Good day, and welcome to the AGCO Corporation 2025 Fourth Quarter Earnings Call. All participants will be in a listen-only mode. By pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. In consideration of time, please limit yourself to one question and one follow-up. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Greg Peterson, AGCO Corporation Head of Investor Relations. Please go ahead.

Thanks, and good morning. Welcome to those of you joining us for AGCO Corporation's fourth quarter 2025 earnings call. We will refer to a slide presentation this morning as posted on our website at www.agocorp.com. The non-GAAP measures used in the slide presentation are reconciled to GAAP measures in the appendix of the presentation. We will make forward-looking statements this morning, including statements about our strategic plans and initiatives as well as our financial impacts. Demand, product development, and capital expenditure plans and timing of those plans and our expectations concerning the costs and benefits of those plans and timing of those benefits. We'll also cover future revenue, crop production, farm income, production levels, price levels, margins, earnings, operating income, cash flow, engineering expense, tax rates, and other financial metrics. All of these forward-looking statements are subject to risks that could cause actual results to differ materially from those suggested by the statements. These risks are further described in the safe harbor included on Slide two in the accompanying presentation. Actual results could differ materially from those suggested in these statements. Further information concerning these and other risks is included in AGCO Corporation's filings with the SEC, including its Form 10-K and subsequent Form 10-Q filings. AGCO Corporation disclaims any obligation to update any forward-looking statements except as required by law. We will make a replay of this call available on our corporate website later today. On the call with me this morning is Eric Hansotia, our chairman, president, and chief executive officer as well as Damon Audia, our senior vice president and chief financial officer. With that, Eric, please go ahead.

Thanks, Greg, and good morning to everyone joining us today. We closed the year with another strong quarter, delivering an adjusted operating margin of 10.1%, and fourth quarter net sales of $2.9 billion which were up 1% year over year or up nearly 4% excluding the grain and protein divestiture. EEM continued to be a powerful driver delivering 8% growth and extending its multi-quarter record of strong performance. On a full-year basis, we delivered a 7.7% adjusted operating margin. Adjusted earnings per share were $5.28, on sales of $10.1 billion, reflecting a 13.5% decrease versus 2024, or just 7% excluding the divested grain and protein business. These results highlight the disciplined execution of our global teams driven by our three high-margin growth levers, sustained cost discipline, and the positive impact of our multiyear structural transformation. We operated at intentionally low production levels and despite a soft market environment, that weighed on industry demand, we ended the year with significantly lower company, and dealer inventories compared to 2024 a favorable outcome that strengthens our position and demonstrates meaningful progress. Our adjusted operating margins are among the best in AGCO Corporation's history. And the strongest we've ever delivered at this point in the cycle. We have nearly doubled our adjusted operating margins from prior troughs and are close to prior industry peaks. Clear evidence that AGCO Corporation has structurally changed to a higher performing and more profitable company. I want to thank the AGCO Corporation team for their disciplined commitment and impressive execution throughout the year. Their agility allowed us to maintain solid performance, repeatedly exceed our expectations, and continue advancing our farmer-first priorities. Building on the transformational actions taken in 2024, including the formation of the PTX business, the divestiture of the majority of grain and protein business, 2025 was a…

Thank you, Eric. Good morning, everyone. Slide eight provides an overview of regional net sales performance for the fourth quarter and full year. Net sales for the fourth quarter were 3% lower year over year excluding the favorable impact of currency translation. For comparability, we also excluded the $75 million of sales associated with the divested grain and protein business in 2024. Breaking fourth quarter net sales down by region. Europe Middle East net sales were 1% lower than the same period in 2024, excluding currency impacts. Lower sales across many Western European markets were partially offset by growth in Germany and The UK, Lower sales in tractors were partially offset by better performance in hay tools. South America net sales were 9% lower, excluding currency translation. Results reflected moderate industry demand, with reduced sales of tractors and implements offset in part by growth in combines. North American net sales were down 9% excluding currency translation. Results reflected moderated industry demand and our deliberate production discipline to support dealer inventory normalization Lower sales of sprayers and midrange tractors accounted for most of the year-over-year change. Asia Pacific Africa net sales were up 3% excluding currency translation impacts. Higher sales in Australia were partially offset by lower sales across several Asian markets. Finally, consolidated replacement part sales were $440 million in the fourth quarter, up 5% year over year on a reported basis and down 1% excluding favorable currency translation. For the full year, parts revenue was $1.9 billion reflecting 2% growth on a reported basis and flat growth excluding favorable currency effects underscoring the strong value and consistent progress of this important growth driver. Turning to Slide nine. The fourth quarter adjusted operating margin was 10.1%, up 20 basis points from the prior year. The improvement reflects excellent and resilient…

