Q3 2023 Ag Growth International Inc Earnings Call

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Thank you for standing by. This is the conference operator. Welcome to the AGI third quarter 2023 results conference call. 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.

Thank you for standing by this is the conference operator welcome to the a T. I third quarter 2023 results Conference call. 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 should you need assistance during the conference call you May signal, an operator by pressing Star then zero 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.

To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. 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.

I would now like to turn the conference over to Paul Householder, President and CEO of AGI. Please go ahead, sir.

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 third quarter 2023 result 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. Following our prepared remarks, the call will be open for questions.

Thank you operator, good morning, and welcome to <unk> third quarter 2023 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. Following our prepared remarks, the call will be opened for questions.

The third quarter marked another record performance for AGI, with margins sustaining the notable expansion from the second quarter. We're confident that many of the tactical and business management changes implemented over recent quarters have taken hold and are steadily becoming company standard across AGI.

The third quarter marked another record performance for Agi with margins sustaining the notable expansion from the second quarter, we're confident that many of the tactical and businessman there's been changes implemented over recent quarters have taken hold and are steadily becoming company standard across agi.

With revenues and adjusted EBITDA up 6% and 20% year to date, and an expanding EBITDA margin profile now over 19% year to date, the trend towards enhanced and optimized performance across the business is becoming increasingly clear.

With revenues and adjusted EBITDA up, 6% and 20% year to date and an expanding EBITDA margin profile now over 19% year to date, the trend towards enhanced and optimize performance across the business is becoming increasingly clear.

A noteworthy dynamic for the quarter not captured in the headline sales figures was the favorable role that volume played.

A noteworthy dynamic for the quarter not captured in the headline sales figures was the favorable rule that volume play.

With steel prices down approximately 20% on average compared to prior year, strong underlining volume gains captured through the corridor highlight the pace of growth and robust global demand for AGI products.

With fuel prices down approximately 20% on average compared to prior year strong underlying volume gains captured through the quarter highlight the pace of growth and robust global demand for agi products.

Before expanding further on our results and providing additional business updates, I'd like to first make a few comments on safety at AGI, given it's a cornerstone of our culture and a priority for our teams around the world.

Before expanding further on our results and providing additional business updates I'd like to first make a few comments on safety at Agi, given it's a cornerstone of our culture and our priority for our teams around the world.

Our old Alberta facility just recently celebrated 10 years of zero lost time in...

Our old Alberta facility, just recently celebrated 10 years of zero lost time incidents.

The team at Olds demonstrates that while the company-wide focus on safety has increased in recent years, many of our operations were already holding themselves accountable to high safety standards. This is an encouraging sign and a proud moment for the team at Olds, as well as the rest of AGI. Olds is one of several AGI facilities that have multiple years of zero-loss time safety incidents, and we will continue to recognize and celebrate these milestones.

The team at olds demonstrates that while the company wide focus on safety has increased in recent years. Many of our operations, we're already holding themselves accountable to high safety standards. This is an encouraging sign and a proud moment for the team at olds as well as the rest of Agi oldest one of several agi facilities that have multiple years.

<unk> zero lost time safety incidents and we will continue to recognize and celebrate these milestone achievements.

Now turning to our third quarter results. Revenues of $410 million were up 2% year over year, with strong underlining volume growth when normalized for higher prior year steel costs, supported by a 5% revenue increase sequentially from Q2.

Now turning to our third quarter results revenues of $410 million were up 2% year over year with strong underlying volume growth when normalized for higher prior year steel costs supported by a 5% revenue increase sequentially from Q2.

adjusted EBITDA margins of 20.6% were up approximately 165 basis points year over year and helped generate 11% growth in adjusted EBITDA for 85 million total.

Adjusted EBITDA margins of 26% were up approximately 165 basis points year over year and helped generate 11% growth in adjusted EBITDA for 85 million total.

Across our three corporate strategic priorities, our high-level KPIs are all trending in a favorable direction.

Across our three corporate strategic priorities are high level Kpis are all trending in a favorable direction.

On profitable organic growth, year-to-date revenue increase of 6% and adjusted EBITDA up 20% are quite encouraging, particularly the acceleration of adjusted EBITDA capture relative to the revenue growth.

On profitable organic growth year to date revenue increase of 6% and adjusted EBITDA up 20% are quite encouraging, particularly the acceleration of adjusted EBITDA capture relative to the revenue growth.

This is a clear indication of the overall efficiency improvement of our business operations and a perfect segue into operational.

This is a clear indication of the overall efficiency improvement of our business operations and a perfect segue into operational excellence.

On operational excellence, adjusted EBITDA margins expanded in the corridor to 20.6%.

On operational excellence adjusted EBITDA margins expanded in the quarter to 26%.

The year-to-date results delivered a margin of 19.2%, an increase of 230 basis points versus prior years.

The year to date results delivered a margin of 19, 2% an increase of 230 basis points versus prior year.

Importantly, we are clearly trending above our stated target of 18%.

Importantly, we are clearly trending above our stated target of 18%.

This is evidence that the new initiative to optimize the business and minimize costs are taking hold.

This is evidenced that the new initiatives to optimize the business and minimize costs are taking hold.

We have full confidence that a step change in AGI's margin profiles taking root as these processes and business practices are steadily becoming institutionalized.

We have full confidence that the step change in <unk> margin profile is taking root as these processes and business practices are steadily becoming institutionalized.

To reinforce our efforts on operational excellence, we made a key new addition to our executive team in the quarter with the hiring of Kate Glasser, who has assumed the newly created role of Executive Vice President, Global Operations.

To reinforce our efforts on operational excellence, we made a key New addition to our executive team in the quarter with the hiring of cake Glasser, who has assumed the newly created role of executive Vice President Global operations. This.

This is a critical hire and an important addition to help further accelerate the centralization of key global business support functions such as manufacturing, supply chain, product management, and sales execution among others.

This is a critical hire and an important addition to help further accelerate the centralization of key global business support functions, such as manufacturing supply chain product management and sales execution among others.

tapering significant experience from a wide range of roles with leading companies and other manufacturing subsectors, and will assume leadership of our global operational excellence capabilities and initiatives.

He brings significant experience from a wide range of roles with leading companies and other manufacturing sub sectors and will assume leadership of our global operational excellence capabilities and initiatives.

As we progress further on our operational excellence journey, we expect support from margins to be just the first realized benefit.

As we progress further on our operational excellence journey, we expect support from margins to be just the first realized benefit improve.

improved internal processes, tools, and overall capabilities will help us enhance the customer experience and create competitive advantages, enabling AGI to continue to gain market share and grow revenue.

Improved internal processes tools, and overall capabilities will help us enhance the customer experience and create competitive advantages, enabling ATI to continue to gain market share and grow revenue.

Our net debt leverage ratio continues to move lower and now sits at 3.2 times.

Our net debt leverage ratio continues to move lower and now sits at three two times.

The continued trend lower is inclusive of the settlement of the bin incident in the quarter, which was a large one time cash outflow that impacted this race.

The continued trend lower is inclusive of the settlement of the bin incident in the quarter, which was a large one time cash outflow that impacted this ratio. We are clearly on pace to exceed our 2023 objectives for managing the balance sheet and look forward to reaching our target steady state of two five times in mid 2020 for once.

We are clearly on pace to exceed our 2023 objectives for managing the balance sheet and look forward to reaching our target steady state of 2.5 times in mid 2024.

Once we achieve this milestone and the balance sheet is proven to have stabilized, it will enable us to more aggressively pursue some of our exciting, organic growth strategies and global priorities. Moving into a review.

We achieved this milestone and the balance sheet has proven towards stabilized it will enable us to more aggressively pursue some of our exciting organic growth strategies and global priorities.

Moving into a review of our segments and businesses.

The farm segment was the anchor contributor to the corridor with stable results in North America complemented by solid growth from our international operation.

The farm segment was the anchor contributor to the quarter with stable results in North America complemented by solid growth from our international operations.

Our Canada farm business continues to generate reliable contributions to the global farms they...

Our Canada farm business continues to generate reliable contributions to the global farm segment.

Revenues were flat year over year in the quarter and up 22% year to date.

Revenues were flat year over year in the quarter and up 22% year to date.

Margins were again strong in the quarter with growing volumes for our portable grain handling products, manufacturing efficiencies, and more disciplined pricing strategies all supporting the results.

Margins were again strong in the quarter with growing volumes for a portable grain handling products manufacturing efficiencies and more disciplined pricing strategies all supporting the results.

Our portable equipment manufacturing facilities continue to review and implement the most efficient ways to increase production while maintaining quality to consistently meet strong fundamental demands.

Our portable equipment manufacturing facilities continue to review and implement the most efficient ways to increase production, while maintaining quality to consistently meet strong fundamental demand.

The strategic focus of our Canada Farm commercial team to actively promote new products across both our existing and targeted dealerships is another source of incremental demand for the business, supporting both current and future growth.

The strategic focus of our Canada farm commercial team to actively promote new products across both our existing and targeted dealerships is another source of incremental demand for the business supporting both current and future growth.

Our Canada farm business maintains a positive outlook with an order book up 129% year over year with significant strength and portable equipment demand.

Our Canada farm business maintains a positive outlook with an order book up 129% year over year with significant strength in portable equipment demand.

Demand for permanent grain handling and storage equipment has often been reached of months as growers acclimate to higher interest rates and navigate a drier 2023.

Demand for permanent grain handling and storage equipment has softened in recent months as growers acclimate to higher interest rates and navigate a drier 2023 season.

are expanding and improving product lines and strengthening customer service capabilities combined with the consistent trend for rising grain volumes lead to to anticipate an even brighter outlook for Canada Farm as we look towards 2020.

Our expanding and improving product lines and strengthening customer service capabilities.

And bind with a consistent trend for rising grain volumes lead us to anticipate an even brighter outlook for Canada farm as we look towards 2024.

The U.S. farm business continued to perform well in the quarter, with revenue stabilizing year over year.

The U S pawn business continued to perform well in the quarter with revenues stabilizing year over year.

Unlike Canada, the US Farm Business featured a more balanced sales mix between portable and permanent handling equipment solutions.

Unlike Canada the U S farm business featured a more balanced sales mix between portable and permanent handling equipment solutions.

The US business is seen as steady rise in contributions from dealer conversions as efforts to win business with new customers and penetrate new geographies generates tangible business results.

