Q1 2024 CNH Industrial NV Earnings Call

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Operator: Ladies and gentlemen, thank you for standing by. Today's call will begin momentarily.

Ladies and gentlemen, thank you for standing by today's call will begin momentarily.

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Operator: ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Thanks for watching! Ladies and gentlemen, thank you for standing by. The CNH 2024 Q1 results conference call will begin in a few moments.

Operator: Ladies and gentlemen, thank you for standing by the C. N. H 2020 for Q1 results conference call will begin in a few moments.

Operator: [music].

Operator: [inaudible]

Operator: Ladies and gentlemen, thank you for standing by good morning, and welcome to the C. N H first quarter 'twenty 'twenty four results conference call.

Operator: ?? ?? ?? ?? ?? ?? ?? Thanks for watching!

Operator: Ladies and gentlemen, thank you for standing by. Good morning, and welcome to the CNH first quarter 2024 results conference call.

Operator: Please note that today's call is being recorded. At this time, all participants are now in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad. To withdraw your question, press star 1 a second time. Thank you. I will now turn the call over to Jason Omerza, Vice President of Investor Relations. Please go ahead.

Speaker Change: Please note that today's call is being recorded.

Jason Omerza: This time all participants are now in a listen only mode.

Jason Omerza: After the Speakers' remarks, there will be a question and answer session.

Jason Omerza: If you would like to ask a question. During this time. Please press star one on your telephone keypad Jewish.

Jason Omerza: She was draw your question Press Star one a second time.

Jason Omerza: Thank you.

Jason Omerza: I will now turn the call over to Jason who marries up Vice President of Investor Relations. Please go ahead.

Jason Omerza: Thank you, Brianna. Good morning, everyone, and we apologize for the delay. We'd like to welcome you to the webcast and conference call for CNH Industrial's first quarter results for the period ending March 31, 2024. This call is being broadcast live on our website and is copyrighted by CNH. Any other use, recording, or transmission of any portion of this broadcast without the express written consent of CNH is strictly prohibited. Hosting today's call are CNH CEO, Scott Wine, and CFO, Oddone Inchiza. They will use the materials available for download from the CNH website.

Jason Omerza: Thank you Barry good morning, everyone and we apologize for the delay.

Jason Omerza: We'd like to welcome you to the webcast and conference call for <unk> Industrial's first quarter results for the period ending March 31, 2020 for this call is being broadcast live on our website and is copyrighted by CNA.

Jason Omerza: Any other use recording or transmission of any portion of this broadcast without the express written consent of <unk> is strictly prohibited.

Jason Omerza: During today's call are <unk>, CEO, Scott wine, and CFO, Donnie and cheese.

Jason Omerza: It will use the material available for download from the <unk> website.

Jason Omerza: Please note that any forward-looking statements that we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor Statement, including in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission. The company presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP measures, is included in the presentation material. I will now turn the call over to Scott.

Jason Omerza: Please note that any forward looking statements that we might make during today's call are subject to risks and uncertainties mentioned in the safe Harbor statement, including in the presentation material.

Scott: Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U S Securities and Exchange Commission.

Scott: The company presentation includes certain non-GAAP financial measures additional information, including reconciliations to the most directly comparable U S. GAAP measures is included in the presentation material.

Jason Omerza: I will now turn the call over to Scott.

Scott Wine: Thank you, Jason, and thanks, everyone, for joining our call. Before we review the quarter, I would like to address my upcoming departure from CNH. First, I want to sincerely thank the team here for delivering three straight years of record sales and profitability and our notable transformation into a customer-focused, technology-forward culture. I am proud of the team's accomplishments, especially the acceleration of our tech development, the successful deployment of CBS and strategic sourcing to drive operational efficiencies, and improving our through-cycle margins, which will surely be a key topic of our discussions today.

Scott: Thank you, Jason and thanks, everyone for joining our call.

Scott Wine: Before we review the quarter I would like to address my upcoming departure from C. N. H first I want to sincerely. Thank the team here for delivering three straight years of record sales and profitability and our notable transformation into a customer focused technology forward culture I'm proud of the team's accomplishments, especially the acceleration of our tech development the.

Scott Wine: First the deployment of CBS and strategic sourcing to drive operational efficiencies and improving our through cycle margins, which we will surely be a key topic of our discussions today.

Scott Wine: I have full confidence in our strategy and our ability to achieve it, even with slowing market demand. We were early to get after productivity, our cost reduction targets are achievable, and we are on track to deliver them. Our tech insourcing work is progressing, and we have a line of sight to execute everything we set out to do. I believe in the team's ability to continue delivering margin expansion while outselling our peers. Simply put, the business is solid. My reasons for leaving are personal and have nothing to do with the ag cycle, our strategy, or CNH's bright future.

Scott Wine: I have full confidence in our strategy and our ability to achieve it even with slowing market demand.

Scott Wine: We're early to get after productivity or cost reduction targets are achievable and we are on track to deliver them.

Scott Wine: Check in sourcing work is progressing and we have a line of sight to execute everything we set out to do I.

Scott Wine: I believe in the team's ability to continue to delivering margin expansion, while outselling our peers simply put the business is solid my reasons for leaving our personal and have nothing to do with the AG cycle. Our strategy, we're seeing <unk> bright future.

Scott Wine: As of July 1st, Garrett Marks will rejoin CNH as the new CEO. Garrett and I have worked closely together when he ran commercial vehicles for CNH, and he has been CEO of Eveco since its spin-off in early 2022. He's a proven leader, he has my full support, and I am confident he will do well here.

Scott Wine: As of July 1st Gerrit Marx will rejoin <unk> as the new CEO.

Scott Wine: And I have worked closely together when he ran commercial vehicles for C and H and he has been CEO of <unk> since its spin off in early 2022. He is a proven leader. He has my full support and I am confident he will do well here now.

Scott Wine: Now, on to our quarterly results. We said the first quarter would be challenging from a demand perspective, and that is how it played out, especially in South America and Europe. We also noted competitive pricing pressure where dealers are working hard to reduce their inventory. Nonetheless, we maintain much of our pricing and profitability gains, with construction even increasing both their absolute profit level and their margin percentage year over year. Cost efficiency remains a priority for us in this environment.

Scott Wine: Now onto our quarterly results.

Scott Wine: We said the first quarter would be challenging from a demand perspective and that is how it played out, especially in South America and Europe. We also noted competitive pricing pressure, where dealers are working hard to reduce their inventories nonetheless.

Scott Wine: Nonetheless, we maintained much of our pricing and profitability gains with construction, even increasing both our absolute profit level and their margin percentage year over year.

Scott Wine: Cost efficiency remains a priority for us in this environment.

Scott Wine: We were ahead of the curve on instituting hard but necessary programs, such as our SG&A restructuring, to respond to the realities of operating in a cyclical downturn. We will build on the cost reductions already implemented, and those savings will compound throughout the remainder of the year.

Scott Wine: We were ahead of the curve on instituting hard but necessary programs, such as our SG&A restructuring to respond to the realities of operating in a cyclical downturn rule.

Scott Wine: We will build on the cost reduction is already implemented and those savings will compound throughout the remainder of the year.

Scott Wine: And we continue to advance our tech stack, expand our team, and integrate solutions from our acquisitions effectively into our business. We announced exciting developments in satellite connectivity and off-board management earlier this week, and we will continue to leverage innovation as a competitive advantage. In line with our expectations, first-quarter consolidated revenues were down 10%, and industrial net sales were down 14% as the industry adjusts to even lower demand and to dealer inventory levels. We proactively addressed South America dealer inventory last year and furthered those efforts in the quarter. Industrial event margin was just under 10%, down 180 basis points compared to last year.

Scott Wine: And we continue to advance our tech stack, expanding our team and integrating solutions from our acquisitions effectively into our business.

Scott Wine: We announced exciting developments and satellite connectivity and onboard management earlier this week and we will continue to leverage innovation as a competitive advantage.

Scott Wine: In line with our expectations first quarter consolidated revenues were down 10% and industrial net sales were down 14% as the industry adjusts to even lower demand and dealer inventory levels.

Scott Wine: We proactively address South America dealer inventory last year and further those efforts in the quarter.

Scott Wine: Industrial EBIT margin was just under 10% down 180 basis points compared to last year. Despite the lower shipments decremental margins were in the mid twenties, reflecting the positive price realization and cost reductions.

Scott Wine: Despite the lower shipments, decremental margins were in the mid-20s, reflecting the positive price realization and cost reduction. Competitive pricing pressure was the most acute in South America, but the team there is doing a great job managing the situation and keeping our operations profitable. Adjusted EPS was $0.33, down just $0.02 from a year ago.

Scott Wine: Competitive pricing pressure was most acute in South America, but the team there is doing a great job managing the situation and keeping our operations profitable adjusted.

Scott Wine: Adjusted EPS was <unk> 33.

Scott Wine: Down just <unk> from a year ago.

Scott Wine: Yeah.

Scott Wine: Throughout the quarter and across all regions, we saw decreased demand in the end markets. However, our retail deliveries in the quarter outperformed the overall market. Despite production cuts in the quarter, we did not make our desired reductions in dealer inventories, so we still have work to do. We continue to lean out and simplify our organization. We completed the first phase of our restructuring program in Q1, and further actions, such as combining and rationalizing our commercial back office operations, are on track. We plan to conclude the restructuring program in Q2, but not our focus on costs.

