commentary. I'll get back in a few.

The next question comes from Andrew Wong with RBC Capital Markets. Please go ahead.

Hey, good morning. Thanks for taking my question. So just to clarify on H2 farm expectations, it sounds like you're. And that the guide assumes a moderate year over year redone. Is that correct? And then just more broadly, like, when we look back. To let's say like a 2021 through 2023 period, and there were some really strong years for farm sales. How much of that would you say was driven by the stronger green place environment and farmer expectations? And when we look at 24 and 25 farm sales. Are these maybe more reflective of the current green pricing conditions that we are in today?

Hey, Andrew, great, great questions. Thanks for those. So, yeah, in terms of the second half of the year for the North America farm market. I mean, it's right to to to look at that. It's certainly something that we're paying quite a lot of attention to is how does that farm market recover it in the second half of the year? As we commented where we sit today, we really have little visibility to that to the shape of that recovery as the year unfolds. Well, we'll obviously get much better visibility and we expect that visibility to come into place more towards Q3. So I think you categorized it correctly. Andrew right now built into our guidance would be more of a cautionary outlook for the second half of the year in that North America farm market. And I did mention previously some of the parameters that we are monitoring quite closely in terms of categorizing or looking at reference points for the North America farm market and our performance within that market. Across a different years, different buckets, 21 and 2023 2021 through 2023. You're right. Extremely strong performance for our North America farm business, particularly in US, but both US and Canada. Yeah, that was supported by favorable market conditions. We saw good commodity prices. We saw reasonable input costs for farmers. So net net farmer income. What was in a positive position? So that enabled farmers. You know what? What? What? What? Higher farmer sentiment to go out and make capital equipment purchases and certainly with our industry leading products in those areas of what we were the beneficiary of that. And we saw a really nice performance across the business in that time range. So now you compare that to what we saw in 2024 and what we saw in 2025. I would not categorize 2024 and 2025 as more of a normal run rate going forward. This is definitely more of a cyclical ag period. You typically see these every so many years that the ag market goes through a down cycle. That looks to be the case of what we're experiencing in 2024 and 2025. I would not use these these years as a more normalized rate going forward. We absolutely expect to come out of this cycle. And then once we do have our North America farm business return to more normal operating levels. It couldn't say right now whether they're going to rebound to that 2021 to the 2023 timeframe or if it would look a little bit different. We would expect that with this downturn and with weaker farmer income, there is going to be an element of pent up demand, pent up interest in replacement equipment. So there is the potential that once you get through this ag cycle, the recovery could look attractive. But obviously we'll know better as we get closer to it.

Okay, great. Thank you for all that. Let me just another one. Back in the middle last year, there was a takeout offer for AGI that was rejected by the board. And since then, has there been another bid or any interest from either that party or any other parties? And I'm just curious, has the board considered revisiting any strategic options?

Hey, Andrew, great question. Thanks for that question. And yes, you are correct. If you go back to the, I think it's actually the beginning of 2024, we did receive an unsolicited conditional inbound offer for the company. That was referenced in a Globe and Mail article. That, you know, the board gave that offer full consideration as well as bringing in advisors to support the evaluation of that proposal. That initial offer was not accepted by the board at that point in time. The board is obviously focused on looking at all alternatives to enhance shareholder value. Coming out of that initial offer, the board did initiate a process to go out and encourage interest across the board on potentially, you know, making bids to take the company private. That process ran for several months across 2024. And these are actually some of the costs that Jim was referring to that we recognized in Q4. That process concluded at the, right around the November timeframe. And out of that process, the board working with its advisors concluded that it was not in the best interest at that time to move forward with any of the offers that were received. So that process has been concluded.

Okay, great. And just one last one on spending. What are your expectations this year for buybacks? And given what your price is today, could you be a little bit more aggressive with that versus what you did last year? And just on capex, if you can give us some guidance.