The U S business has seen a steady rise in contributions from dealer conversions as efforts to win business with new customers and penetrate new geographies generates tangible business results.

Similar to the Canada farm business, the ongoing focus on manufacturing efficiencies has yielded a sustained uptick in the margin profile of our US farm business.

Similar to the Canada farm business the ongoing focus on manufacturing efficiencies has yielded a sustained uptake in the margin profile of our U S farm business the.

The order book is down slightly relative to last year with several activities initiated to strengthen ahead of 2024, such as leveraging product transfers and enhancing sales strategies to product, market, and customer segment.

The order book is down slightly relative to last year with several activities initiated to strengthen ahead of 2024, such as leveraging product transfers and enhancing sales strategies to product market and customer segmentation.

Contributions from international regions drove the growth of the farm segment in the quarter. This is yet another important reminder the benefits of our diversified and resilient overall business model.

Contribution from international regions drove the growth for the pharma segment in the quarter. This is yet another important reminder, the benefits of our diversified and resilient overall business model.

With exposure to different agriculture regions throughout the world, H.I. continues to deliver profitable organic growth and is able to consistently overcome regional pockets of weather, political or economic disruptions.

With exposure to different agricultural regions throughout the World Hei continues to deliver profitable organic growth and is able to consistently overcome regional pockets of weather political or economic disruption.

As the international side of our business continues to grow, the benefits of diversification and the stabilizing impact that has on our results will strengthen.

As the international side of our business continues to grow the benefits of diversification and a stabilizing impact it has on our results will strengthen.

The performance in International Farm was led by Brazil, where revenue set an all-time record, with farm representing the majority of the sales mix from the country.

The performance in International Farm was led by Brazil, where revenue set an all time record with farm, representing the majority of the sales mix from the country.

A record soybean crop and near-record corn crop drove overall activity and an improving farmer sentiment despite some offset from higher interest rates.

A record soybean crop and near record corn crop drove overall activity and an improving farmer sentiment. Despite some offset from higher interest rates.

While non-steel input costs, provided some headwinds to margin capture, the Pharmacy members' ill continues to perform well.

While non steel input costs provided some headwinds to margin capture the farm team in Brazil continues to perform well.

The third quarter results are particularly impressive given the challenging economic conditions in Brazil, which demonstrates a significant demand for AGI products and capabilities in this

The third quarter results are particularly impressive given the challenging economic conditions in Brazil, which demonstrates the significant demand for agi products and capabilities in this region.

In Asia Pacific, our farm business is largely concentrated in Australia, which delivered another steady quarter.

In Asia Pacific Our farm business is largely concentrated in Australia, which delivered another steady quarter.

The portable grain handling product transfer to India continues to progress across the extensive product line with the first models shipped, assembled and tested in Australia by our dealer partners.

The portable grain handling product transferred to India continues to progress across the extensive product line with the first models shipped assembled and tested in Australia by our dealer partners, having local production capabilities in India provides more competitive supply support and service to the strategically important Australian market.

Having local production capabilities in India provides more competitive supply, support and service to the strategically important Australian market, which will enable long-term demand and growth.

Which will enable long term demand and growth.

In Emea, dealer engagement efforts in continental Europe have supported pockets of permanent grain handling and storage solution demands.

In EMEA, our dealer engagement efforts in Continental Europe have supported pockets of permanent grain handling and storage solution demand.

The Farm Statement in Emea is a smaller piece of our farm business and is an area where we are looking to find ways to further unlock opportunities.

The farm segment in EMEA is a smaller piece of our farm business and is an area, where we are looking to find ways to further unlock opportunities.

In aggregate, our farm segment continues to be a key contributor to AGI's overall results.

In aggregate our farm segment continues to be a key contributor to <unk> overall results with an order book up 22% and an expanding margin profile. The outlook is bright for year end and heading into 2024.

With an order book up 22% and an expanding margin profile, the outlook is bright for year end and heading into 2024. Now turning to our-

Now turning to our commercial segment results.

Similar to the farm segment, it was areas within our international business that contributed to the overall positive result and stabilized segment performance.

Similar to the farm segment it was areas within our international business that contributed to the overall positive result, and stabilized segment performance.

The third quarter featured another strong result for the commercial segment in South America and for Brazil in particular.

The third quarter featured another strong result for the commercial segment in South America and for Brazil in particular.

Results were underscored by the final commissioning activities on two very large and complex commercial projects for key cuss

Bolts were underscored by the final commissioning activities on two very large and complex commercial projects for key customers.

These are milestone projects for the local team in Brazil and represent a significant increase in the sophistication of our project execution capabilities.

These are milestone project for the local team in Brazil, and represent a significant increase in the sophistication of our project execution capabilities.

Recently, executive product transfers and the associated increase in local capabilities are expanding the Brazilian teams market range and project scope well ahead of expect. is

Recently executed product transfers and the associated increase in local capabilities are expanding the Brazilian teams' market range and project scope well ahead of expectations as.

As we deepen and extend our project experience, we are well positioned to play a leading role in the development of agriculture infrastructure across Brazil, from routine orders to significant and complex commercial level projects.

As we deepen and extend our project experience, we are well positioned to play a leading role in the development of agriculture infrastructure across Brazil from routine orders to significant and complex commercial level projects.

Our Asia-Pacific commercial revenues were flat with some softness and southeastern Asia offset by continued strength in India.

Our Asia Pacific commercial revenues were flat with some softness in southeast Asia offset by continued strength in India.

Already a leading contributor, the margin profile in India continues to expand as operational excellence initiatives and penetration of higher-end markets combine to drive margins upward.

Already a leading contributor the margin profile in India continues to expand as operational excellence initiatives and penetration of higher end markets combined to drive margins upwards.

This is evidence that the Operational Excellence Initiatives are not just North America-centric. Progress is being made at AGI facilities all around the world.

This is evidence that the operational excellence initiatives are not just North America centric progress is being made at agi facilities all around the world.

On the product transfer front, the success in setting up the storage bin line has attracted interest from local customers with large operations across India.

On the product transfer front the success in setting up the storage bin line has attracted interest from local customers with large operations across India.

Establishing strategic partnerships with customers who are enticed by local production with products tailored to the region are an expected source of accelerated growth. This is true not just for India, but in all regions where active product transfers are taking place.

Establishing strategic partnerships with customers, who are enticed by local production with products tailored to the region or unexpected source of accelerated growth. This is true not just for India, but in all regions, where active product transfers are taking place.

Are you may a region was again able to generate fairly stable result to fight pressing conditions?

Our EMEA region was again able to generate fairly stable results despite pressing conditions.

In lieu of the slowdown in customer purchasing activity, the team continues to focus inward on operational excellence initiatives and has been successful in driving significant gains in gross markets.

In lieu of the slowdown in customer purchasing activity. The team continues to focus inward on operational excellence initiatives and has been successful in driving significant gains in gross margins. This favorably positions, our EMEA region to accelerate EBITDA growth as sales in activity ramps up over time.

Disfavorably, positions are in May a region to accelerate ebid growth as sales and activity ramps up over time.

We have begun to see notable pockets of strength and demand throughout the region as the email order book has grown 17% year over year, and we are further encouraged by a large and highly active pipe-

We have begun to see notable pockets of strength in demand throughout the region as the E. Mail order book has grown 17% year over year and we are further encouraged by a large and highly active pipelines.

One additional comment on our EMEA region as it relates to the evolving situation in the Middle East.

One additional comment on our EMEA region as it relates to the evolving situation in the middle East.

While we do not have assets, operations, employees, or meaningful revenues from the areas where conflict has taken place, we continue to monitor the situation closely. Results in our north-

While we do not have assets operations employees are meaningful revenues from the areas where conflict has taken place we continue to monitor the situation closely.

Results in our North America commercial segment were mixed the core commercial business in the U S. The largest sub segment within North America commercial posted significant increases in revenues and adjusted EBITDA.

The core commercial business in the U.S. the largest sub-segment within North America commercial posted significant increases in revenues and adjusted EBITDA.

Meanwhile, the core commercial business in Canada and the food platform continue to navigate challenging conditions with efforts focused on rebuilding the order.

Meanwhile, the core commercial business in Canada, and the food platform continued to navigate challenging conditions with efforts focused on rebuilding the order books.

Taken together, the North America commercial segment revenues decreased by 6%, but gained from expanding gross margins and discipline to S-GNA to deliver solid, incremental adjusted growth of greater than 8% year-over-year.

Taken together the North America commercial segment revenues decreased by 6%, but gained from expanding gross margins and disciplined SG&A to deliver solid incremental adjusted EBIT growth of greater than 8% year over year.

North America commercial was one of the leading contributors to the overall consolidated, adjusted, even a growth in the quarter and continues to provide good momentum to our results despite the headwinds in the food platform. And finally, a few...

North America commercial was one of the leading contributor to the overall consolidated adjusted EBIT growth in the quarter and continues to provide good momentum to our results. Despite the headwinds in the food platform.

And finally, a few comments on our Agi digital business the.

The challenging and rapid business transformation executed through the first half of the year continues to pay off, with the digital business generating nearly 2.5 million in positive adjusted EBITDA in the quarter.

The challenging and rapid business transformation executed through the first half of the year continues to pay off with the digital business generating nearly $2 5 million in positive adjusted EBITDA in the quarter.

This follows last quarter where digital achieved its first ever break even performance.

This follows last quarter, where digital achieved its first ever breakeven performance the.

The digital business has solidified a firmly positive outlook for four-year adjusted EBITDA. We are now focused on accelerating the growth of our digital business and have several new international opportunities to help further boost performance. An exciting development for an AGI business unit that has primarily been US-centric in sales and operations today.

The digital business has solidified our firmly positive outlook for full year. Adjusted EBITDA. We are now focused on accelerating the growth of our digital business and have several new international opportunities to help further boost performance and exciting development for an Adi business unit that has primarily been U S centric in sales and operations to date.

Overall, we are pleased with our third quarter results and the strong 2023 so far. We are on pace to close out another record year with all high level KPIs trending in a positive direction.

Overall, we are pleased with our third quarter results and the strong 2023, so far we.

We are on pace to close out another record year with all high level kpis trending in a positive direction.

I'm particularly encouraged to see the significant progress on margin expansion from our Operational Excellence Initiative.