We will now begin the question and answer session. To ask a question, you may press star. Then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. And the first question today will come from Stephen Volkmann with Jefferies. Please go ahead.

Great. To think about what you're planning relative to inventories in The U. S. I guess you're still about a month ahead of where you'd like to be. How long does that process take from here? Yeah. Excuse me. Good morning, Steve. So I think as we as you hit on, we we did finish the year a little bit above our six-month target. So we will have some underproduction here likely in the first half of the year in North America trying to right-size the dealer inventories. We'll see how the outlook for the balance of the year goes, but at least right now, I would expect sort of underproduction probably in the around 10% range, give or take. As we continue to rightsize here. Understood. Okay. I think overall that I said in my comments, we did a really good job. We took units down by 9% or so. But just given that twelve-month forward outlook we give you, the months didn't really move materially. They only dropped down one month to despite the 9% reduction in units. Understood. Okay. And then, Damon, you mentioned your prepared comments some discounting, and yet you guys are looking for, I think, 2% or 3% price for '26 Just square those two for me. What what are you seeing in terms of the discounting, and and how do you still get that price?

Yeah. So, Steve, I think overall, we've seen some competitive pressures especially in certain markets like South America. It was definitely a more aggressive market there. When I look at the the team though, despite that, our fourth quarter came in exceptionally strong. If you may recall, I start at the end of the third quarter call, we guided, I think, price in the range of 0 to 1%. We finished the year just north of 1%. So the team gained share took the took dealer inventories down, and had pricing better than our plan coupled with the volume. So the team's done an exceptional job in managing and selling the value of our products relative to the competition. And so when I look at the pricing that we have carryover this year going into 2026, we have north of 1% of that two to 3% sort of already embedded into our into our base here. So, you know, overall, as we think about the new product introductions coming, what we see in Europe, we we feel comfortable in that two to 3% range to at least start the year.

The next question will come from Kristen Owen with Oppenheimer. Please go ahead.

I wanted to start here with your outlook for Europe I mean that has continued to outperform for you guys. You just give us a sense of what's happening on the ground there? I mean, we've seen a little bit of compression in some of the dairy margins recently. So maybe just give us a sense of farmer sentiment there. What you're seeing in terms of demand, and maybe ask you to double click on on the the pricing acceptance that you're seeing there.

Sure. Yeah. I'll take that one, Kristen. You know, if we take a start like, at the industry to start off with, and one of the things that we watch is average age of the fleet. And it's been climbing steeply in EAM as has it as it's been in North America. But let's stay on EM for now. It's almost back to its record peak age, and that's creating just a lot of pent-up demand for new products. And and as so that's number one. That's kinda where the fleet is. Farmer sentiment is actually relatively positive. We had a far a field tech days this fall. Spent time at Agrotechnica. And the spent time with thousands of farmers at AgriTechnica. The the feedback that we were getting was more positive than we expected. So although the SEMA barometer is kinda just hovering in the same spot, which is one of the prediction models, we're bullish we think the market's gonna be up in in this year. And I think, Kristen, if I go to your other questions here,

overall, the demand profiles remain relatively strong. Their dealer inventories, as I made on the comments or Eric made, were right around four months. So we're right where we want to be from a dealer inventory standpoint. Pricing in Europe finished the year quite strong. We had over 3% price in Europe in the fourth quarter on top of that strong volume growth with expectations as well. And so we have relatively good carryover going into 2026 in Europe pricing as well. And then you layer on the new product introductions that we showed at AgriTechnica We've got some great new products out there, the FENT 800, is gonna be a hugely successful product coupled with some of the other ones. So again, the European team has continued despite the backdrop here. The European team is continuing to hit on all cylinders doing very well in gaining share holding their margins at exceptionally high levels for us, and gives us a lot of confidence as we as we go into '26 in that market.