Thanks, Andrew. So for the stock repurchase program, we initiated that towards the end of last year. And then as we went into blackout, we did an automatic stock purchase program that ran through till February. And so we bought in total, including last year and the beginning of this year, $20 million worth of stock, about 422,000 shares. And from a capital allocation priority perspective, as we think about the needs for our cash, you know, the stock purchasing option is relevant, given our stock price. We're going to try to do more of a balanced approach to managing our capital, our cash. You know, we definitely will allocate amounts to grow the business, continue to grow our business. But with the stock prices where they are, it is something that we continually discuss and revisit regularly. So, you know, that is a consideration that we will think very closely on as we go through the year. The program that we put in place, the NCIB, lasts through the end of the year. So we do have that flexibility to continue to purchase some of that stock. In terms of capex, you know, I would expect 2025 to be a similar year in terms of total capex dollars to 2024. You know, we do have, we prioritize our maintenance capex, which is one to one and a half percent of revenue all the time. That's ongoing. We also invest in product development, what we call intangibles. That continues. And then growth capex will be similar levels as 2024. You know, we do, we've called out the India expansion as an opportunity that we continue to be excited about. But we'll manage that, the pace of that expansion, given the cash flow generation in our business through the year.

Great. I appreciate all the callers. Thank you very much.

The next question comes from Maxim Sucheth with National Bank Financial. Please go ahead.

Hi, good morning, Jamin. How are you, Max? Good, good. Most questions have been answered, but just a couple of small ones. So just to be crystal clear on the farm, so are you still assuming some sort of recovery in the farm in the back half, or is it just a little bit of a change in the economy? Slowed deceleration versus the back half of 2024, just trying to gauge what is exactly embedded in your projections.

Yeah, for sure, Max. Thanks for the question. And, you know, we obviously appreciate the interest in the second half of the year for the North America farm market. You know, a little bit of a difficult one to call, given that we have little visibility at this point in time on how that market is going to recover. So we did have to make some assumptions in our guidance. To get to your point, we did not assume that the market was going to deteriorate further from the first half of the year. So you could think of our guidance or what was included in our guidance for the second half of the year for North America farm to be, you know, kind of more flatish, you know, maybe a moderate improvement. So in that kind of flatish to moderate area, but we did not assume that it would be a further deterioration from the first half of the year. We do expect the first half of this year to be soft in North America farm.

Right. I guess, I mean, like the news flow around retaliatory tariffs on corn and things like this, I mean, that's kind of driving corn and wheat pricing down as we speak right now, right? So like, I mean, that's presumably is not included in those in those projections, right?

That's a great call out, Max. Thank you for that. So correct. We really didn't consider any tariff related impacts in our guidance, quite simply, but because it's too dynamic right now and the extent of the impacts are less visible. I like the way you categorized it, Max. So if I could build on that a bit when we look at tariffs, right? There's both a direct impact and an indirect impact or to say it differently. There's there's things that are in our control and there's elements that are obviously outside of our control. Within our control, we're extremely good at managing, you know, so in terms of how we're going to balance our manufacturing facilities, how we're going to optimize our supply chain. How we're going to look to put offsetting measures in place to mitigate the overall impact of the tariffs. We're quite competent, competent capable in that category. We've already implemented quite a number of measures preemptively to get out in front of this. But when you look at those indirect impacts, Max, which I think is what you were referring to is, you know, to the extent the tariffs are long standing, to the extent retaliatory tariffs go into place, you know, there absolutely could be broader, you know, economic ag market related implications to that. We're obviously outside of our control that ultimately could have an impact, particularly on the second half of the year. You know, for those situations, we'll just continue to monitor it, Max. And then based on how it unfolds and how the reality looks, we will absolutely adjust our operations accordingly, just as we did quite successfully across 2024. You know, for sure, for sure. That makes

a huge amount of sense. And then I just wanted to clarify something, Paul, that you mentioned in response to the sort of, all which are from an M&A perspective question. So when you said there was a second process going private, so was it AFN was thinking about going private or were you just running a wider process? I just want to clarify your language specifically. Thanks.

Yes, thanks for the clarification, Max. Yes, let me see if I can be more clear. Right. We had the unsolicited offer come in more towards the beginning of the year, which the board and its advisories evaluated and did not accept. Based on that inbound, the board with its fiduciary responsibilities to make sure that we're evaluating opportunities to enhance shareholder value. They then did kick off a formal process that was supported by both legal and financial advisors. That process ran for approximately six months across 2024. Several external parties were invited into the process to evaluate the attractiveness and their interest in the company. That process concluded towards the end of November. And based on a review with our financial and legal advisors, the board elected not to move forward with any alternatives at that point in time.