Scott Wine: Throughout the quarter and across all regions. We saw decreased demand in the end markets. However, our retail deliveries in the quarter outperformed the overall market.

Scott Wine: Despite production cuts in the quarter, we did not make our desired reductions in dealer inventories. So we still have work to do.

Scott Wine: We continue to lean out and simplify our organization. We completed the first phase of our restructuring program in Q1, and further actions such as combining and rationalizing our commercial back office office operations are on track.

Scott Wine: We plan to conclude the restructuring program in Q2, but not our focus on cost.

Scott Wine: Derek Nielsen and his agriculture team continue to execute in the quarter, achieving favorable price realization despite lower demand by working with our dealer partners on effective sales programs. Construction gross margins and EBIT margins were both up 150 basis points in the quarter. Although volume and mix were a challenge, particularly in Europe, Stefano Pompiloni and his team's focus on quality and cost efficiency continues to support improving profitability. In particular, our financial services business delivered strong results. Their net income grew on larger receivable balances, and despite some increases in delinquencies, we have a very strong credit portfolio.

Scott Wine: Derek Nielsen as agriculture team.

Scott Wine: To execute in the quarter, achieving favorable price realization, despite lower demand by working with our dealer partners on effective sales programs.

Scott Wine: Construction gross margins and EBIT margins were both up 150 basis points in the quarter, although volume and mix were a challenge, particularly in Europe, Stefano Pamplona and his team's focus on quality and cost efficiency continues to support improving profitability.

Scott Wine: Our financial services business delivered strong results their net income grew on larger receivable balances and despite some increases in delinquencies, we have a very strong credit portfolio.

Scott Wine: As we look at our strategic priorities, I want to start with some recent developments on the tech side. Our obsessive focus on customer-centric development has shown us the importance of being the easiest to use OEM. This week we introduced FieldOps, our brand new web and mobile digital app. Field Ops will lead the industry in usability and intuitive design. Everything farmers need to run their operations will be at their fingertips with a dramatically improved look and feel.

Speaker Change: As we look at our strategic priorities I want to start with some recent developments on the tech side.

Scott Wine: Our obsessive focus on customer centric development has shown us the importance of being the easiest to use OEM.

Scott Wine: This week, we introduced field ops are brand, new web and mobile digital App.

Scott Wine: Field ops will lead the industry in usability and intuitive design everything farmers need to run their operations will be at their fingertips with a dramatically improved look and feel.

Scott Wine: The FieldOps interface simplifies farm management and makes data accessible from anywhere, all with fewer clicks to accomplish every task. It also streamlines our internal workflows, as our universal approach to tech development means there is one single app for all customers. The Field Ops web and mobile apps launch in June, and the overall customer experience is already garnering rave reviews from our beta testers. This week, we also announced our collaboration with Intelsat, which brings multi-orbit satellite connectivity to more of our customers' machines so they can access our full suite of precision offerings from a remote location.

Scott Wine: The field ops interface simplifies farm management and makes data accessible from anywhere.

Scott Wine: With fewer clicks to accomplish every task. It also streamlines, our internal workflows as our universal approach to Tech development means there is one single app for all customers.

Scott Wine: The field apps web and mobile apps launch in June and the overall customer experience is already garnering rave reviews from our beta testers.

Scott Wine: This week, we also announced our collaboration with Intelsat, which brings multi orbit satellite connectivity to more of our customers' machines. So they can access our full suite of precision offerings from remote locations.

Scott Wine: We have been judicious in our approach to connecting soil to space. We needed a partner with technology that would work in harsh farm operating environments. IntelSat's antennas have been proven in critical applications and inhospitable conditions, so we can bring them to market quickly with confidence that they will perform. We also serve customers in areas where low-orbit satellites do not consistently reach. Intelsat's multi-orbit constellation of satellites provides greater coverage with a stronger connection.

Scott Wine: We have been judicious in our approach to connecting solar space, we needed a partner with technology that would work and farm severe operating environments. Intelsat antennas have the proven have been proven in critical applications and in hospitable conditions. So we can bring them to market quickly with confidence they will perform.

Scott Wine: We also serve customers in areas, where low orbit satellites do not consistently reach intelsat multi orbit constellation of satellites provides greater coverage with a stronger connection.

Scott Wine: Becoming a more productive company is a key part of our strategy, and successfully executing our cost reduction program plays an important role. We continue to drive production cost savings through procurement, logistics, and manufacturing efficiency. Some of those savings are held on the balance sheet at the quarter end as we build inventory for the coming season, but we are confident in our full year targets. The absolute dollar impact of these savings is somewhat contingent upon production levels, which we will adjust as industry conditions necessitate.

Scott Wine: Becoming a more productive company is a key part of our strategy and successfully executing our cost reduction program plays an important role.

Scott Wine: We continue to drive production cost savings through procurement logistics and manufacturing efficiencies. Some of those savings are held on the balance sheet at quarter end as we build inventory for the coming season, but we are confident in our full year targets. The absolute dollar impact of these savings is somewhat contingent upon production levels, which we will adjust as industry.

Scott Wine: Man necessitate necessitate.

Scott Wine: As mentioned earlier... The first phase of our restructuring program has been implemented, and we have imposed strict discipline on our discretionary spending. We are already working on additional projects, such as expanding support operations in low-cost countries. I will now turn the call over to Odone to take us through the financial results. Thank you, Scott.

Donate: As mentioned earlier, the first phase of our restructuring program has been implemented and we have imposed strict discipline on our discretionary spending we are already working on additional projects such as expanding support operations in low cost countries I will now turn the call over to donate to take us through the financial results. Thank you Scott and good morning, and good afternoon to everyone on the call.

Oddone Incisa Della Rocchetta: Thank you, Scott, and good morning, and good afternoon to everyone on the call. In the first quarter, industrial net sales were down 14% year-over-year to $4.1 billion. This decline was mainly due to lower active volumes in all regions, partially offset by net price variations. Adjusted net income decreased by 11%, with adjusted EPS down $0.02 to $0.33. Higher net income from financial services, lower tax rate, some discreet tax adjustments, and lower share count all contributed to the relative strength of the earnings per share. However, industrial free cash flow was an outflow of $1.2 billion.

Oddone Incisa Della Rocchetta: First quarter industrial net sales were down 14% year over year to $4 $1 billion.

Oddone Incisa Della Rocchetta: This decline was mainly due to lower volumes in all regions, partially offset by net price realization.

Oddone Incisa Della Rocchetta: Adjusted net income decreased by 11% with adjusted EPS down to <unk> 30.

Oddone Incisa Della Rocchetta: <unk> 38.

Oddone Incisa Della Rocchetta: Higher net income from financial services lower tax rate from discrete tax adjustments and a lower share count all contributed to the relative strength of the <unk> earnings per share.

Oddone Incisa Della Rocchetta: Industrial free cash flow was an outflow of $1 $2 billion in outflow as normal in Q1 as we build finished good inventory in support of it in Q2 selling season.

Oddone Incisa Della Rocchetta: An outflow is normal in Q1, as we build finished goods inventory in support of the Q2 selling season. And this year, we have additional working capital impacts from the global production level. In agriculture, the net sales decrease of 14% in the quarter was driven by lower volumes and the year-over-year impact of data stocking. However, dealer inventories grew significantly in the first quarter of 2023, as our supply chain was dramatically improving. One in 2024, dealer inventories slightly decreased at the global level.

Oddone Incisa Della Rocchetta: And this year, we have additional working capital impacts from lower production levels.

Oddone Incisa Della Rocchetta: In agriculture, the net sales decrease of 14% in the quarter was driven by lower volumes and a year over year impact of beat our stocking.

Oddone Incisa Della Rocchetta: Inventory reduced significantly the first quarter of 2020 as our supply chain was dramatically improving one 2020 for dealer inventory slightly decrease the global App.

Oddone Incisa Della Rocchetta: Lower sales volumes were partially offset by favorable price realization despite some fierce competitive pricing pressure, especially in South America. Gross margin for ag was 23.8%, down from 26.2% in Q1 2023, but up sequentially from Q4. The main driver for the margin compression was lower volumes with production hours 22% lower compared to the first quarter of 2023, which impacted fixed cost absorption. However, we were able to reduce product costs from re-manufacturing efforts despite continued labor inflation. As Scott mentioned, not all of the product cost actions implemented in Q1 were realized in a quarter at P&L.

Oddone Incisa Della Rocchetta: Lower sales volumes were partially offset by favorable price realization. Despite some fierce competitive pricing pressure, especially in South America.

Oddone Incisa Della Rocchetta: Gross margin for <unk>.

Oddone Incisa Della Rocchetta: Was 28, 8% down from 26, 2% in Q1 2028, but sequentially from Q4.

Oddone Incisa Della Rocchetta: The main driver for the market compression, if the lower volumes with production hours, 22% lower compared to the first quarter of 2023.

Oddone Incisa Della Rocchetta: Which impacted fixed cost absorption.

Oddone Incisa Della Rocchetta: But we were able to reduce product costs for lean manufacturing efforts. Despite continued elaborate creation.

Oddone Incisa Della Rocchetta: As Scott mentioned, the all of the product cost actions implemented in Q1, we're realizing in the quarter P&L.