That's great. Thank you for that color. And then my my follow-up question just is here on the cost savings actions. I think you called out $65 million bottom line benefit in savings in 2025. Another $40 million to $60 million in 'twenty six. Can you just remind us where the big buckets of those cost savings are coming from and maybe tie that back to what you outlined for the 2029 targets, where you're seeing those cost savings come through? Thank you.

Yeah, sure. Good question, Kristen. And geographically, I would say they're very similar to our revenue split. So we're seeing them across all of our four regions. The the vast majority of this is coming through or in the g and a bucket. So a lot of as AGCO Corporation's a company that had been built through acquisitions, we spent a lot of time in the last couple years really trying to standardize and simplify our processes Once we've done that, how do we move them into lower cost opportunities, either offshoring them to other AGCO Corporation locations or potentially outsourcing them to third-party providers who can do that well for us And so we've seen a lot of savings coming from that shift And at the same time, we've really been trying to leverage artificial intelligence more and more within the company where we can automate those processes streamline that, making it easier for our dealers, easier for our customers, easier for our associates. So we're seeing some good momentum on the AI side of the house as well. By just streamlining the work and moving it into a more advanced product. You're right. We did about $65 million in savings this year. We have another $40 to $60 million in savings coming in 2026. As I've mentioned on some prior calls, given the industry downturn, we've been looking to accelerate some of those cost actions that we saw in '26. Into 2025. Excuse me. And that was part of the benefit that we saw in the fourth quarter. So as I think about where we are at the end of 2025, the run rate savings is about a $190 million. So we're already in line with what we told the investors in December 2024. As to how we would run rate out of 2026. So we pulled some things in. Now we got a lot of that in the fourth quarter, so you're still gonna see the absolute dollars come to the bottom line here in 2026. From a run rate savings, we're already at about $1.90. So we'll probably get a little bit north of that 200 by the '26. So very well positioned for that particular bucket. On delivering to the 14 to 15% adjusted operating margin at mid-cycle that we talked about at our last Investor Day.

Yeah. Maybe I'll just add a little bit on that one. This is Project Reimagine that Damon was describing, and you know, 700 projects that are all managed very tightly going through the stage gates, that's taking out the $200 million in overhead. What's still in front of us is more work left to do on AI. As Damon's talked about. We've got about a 160 agentic AI projects in flight right now, 50 of them completely done. But a lot of them in flight. And then shift to low-cost country. That's still in front of us as well. We're we're aggressively going after that in '26 and '27. Much of our supply base is in high-cost countries. We're we're aggressively moving that. So overhead kinda towards the tail end and very mature, we're going after product cost really aggressively.

Again, if you have a question, please press star. Then 1. Next question will come from Mig Dobre with Baird. Please go ahead.

I I I found your comments on on 2025 being a the biggest year of share gain to be really interesting. And I'm wondering if you can maybe give us a little more context there. As I understood it, it's North America. What's sort of specific to some of the things that you've been doing relative to maybe competitors pulling back from the market if if that at all was a factor. And PTX, you know, can we talk a little bit about how you see that progressing as well? It seems like the market, to some extent, are starting to stabilize here. Do you think PTX can be a source of outgrowth, especially on the retrofitting part the business as we think about '26 and even '27?