I am, particularly encouraged to see the significant progress on margin expansion from our operational excellence initiatives.

This is quickly becoming a key capability for AGI, along with our broad product portfolio and wide range of geographic positions.

This is quickly becoming a key capability for agi, along with our broad product portfolio and wide range of geographic positions.

Our third quarter results were enabled by excellent contributions from our international geographies, notably Brazil, delivering an all-time record quarter. Our international regions have now collectively delivered over $500 million in revenue over the last four quarters, a key milestone achievement and tangible evidence that our diversified business model continues to drive stable and growing results for AGI.

Our third quarter results were enabled by excellent contributions from our international geographies, notably, Brazil, delivering an all time record quarter. Our international regions have now collectively delivered over $500 million in revenue over the last four quarters, our key milestone achievement and tangible evidence that our diversified business model.

<unk> continues to drive stable and growing results for Agi.

We look ahead to 2024. We are committed to complimenting this enhanced margin profile with accelerated revenue growth initiatives.

As we look ahead to 2024, we are committed to complementing this enhanced margin profile with accelerated revenue growth initiatives.

Leveraging expanded margins, a strong revenue growth, and a deleveraged balance sheet, AGI will continue to create value for all our valued stakeholders, our customers, employees, and shareholders.

Leveraging expanded margins a strong revenue growth and a deleveraged balance sheet, a gi will continue to create value for all our valued stakeholders, our customers employees and shareholders. Thank you for your time this morning, and I'll now hand, the call over to Jim.

Thank you for your time this morning, and I'll now hand the call over to.

Thank you, Paul, and good morning, everyone. For today's call, I will touch on four areas, including an overview of our third quarter results, an update on our balance sheet and related key metrics, a few comments on our cash flow, and I'll close out the prepared remarks with a recap on our outlook for the year.

Thank you Paul and good morning, everyone for today's call I will touch on four areas, including an overview of our third quarter results and update on our balance sheet and related key metrics a few comments on our cash flow and I'll close out the prepared remarks with a recap on our outlook for the year.

On a consolidated basis, third quarter revenues of $410 million increased 2% over last year's all-time record quarter.

On a consolidated basis third quarter revenues of $410 million increased 2% over last year's all time record quarter.

The trend in expanding gross margins continued from the second quarter and in addition to disciplined SG&A cost containment helped to drive approximately 165 basis points of adjusted EBITDA margin expansion.

The trend in expanding gross margins continued from the second quarter and in addition to disciplined SG&A cost containment helped to drive approximately 165 basis points of adjusted EBITDA margin expansion.

Overall Adjusted EBITDA landed at $85 million, growing 11% in the quarter, and clearly demonstrates our ability to capture additional margins from modest sales increases as the benefits of our Operational Excellence Initiatives take hold.

Overall, adjusted EBITDA landed at 85 million growing 11% in the quarter and clearly demonstrates our ability to capture additional margins from modest sales increases as the benefits of our operational excellence initiatives take hold.

Our farm segment delivered 227 million in revenue, growing 3% year over year. Adjusted EBITDA of 62 million, grew 22% year over year with margins expanding over 400 basis points to 27%.

Our farm segment delivered $227 million in revenue growing 3% year over year, adjusted EBITDA of $62 million grew 22% year over year with margins expanding over 400 basis points to 27% stay.

Stable sales in North America were complemented by growth in international regions notably Brazil.

Stable sales in North America were complemented by growth in international regions, notably, Brazil the.

The margin result was a combination of operational excellence initiatives, as well as from mix with a weighting towards portable equipment relative to last year.

The margin result was a combination of operational excellence initiatives as well as from mix with a weighting towards portable equipment relative to last year.

In the commercial segment, revenues of $183 million were stable with last year's result. Adjusted EBITDA of $34 million grew 6% year over year with margins increasing roughly 100 basis points.

In the commercial segment revenues of 183 million were stable with last year's result.

Adjusted EBITDA of $34 million grew 6% year over year with margins, increasing roughly 100 basis points similar to farm. The strong results in Brazil helped offset some softness in other areas.

Similar to farm, the strong results in Brazil helped offset some softness in other areas.

Moving on to our balance sheet.

We continue to make steady progress on our working capital metrics and key leverage ratios, clear indicators of the structural improvements we are making to the business and how we manage.

We continue to make steady progress on our working capital metrics and key leverage ratios clear indicators of the structural improvements, we're making to the business and how we manage it.

Working capital investment continues to be a key focus area across the organization. Our net investment of $243 million in the third quarter was down from $264 million year over year.

Working capital investment continues to be a key focus area across the organization. Our net investment of 243 million in the third quarter was down from 264 million year over year.

As a percentage of revenue, working capital investment fell from 16.4% to 14.8% year over year on an annualized basis.

As a percentage of revenue working capital investment fell from 16.4% to 14.8% year over year on an annualized basis. This is roughly a 160 basis point improvement and continues a clear trend from the last several quarters that shows a sustained improvement in how we are.

This is roughly a 160 basis point improvement and continues a clear trend from the last several quarters that shows a sustained improvement in how we are managing our working capital across AGI.

Managing our working capital across Agi.

Over the last year, we placed a heightened focus on our inventory levels and in particular, our day stales in inventory or DSI.

Over the last year, we placed a heightened focus on our inventory levels and in particular, our days sales in inventory or DSI.

Our DSI metrics are closely managed KPI across AGI.

Our DSI metrics are closely managed kpis across agi.

and they continue to make tremendous strides versus recent quarters and year over year.

And they continue to make tremendous strides versus recent quarters and year over year.

Credit facility management also continues to be a focus area. Our net debt leverage ratio decreased to 3.2 times in the third quarter. This is a significant improvement from 4.1 times year over year and 3.3 times sequentially.

Credit facility management also continues to be a focus area, our net debt leverage ratio decreased to 3.2 times in the third quarter.

This is a significant improvement from four one times year over year, and 3.3 times sequentially.

This is after factoring in the bin settlement.

This is after factoring in the bin incident settlement repayment without that one time nonrecurring costs in the quarter, our net debt leverage ratio would have improved even further.

Without that one-time non-recurring cost in the quarter, our net debt leverage ratio would have improved even further.

Despite this added cash outflow, we still expect to be at or close to our original goal of approximately three times by the end of 20.

Despite this added cash outflow, we still expect to be at or close to our original goal of approximately three times by the end of 2023.

Turning to a few comments on cash flow, funds from operations of $64 million were up from $56 million year over year. Similar to last quarter, the step up in available cash flow mirrors the increase in adjusted EVITA and demonstrates our ability to capture and convert our growing adjusted EVITA into cash flow.

Turning to a few comments on cash flow.

<unk> from operations of $64 million were up from $56 million year over year similar to last quarter, the step up and available cash flow mirrors, the increase in adjusted EBITDA and demonstrates our ability to capture and convert our growing adjusted EBITDA into cash flow.

And finally, turning to our outlook we remain excited about the path. We are on to close out 2023, we.

We remain excited about the path we are on to close out 2020.

We are encouraged that the order book continues to grow and is up 3% year over year.

We are encouraged that the order book continues to grow and is up 3% year over year.

This is in light of a few areas across AGI where we are rebuilding the pipeline most notably our food plants.

This is in light of a few areas across Agi were we are rebuilding the pipeline most notably our food platform.

We have clear line of sight to the end of 2023 and have reiterated our outlook for the full year with a justity of at least 290 million.

We have clear line of sight to the end of 'twenty 23, and have reiterated our outlook for the full year with adjusted EBITDA of at least $290 million.

In addition, we have updated our full-year margin guidance with Adjusted EBITDA margins now expected to be of at least 18.5%. Up 50 basis points from prior guidance of 18.

In addition, we have updated our full year margin guidance with adjusted EBITDA margin is now expected to be up at least 18.5% up 50 basis points from prior guidance of 18%.

This represents a significant step up in results. When the last several years of consecutive successive record results are taken into consideration.

This represents a significant step up in results when the last several years of consecutive successive record results are taken into consideration.

Achieving this level of growth and profitability on a consistent basis is a clear indicator of AGI's growth trajectory and the types of opportunities available in the markets we serve around the world. For more information, visit our website at www.agilent.com

Achieving this level of growth and profitability on a consistent basis is a clear indicator of ags growth trajectory and the types of opportunities available in the markets we serve around the world.

Thanks everyone for your time and we'll now open up the call for questions.

Thanks, everyone for your time, and we'll now open up the call for questions.

Thank you we will now begin the analyst question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.

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The first question comes from Jacob bout CIBC. Please go ahead.

Good morning.

Hey Jacob, how you doing? Good. So a couple of quarters here we've seen revenue kind of in the low single digit growth rate year and year. Maybe just comment on what your expectation is for revenue growth through the end of this year into 2024 because if you take a look at backlog, overall US is down and South America is.

Hey, Jacob How're you doing.

Good.

So a couple of quarters here, we've seen revenue kind of in the low single digit growth rate year on year.

Maybe just comment on what your expectation is for revenue growth through the end of this year into 2024 because.

If you take a look at our backlog.

Overall U S is down in South America is down year on year and so.

is down year on year. And so maybe just talk through, you know, backwagas as a predictor of revenue growth going forward. Yeah, I know it's right.

Maybe just talk through backlogs as a predictor of revenue growth going forward.

Yeah, great. Thanks, Thanks for the question Jacob.

Yeah, first I'll start with the revenue portion commenting on your points on the revenue over the past two quarters. You heard in our opening comments one of the things that we highlighted is the steel impact on our revenues. So just to elaborate on that a bit further, if you look at Q2 and Q3, we've seen steel as a significant input cost that represents some around 25 to 30% of our cost faces.

Yes, first I'll start with the revenue portion commenting on your point on the on the revenue over the past few quarters you heard in our opening comments one of the things that we highlighted is the steel impact on our revenues. So just to elaborate on that a bit further if you look at Q2 and Q3, we've seen steel is a significant.

Input cost that represents somewhere around 25% to 30% of our cost basis still being down about 20%. So if you look at that and normalize out that steel costs that would add about 3% to 5% roughly to our revenue. So you put that into context with Q2 being up 2% normalized for steel, we see that more in a.

still being down about 20%. So if you look at that and normalize out that field cost, that would add about three to five percent roughly to our revenue.

So you put that in the context of Q2 being up 2%, normalized for steel, we see that more in a 5% to 7% range. So just to build on those opening comments relative to steel.