Oddone Incisa Della Rocchetta: Unix Helding Company Inventory, keep your savings on the balance sheet until they are sold to dealers. The SG&A savings of $33 million reflects a restructuring program that helped mitigate the detrimental margins. Adjusted EBIT margin was 12.5%, 200 basis points lower than last year. In construction, net sales for the first quarter were down about 11%, mostly due to lower volumes, with net pricing about flat.

Oddone Incisa Della Rocchetta: Unit selling company inventory keep the savings on the balance sheet until they are sold to dealers.

Oddone Incisa Della Rocchetta: The SG&A savings of $33 million reflect a restructuring program and.

Oddone Incisa Della Rocchetta: And help mitigate the decremental markets adjusted EBIT margin was one 5% to 100 basis points lower than last year.

Oddone Incisa Della Rocchetta: <unk> net sales for the first quarter were down about 11%, mostly due to lower volumes with net pricing about flat.

Oddone Incisa Della Rocchetta: Gross margin increased by 150 basis points to 17.4% as improved product costs more than offset the volume impact. Adjusted EBIT also benefits from the lower SG&A expenses, ending the quarter at 6.7% EBIT margin, well above last year's level. Net income of financial services was $118 million, a $40 million increase compared to Q1 2023. The notable improvement was mostly driven by solid market gains, but the adjustment to higher interest rates is now largely completed on the receivable portfolio.

Oddone Incisa Della Rocchetta: Gross margin increased by 150 basis points to 17, 4% as improved product costs more than offset the volume impact.

Oddone Incisa Della Rocchetta: Adjusted EBIT also benefits from lower SG&A expenses, ending the quarter at six 7% EBIT margin well above last year's levels.

Oddone Incisa Della Rocchetta: Okay.

Oddone Incisa Della Rocchetta: Net income of financial services was $180 million or 40 million increase compared to Q1 2020.

Oddone Incisa Della Rocchetta: The notable improvement was mostly driven by solid might regain adjustment to higher interest rates is now largely completed on the receivable portfolio.

Oddone Incisa Della Rocchetta: We also have improved volumes across regions and a favorable effective tax rate. Retail originations in the quarter were $2.5 billion, up $300 million compared to the same period last year, as we continue capturing a high percentage of our end customers' equipment financing. The managed portfolio at the end of the quarter was nearly $29 billion, up over $4 billion compared to the prior year. You will note that delinquency picks up in the quarter, which is normal when markets contract.

Oddone Incisa Della Rocchetta: We also had improved volumes across regions and a favorable effective tax rate.

Oddone Incisa Della Rocchetta: Retained originations in the quarter with $2 $5 billion up $300 million compared to the same period of 2020, as we continue capturing a high percentage of our end customers equipment financing needs.

Oddone Incisa Della Rocchetta: The management at the end of the quarter was nearly $29 million million dollars up over 4 billion compared to the prior year.

Oddone Incisa Della Rocchetta: You will note that delinquency status in the quarter, which is normal when market contracts.

Oddone Incisa Della Rocchetta: Higher delinquency is in pockets of our portfolio and mainly in South America, where we are seeing more frequent late payments but no increase in credit losses so far. The delinquency rates we are seeing now are the same or lower levels than in previous downturns.

Oddone Incisa Della Rocchetta: Higher delinquency pockets of our portfolio and mainly in South America, where we are seeing more frequently payments, but no increase in credit losses, so far.

Oddone Incisa Della Rocchetta: The delinquency rates, we are seeing now are the same or lower levels that Peter's downturns.

Oddone Incisa Della Rocchetta: Finally, just a quick note on our capital allocation priorities and, specifically, on shareholder returns. We repurchased over $580 million worth of stock in the first quarter, as we completed our $1 billion Extraordinary Buy Back program and moved on to the new $500 million program in March. We continue to buy shares now, and we will pay our annual dividend of about $600 million in the coming weeks. CNH is a cash-generating business, and net of any M&A needs; it is our goal to return to our shareholders nearly 100% of industrial free cash flow through dividends and share buybacks.

Oddone Incisa Della Rocchetta: Credit reserves are properly set to protect our future profitability.

Oddone Incisa Della Rocchetta: Okay.

Oddone Incisa Della Rocchetta: Finally, just a brief note on our capital allocation priorities and specifically on shareholder returns.

Oddone Incisa Della Rocchetta: We repurchased over $580 million worth of stock in the first quarter as we completed our $1 billion extraordinary back program and move on to the new $500 million program in March.

Oddone Incisa Della Rocchetta: We continue to buy shares now and we paid our annual dividend of about $600 million in the coming weeks.

Oddone Incisa Della Rocchetta: <unk> is a cash generating business.

Oddone Incisa Della Rocchetta: Any M&A needs. It is our goal to return back to our shareholders nearly 100% of industrial free cash flow through dividends and share buybacks.

Oddone Incisa Della Rocchetta: And with that, I will now turn it back to Scott and come back for the Q&A. All right. Thank you, Donny.

Oddone Incisa Della Rocchetta: And with that I will now turn it back to Scott and come back for Q&A Alright. Thank you Donna.

Scott Wine: Looking at the full year outlook for agriculture, our forecast for tractors is largely in line with previous projections, albeit moving more toward the lower ends of our range. We have also reduced our expectations for combine industry volumes in both EMEA and South America. In aggregate for our key markets, we now estimate that agriculture industry retail sales will be down about 15%, putting us at the low end of our previous guide. Consequently, we're lowering our 2024 agriculture net sales forecast to decrease by 11 to 15 percent from 2023 versus our previous projection of down 8 to 12 percent. This reduction is related only to lower industry demand and our intention to keep channel inventory in check.

Oddone Incisa Della Rocchetta: Viewing our full year outlook for agriculture, our forecast for tractors is largely in line with previous projections, albeit moving more toward the lower ends of our range.

Scott Wine: We have reduced our expectations for combine industry volumes in both EMEA and South America.

Scott Wine: In aggregate for our key markets, we now estimate that agriculture industry retail sales will be down about 15%, putting us at the low end of our previous guidance.

Scott Wine: Consequently, we are lowering our 2020 for agriculture net sales forecast to decreased by 11% to 15% from 2023 versus our previous projection of down 8% to 12%.

Scott Wine: This reduction is related only to lower industry demand and our intention to keep channel inventory in check.

Scott Wine: With this lower volume, we will decrease our EBIT margin forecast by 50 basis points to between 13.5% and 14.5%. In construction, we have slightly improved our industry forecast for heavy products in North America but marginally lowered the projection for light, equipment, and APAC. In the aggregate, we still expect industry volumes to be down about 10%. We are reaffirming our net sales and EBIT margin forecast with sales down 7-11% and EBIT margins flat year-over-year at 5-6%. Combining the agriculture and construction net sales forecast, industrial net sales are expected to be down 10 to 14 percent versus last year, with industrial free cash flow now estimated at 1.1 to 1.3 billion dollars.

Scott Wine: With this lower volume, we will decrease our EBIT margin forecast by 50 basis points to between 13, 5% and 14, 5%.

Scott Wine: In construction, we have slightly improved our industry forecast for heavy products in North America, but marginally lowered the projections for light equipment and APAC.

Scott Wine: In the aggregate, we still expect industry volumes to be down about 10%.

Scott Wine: We are reaffirming our net sales and EBIT margin forecast with sales down, 711% and EBIT margins flat year over year at 5% to 6%.

Scott Wine: Yes.

Scott Wine: Combining the agriculture and construction net sales forecast industrial net sales are expected to be down 10% to 14% versus last year with industrial free cash flow now estimated at one one to $1 3 billion. We've also trimmed the EPS projection by <unk> <unk> to $1 45 to $1 55.

Scott Wine: We've also trimmed the EPS projection by 5 cents to $1.45 to $1.55. What I would like you to take away from our call today is that we are on track in executing our strategy, which will see us through the downturn while strengthening our position for the inevitable upswing. We have built a leaner and more resilient company that puts our customers at the center of everything we do. We have a deeply ingrained focus on margin and market share improvement as we continue on the path of marrying great iron with great tech.

Scott Wine: <unk>.

Scott Wine: What I would like you to take away from our call. Today is that we are on track in executing our strategy, which we will see us through the downturn, while strengthening our position for the edible upswing.

Scott Wine: We have built a leaner and more resilient company that puts our customers at the center of everything we do.

Scott Wine: We have a deeply ingrained focus on margin and market share improvement as we continued on the path of marrying great iron with Great Tech.

Scott Wine: We've simplified our capital market profile with a single listing in New York, and we have an experienced team who, under Garrett's leadership, will take CNH to even greater heights. Garrett and I have worked together since I joined CNH, and he is not only a strong operator and a highly respected colleague; he's a good friend whom I have tremendous confidence in. I am grateful for my time at CNH and would like to sincerely thank our hard-working team. I will remain a significant shareholder and a cheerleader. Thank you all. Brianna, that concludes our prepared remarks. If you could open the line for questions,

Scott Wine: We have simplified our capital market profile with a single listing in New York and we have an experienced team who under Gary's leadership will take <unk> to even greater heights.

Scott Wine: Gary and I have worked together since I joined <unk> and he is not only a strong operator and a highly respected colleague he's a good friend who might have tremendous confidence in.

Scott Wine: I am grateful for my time at <unk> I would like to sincerely. Thank our hard working team I will remain a significant shareholder and a cheerleader.

Scott Wine: You all.