Yeah. Thanks, Vic. Few comments. One, overall, AGCO Corporation turned in the highest market share in our history in 2025. And that's global. So all over, when you take a look at where farmers are seeing value, they voted with their their order book to come to AGCO Corporation. What's underneath that? Net promoter score which is our customer feedback to AGCO Corporation, hit its all-time high in '25. So the the the this the perception of the overall value of the product, the dealer performance, the services, the data, management, data platform, all of that is coming together. And and we feel like it's it's, fueled for growth. We had a record patent filing in 2025. So we think we've got a great set of innovations continuing to come through. So that's the macro. Then you drill into North America, it was the largest one-year gain in market share for large ag in in North America. Largely, our portfolio has been what it is. It's it's now working with the dealers. To get the most out of our our partnership with our dealers to serve customers. We've got several focus areas. It's not so much about conquering white space. It's largely about penetrating the space the dealers are already in. And so we've been looking at performance by county and getting a very granular work plan together with our our major dealers and saying, how do we go change how we're how we're, supporting the farmers About 85% of our big dealers now have their have adopted Farmer Core, at least the early phases of it. They're showing where their service trucks are and, doing much more of the work on farm. So you know, that farmer core combined with detailed work with our dealers matched up with a…

Appreciate the color. That was really helpful. And then, I guess my follow-up going going back to EMEA, can you talk a little bit about how how we should think about margins? I mean, margin here in '25 surprised at least relative to our model pretty consistently. Should we be thinking additional margin expansion in '26 especially as maybe volumes here get a little bit better? Thank you. You.

Yeah. Nick Nick, overall, I think you're gonna see the European margins stay relatively consistent here in 'twenty six versus 2025 on an annual basis. May mix a little bit in quarter depending on production schedules, timing of pricing actions, but but generally speaking, would expect to see Europe right around that percent operating margin where they finished last year.

The next question will come from Jamie Cook with Truist. Please go ahead.

Hi, good morning. Nice quarter. I guess Damon, just two questions. You just answered the question on e margins. Just wondering how we're thinking about margins or sorry, losses in North America in 2026 relative to 2025, given the top line outlook and how where we end up in South America with concerns about some of the discounting I guess then on the positive, I think operating cash flow number, it was very strong in the fourth quarter for the year. So was there anything unusual in that? Is there any reason to believe free cash flow conversion has opportunities to improve from here? Thank you.

Yeah. Good morning, Jamie. And, I think on on North America, we're as I in one of the earlier questions, we will be underproducing relative to retail in in the first half of the year. So you're gonna see the the North American margins are are gonna be negative likely for the first two to three quarters. A little bit too early to to see how they play out in the fourth quarter right now given the the industry outlook, but I think for us, we'll see Q1 and Q2 will likely be worse than Q1 and Q2 last year given the underproduction and the decline in the large ag market. And then hopefully, we'll start to see the margins improve year over year, but still be down in Q3, which is likely a negative for the full year. So but we'll see how that fourth quarter starts to pan out Fourth quarter free cash flow, again, I so I've said in my comments, just great performance, record free cash flow for the year. A lot of that was to do with the incremental volume that we saw flow through in North America and the significant volume increase we saw in South I'm sorry, in Europe. As you know, Jamie, we sell those receivables to AGCO Corporation Finance so that receivable translates into cash for us very quickly. So great result for us there. As I think about twenty-six, we still feel comfortable in that conversion ratio of 75 to a 100% of of adjusted net income. So we'll stick with that for, for 2026. If I think about working capital, here for '26, again, I expect us to continue to refine our inventory, but we'll see how the build comes up The team has done a really nice job with forecasting, and getting the scheduling in our factories better, helping take out some of that working capital in the system. So I'm hopeful that there's a little bit of a modest improvement in working capital 26 as well.

Thank you.

The next question will come from Jerry Revich with Wells Fargo. Please go ahead.

Yes. Hi. Good morning, everybody. I wonder if we could just talk about your Precision Planting product lines specifically. What kind of demand are you anticipating for this planting season? How does 26 versus 25 look for that product on a retrofit and first fit? Basis, if you mind.