5% to 7% range. So just to build on those opening comments relative to steel.

Going to comment on the order book. Yeah, we're up 3% versus prior year

I'm not going to comment on the order book, Yes, we're up 3% versus prior year we.

We do have some very important pockets of strength in our order book, notably Canada Farm, EMEA, India, all three of those regions, Jacob, are up over 10% from an order book standpoint.

We do have some some very important pockets of strength in our order book, notably, Canada Farm EMEA, India. All three of those regions Jacobs are up over 10% from an order book standpoint, as you correctly pointed out we do have some soft areas in our order book U S farm. It saw South America is soft as well I'll take it.

As you correctly pointed out, we do have some soft areas in our order book, US Farm, it's soft South America is soft as well. I'll take each one of those individually. When you look at US Farm, we do have a positive outlook on that order book encouraging or improving setting ourselves up for a positive 2024. One of the dynamics that we're watching closely here over Q4 is the rising steel costs now that we're seeing.

Each one of those individually when you look at U S farm we.

We do have a positive outlook on that order book, encouraging or improving setting ourselves up for a positive 2024 are one of the dynamics that we're watching closely here over Q4 is the rising steel costs now that we're seen steel cost or increase rather notably over the past four to six weeks that's often a.

Steel costs have increased rather notably over the past four to six weeks. That's often a catalyst.

for dealers to move forward with purchases on our permanent side of our business. So we're out there very actively with our dealer partners, having conversations with them on the permanent side of our business. We think that's also a driver for a strengthening US farm order book heading into 2024 as well. Portable demand remains robust, particularly in Canada, but as well as US. So going forward, it's really on the permanent side that we would expect to see an improvement from an order book standpoint.

Catalyst.

For dealers to move forward with purchases on our permanent side of our business. So we're out there very actively with our dealer partners, having conversations with them on the permanent side of our business. We think that's also a driver for a strengthening U S farm order book heading into 2024, as well portable portable demand remains robust, particularly in <unk>.

But as well as the U S. So going forward, it's really on the permanent side that we would expect to see an improvement from an order book standpoint.

Jumping down the South America, I mean, fantastic quarter for Brazil. Tremendous work by the team in that area. We're quite confident that our performance in Brazil has led to a significant increase in market share. We continue to gain market share throughout this year. But order book is down. A lot of that is timing. We mentioned that we had two significant commercial projects.

Jumping down to South America, I mean fantastic quarter for Brazil tremendous work by the team.

In that area, we're quite confident that our performance in Brazil has led to a significant increase in market share. We continue to gain market share throughout this year. Our order book is down a lot of that is timing. We mentioned that we had two significant commercial projects. They closed in Q3 those are very important projects for us key cut.

that closed in Q3. Those were very important projects for us, key customers, both quite successful projects. So we're very proud of the team and the accomplishments down there. We do expect that commercial portion of our order book in South America to rebuild. We've got a number of exciting opportunities in our pipeline that we're working very closely with our customers in securing those orders.

Tumors are both quite successful projects or we're very proud of the team and the a compliment accomplishments down there. We do expect that commercial portion of our order book in South America to rebuild we've got a number of exciting opportunities in our pipeline that we're working very closely with our customers and securing those orders and then.

And then on the farm side, there's been some improving farmer sentiment, at least from our perspective, that is a good tailwind heading into 2024.

On the farm side Theres been some improving farmer sentiment at least from our perspective that is a good tailwind heading into 2024 complementing.

complementing that from some key government initiatives that are supporting investment in infrastructure on the farm level as more credit becomes available, encouraging farmers to make and move forward with those purchases.

Complementing that.

Some some key government initiatives that are supporting our index.

Investment in infrastructure on the farm level as more credit becomes available encouraging farmers to make and move forward with those purchases.

maybe just to follow up here. So do you expect backlog then to be positive year and year in the US and South America as we get through court order?

Maybe just a follow up here. So do you expect backlog than to be positive year on year in the U S and South America as we get through the fourth quarter.

But we certainly expect the order books to approve sequentially, Jacob, across Q4 and into Q1. And certainly our target would be for both of those to be up over prior years we head into the year. But certainly improving and strengthening sequentially, yes. Okay.

But we certainly expect the order books to approve sequentially Jacob across Q4 and into Q1.

And are certainly our target would be for both of those to be up over prior year as we head into the year, but certainly improving and strengthening sequentially yes.

Okay. Thank you that's my two questions.

Next question comes from Michael Dume with Krocebaak. Please go ahead.

The next question comes from Michael <unk> with Scotiabank. Please go ahead.

Hey, good morning, guys.

Hey, Michael.

Hey, so very nice improvement on the margins. You know, several operational excellence initiatives helped you get here, but it doesn't sound like you're done, Paul. I don't know if Paul has ever been done there, but how do I square the year to date, you've done margins at 19.2, despite the low Q1 and more efficiencies to come with the 18.5%. Presumably,

So very nice improvement in the margins.

Several operational excellence initiatives helped you get here, but it doesn't sound like you're done Paul I don't know, Paul if you'll ever be done there, but how do I square the year to date EBITDA margins at 19 point too despite the low Q1.

And more efficiencies to come with the 18, 5%.

Gently.

You all, you said for 2023, we're presumably beyond. Just wondering if, you know, there's an element of conservatism there or, you know, if there's potential headwinds we should consider.

You. All you said for 2023 were presumably beyond just wondering if there is an element of conservatism there or if there's potential headwinds we should consider.

Yeah, thanks, thanks for the question, Michael. And we're equally encouraged by the performance we've had from an operational excellence standpoint and the margin improvement gains that we've made. You know, it's interesting to note that as we look very deep, very deep at where that margin improvement is coming from, it's really even all the way down to the individual product line basis. So that's where it's particularly encouraging.

Yeah. Thanks, Thanks for the question, Michael and we're equally encouraged by the performance we've had from an operational excellence standpoint, and the margin improvement gains that we've made.

It's interesting to note that as we look very very deep at where that margin improvement is coming from it's really even all the way down to the individual product line basis. So that's where it's particularly encouraging is that we're seeing notable improvements in margins at the individual product line level. Obviously, we had a significant step up in our EBA.

is that we're seeing notable improvements in margins at the individual product line level. Obviously, we had a significant step up in our EBITDA margins from Q1 to Q2, and then largely holding on to that in Q3, which is encouraging.

Our margins from Q1 to Q2, and then largely holding onto that in Q3, which is encouraging.

You know, when you look at the business at AGI over across the year, you know, we do have peaks in the quarters, Q2 and Q3, typically being our strongest quarters from a top line standpoint. And with the strength and the top line of Q2 and Q3, that's going to support our highest margin quarters for the year. So, you know, we would expect Q2 and Q3 to be peaks in terms of our EBITDA margins for the year, Q4 coming off those levels, but still up notably over prior year, which supports that 18.5%.

When you look at the business.

Agi over across the year, we do have peaks in the quarters Q2, and Q3 typically being our strongest quarters from a top line standpoint, and with the strength in the topline of Q2 and Q3, that's going to support our highest margin quarters for the year. So yes, we would expect Q2 and Q3 to be <unk>.

In terms of our EBITDA margins for the for the year Q4 coming off those levels, but still up notably over prior year, which supports that 18, 5% full year guidance.

for your guidance.

Going forward, you know, as we commented, we're really just getting started from the operational excellence standpoint. A lot of the initiatives that we have underway, we kicked off just the beginning of the year in 2023. These are multi-year initiatives, so as your referencing might, but we do expect to have further improvements from our operational excellence capabilities.

Going forward you know as we've commented we're really just getting started from an operational excellence standpoint, a lot of the initiatives that we have underway. We kicked off just the beginning of the year. In 2023. These are multi year initiatives. So as you're referencing Michael we do expect to have further improvements from our operational excellence capabilities.

going forward. Obviously, this is an important area for us. We continue to invest in key resources, prioritize this as an area of investment because we think it's going to be a key capability for us going forward. So, in aggregate, yes, we see benefits from our operational excellence carrying into and through 2024.

Going forward. Obviously this is an important area for us we continue to invest in key resources prioritize. This is an area of investment because we think it's going to be a key capability for us going forward. So in aggregate, yes, we see benefits from our operational excellence caring into and through 2024.

Perfect. Second question, you know, I think we're all going to try to.

Perfect second question.

I think we're all going to try to figure this out and ask questions on it 2023 looks to be a great year for our growth.

this out and ask questions on it. You know 2023 looks to be a great year for aggro. And I guess the question is, you know, how repeatable or beatable is it in 2024? You talked about a couple of things accelerated growth initiatives, margin expansion, just wondering how that all swear is at with your, you know, visibility on the macro so far.

And I guess the question is how repeatable are beautiful is it in 2024 and you talked about a couple of things accelerated growth initiatives margin expansion, just wondering how that all square that with your visibility on the macro so far.

Yeah, thanks, Mike Glanty. You know, this is a challenge that the team is certainly up for. When I say challenge, it's the challenge of continuing to outperform our prior year. We continue to set an increase, an increasingly high performance bar. If you look at our track record over the past three years, we've consistently grown even greater than 20%.

Yeah. Thanks, Michael and you know this is a challenge that the team is certainly up for when I say challenge is the challenge of continuing to outperform our prior year. We continue to set an increase an increasingly high performance bar. If you look at our track record over the past three years, we've consistently grow.

One EBITDA greater than 20% I think over the past three years. Our EBITDA is now almost doubled and then we've complemented that by an EBIT to EBITDA margin expansion of approximately 400 basis points over the past two years. So the team is doing fantastic work, we're setting the performance bar quite high and we're entering 2024.

I think over the past three years our EBITDA has now almost doubled. And then we've complemented that by an EBITDA margin expansion of approximately 400 basis points over the past two years. So the teams doing fantastic work. We're setting the performance bar quite high and we're entering 2024 with a high degree of confidence. Not only do we have the higher margins and all the initiatives in place to support that area.

With a high degree of confidence not only do we have the higher margins in all the initiatives in place.

To support that area.

But a number of our growth initiatives provide a tailwind.

But a number of our growth initiatives provide a tailwind heading into 2023, and so just commenting Michael a bit on a few of those a growth tailwind theres really three in particular that will highlight one is our growth platforms and when we talk about growth platforms Theres really three <unk>.

heading into 2023. And so just commenting, Michael, a bit on a few of those growth tailwinds, there's really three in particular that will highlight.