Brianna: That concludes our prepared remarks, if you could open the line for questions.

Operator: Thank you. We will now begin the question and answer session of the call. If you would like to ask a question, please press star 1 on your telephone keypad to join the queue. To withdraw your question, press star 1 a second time. We kindly ask that you please limit yourself to one question and one follow-up to allow time for as many participants as possible. Thank you. Your first question comes from Mig Dobre with Baird. Please go ahead.

Speaker Change: Thank you we will now begin the question and answer session of the call.

Operator: If you would like to ask a question. Please press star one on your telephone keypad to join the queue.

Mircea Dobre: Jay Your question Press Star one second time.

Operator: We kindly ask that you. Please limit yourself to one question and one follow up to allow time for as many participants as possible.

Mircea Dobre: Thank you.

Mircea Dobre: Your first question comes from Mig <unk> with Baird. Please go ahead.

Mircea Dobre: Thank you. Good morning, everyone.

Mircea Dobre: Thank you and good morning, everyone.

Mircea Dobre: While Scott.

Mircea Dobre: It's a shame to see you go and I understand your comments about about the circumstances around your departure, but I do want to ask.

Mircea Dobre: Well, Scott, it's a shame to see you go, and I understand your comments about the circumstances around your departure. But I do want to ask, timing wise, you were stepping down here before we were really kind of seeing the fruits of your labor. You and the team over the past couple of years have done a lot to transform the business. So, you know, I guess I have two questions around that.

Mircea Dobre: Timing wise.

Mircea Dobre: You were stepping down here before we're really kind of seeing the fruits of your labor.

Mircea Dobre: And the team over the past couple of years have done a lot to transform the business.

Scott Wine: You know, as you're sort of looking at the execution or operating momentum, how do you sort of frame that relative to your expectations when you first, you know, sort of design the strategy and the plan? And the second thing is, how is Garrett coming into all of this, right? I mean, how familiar is he with the strategy that you put in place? Is it fair for shareholders to expect Garrett to maybe take the company in a different direction than the one that it's in now? What has your communication with him been like so far?

Mircea Dobre: So I guess two questions around that.

Scott Wine: As you're sort of looking at the.

Scott Wine: Execution of our operating momentum how do you sort of frame that relative to your expectations. When you first did.

Scott Wine: Design the strategy in the plan.

Scott Wine: And the second thing is how is Garrett.

Scott Wine: Yeah.

Scott Wine: Coming into all of this right I mean, how familiar easy with the strategy that you put in place is it fair for shareholders to expect Gareth maybe take the company in a different direction than that and of course that is what is your communication with him been so far.

Scott Wine: Yeah, well, first of all, as I said in my prepared remarks, I'm just really... Thankful for the impressive work the team did, you know, delivering margin expansion, changing into a customer, all of the stuff that we've accomplished. You know, part of the reason that I'm comfortable leaving is that the team has really, and I said it in, an ingrained culture of focusing on customers and delivering margins, and that won't change.

Scott Wine: Well I mean first of all as I said in our prepared remarks, I'm just really.

Scott Wine: Thankful for the impressive work the team did.

Scott Wine: Delivering margin expansion changing into our customers all of the stuff that we've accomplished.

Scott Wine: Part of the reason that I am comfortable leaving is that the team has really and I said I mean, it's an ingrained culture of focusing on customers and delivering margins.

Scott Wine: That doesn't change.

Scott Wine: You know, part of, I mean, again, I have a tremendous vested interest in the ongoing success of this company. And, you know, Garrett and I have had ongoing dialogue since this was announced. He didn't run the ag businesses, but he participated in all of the operating reviews. He's intimately familiar with how we do this. You know, obviously, he's going to put his spin on things, but, you know, you can't, ultimately, if you think about, step way back from what our strategy is, it's about margin share, market gains, market share gains, and margin expansion.

Scott Wine: I mean again I have a tremendous vested interest in the ongoing success of this company.

Scott Wine: Gary and I have had ongoing dialogues since this was announced.

Scott Wine: So he didn't run that the AG businesses, but he watched and all of the operating reviews. He is intimately familiar with how we do this obviously he's going to put his spin on things.

Scott Wine: But you can't do that.

Scott Wine: Ultimately if you think about you step way back what our strategy is it's about margin share market gains market share gains and margin expansion and I don't care, who is running the company. Those are the two value creation levers that we're going to and how we get to those things could change, but if you look at the construction results in Stefanos team delivered you look.

Scott Wine: And I don't care who's running the company; those are the two value creation levers that we're going to have. Now, how we get to those things could change, but, you know, if you look at the construction results that Stefano's team delivered, and you look at what Derek did over the last three years, there is a lot of momentum that's going to carry forward, whether I'm here or not.

Scott Wine: What Derrick said over the last three years there is a lot of momentum that's going to carry carryforward, whether I'm here or not.

Scott Wine: I'd love to get your perspective as to what you're seeing on the channel, and I'd appreciate it if you could comment by geography and also by segment. I'm curious what you're seeing in construction. All right, well, I'll start with construction. Stefano and his...

Scott Wine: Understood.

Speaker Change: My follow up.

Scott Wine: Maybe a question on on dealer inventories I'd love to get your perspective as to as to what you were seeing in the channel and I would appreciate it if you could comment by geography and also by segment I'm curious, what you're seeing in construction as well as that thank you.

Scott Wine: Alright, well, I'll start with construction. Stefano and his team continue to do very well. That was a different scenario because, you know, throughout last year, we got ahead of ourselves a little bit on agricultural shipments. But construction really never had that, and especially the strong retail performance they had in the fourth quarter, you know, allowed us to be in a much better position overall on construction. So we'll essentially shift to demand there throughout the year.

Scott Wine: All right well I'll start with construction Stefano and his team.

Scott Wine: Continue to do well and that was a different scenario because we add even throughout last year we.

Scott Wine: We got ahead of ourselves a little bit on the agriculture shipments, but construction really never had that in especially the strong retail performance. They had in the fourth quarter allows.

Scott Wine: Allows us to be in a much better position overall on construction, so we'll essentially shifted demand.

Scott Wine: There throughout the year on the AG side again, we had a good market share performance in the first quarter.

Scott Wine: On the ag side, again, we had a good market share performance in the first quarter. Although we had somewhat significant production cuts, we still did not decrease dealer inventory at the levels we wanted to. So, we've got work to do, we'll get most of that done in the second quarter. Combines are, you know, we talked about that in prepared remarks. Combines are where we're seeing the most pressure. There's used inventory building

Scott Wine: But despite.

Scott Wine: Somewhat significant production cuts, we still did not decrease dealer inventory at the levels. We wanted to so we've got work to do we will get most of that done.

Scott Wine: In the second quarter.

Scott Wine: <unk> combines or we talked about that in the prepared remarks combines are where we're seeing the most pressure theres used inventory building up demand is down quite considerably so we'll adjust that.

Scott Wine: Demand is down quite considerably. So, you know, we'll adjust that as we go forward. But, you know, interestingly, the North American tractor market's still pretty strong. But, you know, we're overall committed to getting the biggest chunk of dealer inventory done in Q2. Probably some will probably carry into Q3, but I think we're in pretty good shape there.

Scott Wine: As we go forward, but interestingly the the North American tractor market is still pretty strong.

Scott Wine: But we're overall committed to getting the biggest chunk of dealer inventory down in Q2 still probably some will carry into Q3, but I think we're in pretty good shape there.

Speaker Change: Alright, good luck Scott.

Speaker Change: Thank you.

Jamie Lyn Cook: Your next question comes from Jamie Cook with Truist. Please go ahead.

Scott Wine: Your next question comes from Jamie Cook with <unk>. Please go ahead.

Jamie Lyn Cook: Hi, good morning. And as well, Scott, sorry to see you go because you've done a great job with the company. So I guess my first question is on production cuts. Scott, I know you said you have more to do in the second quarter.

Jamie Lyn Cook: Hi, good morning.

Jamie Lyn Cook: And as well as Scott sorry.

Jamie Lyn Cook: Scott sorry to see you go in and because you've done a great job with the company.

Jamie Lyn Cook: So I guess my first question just on.

Jamie Lyn Cook: Production cuts Scott I know you said you have more to do in the second quarter can you talk to how much you think youre going to Underproduce retail demand and do you still think that you will be in a position where as we exit 2024 that we should be able to produce in line with retail demand given just your view of the market.

Scott Wine: Can you talk about how much you think you're going to underproduce retail demand? And do you still think that we will be in a position where, as we exit 2024, we should be able to produce in line with retail demand, given just your view of the market today? And then my second question, you know, given the stock underperformance, you know, based on concerns about the magnitude of the downturn, you know, and management changes that sort of weren't expected.

Scott Wine: You know it today.

Scott Wine: And then my second question.

Scott Wine: Given the stock underperformance.

Scott Wine: Based on concerns about the magnitude of the downturn.

Scott Wine: You know management changes that sort of warrant expected.

Scott Wine: I'm sort of wondering how you guys are thinking about utilizing your balance sheet. I know you've done a lot in terms of share repurchase. A lot of that was associated with the delisting. But just, you know, just to give the market confidence, I guess that there still is a cost and market share story there. So I'll wrap up with those two.

Scott Wine: Sort of wondering how you guys are thinking about utilizing your balance sheet I know you've done a lot in terms of share repurchase a lot of that was associated with the delisting.