Okay. Okay. I appreciate the clarification. Thank you so much. That's it for me. You got it, Max. Thank you.

The next question is a follow-up from Tim Monticello with ATB Capital Markets. Please go ahead.

Thanks. Just on the farm margins, they're pretty strong in the quarter. And I would have imagined that portable farm was down significantly year over year. What are you thinking is a reasonable range to estimate farm margins in 2025?

Yeah. So thanks, Tim. As you're pointing out, in our farm business, there's really two types of products that we sell in there. One is what we call permanent, so the storage bins, the handling equipment, et cetera, more permanent installations. And then we have what we call portable equipment, so our augers and some of our portable conveyors. The portable equipment does have the highest margins, but even combined with our permanent business, the overall farm tends to hover for the year between 24 and 26% in terms of EBITDA margins, and commercials typically 17 to 18% overall. That's a full year basis. But we will have some challenges in 2025 with farm continuing to be down versus the prior year. That mix impact, we expect to offset with some operational improvements. But as Paul alluded to earlier, to the extent that the mix is that significant, we could see pressure overall. We operate between 18 to 20% generally. From a margin perspective, that could be between 17 and 19% in 2025. We're doing everything we can to make sure we stay in that 18 to 20% range, though, to offset that mixed pressure.

Okay. And then the tariff impacts, obviously, steel tariffs could have a broad-ranging impact on farmers and input costs, and even further downstream. And I'm just curious, do you think there's a risk that you can see contagion from what you're seeing in weakness in the upstream farm market into more of the downstream commercial markets at any point?

Yeah, Tim, maybe I'll take that question. That's an excellent question. So I would probably say that we remain pretty bullish on our commercial outlook for 2025, irrespective of tariffs. And let me build on that a bit, Tim, and just put some color around it. Right now we have an extremely strong order book entering the year for our commercial business, as we noted in our prepared mark. That order book is up just under 50% versus prior year. And that prior year comparison is a strong one, Tim, as you know. So that order book in our commercial business is substantial, and having that kind of position already locked in helps us with understanding that the impact due to tariffs would be minimal. The other thing to note there, Tim, is the majority of our commercial business and that order book is biased internationally. You can think of Brazil, across the May, even into Southeast Asia. And right now, at least from a tariff-related standpoint, we don't anticipate impacts in those regions. So I would say that's why we would not expect really a big impact from tariffs on our commercial business, certainly far, far smaller than what we're monitoring across North America.

And does that order book have legal contingencies attached to it around the oil crisis? Inflationary impacts, or are you hedging those orders with purchases?

Yeah, terrific question, Tim. Let me make sure I understand it. So I think where you're getting at is if we see a lot of global inflationary prices, if we see spike up in steel, or other related costs with the potential impact in our order book, assuming that's a question, if you go back to what we saw a couple of years ago with dramatically accelerating steel costs, we changed our standard contracts and our contractual provisions so that we got the right language in those contracts to protect us from any significant spikes, external spikes in steel supplies, steel costs, or other supply chain-related events. So I would say the potential impact is minimum related to our current order book.

Okay, great. And then last one from me. Clearly as you're starting to de-level the balance sheet, you're doing some share purchases over the last couple quarters. So how does the dividend fit into this? It's about an $11 million drawing cash. I'm not sure that people are buying the stock based on it being a yield investment. I'm just curious if there's any consideration around potentially eliminating the dividend to sort of allocate cash in the balance sheet.

Yeah, thanks, Tim, for that. Right now, there is no discussion on removing the dividend. But certainly as we continue to execute through these interesting times, how we figure out our cash flow and the prioritization of what to do with it is a topic of ongoing discussion. You know, to the extent that we want to divert more to buying back stock and freeing up cash elsewhere, it could be a consideration. But right now, it's not a discussion. It's not on the table. Okay,

appreciate it. I'll turn it back.

This concludes our question and answer session. I would like to turn the conference back over to Paul Householder for any closing remarks.

Thank you. Yeah, first of all, thanks everybody for joining our call here this morning. Really appreciate the outstanding questions. This morning, we have been getting the challenges and really capitalizing on the opportunities to present across 2025. We're a strong operating company, a strong operating team as visible in our Q4 results and full year results. And I'd just like to say thanks and appreciate all the outstanding efforts and achievements from our global team. Thanks again for joining us.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.