One is our growth platforms. So when we talk about growth platforms, there's really three in particular food, digital and.

In particular food digital and feed now, obviously food and digital they've been restructured programs across 2023, we've made substantial progress.

Now obviously food and digital, they've been at restructured programs across 2023. We've made substantial progress in but-

substantial progress in both of those areas, which gives us a lot of confidence that performance in those two businesses are actually going to be a tailwind across 2024. And then complimenting that by a lot of progress we've made in the feed segment, a very attractive order pipeline in feed that will also be a tailwind for growth heading into 2024. Second one, geographically.

<unk> substantial progress in both of those areas, which gives us a lot of confidence that performance in those two businesses are actually going to be a tailwind across 2024, and then complementing that by a lot of progress. We've made in the beef segment, a very attractive order pipeline in feed that will also be a tailwind.

For growth heading into 2024.

Second one geographic expansion, notably Africa, and Middle East substantial progress across 2023. This is one of the areas that underpinned that increase in our EMEA up order book by 17% and that is complemented by an extremely strong order pipeline the food.

Notably, Africa and Middle East substantial progress across 2023. This is one of the areas that underpinned that increase in our EMEA order book by 17%. And that is complemented by an extremely strong order pipeline.

The food security, particularly across the Middle East, is a very strong driver for demand. And that is where a lot of that quote log resides. We expect our order book in EMEA to improve substantially over Q4 and set us up very strongly for 2024. And then the last one that we've talked about frequently is the product transfers.

Security, particularly across the Middle East is a very strong driver for demand and that is where a lot of that quote log resides we expect our order book in EMEA to improve substantially over Q4 and set us up very strongly.

For 2024, and then the last one that we've talked about.

Frequently as the product transfers across 2023, we've made notable progress in all of the upfront efforts around engineering and manufacturing transfer, we're now out marketing and selling these product transfers across key geographies of Brazil, India as well as North America and not only is our quote logs.

Across 2023, we've made notable progress in all the upfront efforts around engineering and manufacturing, transferring, we're now out marketing and selling these product transfers across key geographies of Brazil, India, as well as North America. Not only is our quote-log increasing substantially in support of these product transfers, they're now tangibly in our order book, and we expect a very strong order book on product transfers heading into 2024. So that's really our third driver of growth and why we're quite bullish heading into 2024.

<unk> substantially in support of these product transfers, they're now tangibly in our order book and we expect a very strong order book on product transfers heading into 2024, So thats really our third a driver of growth and why we're quite bullish heading into 2024.

Really appreciate it Paul. That's the dumb thanks. You guys. Yeah, thanks Michael.

Really appreciate it Paul.

Yeah, Yeah. Thanks, Michael.

The next question comes from Stephen Hansen with Raymond James. Please go ahead.

The next question comes from Stephen Hanson with Raymond James. Please go ahead.

Oh, yeah. Good morning, guys. Thanks for the time. Paul, I understand. I'm not trying to diminish any of the progress you're making on the operational. I can finish it. They sound fantastic, but I'm surprised you didn't mention the portable mix in your.

Oh, Yeah. Good morning, guys. Thanks for the time.

Paul I understand.

Not trying to diminish any of the progress you're making on the operational excellence initiatives, there's some fantastic, but I'm surprised you didn't mention the portable mix in your commentary around the margin progression there.

The dollar is asking, I'm just mindful that if you get a big surge or recovery in some of the permanent business next year that you don't get some contraction of the margin expansion, is it possible to attribute the margin expansion?

Doors, asking I'm, just mindful that if you get a big surge or recovery in some of the permanent business next year that you don't get some contraction of emerging is it possible to attribute the margin expansion between the mix shift in the portal business versus all the other initiatives you've already discussed.

in the portal business versus all the other initiatives you've already discussed.

Yeah, for sure, Stephen, and that's a fantastic question. Thanks. Thanks for the question. So, yeah, it is important to look at our margin expansion and delineate between mix.

Yeah for sure Steven and that's a fantastic question. Thanks. Thanks for the question. So yeah. You know it is important to look at our margin expansion and delineate between mix as well as fundamental improvements in our margin, which I think is the point that you are getting at so absolutely we've had very strong performance.

as well as fundamental improvements in our margin, which I think is the point that you're getting at. So absolutely, we've had very strong performance in our farm segment this year. We've had very strong performance in our portable segment this year. So for sure, that is supporting our margins from a mixed standpoint.

Our farm segment. This year, we've had very strong performance in our portable segment. This year. So for sure that is supporting our margins from a mix standpoint, what is encouraging when you look at our operational excellence initiatives is it when you drill down to the product lines you see a similar.

What is encouraging when you look at our operational excellence initiatives is that when you drill down to the product line.

you see a similar margin expansion. So it's not just mixed driven. It is fundamental improvements in our cost structure and our efficiencies measured at the product line level. So our portable margins have expanded. Our permanent margins have expanded. Our commercial margins have expanded. So it's fundamentally ingrained at the core of our business.

Margin expansion, so it's not just mix driven.

It is a fundamental improvements in our cost structure and our efficiencies measured at the product line level. So our portable mat margins have expanded our permanent margins have expanded our commercial margins have expanded so it's fundamentally ingrained in the core of our business now absolutely Steve too.

Now, absolutely, Steve, to your comment going forward, if and as we see a mix, a mix shift across 2024 with perhaps commercial strengthening and the permanent side of our strength and our permanent side of our farm business strength.

Your comment going forward, if and as we see a mix a mix shift across 2024, with perhaps commercial strengthening and the permanent side of our strengthened our permanent side of our farm business strengthen strengthening fundamentally that mix shift would support margins going down we are quite confident that the <unk>.

strengthening. Fundamentally, that makeshift would support margins going down. We're quite confident that the ongoing efforts in operational excellence and the improvements that we are going to make are going to more than offset makeshift. Go.

Our ongoing efforts in operational excellence and the improvements that we are going to make are going to more than offset mix shift going forward.

Okay, very helpful. Thank you. And then just one follow up again on the outlook for the US business in particular. That's where some of the weakness has been more centric of late. How do you feel about that that business from a growth standpoint into next year? You've described a few elements of that business already, but whether it's the dealer take up the farmer sentiment. I mean, how you balancing all those factors.

Okay very helpful. Thank you and then just one follow up again on the outlook for the U S business in particular, that's where some of the weakness has been more centric of late how do you feel about that that business from a growth standpoint into next year, you've described a few.

Elements of that business already but whether it's the dealer take up the farmer sentiment I mean, how you're balancing all the factors.

as it stands, and then I guess just maybe a bit more color on the same point is around the steel surge that we've seen, it sounds like that's starting to pull customers in the door a little bit faster ahead of the deal increase. I think that's with a tonier question.

As it stands and then I guess, just maybe a bit more color on the same point is around the steel surge that we've been seeing is that it sounds like that's starting to pull.

Customers in the door, a little bit faster ahead of the deal increase I think that with the tone of your question.

Your point.

Yep, yes, Steve. I think it's spot on. Very good read. So you, you as key, uh,

Yes, Steve I think you're spot on a very good return U S key.

segment for us, certainly across both farm and commercial. When you look at our farm business, we have a terrific.

Segment for Us certainly across both farm and commercial when you look at our foreign business. We have we have a terrific position from the portable side, we have very strong market share demand has continued to be very good and we expect 2024 to be another very strong year for our portable side of our business and farm, where do you see.

In fact, 2024 to be another very strong year for our portable side of our business in form, where you see the softness is on the permanent albeit the part we have had a pretty good year on the permanent side in US farm. But yes, we do see the recent surge, the recent increase in steel prices, being a catalyst for a improvement in the permanent side of our business and a strengthening of that order, both heading into 2024. Our fantastic sales team is out now working and collaborating with our value dealer partners on exactly that topic, working with them, encouraging them to take advantage of the current favorable pricing that we have in our product lines, get ahead of the steel increases and get their orders placed heading into 2024. So yes, that is a tailwind that we see supporting both our US farm business as well as our order books and aggregate going forward. Appreciate them.

The softness is on is on the permanent, albeit the front, we have had a pretty good year on the permanent side in U S farm, but yes, we do see the recent surge the recent increase in steel prices being a catalyst for a improvement in the permanent side of our business and are strengthening.

Of that order book heading into 2024.

Our fantastic sales team is out now all working and collaborating with our valued dealer partners on exactly that topic working with them encouraging them to take advantage of the current favorable pricing that we have in our product lines get ahead of the steel increases and get their orders.

Place heading into 2024, so yes that is a tailwind that we see supporting both our U S farm business as well as our order books in aggregate going forward.

Appreciate the time.

Appreciate them.

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

The next question comes from Andrew Wong with RBC capital markets. Please go ahead.

Hey, good morning. So, you know, AGI has definitely had a great few years. Operations have executed really well. I think your commentary does a really good job of highlighting.

Hey, good morning.

In Asia, It's definitely had a great few years.

Operations executed really well I think your commentary doesn't really good job of highlighting the tailwind in your confidence in the business. So just not to take away from any of that I.

tailwind and your confidence in the business. So just not to take away from any of that. I just wanted to wonder, like, did you flag any potential hurdles or challenges that you do think could come up as you go to 2024? I'm sure you look at those.

I just want to.

Wanted to wonder like could you flag any potential hurdles or challenges that you think could come up as you go into 2024 I'm sure you look at those.

And what are some of those things that might keep you up or worry you going to do?

And what are some of those things that might keep you up or you go into 2024.

Yeah, thanks. Thanks, Andrew. Great question. For sure, there are hurdles and challenges out there, just as there have been over the past three years. And we are quite confident that we will continue to face those hurdles and overcome them. As we look into 2024, some of the hurdles, I mean, it's a pretty dynamic condition from a weather standpoint and an outlook, whether that's down in...

Yeah. Thanks, Thanks, Andrew Great Great question for sure. There are there are hurdles and challenges out there just as there have been over the past three years and more.

We are quite confident that we will continue to face those hurdles and overcome them.

Yeah.

As we look into 2020 for some of the hurdles.

A pretty dynamic.

Condition from a from a weather standpoint, and an outlook, whether that's down in South America, where we're seeing some dryness in Brazil in the north.

South America where we're seeing some dryness in Brazil in the North.