Yeah. We're we're expecting, you know, the market in general to be down in North America as we you know, the overall market kinda moves in the same direction. But we think that there's gonna be enough attention on the retrofit business that it won't move down as much. And there's a lot of interest in AeroTube. That's the new seat placement launch that we had where you it places the seed tip down and at the right orientation. So when it comes out of the ground, it it perfect emergence and the leaves have more capture of sunlight. That's all. That's unique to precision planting. There's nothing else like it in the in the world, and and we think that that's gonna generate a lot of attention. But so is the dual boom spray system. So we we're we're pretty bullish Those two, hardware products combined with our PharmEngage platform we think that there's a lot of interest in the precision planning market. Especially those two are predominantly biggest hits for North America.

Yeah. And, Jerry, just to put some numbers, I know we've had a couple questions on PTX. So 2025, the PTX team, did an exceptional job. They they hit their numbers. They finished the year right around $860 million. So credit to the team, they were on forecasts or above every quarter, so a little bit better than where we finished 2024. And for 2026, again, Eric alluded to, we do see the retrofit market doing better than the equipment market. And I I would say right now, we see the, the '26 PTX revenue flat to to modestly up versus the $8.60 that they finished, this year here. So good performance by the team and a lot of new products as Eric touched on giving us some good momentum especially on that retrofit channel.

Well, that's that's a good year given the backdrop. And in terms of the overall cost structure, obviously, you folks have done a lot of work. Can you talk about any incremental opportunities that you're considering? You know, obviously, the the tariff headwinds are pretty painful. Do we see more potential opportunities if we think about the cost structure exiting '26 versus starting '26?

I think, Jerry, for us, from the SG and A standpoint, what we've sort of communicated to the here for the 60 for the 40 to 60,000,000 of incremental costs, I think we got fairly really good visibility on that. Eric alluded to more on the cost of goods sold side. And I wouldn't say that's necessarily connected to the tariff environment. But as we think about how do we make ourselves more efficient without compromising to the farmers, we do think there are some opportunities to evaluate our sourcing. Now that may come to certain that may help us from a tariff standpoint, but as we think about that, it's identifying suppliers who can deliver the quality that our farmers demand but doing it in a way that's lower cost for us and really leveraging the economies of scale that we have with our Massey Ferguson and our Vulture brands. Globally globally. And so we see some opportunities for that helping improve the cost of goods sold. And helping position the margins for Massey and Vulture more, especially as these volumes start to pick up hopefully in '27 and beyond.

The next question will come from Tami Zakaria with JPMorgan. Please go ahead.

Hey. Hey. Good morning. Thank you so much. I wanted to get some color on how you're thinking about operating margins by the different regions. If if you could provide some color there, North America, Brazil, Europe, how to think about you know, as the year progresses, like, first half for back half. So any color you can give on regional margins as it relates to first half and back half would be helpful.

Yeah. Sure. No worries, Tammy. I think for as Mig asked in the question, I think Europe should stay right around that 15% margin for the full year and similar to what we've seen in the individual quarters. As the other question came up on North America, think you're gonna see North America, let's say, directionally down in a loss position position probably in that sort of high single, low double-digit range for '26 based on the industry forecast. It's gonna be worse year over year in the first half given the industry and the underproduction and then probably a little bit better than what we did last year in the back half of the year. And then South America, that's kind of, as you know, a little bit uncertain right now. Overall, for the full year, I think it'll be our fourth forecast shows it being modestly better versus versus 2025 on a full-year basis. Gonna start worse off because we gotta do some underproduction here. We've gotta get the dealer inventories, and we've got some weaker mix right now and then sort of picking up to be a little bit stronger in the back half of the year given what we saw here in the back half of 2025. So I'd say margins for the full year relatively flat, maybe a little bit above but more of a shift between first and second half, and then Asia being relatively flat relative to last year from an overall margin perspective.

Understood. That's very helpful. And quickly, I think there's been some announcements on Indian tariffs going down. Any any thoughts on whether that could be a tailwind for you And overall, like, could you remind how much of tires and pack is currently baked in so we can kind of keep track if if other tariff rates come down. We can sort of calculate this off with that.