Scott Wine: But just you know just to give the market confidence I guess that there still is a constant and market share story, there. So I'll wrap up with those two thank you.

Scott Wine: No, we feel really good about, I mean, the production adjustments, you know, Derek and his team, because it's mostly an ag phenomenon, but have really looked at the ongoing production for the next three quarters, and there's, I mean, unless there is, I mean, obviously, we can't predict exactly what the market's going to do, but given the ranges that we are expecting, we will be shipping to demand not only in 2025, but later in 2024.

Speaker Change: Thanks, Jamie we feel really good about the production adjustments.

Scott Wine: Derek and his team because it's again, it's mostly in AG.

Scott Wine: <unk> phenomenon, but have really looked at the ongoing production for the next three quarters and there is I mean, unless there is I mean, obviously, we can't predict exactly what the market is going to do but given the ranges that we are expecting we will be shipping to demand not only in 2025, but the later in 2024.

Scott Wine: That I'm pretty confident in.

Scott Wine: Don do you want to talk about the share buybacks and where we stand.

Scott Wine: I had in my prepared remarks that we.

Oddone Incisa Della Rocchetta: We completed the $1 billion program. We started a new $500 million program in March, and we are buying on that program. We're going to pay $600 million in dividends this year. So if you add up all the amounts, it's a considerable amount of money that is going out to shareholders this year. And if we consider the behavior we're having now on share buybacks and our dividends; we don't expect to change our dividend policies, almost 100% of our free industrial cash flow will be devolved back to shareholders if we exclude any M&A that we may have. Consider that we don't have any large M&A outside right now.

Scott Wine: We completed the 1 billion program, we started a new 500 medium program in March and we are fine on that program, we got up a 600 million in dividends DSO, if you add up.

Oddone Incisa Della Rocchetta: Is that a considerable amount of money that is going out to shareholders easier.

Oddone Incisa Della Rocchetta: And if we consider the behavior, we are having now in share buyback and our dividend with unexpected.

Oddone Incisa Della Rocchetta: Tools to change our dividend policy is basically.

Oddone Incisa Della Rocchetta: Almost 100% of our freak industrial free cash flow will lead the bowl that tool back to shareholders. If we exclude any M&A that we may have.

Oddone Incisa Della Rocchetta: Consider that we don't have any large M&A in size right now.

Jamie Lyn Cook: Okay, thank you very much.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thanks, Jamie.

Nicole DeBlase: Your next question comes from Nicole DeBlase with Deutsche Bank. Please go ahead.

Jamie Lyn Cook: Your next question comes from Nicole <unk> with Deutsche Bank. Please go ahead, yes.

Nicole DeBlase: Yeah, thanks. Good morning, guys. And, Scott, thanks for all the help, and good luck in the future. I guess, starting with picking up where Jamie just left off on production and ag, is the expectation that the worst year-on-year production decline occurs in the second quarter, and then you guys kind of get back to more modest declines in 3Q, just maybe putting a finer point on the quarterly cadence in the ag segment?

Nicole DeBlase: Yeah. Thanks, Good morning, guys and Scott Thanks for all the help and good luck in the future.

Nicole DeBlase: I guess, maybe starting with picking up with Jamie just left off on production and add them.

Nicole DeBlase: Is the expectation that the worst year on year production decline occurred in the second quarter, and then you guys kind of get back to my modest declines in <unk>, just maybe putting a finer point on the quarterly cadence in the AG segment.

Scott Wine: Yeah, that's true, and it's also true because of the comparisons year over year. You know, the comparisons get a lot easier for us in the second half, but also, you know, we're pretty confident. And, I mean, the production cuts are one half of it.

Speaker Change: Yes, that's true and it's also true because of the compares year over year.

Scott Wine: You know that the compares get a lot easier for us in the second half so that but also we're pretty confident and I mean, the production cuts are one half of it. The other part is what we do driving retail and I'm really confident and how the team is working closely with our dealer partners to make sure that we accelerate and capture every.

Scott Wine: The other part is what we do driving retail, and I'm really confident in how the team is working closely with our dealer partners to make sure that we accelerate and capture every one of those opportunities where we can. Since I mentioned it, I will talk about the fact that we're not going to chase, and we're going to be disciplined, and when, you know, some of our competitors will really discount things to get sales, and we're not going to do that, and I think you see the price realization that we're talking about. We're being We're going to drive for market share gains, we're going to drive for retail efficacy, but we are going to be very disciplined in managing price through that.

Scott Wine: One of those where we can I will since I've mentioned it I'll talk about the fact that we're not going to chase.

Scott Wine: We're going to be disciplined and when some of our competitors are really discount things to get sales and we're not going to do that and I think you see the price realization that we're talking to we're being we're going to drive for market share gains, we're going to drive for retail efficacy, but we are going to be very disciplined on on managing price through that.

Nicole DeBlase: Got it. Thanks, Scott. That's helpful. And then, just maybe, one on construction.

Speaker Change: Got it thanks, Scott that's helpful. And then just maybe one on construction the margin performance was really impressive there this quarter, but you guys had still maintain the guidance for 5% to 6% for the full year implies a step down from first quarter results I guess, what's driving that.

Nicole DeBlase: The margin performance was really impressive there this quarter, but you guys have still maintained the guidance for 5% to 6% for the full year, which implies a step down from the first quarter results. I guess what's driving that? Well, first,

Scott Wine: Well, first of all, you can't not recognize the significant improvement in margins that Stefano and his team have made. The reason we didn't rate it most, or a good bit of the beat in the first quarter was related to the ongoing strike impact that we had in the first quarter of last year that doesn't repeat throughout the year.

Scott Wine: Well first of all you can't not recognize the significant improvement in margins as Stephanotis team if drawn.

Scott Wine: But.

Scott Wine: The reason, we didnt rated most of or a good bit of the beat in the first quarter was related to ongoing strike impact that we had in the first quarter of last year that doesn't repeat throughout the year.

Nicole DeBlase: Got it. Thanks, Scott. I'll pass it on.

Speaker Change: Got it thanks, Scott I'll pass it on.

David Raso: Your next question comes from David Raso with Evercore. Please go ahead. Hi, thank you.

Nicole DeBlase: Your next question comes from David Raso with Evercore ISI. Please go ahead.

David Raso: Hi, thank you. Uh, I'm just trying to square up an ag. The sales guide is down 13%, but your end market outlook is down 15%. Obviously, the parts business itself doesn't move around as much as... Unit Forecast for the Industry. Complete Goods, and in the fourth quarter of last year, you did underproduce retail. So I appreciate those two offsetting factors. But when you were thinking about the rest of the year

David Raso: Hi, Thank you I'm, just trying to square up an egg.

David Raso: The sales guide is down 13%, but your end market outlook is down 15.

David Raso: Obviously, the parts business itself doesn't move around as much as unit forecast for the industry. The complete goods in the fourth quarter of last year, you did under produce retail. So I appreciate those two offsetting factors, but when you were thinking about the rest of the year.

David Raso: I don't think pricing is that high. I'm just trying to square up. How much are we really underproducing if the sales guide isn't down as much as your industry guide? This is my first question. Trying to make sure that we're at a level setting where you expect inventory to end the year. I just, the math isn't working for me as easily as I would like it to.

David Raso: I don't think pricing is that high I'm, just trying to square up how much are we really under producing at the sales guide isn't down as much as the industry guys. This is my first question.

David Raso: I'm, just trying to make sure that lower level setting, where you expect inventory to end the year I'm just the math isn't working for me diseases I would've liked.

Scott Wine: Well, definitely, there's a mix in there. There's a market share consideration, and we expect to gain market share to outperform the market this year. If you look at how we behaved compared to the market last year in some parts of the world, and I will look at South America first, there we have space for production or sales to the market. I mean, it's a question of stocking and de-stocking the dealers. We had already stocked our dealers in the first quarter of last year.

Speaker Change: Well definitely there is some mix in there there are some market share consideration and we expect to gain market to outperform the market.

Scott Wine: If you look at how we behave compared to the market.

Scott Wine: In some parts of the World and I will look in South America first.

Scott Wine: There we have space at all.

Scott Wine: To recover and good day.

Scott Wine: Production or sales to market.

Scott Wine:

Scott Wine: Neil I mean is it.

Scott Wine: Section of stocking and Destocking that.

Scott Wine: So we had stock our dealers in the first quarter of last year.

Scott Wine: We our ddos or have kept their stops up basically flat this year are slightly down.

Scott Wine: Our dealers have kept their stocks basically flat this year, or slightly down. This quarter, sorry, and we expect to have inventories at the end of the year lower from where they were at the end of last year, but most of the legwork has been done there. And don't forget PR. Our penetration of technology sales is improving as well throughout the year.

Scott Wine: The Florida site.

Scott Wine: And we expect to have inventories at the end of some dealer inventory at the end of the year lower from where they were.

Scott Wine: At the end of last year.

Scott Wine: But most of the legwork that's been done there.

Scott Wine: And don't forget.

Scott Wine: Our penetration of the end of technology sales is improving as well throughout the year.

Scott Wine: Yeah, I mean, it feels like there's at least enough market share there to at least have to put that into the equation. Because when you look at the mix, it's actually high-ticket items that are down more than the low-ticket items, right? Brazil... Combines, really combines around the world, as well as even within North America, it's the larger tractors that are down.