We've had a variable monsoon season out in India with some pockets of dryness in some areas, some pockets of high moisture in others. Obviously Canada and the US farm have also been challenged with some difficult weather conditions in 2023. And you throw on top of that high interest rate.

We've had a variable monsoon season out in India with some pockets of dryness in some areas some pockets of high moisture and others, Obviously, Canada.

In the U S farm have also been challenged with some difficult weather conditions in 2023, and you throw on top of that high interest rates.

which are impacting quite a number of businesses in foot cost rising. So yeah, there are a number of hurdles and challenges that we keep a very close eye on. What is encouraging is these are very similar challenges that we have faced over common continued to deliver outstanding performance in the past. And it's why we're so confident that we'll be able to continue to do it going forward. And it's really it's our diversified product line. Our strong geographic positions that provide an underlying resiliency to our business that is now further complemented by our expanding margin capabilities, given us another lever in our toolkit to drive a margin in profit expansion.

Which are impacting a quite a number of businesses input costs rising. So yes, there are a number of hurdles and challenges that we keep a very close eye on what is encouraging as these are very similar challenges that we have faced overcome and continue to deliver outstanding performance in the past and it's why we're so confident that we'll be able.

To continue to do it going forward and it's really it's our diversified product line are.

Strong geographic positions and to provide an underlying resiliency to our business that is now further complemented by our expanding margin capabilities, giving us another lever.

In our tool kit to drive.

Margin and profit expansion.

Okay, that's great. And then maybe a question for Jim here on working capital. Most like seasonally Q4 is when there typically can be capital that unwinds. Is that a reasonable expectation for this year as well? And do you have any guidance on where that ends up for the year? Yeah, we have an laboratory in sections of this course whichmates you with

Okay, that's great and then.

Maybe a question for Jim here on working capital looks like seasonally Q4 is when they're typically can be capital.

Hawaii is that it.

Reasonable expectation for this year as well and do you have any guidance on where that ends up for the year.

Yeah, Thanks, Andrew and.

You know, we've done quite a bit in working capital this year.

We've done quite a bit in working capital this year.

The focus this year on Wrenkel has been on inventory management and we've made some really significant improvements in terms of the number of days of inventory we need on hand. That focus will continue and as you mentioned the nature of our business is such that typically Q3 and Q4 ends up being more of the periods where working capital needs to manage quite significantly and that translates to a lot of cash generation.

The focus this year on working capital has been on inventory management and we've made some really significant improvements in terms of.

The number of days of inventory, we need on hand that focus will continue and as you mentioned the nature of our business is such that typically Q.

Q3, and Q4 ends up being more of the periods, where working capital needs diminish quite significantly and that translates to a lot of cash generation last year. The back half of the year was about $110 million. This year, we expect similar improvements year on year and in a lot of it.

Last year the back half of the year was about $110 million. This year we expect similar improvements year on year. And a lot of it typically happens in Q4. We had a very strong Q3. As you saw, although a lot of it was used up to resolve the good incidents.

<unk> happens in Q4, we had a very strong Q3 as you saw although a lot of it was used up to resolve the debate incident.

But we expect a similar, if not a little bit better, working out the improvements in Q4 versus the prior year. So yeah, very strong cash generation. And what that means from a leverage perspective is we ended the quarter at 3.2 times. So still down sequentially from last quarter, despite the bin settlement.

But we expect a similar if not a little bit better working capital improvements in Q4 versus the prior year, So very strong cash generation and what that means from a leverage perspective as we ended the quarter at three two times, so still down sequentially from last quarter. Despite the.

Ben settlement.

But we expect continued momentum and us to be comfortably able to hit our three times leverage ratio, net leverage ratio target for the end of the year.

But but we expect.

Continued momentum and us to be comfortably able to hit our three times leverage ratio net leverage ratio target for the end of the year.

That's great. Thank you.

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

The next question comes from Tim Monticello with ATB capital markets. Please go ahead.

Hey, good morning.

Hi, Joe.

Doing great.

There's a bunch of positive commentary on the momentum in the storm through the back half of sort of jack quarter of the year. Um.

There's a bunch of positive commentary on the momentum on the farm through the back half started back order of the year.

Is that meant to suggest that we should see some positive momentum year on year or even to sequentially admit you?

Is that meant to suggest that we should see some positive momentum.

Year on year or even sequentially into Q4.

Yeah, so thanks for the question Tim. You know, we are quite pleased with the performance of our farm businesses, particularly here today. You heard Canada farm started out the year just fantastic. That was how the year was setting up from the beginning. We saw that.

Yes, so thanks for the question Tim.

We are quite.

I'm pleased with the performance of our farm businesses, particularly year to date, you heard Canada farm. It started out the year just fantastic that with how the year was setting up from the beginning we saw that year to date I think we're up over over 20% in U S Farm also performing quite well. So net net we do expect a full year.

uh... here today i think we're up over over twenty percent u.s. farm also performing quite well uh... so net net we do expect uh... full year to be a strong year across our farm statement uh... led by uh... north america u.s. in canada and then further supported by the the strength internationally and we're we're extremely pleased with the uptick uh... that we've seen in the farm business in q3

To be a strong year across our farm segment led by North America U S and Canada and then further supported by the strength internationally and we're extremely pleased with the uptick that we've seen in the farm business in Q3.

quite confident that that directly translates to a step change increase in market share. And that's going to be a positive tailwind for us Tim. I think that's why we are bullish on the continued strong performance of our farm statement through Q4 and heading into 2024.

Quite confident that that.

Directly translates to a step change increase in market share.

And that's going to be a positive tailwind for us Tim I think thats why we are booked.

Bullish on the continued strong performance of our farm segment through Q4 and heading into 2024.

If you think that there's a chance that that international strength could offset from the seasonality in North American.

And do you think that there is a chance that that international strength could offset some of the seasonality in North America in Q4.

Yeah, that's absolutely. Tim gets to the core of the resiliency of our business is we do have those very strong positions geographically gives us a level of diversification. And yes, we see opportunities for that diversification to continue to play a significant role and that's being able to deliver steady and consistent results. Whether that's within the farm segment, within the commercial segment or an aggregate across safely, pays or we do that for the most part ever and we really have to enjoy that within the

Yeah, that's absolutely Tim.

<unk> gets to the core of the resiliency of our business is we do have those very strong positions geographically it gives us a level of diversification.

And yes, we see opportunities for that diversification to continue to play a significant role and thats being able to deliver steady and consistent results whether that's within the farm segment within the commercial segment or in aggregate across Agi So absolutely.

Okay, got it. And then I'm just curious, you know, margin performance.

Okay got it.

And then I was just curious.

has been really strong, I'm just even passionate about what I'm just called.

Performance.

<unk> has been really strong obviously you touched on that a lot of in store.

But we've seen some steel price depletion. Well, steel prices are rising. We would have talked about the percentage margin coming down, but the dollar margin is staying intact, which would suggest that there was a lot of pass through in that steel price. So our

But we've seen some steel price deflation.

Steel prices were rising.

Would have talked about.

Percentage margin coming down but.

The dollar margin staying intact, which would suggest that there was a lot of pass through and that's price.

So.

How much of a driver of margin expansion in the last few quarters? A percentage basis has the oppressed deflation.

How much of a driver of margin expansion over the last few quarters on a percentage basis.

Deflation bad.

Yeah, thanks for the question, Tim. So when we look at pricing, there's predominantly three buckets and three different activities that we have. One is moving pricing relative to changes in our input costs.

Yeah. Thanks for the question, Tim So when we look at pricing there.

There is predominantly three buckets.

And three different activities that we have one is moving pricing relative to changes in our input costs.

We put substantial efforts, processes, and tools around this over the past three years. We're now quite confident in our capabilities to manage pricing relative to dynamic input costs, both as our costs go up, as our costs as well as costs coming down so that we keep margins at least with varying input costs. Obviously, it's the rate in which

We put substantial efforts processes and tools around this over the past three years, we are now quite confident in our capabilities to manage pricing relative to dynamic input costs, both as as as our costs go up as our cost as well as cost coming down so that we are.

Keep margins at least constant with varying input costs now obviously.

It's it's the rate in which your input cost increase or decrease that create challenges or opportunities. So if it is steel costs go up extremely quick like we saw a couple of years ago.

your input costs increase or decrease, they create challenges or opportunities. So if it still costs go up extremely quick, like we saw a couple of years ago, that's free for talents and just keeping pace.

That creates a challenge in just keeping pace and you might under recover.

and you might under recover on the, as that curve goes up. And then if steel costs come down very quick, then you have the opportunity to over recover coming down. But in aggregate, we're focused on making sure that pricing keeps pace with changes in input costs. That's kind of bucket number one. And then bucket number two, that we look at very closely. It's just net price expansion to drive margin improvement. So recovery, even above changes in input costs, whether they're going down or going up. And that's where we are extremely pleased with our results across 2023 as we've proven an ability to gain margin expansion on core fundamental pricing actions. Regardless of movements in input costs. And we think that's a core capability that we're going to have in 2024. Then just to round it out bucket three, we continue to make significant improvements. On supplier management, supplier partnership and just managing input costs.

And as that curve goes up and then if steel costs come down.

A very quick then you'll have the opportunity to over recover coming down but in aggregate, we're focused on making sure that pricing keeps.

Keeps pace with changes in input costs, that's kind of bucket number one and then bucket number two that we look at very closely just net net price expansion to drive margin improvement so recovery, even above changes in input costs, whether theyre going down or going up and Thats, where we are extremely pleased with our results across 2020.

As we've proven an ability to gain margin expansion on core fundamental pricing actions, regardless of movement in input costs and we think that's a core capability that we're going to have in 2024, and then just to round. It out bucket three we continue to make significant improvements on supplier man.

<unk> supplier partnership and just managing input costs.

better than market performance.

Better than market performance.

As we make those improvements, we make sure that we adjust our pricing accordingly. So we capture those margin gains from improved supplier performance within our net margin.

As we make those improvements we make sure that we adjust our pricing accordingly, so we captured those.

Margin gains from improved supplier performance.

Within our net net margins.

Okay.

And then last one is sort of a longer term question. I'm just...

And then last one on sort of a longer term question I'm just.

Trying to, I guess, square off all these factors that may be impacting demand for permanent farm and commercial storage applications, namely, you know, steel prices.