Yeah. Absolutely. So if we think about the incremental tariff cost that we're gonna to see in our P and L in 2026 versus 'twenty five, and it's just the tariff costs themselves, that's about a $65 million headwind year over year. And if I think about what we incurred in our P and L last year, it was around $40 million So the absolute total tariff cost in '26 will be just around $105,110,000,000. So we've set around 1% of our sales. So that's sort of directionally where we're at. But about 65 of that will be incremental to 2020, to 2025. And that's what's compressing our year over year margins because when you look at our pricing guide of two to 3%, as I said on the call, at 3% when you look at inflation plus tariffs, we're only going to cover that on a dollar basis at the three. So that's actually margin dilutive and if you look at the midpoint of our pricing guide we would actually be negative from an earning standpoint and it would be margin dilutive. So that's sort of what's in the numbers right now. Based on what we know. If what was communicated related to India does come to fruition. Probably not gonna have a big effect on us Tammy. It's a couple it would be a couple million dollars of a positive but not a not a big mover to that $65 million that I just quoted.

Please go ahead. And the last question today will come from Angel Castillo with Morgan Stanley.

Hi. This is Esther O'Shaneya. On for Angel. Congrats on a good quarter. My question is, maybe going back to tariffs, could you maybe give us like kind of the cadence, each quarter going to 2026? Do you see more happening in the first half or second half? Or is it kind of equally, divvied up?

Yeah. Good morning, Esther. So, overall, given the timing of the tariffs last year, again, as I think about that $65 million incremental, it's going to be heavily weighted here in the first half of the year because if you remember the timing of when tariffs rolled in last year, coupled with the level of inventories that we had and our dealers had we really saw that start to pick up in the third quarter and more into the fourth quarter. So you're sort of looking at probably the majority of that 65 sitting in the first half. And then the balance of it sort of rolling in in the third quarter and then being somewhat neutral in the fourth quarter.

Okay. And just a follow-up, are there any limiting factors in your ability to under produce at a greater degree just to kinda fix some of the excess inventory you mentioned in the call today?

So there's no

there's no inhibitors for us in reducing our production. But I think you have to understand the complexity of a full portfolio And as we talk about the industry, the planter industry, industry is different than the combine industry, which is different than a low horsepower, medium horsepower, high horsepower. So depending on which industry is fluctuating and what that dealer has on his or her yard will influence our production. So we don't have any take or pay contracts with suppliers. We don't have any issues that prohibit us from slowing our production, but it's more as the different types of products have different dynamics that influence them that's what may adjust the inventory or the the, the months on hand that we then have try to adjust.

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

Great. So I just want to thank everybody for joining us today and, some of the really good questions. 2025 reflects a meaningful progress year that we've made in transferring AGCO Corporation. Into a more resilient, better-positioned company We're executing with discipline and focus on what we can control. In a pretty volatile market. And we're always staying focused on our farmer-first strategy, to to that creates purpose for our employees. Our global team delivered a 7.7% adjusted operating margin in 2025. That's a high watermark and notable achievement at this stage of the ag cycle, best we've ever performed at the trough. I'm really appreciative of the commitment and results of our team and our dealer organization. We remain focused on delivering for all stakeholders. For our farmers, our innovation flywheel continues to spin fast. With solutions designed to solve real on-farm problems. We recorded a record net promoter score, and have a record set of patent filings. So farmers like what we've got, and we've got more coming. For shareholders, we exceeded, executed a $250 million accelerated share repurchase in quarter four as part of our $1 billion program, and we're in a new chapter in that regard, with our ability to to do share buybacks. And share buybacks are probably coming more in the future. Because we had a record free cash flow of 07/2025, all-time high mark for for AGCO Corporation. Our 2026 outlook reflects our ability to keep earnings earning the trust of farmers and OEMs. Transforming our dealer network gaining market share, driving our high-margin growth levers, and executing structural changes, and cost initiatives that will position us well for when demand recovers. 2025 was the bottom of the trough and the fleets in our major markets are at the peak of their age. So we expect that the the future looks brighter. Thanks for everybody's participation today.

Thank you for joining the AGCO Corporation earnings call. The call has concluded. Have a nice day.