Good day, and welcome to the AGCO Second Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Greg Peterson, AGCO Head of Investor Relations. Please go ahead.

Thanks and good morning. Welcome to those of you joining us for AGCO's second quarter 2023 earnings call. We will refer to a slide presentation this morning that's posted to our website at www.agcocorp.com. The non-GAAP metrics used in the presentation are reconciled to GAAP measures in the appendix of the presentation. We'll also make forward-looking statements this morning with respect to strategic plans, demand, product development and capital expenditure plans, production levels, engineering expense, exchange rate impacts, pricing, dividends, interest rates, future commodity prices, crop production, farm income, supply chain disruption, inflation, component delivery, sales, margins, earnings, inventories, cash flow tax rates and other financial metrics. We wish to caution you that these statements are predictions and that actual events may differ materially. We refer you to the periodic reports that we file from time to time with the Securities and Exchange Commission including the company's Form 10-K for the year ended December 31, 2022. These documents discuss important factors that could cause the actual results to differ materially from those contained in our forward-looking statements. These factors include, but are not limited to, adverse developments in the agricultural industry, including those resulting from COVID-19, supply chain disruption, weather, exchange rate volatility, commodity prices and changes in product demand. We disclaim any obligation to update forward-looking statements, except as required by law. A replay of this call will be available on our corporate website later today. On the call with me this morning is Eric Hansotia, our Chairman, President and Chief Executive Officer; and Damon Audia, our Senior Vice President and Chief Financial Officer. With that, Eric, please go ahead.

Thanks, Greg, and good morning. We appreciate your interest in AGCO and your participation on the call today. This morning, we reported another record quarter in terms of sales, operating margin and earnings. The continued execution on our Farmer First strategy yielded second quarter sales growth of almost 30%, with adjusted operating margins expanding by 420 basis points to 13%. This makes four consecutive quarters with operating margins above 10.5%, which is evidence of how we have structurally transformed our business and further demonstrates the progress we are making towards our mid-cycle 12% operating margin target. We are seeing excellent demand for our technology-rich Fendt tractors, our precision ag solutions and replacement parts. North and South American Fendt sales are ahead of our growth targets as we expand our distribution networks into the regions to give more farmers access to the industry's best equipment. Compared to June year-to-date 2022, AGCO's precision ag sales were up 23% and IDEAL combine sales increased 76%. We've also made significant progress with our efforts to optimize our South American operations and improve margins there. This quarter marks the fourth consecutive quarter with South American operating margins over 19%, which is a testament to the team's execution and industry-leading products. Our customers' growing interest in AGCO's precision ag solutions is supporting extended order boards. We expect solid market conditions to continue. Our improved financial outlook for 2023 reflects this optimism. As we look at the second half of the year, we have increased our full year sales, operating margin, earnings and free cash flow forecast. Slide 4 details industry unit retail sales by region for quarter two 2023. Supportive farm economics resulted in robust demand for large agricultural equipment as farmers continue to replace aging machines. While dealer inventory of smaller equipment has increased versus…

Thank you, Eric, and good morning, everyone. I will start on Slide 8 with an overview of regional net sales performance for the second quarter. Net sales were up approximately 31% in the quarter compared to the second quarter of 2022, when excluding the negative effect of currency translation. Pricing in the quarter, which was over 14% contributed to higher sales. The strong year-over-year performance was partially influenced by the lower sales in the second quarter of 2022 that were negatively affected by the cyber-attack we experienced, particularly in our European and North American operations. By region, the Europe/Middle East segment reported an increase in second quarter net sales of approximately 36%, excluding the negative effect of currency translation compared to the prior year. The improvement was driven by increased sales of mid and high horsepower tractors and combines along with favorable pricing actions. In South America, net sales in the second quarter grew approximately 16% year-over-year, excluding the negative effects currency translation driven by the continued strong sales growth in Brazil, partially offset by lower sales in Argentina. Higher sales of tractors and momentum planters as well as favorable pricing effects drove most of the increase. Net sales in North America increased approximately 35% in the quarter, excluding the unfavorable impact of currency translation compared to the second quarter of 2022. The growth resulted primarily from increased sales of high horsepower tractors, combines and application equipment, along with the positive effects of pricing that more than offset inflationary cost pressures. On a constant currency basis, net sales in our Asia-Pacific/Africa segment increased about 14%. Delayed shipments from our European factories in late 2022 caught back up in the second quarter, resulting in the higher sales in Australia and China. Finally, consolidated replacement parts sales were approximately $492 million for…

Thanks, Damon. To maximize participation in the Q&A session today, we’ll ask you to limit yourselves to one question and one follow-up. Gary, with that we’re ready to go ahead and start Q&A.