Speaker Change: Yeah, I mean, it feels like there's a loose enough market share there.

Scott Wine: To listen.

Scott Wine: I have to put that into the equation because when you look at the mix, it's actually high ticket items that are down more than the low ticket items right, Brazil com.

Scott Wine: Combines really calm markets around the world as well as even within North America. The larger tractors that are down that that's why but obviously there is a market share component there.

David Raso: That's why, but obviously, there's a market share component there. Lastly, on the margins for the rest of the year in agriculture. And if you square that up with what you're trying to insinuate on slide nine of how much savings are left for the year, and I know that covers both segments, but the framework still seems pretty comfortable with, you know, rough numbers, decrements of 40, but then you add the cost savings, and we kind of get back to around that 20.

David Raso: Lastly on the margins for the rest of the year.

David Raso: Egg.

David Raso: And have you square that up with what you're trying to insinuate on slide nine of how much savings are less less for the year.

David Raso: And I know that covers both segments, but the framework still seems still pretty comfortable with.

David Raso: Rough numbers Decrementals of 40, but then you add the cost savings and we kind of get back to around that 20 that doesn't seem to have changed.

David Raso: That doesn't seem to have changed. So I guess the question is on price and cost. Did anything change in your thoughts in the guide on pricing versus before and price cost in general? The math suggests not. And I'm just trying to square up the market share, but are we not changing the price look? So I'm just trying to square all this up. Thank you.

David Raso: So I guess the question is on price cost did anything change in your thoughts in the guide on pricing versus before and price cost in general or is the math suggests not and I'm just trying to square up the market share, but no. We're not changing the price looks I'm just trying to square all of this up thank you.

Scott Wine: No, it hasn't. It hasn't. I mean, we still have the same consideration in pricing that we had before, so modest. I'm talking about agriculture, right? A modest, very modest price increase, but some price increase, and uh..., a continued reduction in our cost of production, and then, positively, Bhaktivaras Jneha.

Speaker Change: It Hasnt I mean, if we stay at half.

Scott Wine: The same consideration in pricing that we had before so modest.

Scott Wine: As a token on the contrary modest very modest price increase the stock price increase.

Scott Wine: And.

Scott Wine: Continued reduction in our cost of production.

Scott Wine: And.

Scott Wine: And then positive impact of our SG&A actions.

David Raso: All right, that's helpful. Thank you so much.

Speaker Change: That's helpful. Thank you so much.

David Raso: Okay.

Michael Feniger: Your next question comes from Mike Shilsky with DA Davidson. Please go ahead.

David Raso: Your next question comes from Mike Zaremski with D. A Davidson. Please go ahead.

Michael Feniger: Yes, hi, good morning, and Scott, I'll add my best wishes to you as well. I wanted to talk quickly about pricing in agriculture. You mentioned positive pricing in the quarter. I know that's wholesale, not necessarily retail, where there was some discounting happening around the world from your competitors, but would you say that, just kind of broadly speaking, when you price to farmers, you're not looking to kind of play that game right now, and is that implying that maybe you're trying to keep things open for some growth in 2025?

Michael Feniger: Yes, hi, good morning, and Scott I'll add my best wishes to you as well.

Michael Feniger: Wanted to talk quickly on pricing in AG.

Michael Feniger: Positive pricing in the quarter and I know, that's just that's wholesale not necessarily retail where there was discounting happening.

Michael Feniger: Around the world.

Michael Feniger: Your competitors, but.

Michael Feniger: I would just say that you're just kind of broadly speaking when you when you price to pharma as youre not looking to kind of play that game right now.

Michael Feniger: Is that implying that maybe you're too.

Michael Feniger: Trying to keep things open for some growth.

Michael Feniger: <unk> thousand 25.

Scott Wine: I mean, obviously, we're going to do everything we can to position ourselves for growth in the years ahead. But, you know, right now, it's just being disciplined on price realization. And like I've said before, this is a, you know, we were mostly covering costs before, but Derek and his team have really done a nice job, and it's a region by region execution. It's not a, we don't have a universal policy.

Speaker Change: I mean, obviously, we're going to do everything we can to position ourselves for growth in the years ahead, but right now, it's just being disciplined on on price realization and.

Scott Wine: Like I've said before this is a.

Scott Wine: We were mostly covering cost before but Derek and his team have really done a nice job and its a region by region execution. It's not a we don't have a universal policy and I think what we're striving to do is.

Scott Wine: And I think what we're striving to do is get price where we can, get price where it makes sense, but get market share and retail acceleration to the extent we can. And I think the team's done a really good job, region by region, executing that strategy. And, you know, we're comfortable that as we exit the year, and again, very proud of what Rafa and the team have done down in South America, just really putting us in very, very good dealer inventory positions.

Scott Wine: Get price, where we can get price, where it makes sense, but get market share in retail acceleration to the extent, we can and I think the team has done a really good job region by region executing that strategy and we're comfortable that as we exit the year and again.

Scott Wine: Most most proud of what Ralph and the team have done down in South America, just really having us in very very good dealer inventory position. So as soon as that market turns we will be able to take full advantage of what happened. So.

Scott Wine: So as soon as that market turns, we'll be able to take full advantage of what happens. So I think it's reasonable to assume that what we did in the first quarter with pricing will hold throughout the year.

Scott Wine: I think it's reasonable to assume that what we did in the first quarter with pricing will maintain throughout the year.

Scott Wine: Okay.

Michael Feniger: Okay, great. And then to follow up on how you grow your tech stack. I guess I'm curious, with the Intel-STAT agreement, are there any one-time costs? The next step is to get the software or hardware upgraded on current systems and any future systems that get sold to the farmers here, or is it baked into each individual sale or some other way to account for layering in Intel's SAS capabilities here.

Scott Wine: And then my follow up on the how you grow your Tam.

Scott Wine: <unk>.

Michael Feniger: I guess I'm curious with the Intelsat agreement are there any onetime costs.

Michael Feniger: That will take place this year or next to get either the software or the hardware upgrade on current.

Michael Feniger: And any future systems that get sold to the farmers here or and.

Michael Feniger: Kind of baked in.

Michael Feniger: Each individual sale or some other way to account for.

Michael Feniger: Layering in Intel SaaS capability here.

Scott Wine: Part of the reason that we went with DELSAT is because of the proven ruggedness of what they do, which lowers the amount of validation work. I mean, I'm reluctant to ever call anything plug and play anymore, but it's about as close as we can get. And, you know, Mark Kirmish and his team have really done a good job of evaluating the opportunities and ensuring that this is something that we can run. The first market to benefit from this will be Brazil, and that will happen later in the year.

Michael Feniger: No I mean part of the reason that we went with Intelsat is because of the proven ruggedness of what they do.

Scott Wine: Which lowers the amount of validation work I wouldn't.

Scott Wine: I'm reluctant to ever call anything plug and play anymore.

Scott Wine: But it's about as close as we can get and you know Mark <unk> and his team have really done a good job of evaluating the opportunities and ensuring that this is something that we can read the first market to benefit from this will be Brazil, and that'll happen later in the year.

Michael Feniger: Okay, great. Thank you so much.

Speaker Change: Okay Super Thank you so much.

Kristen Owen: Your next question comes from Kristen Owen with Oppenheimer. Please go ahead.

Speaker Change: Your next question comes from Christopher <unk> with Oppenheimer. Please go ahead.

Kristen Owen: Great, thank you so much for taking the question, and Scott, also, best wishes to you. I wanted to ask about market share commons, this being, obviously, one of the two biggest drivers that you have going forward. You highlighted the outperformance relative to the industry in the first quarter. I was just wondering how much of the market share gains that you're seeing are through this recovery, given last year, you mentioned, you know, you're still coping with some of the strike implications.

Kristen Owen: Great. Thank you so much for taking the question.

Kristen Owen: Scott I'll take that question.

Kristen Owen: I wanted to talk about that the market share comment.

Kristen Owen: This being obviously one of the two biggest drivers that you have going forward you highlighted the outperformance relative to industry in the first quarter, just wondering how much of the market share gains that you're seeing are David's recovery given last year, you mentioned, you're still keeping some of the strike.

Kristen Owen: Implication.

Kristen Owen: What you're regaining there, and how well-positioned you are from a market share perspective, do you anticipate that that will be incremental market share versus just making up what you lost? And then I'll have a follow-up question on the tech stack. Well, we made up.

Kristen Owen: Once youre regaining there and how how well positioned you are from a market share perspective.

Kristen Owen: I anticipate that that will be incremental market share versus just making up a lot.

Speaker Change: And then I have follow up question on that.

Scott Wine: Well, we made up throughout the year last year, and I was really proud of the work the team and Racine did to just accelerate our production throughout the year. And I think we're there, again, about to make to demand. It's a street fight out there.

Kristen Owen: While we made up throughout the year last year I was really proud of the work the team in Racine did to just accelerate our.

Scott Wine: Our production throughout the year and I think we're there again about about to making to demand.

Scott Wine: It's a street fight out there and I would tell you that.

Scott Wine: And I tell you that a lot of what we've done is just driving a customer-centric, customer-focused business, and I think you're seeing that play out with our dealers as we're able to win more of those battles throughout the year. But, I mean, don't expect much. It is a battle, and I'm not suggesting it's easy, but I think what you saw in the first quarter is the team's ability to execute that.