Trying to square all those factors, maybe impacting demand for permanent farm and commercial storage applications.

<unk>.

Steel prices.

the fact that the Akira interstates and the fact that crop prices remain relatively...

In fact, the higher interest rates and the fact that crop prices remain.

Relatively elevated so.

you know, higher interest rates and higher crop prices would probably be, you know, negatives for long-term demand for storage. And then you're health and Terry that, you know,

Higher interest rates and higher crop prices would probably be a negative for long term demand for storage.

And then your commentary there.

the view towards higher steel prices incentivizes sort of shorter term bananas, especially in the North American context, but do low steel prices help with affordability and...

The view towards higher steel prices incentivize and the sort of shorter term demand, especially in the north American context, but do low steel prices help with affordability and.

And so like, I guess any commentary that you have on, I guess the trend across the platform in terms of...

And so like.

Yes, any commentary that you have on I guess the.

Trend.

Cross the platform in terms of.

The permanent.

and in commercial storage in sort of a higher interest.

And.

On commercial storage on sort of a higher interest rate.

Current environment would be great, yes, but for short term and it's a fantastic question. Thanks for the question you are right to point out that I'll say it at the micro level. There is a number of factors that can impact demand for our permanent side of our business and you've hit on a lot of them, whether it's the variability in steel cost the variability.

Yeah, for sure, Tim. It's a fantastic question. Thanks for the question. You're right to point out that, you know, I'll say it's at the micro level, there's a number of factors that can impact a man for a permanent side of our business. And you hit on a lot of them, whether it's the variability in steel costs, the variability in crops, as well as the high interest rates. So these are all.

And crops as well as the high interest rate. So these are all very important micro level drivers, we keep a very close eye on and make sure we're making the right business decisions in the moment to ensure that we are performing well within those what I'll call again micro level drivers.

Very important micro-level drivers to keep a very close eye on and make sure that we're making the right business decisions in the moment to ensure that we are performing well within those, but I'll call again, micro-level drivers.

But I think it is a very important question that you have. And I think, Tim, it gets more to the macro level drivers of investment in storage and investment in commercial projects. And it's underscored by a global interest around food security, as well as the elimination of food waste.

But I think it's a very important question that you asked and I think Tim It gets more to the macro level drivers of investment in storage and the investment in commercial projects and it's underscored by our global interest around food security as well as the <unk>.

Eliminating the elimination of food waste. These are very powerful and important macro level drivers net net we think as you go around the region.

These are very powerful and important macro level drivers. Net-net we think.

As you go around the region, where there's an under-investment in storage capacity.

There is an under investment in storage capacity, particularly when you get to food security. This is highly relevant in Brazil equally so in the U S and we're seeing a.

Particularly when you get to food security, this is highly relevant in Brazil, equally so in the US, and we're seeing very strong demand polls in the Middle East and India, specifically around that food security. So that's a very powerful macro level driver, and then it's further supported by just that underlying factor that net, net investing in storage capacity eliminates weight.

Very strong demand pulled in the middle East and India, specifically around that food security. So that's a very powerful macro level driver and then it is further supported by just that underlying factor that net net investing in storage capacity eliminates waste.

That increasingly is becoming a strong driver and we see continuing to be a strong macro level driver going forward. A lot of positive macro level conditions, it was just short medium long-term demand for investment in storage capacity as well as commercial infrastructure.

That that could that increasingly is becoming a strong driver.

We see continuing to be a strong macro level driver going forward. So a lot of positive macro level conditions. It would suggest short medium long term demand for investment in storage capacity as well as commercial infrastructure.

Okay. I appreciate that. I guess maybe I can sneak one more in. Can you talk a little bit about what your backlog would look like on a year-over-year basis adjusted or normalized for steel?

Okay.

I appreciate that I guess.

Maybe I can sneak one more.

Can you talk a little bit about what you do.

Backlog will look like on a year over year basis, adjusted or normalized for steel.

It's a great question, Tim. So I commented earlier that when you do all the math, roughly a 20% decrease in still would translate to a 3 to 5%.

Steel price and it's a great. It's a great question, Tim So I commented earlier that when you do all the math roughly a 20% decrease in still would translate to a 3% to 5%.

improvement or increase in revenue, right? Just normalizing out for those steel costs. We would suggest that's about the same for our order book, particularly when you look at Q2 and Q3, both quarters now have seen steel at least at a 20% low versus prior year.

Improvement or increase in revenue right just normalizing out for those steel costs. We would suggest that's about the same for our order book, particularly when you look at Q2 and Q3, both quarters now has seen steel at least at a 20% low versus prior year. So specifically we would say.

So, you know, specifically, we would say it adds a, a 2 to 4, 3 to 5% increase in our order book normalizing for steel. So 103% might be more like up up 6 to 7, 6 to 8%.

It adds a two to four 3% to 5% increase in our order book normalizing for steel, so 100 up 3% might be more like up 6% to seven 6% to 8%.

Okay, that's great I'll turn it back thanks.

Alright, Thanks, Tim.

The next question comes from Gary Ho with Desjardins. Please go ahead.

The next question comes from Gary Ho with Desjardin. Please go ahead.

Thanks. Good morning. My first question is, want to go back to Brazil a little bit. What are you seeing? Can I have to do is that we're establishing this establishment, I guess, of the new government funding program. A few months back and then thoughts on putting more growth capital to work in Brazil to exploit the opportunity there. And where do you see the Brazil?

Thanks. Good morning. My first question just want to go back to Brazil, a little bit what are you seeing kind of have to derisk that we're establishing the establishment I guess that the new government funding program a few months back and then thoughts on putting more growth capital to work in Brazil to exploit the opportunity there and.

Where do you see the Brazil mix as as consolidated total revenue when you kind of look three years out.

as a consolidated total revenue when you kind of look three years out.

That is a great question, Gary, thanks for that question. So yeah, I mean, we're pretty encouraged by the reestablishment of the government incentives to help continue to fuel investment in agriculture infrastructure. Obviously, agriculture is a very key part of the Brazil economy.

And it's a great question Gary Thanks for that question. So yes, I mean, we're pretty encouraged by the reestablishment of the government incentives to help continue to fuel investment in.

Agriculture infrastructure obviously.

Agriculture is a very key part of the Brazil economy.

represents greater than 30% of the GDP, Brazil's now, you know, the top, one of the top exporters of agriculture products globally. So this is an extremely important part of the global agriculture business and we're very excited about the position that we've grown there, the team, the capabilities that we have and how that's gonna be a core part of AGI's growth going forward.

Represents greater than 30% of the GDP, Brazil is now the top one of the top exporters of agricultural products globally. So this is an extremely important part of the global agriculture business and we're very excited about the position that we've grown there the team the capabilities that we have.

And how that is going to be a core part of <unk> growth going forward.

So yeah, all very positive in terms of the mix, you know, I think we started this year. Brazil was roughly 10 to 11% of our total revenues in Q3 with the record performance that we've had in Brazil. That's spiked up to 15%. Going forward, we do see a lot of tail winds for growth in Brazil. This is a country that is very under invested from a storage and infrastructure capacity.

So all very positive in terms of the mix I think we started this year, Brazil was roughly 10% to 11%.

Of our total revenues in Q3 with the record performance that we've had in Brazil that spiked up to 15%.

Going forward, we do see a lot of.

Tailwind for growth in Brazil, and this is a country that is very underinvested from a storage and infrastructure capacity.

Um, that that's going to be a key driver. So we do see that mix, uh, improving, uh, from where we entered at 10 to 11%. Uh, going forward could be, uh, 15 could stabilize at 15%. The peak that we hit in Q3 and as well, uh, grow from there. And thoughts on.

That's going to be a key driver. So we do see that mix improving from where we entered a 10% to 11% going forward could be 15 could stabilize at 15% the peak that we hit in Q3 and as well.

Grow from there.

Okay.

And thoughts on putting growth capital to work there.

Yeah, you know, it's, I think we've commented on this on the past two quarters, Gary, so thanks for bringing it up. As we continue to strengthen our balance sheet and move more and more towards that 2.5 times leverage ratio that we expect to achieve in mid-year, it now positions us to invest in organic growth for the business. The two areas that we see excellent opportunities for

Yes.

I think we've commented on this on the past few quarters, Gary So thanks for bringing it up as we continue to strengthen our balance sheet and move more and more towards that two five times leverage ratio that we expect to achieve in mid year and now positions us to invest in organic growth.

The business the two areas that we see excellent opportunities for our India and Brazil, So absolutely it's an opportunity for us to make investments to ensure that we've got the capacity and the capabilities down there to keep pace with the growth opportunities. So short answer is yes.

Our India and Brazil, so absolutely, it's an opportunity for us to make investments, to ensure that we've got the capacity and the capabilities down there to keep pace with the growth opportunities. So short answer is yes.

as India is attractive area and to be honest, as is North America attractive area. So we're quite excited about our opportunity to invest in organic growth across our key businesses as that balance sheet strength.

As India is attractive area and to be honest as is North America attractive area. So we're quite excited about our opportunity to invest in organic growth across our key businesses as that balance sheet strengthened.

Perfect. And then my second question, maybe you can elaborate on the rebuilding of the food segment. What are you seeing there and timing on skilling?

Perfect and then my second question, maybe you can elaborate on the rebuilding of the foods segment.

What are you seeing there and timing on scaling that up.

Yeah, thanks Gary. So, you know, we knew that 2023 was going to be a soft year for food. We saw that coming in. We've made some substantial progress around the restructuring of that business. We're particularly encouraged with some of the progress that we've seen in the past few months.

Yeah. Thanks, Gary So we knew that 2023 was going to be a soft year for food, we saw that coming in we've made substantial progress around the restructuring of that business, we're particularly encouraged with some of the progress that we've seen in the past few months you look at September Gary in particular that was.

You look at September Gary in particular, that was the month of highest order intake all year. So a nice early indicator that returning the corner on our food's business.

The month of highest order intake all year. So a nice early indicator that we're turning the corner on our foods business some of our top customers. The top customers that we have within that segment. They had pulled back on their capital investment at the tail end of 2022, which was really set up some of the softness in 2002.

Some of our top customers, the top customers that we have within that statement, uh, they had pulled back on their capital investment at the tail end of 2022, which, which really set up some of the softness in 2023, they are now coming back there. They're now reopening their CapEx book.