Scott Wine: Lot of what we've done is it just a driving.

Scott Wine: Our customer centric customer focus and I think youre seeing that play out with our dealers as we are able to win more of those those battles throughout the year, but I mean don't.

Scott Wine: Don't expect Big I mean, it is a battle and I'm not suggesting it's easy, but I think what you saw in the first quarter as the team's ability to execute that in what we've guided is the expectation that that will continue.

Kristen Owen: And what we've guided is the expectation that that will continue. But it really is, the product portfolio is quite strong right now, and as you've seen with some of the announcements of late, it's just getting better. So we feel like technology is getting better, the product portfolio is getting better, and the team's execution is getting better. And as you do all of that, you have to expect that market share gets better.

Kristen Owen: But it really is the product portfolio is quite strong right now and as you've seen with some of the announcements of late it's just getting better. So we feel like technology is getting better the product portfolio is getting better the team's execution getting better and as you do all of that you can have to expected market share gets better.

Kristen Owen: Okay.

Scott Wine: So then, I followed up on the text back, sort of talked a little bit about IntelSat being, but as close to plug-and-play as it can get, I mean, is there an incremental modem, or maybe help us understand, like, how you actually go about implementing that, and how IntelSat fits in with the integration of Raven and Hemisphere GNSS, sort of what that unlocks for you on a go-forward Yeah, it is in Canada.

Kristen Owen: And then I.

Kristen Owen: A follow up on that on the Tech stack.

Scott Wine: Talk a little bit about the Intelsat <unk>.

Scott Wine: That's close to plug and play as it can get.

Scott Wine: Is there an incremental slowdown or maybe help us understand like how you actually go about implementing that.

Speaker Change: Thanks, Dan.

Scott Wine: The integration.

Scott Wine: He then hemisphere TNF that.

Speaker Change: And one for you on a go forward basis. Thank you so much.

Scott Wine: Yeah, it is an antenna that goes on that we have to do, and that's the ruggedness we talked about. You know, we've done this for a long time. We've figured out how to integrate different cell phone signals and everything into our operating system. So Mark and his team are really comfortable with their ability to integrate this quite, quite seamlessly, you know, into both AFS Connect and PLM Connect going forward.

Scott Wine: It is an antenna that goes on that we have to do and Thats. The ruggedness, we talked about.

Scott Wine: We've done the meeting through for a long time, we figured out how to integrate different cell phone signals that everything into our operating system. So market. His team are really comfortable.

Scott Wine: About their ability to to integrate this quite quite seamlessly.

Scott Wine: Both <unk> connect in PSM connect going forward.

Tami Zakaria: Your next question comes from Tami Zakaria with J.P. Morgan. Please go ahead.

Scott Wine: Your next question comes from Tami Zakaria with Jpmorgan. Please go ahead.

Tami Zakaria: Hi, good morning. Thank you so much. Scott, congratulations on completing a very successful time leading CNHI. I'll miss you, but best of luck for the next chapter. So, my first question is, sure. So, my first question is, can you comment by geography on what you expect total sales decline in the ag segment to look like this year? You're guiding to down 11 to 15% ag sales. Can you give me some color, like how should we think about North America versus South America versus Europe for the year?

Tami Zakaria: Hi, good morning. Thank you so much Scott congrats on completing a very successful time, leading Danny.

Speaker Change: I will Miss you, but best of luck for the next chapter.

Tami Zakaria: And my final question.

Oddone Incisa Della Rocchetta: Well, South America is where we're seeing the highest declines in percentage terms. Europe, as we commented, we also see industry down in the class, in particular in the combined market. In North America, in percentage terms, the clients are lower. But, of course, the market is larger. So, I would say the clients are across the board, right? They've heard most or they are more intense in South America right now. And, and It may recover at the end of the year, but that's what we have. But I would say, in every region, we have a bank.

Speaker Change: Yes sure. So my first question is.

Tami Zakaria: Got it. Okay.

Tami Zakaria: Can you comment by geography, where you would expect.

Tami Zakaria: Total sales decline in the AG segment look like for this year, you're guiding to down 11% to 15% AD sales.

Speaker Change: Can you give me some color like how should we think about North America versus South America versus Europe for the year.

Tami Zakaria: South America is where we're seeing the highest declines 8% of starz.

Tami Zakaria: Europe.

Tami Zakaria: As we commented we are also see industry down into clients in particular in the combined.

Tami Zakaria: Market.

Tami Zakaria: North America.

Tami Zakaria: As a percentage of service to clients at lower.

Tami Zakaria: The market is larger so.

Tami Zakaria: So I would say.

Tami Zakaria: The clients are.

Tami Zakaria: Across the board.

Tami Zakaria: Kurt.

Tami Zakaria: Most are there more intense in South America.

Tami Zakaria: Right now and.

Tami Zakaria: And in.

Tami Zakaria: <unk> recovered at the end of the year.

Tami Zakaria: Yes.

Tami Zakaria: And Thats, what we have but I would say in every region we have in mind.

Tami Zakaria: Okay.

Tami Zakaria: That's very helpful. And then on the construction business, I think the first quarter margin was quite impressive. Can you elaborate on what really drove that? And also, since we're – I mean, the guide would imply construction segment sales improving sequentially from here on. So, I guess why keep the full year guide unchanged? Would margins not see improvement as well as total sales move up?

Speaker Change: Got it okay, that's very helpful and.

Tami Zakaria: Then on the construction business I think.

Tami Zakaria: The first quarter margin was quite impressive.

Tami Zakaria: Can you elaborate what really drove that and also at <unk>.

Tami Zakaria: <unk>.

Tami Zakaria: I mean, the guide would imply our construction segment sales improving sequentially from here on.

Tami Zakaria: Why why keep the full year guide unchanged.

Tami Zakaria: Would margins not seen improvement as well as total sales move up.

Scott Wine: Yeah, well, again... We had some benefit in the first quarter compared to the year before that didn't have the Burlington cost in there, so that's part of the reason we're not guiding it. You know, we do expect that pricing pressure will be greater in construction than it is in ag. So, we're going to have to fight that battle to the extent we can. But you cannot talk about construction and not look at, you know, the portfolio expansion is helping drive both sales and margin. The relocation of production to low-cost regions has helped drive it.

Speaker Change: Yeah, well again.

Tami Zakaria: We had some benefit in the first quarter of a compare to the year before that didn't have the Burlington cost in there. So that's part of the reason we're not guiding it.

Scott Wine: We do expect that pricing pressure will be greater in construction that it is an AG. So we're going to have to fight that battle to the extent we can.

Scott Wine: But you cannot talk about construction and not look at the portfolio expansion is helping drive both sales and margin the relocation of production to low cost regions has helped driving it and Stefano and his team have done a really good job of improving quality and all of those things contribute to margin.

Scott Wine: And Stefano and his team have done a really good job of improving quality. And all of those things contribute to margin. But we don't expect everything. And again, as we go throughout the year, the comparison gets more difficult. So, we feel like it's prudent right now. And again, you see it in the other, our peers in construction. You know, it's been a robust market, but it's not going to get more robust throughout the year. If anything, it's going to get less, and we're just prepared for that.

Scott Wine: But we don't expect everything and again as we go throughout the year the compare gets more difficult. So we feel like it's prudent right now and again you see it in the the other our peers in construction.

Scott Wine: It's been a robust market, but it's not going to get more robust throughout the year, if anything it's going to get less and we're just prepared to that.

Tami Zakaria: Got it. That's fair. Okay. Thank you.

Speaker Change: Got it that's fair okay. Thank you.

Tami Zakaria: Okay.

Angel Castillo: Your next question comes from Angel Castillo with Morgan Stanley. Please go ahead.

Tami Zakaria: Your next question comes from Angel Castillo with Morgan Stanley. Please go ahead.

Angel Castillo: Hi, thanks for taking my question. I just wanted to maybe stick to the cost kind of conversation a little bit more. You talked about earlier just kind of remaining cost focused even beyond the programs that you've kind of laid out. So, you know, given you've already done so much to improve operations, you mentioned again some of the changes you made in your cost structure, what kind of levers do you foresee are left to continue to pull beyond this to continue to improve that that aren't kind of contemplated already in your cost initiative?

Angel Castillo: Alright, Thanks for taking my question I, just wanted to maybe stick to their cost kind of conversation a little bit more you talked about earlier, just kind of remaining cost focus even beyond the programs that you've kind of laid out so.

Angel Castillo: Given you've already done so much to improve operations you mentioned again some of the changes you made in your cost structure.

Angel Castillo: What kind of levers do you foresee or left to continue to pull beyond this to continue to improve that that aren't kind of contemplated already in your cost.

Scott Wine: Well, first of all, we talked about kind of putting a bow on this overall SG&A restructuring. At some point, you've got to stop having anxiety amongst the team, and I think we're going to close that out in the second quarter. So, you know, the team can move on to different things when I leave. That restructuring will have been effective and will be over with.

Angel Castillo: Initiatives.

Angel Castillo: Yes.

Angel Castillo: Well first of all we talked about kind of putting a bow on this this overall SG&A restructuring at some point you got to stop having anxiety amongst the team and I think we're going to close that out in the second quarter. So the team can move on to different things when I leave at that that restructuring will have been effective and we will be over with but what doesn't stop.

Scott Wine: But what won't stop is the work with CBS and our lean initiatives in the plant. That just gets better and better every week, every month, every quarter, and every year. And that is building momentum throughout the organization. Our strategic sourcing program, it's – I mean, I'm so impressed with the work the team did. But it is a slow buildup as we resource things where we need to. We implement new suppliers and integrate them into the machine.

Scott Wine: <unk> is the work with Cvs on our lean initiatives in the plant that just gets better and better every week every month every quarter and every year and that is building momentum throughout the organization our strategic sourcing program.

Scott Wine: Im so impressed with the work the team has done but it is a slow buildup as we resource things, where we need to we implement new suppliers integrate them into a machine. So that is one that builds over time.

Scott Wine: So that is one that builds over time. And then, you know, what Odone has been leading is almost a zero-based budgeting exercise. It's just a fundamental focus on cost in everything we do. And I think those three levers will put us in a position that we can continue to drive that margin expansion well into the future.

Scott Wine: And then what Adobe has been leading it's almost a zero based budgeting exercise just a fundamental focus on cost and everything we do and I think those three levers will put us in a position that that we can continue to drive that margin expansion well into the future.

Speaker Change: That's very helpful. Thank you and sorry to keep going back to this but I just.

Angel Castillo: That's very helpful. And sorry to keep going back to this, but I'm still a little bit confused as to the construction outlook. So you talked about, you know, I guess kind of the Burlington impact and some of the one-time items on the margin side, but I think you talked about kind of an industry unit performance, at least in North America, for heavy construction equipment that is improved to now kind of minus 5% to flat.

Scott Wine: I'm still a little bit confused as to the construction outlook. So you talked about I guess kind of the Burlington impact on some of the onetime items on the margin side, but I think you talked about kind of an industry unit performance at least in North America.

Angel Castillo: For heavy construction equipment that is improved to now kind of minus 5% to flat, but how do we square that with your comment that pricing in this industry is probably tougher.

Angel Castillo: But how do we square that with your comment that, you know, pricing in this industry is probably tougher, just given that it seems like industry demand seems to be improving? So maybe, you know, any kind of help you can kind of give to kind of bridge that as well as, you know, an incremental call around retail sales and what you're seeing and maybe what's driving some of that heavy improvement for the year.

Angel Castillo: Just given that it seems like the industry demand seems to be improving so maybe any kind of help you can kind of give a tip.

Angel Castillo: Kind of bridge that as well as you know any incremental color on retail sales and what youre seeing and maybe whats driving some of that heavy <unk>.

Angel Castillo: Improvement in <unk>.

Angel Castillo: For the year.

Angel Castillo: Yes.

Oddone Incisa Della Rocchetta: Well, I will say two things. One, the residential outlook in North America is not clear at this point. And with the latest news on interest rates and all the rest, we're sort of prudent there. Secondly, our ability to maintain pricing, as Scott mentioned before, in construction is very much subject to the fluctuations of the overall market. Construction is a very competitive market. There are many players there, and many players coming from overseas as well. Not that much in North America, but in the other regions, we have competition from the Far East, which is quite intense and on pricing. And so our prudence in construction is on the price line.

Speaker Change: Well I will say two things one the.

Oddone Incisa Della Rocchetta: The residential outlook.

Oddone Incisa Della Rocchetta: North America is not clear at this point and.

Oddone Incisa Della Rocchetta: The latest news on interest rates and all the rest.

Oddone Incisa Della Rocchetta: We're sort of prudent there secondly.

Oddone Incisa Della Rocchetta: <unk>.

Oddone Incisa Della Rocchetta: Our ability to maintain pricing as Scott mentioned before in construction.

Oddone Incisa Della Rocchetta: <unk> very much subject to the fluctuations of the overall market.

Oddone Incisa Della Rocchetta: Construction aided bank competitive market.

Oddone Incisa Della Rocchetta: Many players there.

Oddone Incisa Della Rocchetta: Many players coming from from overseas as well not that much not that much in North America, but in the other regions.

Oddone Incisa Della Rocchetta: We have competition from the far east, which is quite intense and on pricing and so our prudence in construction is on the price in line I would say.

Angel Castillo: That's very helpful. Thank you. And Scott, I wish you all the best.

Speaker Change: That's very helpful. Thank you and Scott wish you all the best.

Scott Wine: Thank you.

Angel Castillo: Okay.

Michael Feniger: Your final question comes from Michael Feniger with Bank of America. Please go ahead.

Angel Castillo: Your final question comes from Michael Feniger with Bank of America. Please go ahead.

Michael Feniger: Hey, everyone, thanks for having me. Scott, you were more cautious on the ag cycle, you know, getting, you know, CNH in a better position before the downturn kind of became clear. Just where we stand today, 450 corn, rates potentially staying higher for longer. If there's no significant change within some of these variables, you know, is it tough to grow on that in 2025? I'm just curious what you feel about, at least for your key customer, the puts and takes there that we should be kind of keeping our eye on as you're trying to position the company for 2025. Believe me, you're in a good place. Thank you.

Michael Feniger: Yes, hey, everyone. Thanks for.

Michael Feniger: Friday.

Michael Feniger: Scott.

Michael Feniger: You were more cautious on AG cycle.

Michael Feniger: Getting getting needs in a better position.

Michael Feniger: Just before the downturn.

Michael Feniger: Clear.

Michael Feniger: Just where we stand today or 50, corn rates potentially staying higher for longer.

Michael Feniger: There is no significant change within some of these variables.

Michael Feniger: Is it up to grow on that.

Michael Feniger: 2025, I'm just curious what you feel like at least.

Michael Feniger: Sure.

Michael Feniger: Customers.

Michael Feniger: It's there that we should be kind of keeping our eye on as youre trying to position the company.

Michael Feniger: For 2025, leaving a good place thank you.

Scott Wine: Well, you know, I've tried. Obviously, coming into this business, there was a lot to learn, but if I learned anything, it's not to comment or opine on the agricultural cycle, so you're not going to trap me into saying something about 2025 on this call.

Michael Feniger: Wow.

Scott Wine: I've tried obviously coming into this business there was a lot to learn but if I learned anything it's not to comment or opine on the AG cycle. So youre not going to trap me into saying something about 2025 on this cost.

Scott Wine: Yes.

Michael Feniger: Fair enough, Scott. And then just one of the things we talked about a lot about margins, and there's some commentary on market share. I'm just curious, you know, beyond 2024, just what are the regions and product groups where you see the best line of sight to gain that share? Is it, you know, new product introductions, what you guys are doing on Raven? Do you feel like that ball's already in momentum, already going?

Speaker Change: Fair enough Scott and then just one of the we talked a lot about margins and there's some commentary market share I'm just curious.

Michael Feniger: Beyond 2024, just what are the regions and product groups, where you see the.

Michael Feniger: The best line of sight to gain that share is it new.

Michael Feniger: Or is there some more, you know, levers that need to be pulled to really drive market share higher than maybe it was when you started and came to the company a few years ago? Thank you. You know, the term we like to use is great iron and great tech.

Michael Feniger: Product introduction.

Michael Feniger: You guys are doing on Ray ban did you feel like that bowls already in momentum already going or is there some more.

Michael Feniger: Levers that you can pull to really drive market share higher than maybe it was when you started.

Michael Feniger: And came to the company a few years ago. Thank you.

Scott Wine: You know, the term we like to use is great iron and great tech. I mean, when I started, you know, we got Regularly people commented on man.

Michael Feniger: The term we like to use is great irony, great tack I mean, when I started we got regularly people commented on them and you guys have great Iron We just wish your tech to get there and then part of what helps our market share in the future and you saw I mean field ops. This awkward management system is really really good as we continue to develop.

Scott Wine: You guys have great iron. We just wish your tech could get there and be a part of what helps our market share in the future. And you see, field operations, this off-board management system is really, really good as we continue to develop NGMA or our system for AFS Connect and PLM Connect to give our customers better solutions. You know that all plays into it. But ultimately, it comes down to, I think, a couple of levers. It That's, you know, we're going to have 25-ish, probably a little bit more because there's so much demand for them of those machines operating in the field. And the incremental productivity that that brings, you know, obviously I think is going to drive tremendous demand going forward.

Scott Wine: In GMA, our system for Ams connection BLM connect to give our customers better solutions that all plays into it but ultimately it comes down to I think a couple of levers are.

Scott Wine: Our close working relationship with our dealers and our focus on delivering for our customers.

Scott Wine: The CR 11, the new.

Scott Wine: Cloud 10, it's unbelievable what that does that's we're going to have 25 ish, probably a little bit more because there's so much demand for either of those machines operating in the field and the incremental productivity that that brings.

Scott Wine: Obviously, I think is going to drive tremendous demand going forward, what we've done with the tractor portfolio, especially the European tractors and then soon upgrading the north American tractor platforms is all really good and derek's been investing a lot of money in some products or what I'll call white space that we could or should be and thank all of those bode well.

Scott Wine: What we've done with the tractor portfolio, especially the European tractors, and then soon upgrading the North American tractor platforms, is all really good. And you know, Derek's been investing a lot of money in some products, what I'll call "white space," that we could or should be in, so I think all of those bode well for the ability to gain market share in the future.

Scott Wine: For the ability to gain market share in the future.

Operator: There are no further questions at this time. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.

Speaker Change: There are no further questions at this time this will conclude today's conference call. Thank you all for your participation you may now disconnect.

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