23, they are now coming back there now reopening their capex book and they're moving forward with projects that to some extent they had shelved or postponed in 2023 and then in addition to that Gary We've made notable progress in diversifying our customer base expanding beyond these top customers. So for a number of reasons.

and they're moving forward with projects that to some extent they had shelved their postponed in 2023. And then in addition to that Gary, we've made notable progress in diversifying our customer base expanding beyond these top customers. So for a number of reasons, we feel very good about what we built accomplish and restructuring that business and we're bullish heading into 2024. Great, thanks for that, folks from my two. Yep, thanks, Darren. Thanks Gary.

We feel very good about what we built complicit in restructuring that business and we're bullish heading into 2024.

Great. Thanks for that those are my two.

Yes, Thanks, Derik scary.

The next question comes from Michael <unk> with TD Securities. Please go ahead.

Thank you good morning.

Hey, Michael.

Morning. You had just one question for me on the product transfer strategy. Are you able to comment on where you expected to be in terms of that journey going into next year? And I guess more specifically, your investor day you talked about expanding your total addressable market by about $4 billion in capturing a 20% share over time through that strategy.

Good morning, just one question for me on the product transfer strategy are you able to comment on where you expect to be in terms of that journey going into next year and I guess more specifically at your Investor Day, you talked about expanding your total addressable market.

By about $4 billion in capturing a 20% share over time through that strategy.

I guess what I'm wondering is, is it possible to comment on how much of that additional market opportunity you'll have available to you in 2024 and how we should think about your share ramping up?

I guess, what I'm wondering is it possible to comment on how much of that additional market opportunity you'll have available to you in 2024, and how we should think about your share ramping up next year.

Yeah, for sure, for sure, Michael. And I'll just hit on a couple of key areas of focus for us and progress from a product transfer standpoint and how we see that supporting 2024. So, to no doubt, the product transfers of fertilizer down to Brazil.

Yes for sure Michael and I'll just hit on a couple of key areas of focus for us and progress from a product transfer standpoint, and how we see that supporting 2024.

So no doubt the product transfers of fertilizer down to Brazil fertilizer over to EMEA.

Furnalizer over to EMEA are being in material handling line in India, are portable equipment down in India, as well as the farm line up into North America. You know, those are five significant product transfers and which the team has largely accomplished across 2023. We're now seeing

<unk> been in material handling line in India, our portable equipment down in India as well as the farm line up into North America.

Those are five significant product transfers in which the team is largely accomplished across 2023.

We're now seeing.

notable order intake in each of those areas that we expect will strengthen our order book heading into Q4. You know, I would expect, Michael, that as we get into the end of Q4 and into 2024, we'll start

Order intake in each of those areas that we expect will strengthen our order book heading into Q4.

I would expect Michael that as we get into.

At the end of Q4 and into 2024, we'll start <unk>.

providing specific numbers relative to what portion of our order book is supported by product transfers. We remain quite confident that this is going to be a notable growth driver for us going forward. The comments that we made in investor day remain consistent with our views at this point.

By adding specific numbers relative to what portion of our order book is supported by product transfers. We remain quite confident that this is going to be a notable growth driver for us going forward. The comments that we made in Investor day.

Remain consistent with our views at this point.

Alright, thanks very much.

You got it Michael.

Once again, if you have a question, please press star then one. The next question comes from Stephen Hansen with Freeman James. Please go ahead.

Once again, if you have a question. Please press Star then one the next question comes from Stephen Hanson with Raymond James. Please go ahead.

Yeah guys, thanks just one quick follow up. I look, oh, I know it's really hard to comment on any outstanding legal matters, but there have been some press reports.

Yeah, guys. Thanks, just one quick follow up I look Paul I know, it's really hard to comment on any outstanding legal matters, but there have been some press reports lately in Vancouver speaking with some outstanding lawsuits with respect to its been collapsed a couple of years back now.

Lately in Vancouver speaking, the most fanning lawsuits with respect has been collapsed a couple of years back now, in particular one of the third party. I understand your position that you're not liable for third party damages, but that's fine. Is there a timeframe where you think the sort of lingering issues will ultimately be dismissed or settled or entirely behind us? Is it possible to comment on any timelines around that or milestones that you expect to provide some authority?

In particular wanted to third party.

I understand your position that you are not liable for third party damages. That's fine I just is there a timeframe, where you think the sort of lingering issues will ultimately be dismissed are settled or entirely behind us.

Is it possible to comment on any timelines around that or milestones that you expect to provide some clarity.

Yeah.

Yeah, thanks Steven. I appreciate the question. Obviously, this has been a topic and a focus for us over the past several years. We are quite encouraged with the significant step forward that we made in the overall net resolution of this issue as we reached a settlement agreement with our customer that was impacted in this. You're correct, obviously, we still have some additional legal items hanging out there. In terms of the legal process, it's very difficult to predict how long that will take until we get to full resolution.

Yeah. Thanks, Steve I appreciate the question Yeah, obviously, it's been a topic and a focus for us over the past several years, we are quite encouraged with the significant step forward that we made in the overall net resolution of this issue as we reached a settlement agreement with our customer that was impacted in this.

Youre correct, obviously, we still have some additional <unk>.

Legal items hanging out there.

In terms of the legal process.

It's very difficult to predict how long that will take until we get to full resolution.

Where we sit currently, Steve, we see this being an ongoing legal discussion through 2024. Let's see again while we

We where we sit currently Steve we see this being.

And ongoing.

Lead legal discussion through 2024.

Okay very helpful. Thank you.

Yeah.

Next question comes from Tim Manichello with ATV Capital Markets. Please go ahead.

The next question comes from Tim Monticello with ATB capital markets. Please go ahead.

Just one follow up.

In the prepared remarks, you mentioned pursuing additional organic growth opportunities. Once you hit the leverage target, the most vulnerable you can kind of comment on.

<unk>.

In the prepared remarks.

And.

We're pursuing additional organic growth opportunities.

Once you hit the leverage target in the spring.

You can kind of comment on.

you know what those might look like and what the capital intensity of the business might look like. F e.

What those might look like and what the capital intensity of the business might look like.

After you hit those leverage targets.

Yeah, thanks Tim. Good question. And he kind of translates back to some of the commentary with Gary. But yeah, we expect our leverage ratio to improve the two and a half times. Mid-years, that's a tough, quite nicely to invest in these very exciting, organic growth opportunities in India, Brazil, and even across North America. As we look at these investment opportunities, Tim, they're going to focus on two key areas. It's going to be an expansion of our manufacturing capacity.

Yeah. Thanks, Tim Good question, it kind of translates back to some of the commentary with Gary but yes, we expect our leverage ratio to improve to two five times mid year sets us up quite nicely to invest in these very exciting organic growth opportunities, India, Brazil, and even across North America as well.

Look at these investment opportunities, Tim they're going to focus on two key areas, it's going to be an expansion of our manufacturing capacity and an enhancement of our manufacturing capabilities. So as that capacity gets to the point of ensuring we've got the capacity.

and an enhancement of our manufacturing capabilities. So the capacity gets to the point of ensuring that we've got the capacity in these growth areas.

In these growth areas.

to support our expectations for growth over the next...

To support our expectations for growth over the next five to seven plus years. So when we make these investments they're going to be notable investments and there will be.

five to seven plus years. So when we make these investments, they're gonna be notable investments and they'll be investments that set us up quite favorably for long-term growth from a capacity.

Investments that set us up quite favorably for long term growth from a capacity standpoint, and then from a capability standpoint into enhancing our manufacturing capabilities. In these key geographies, specifically tied to our product transfer strategy. So that we've got the most optimal manufacturing capability.

And then from a capability standpoint, it's enhancing our manufacturing capabilities in these key geographies, specifically tied to our product transfer strategies. So that we've got the most optimal manufacturing capabilities to support the new products that we're introducing as well as the growth that we expect of those products going forward. So we're not yet at the point where we've got a views on the intensity of the capital investment. We've got a team that is working on the definition of those opportunities, scoping them out and putting that information together so that when we are at a point in time of making those investments, we're fully prepared for it.

To support the new products products that were introducing as well as the growth that we expect of those products of.

Going forward so.

We're not yet at the point, where we've got our views on the intensity of the capital investment we have.

Got a team that is working on the definition of those opportunities scoping them out and putting that information together. So that when we are at a point in time with making those investments were fully prepared for it.

You think that you're manufacturing capacity in the year primary growth regions is sufficient to meet the near term expectations for growth in those markets.

Do you think that your manufacturing capacity.

Primary growth regions is sufficient to meet.

The near term.

Expectations for growth in those markets.

And the timing before you can get those plants up and running.

Yeah, short answer, Kim is yes. You know, Jim, Jim does a great job of describing how we are currently allocating our CAPEX. We got a good balance between maintenance CAPEX and as well we have been and we'll continue to make incremental investments in growth CAPEX. So we have added important CAPEX, you know, important manufacturing elements.

Yeah short answer is yes.

Jim Jim does a great job of describing how we're currently allocating our capex, we got a good balance between maintenance Capex and as well we have been and will continue to make incremental investments in growth Capex. So we have added important key important manufacturing.

and investments into Brazil into India across North America.

<unk> and investments into Brazil into India across North America that are specifically geared at making sure that we've got the capacity needed to support the excellent near term growth opportunities. So short answer yes, we've got the capacity that we need to support our near term growth.

that are specifically geared at making sure that we've got the capacity needed to support the excellent near-term growth opportunities. So short answer, yes, we've got the capacity that we need to support our near-term growth.

Okay. Thanks, a lot and turn it back.

Thank you Tim.

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

This concludes the question and answer session I would like to turn the conference back over to Paul householder for any closing remarks. Please go ahead.

Yeah, thanks everybody for joining our call today. Very pleased with the Q3 results that we were able to deliver. And when you provide a specific thanks and appreciation to the outstanding work from the Global AGI team, it's ultimately our team and our people that are delivering these fantastic results. So we look forward to Q4. We look forward to 2024. Thanks.

Yeah, Thanks, everybody for joining our call today I'm very pleased with the Q3 results that we were able to deliver.

And wanted to provide a specific thanks and appreciation to the outstanding work from the global Agi team and it's ultimately our team and our people that are delivering these fantastic results. So we look forward to Q4, and we look forward to 2024.

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

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

Got' know.

Yes.

Yes.