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Jamie Cook with Credit Suisse. Please go ahead.

Hi. Good morning and congratulations on a nice quarter. I think my first question, obviously a nice quarter, a nice raise to guidance, but I’m just trying, the guidance in particular, the operating margin assumption in the back half seems conservative given what we’ve put up the margin performance in the first half of the year. I think margins in the back half are implied down about 150 basis points from the first half. So just trying to understand the drivers of why margins would deteriorate second half versus the first half and where is the conservatism there? And then my second question just understanding you have a strong order book or some visibility into 2024. What’s your approach for the order book for 2024? And of the orders that are there, what’s going to retail versus dealer? Thank you.

Sure. So Jamie, I’ll start with the margins first half, second half. Then maybe I’ll let Eric talk about the order board. I think if we think about the first half, again, we had a very strong performance here as you alluded to. For the second half, I think about that sequential change. There’s really a couple drivers influencing the second half. One is the engineering spend. So as we’ve been talking about this year, we are increasing our engineering spend over $100 million year-over-year. If you look at my first half engineering versus second half, you’re going to see that increasing. So that will be a little bit of a detractor on the second half. Second is material cost. Again, even though we’re seeing the underlying fundamentals of things like steel come down, we are still seeing sequential increase in material cost. So that would be the second biggest driver. Third would be, I would say a little bit of pricing first half versus second half. You’ve heard us talk about the Lower Horsepower segment in South America as we think about some of the incentives to spur the retail delivery there. We do see potentially some further some incentives there, again, that we didn’t have to use in the first half in South America. So I would say, those are the big three drivers. First half versus second half, maybe a little bit of mix as well. As you know, planters are a big first half product for us, which is a rich mix and then that’s South American low horsepower tractors, which were lower than expectations in the first half as they ramp back up in the second half. That’ll be sort of a negative mix to the Brazilian or the South American margins first half versus second half.

Jamie, your question on order board, we expect to continue to manage – the place where we’re managing the order board most tightly is in South America, and we continue to plan to roll that out one quarter at a time to be able to handle both pricing and market volatility. That’s been really effective for us and we think we’ll keep that into next year. We’ve got strong order books in terms of quantity, but also those books are loaded with retail orders. It’s already – today, we’re remaining a high percent retail order, well over 40% and we think that’ll continue to strengthen into next year, probably over 50% retail order percentage of the order bank.

Okay. Thank you. I appreciate the color.

The next question is from Tim Thein with Citigroup. Please go ahead.

Hi. Good morning. Maybe just first question on Europe and maybe Eric, you can speak to some of the –which I don’t always have a perfect track record in terms of their predictability, but some of the sentiment indicators there have softened. And one of the points raised is some concern around some pickup in inventory, so which is counter to the message that you’ve conveyed this morning from what you guys were seeing. So maybe just speak to the feedback and what you’re hearing from the dealer base? I know it’s not a uniform and there’s a lot of countries which can move in different trajectory. But maybe just speak to Europe as a whole and how you’re thinking about that into 2024?

Okay. Europe, there’s a couple dynamics going on. They have a little more inflation than some of the other markets, so that’s a negative. But the Ukrainian, as bad for the world as the Ukrainian grain stoppage was in some ways it was good for farmers because we most expect that that’s going to drive prices up somewhere in the 10% to 15% range for most commodities. Because you have substitution, it’s not just wheat. You have substitution across all grains. So that helps profitability for the farmers, especially in Europe. So although the sentiment indicator came down a little bit, it’s still pretty strong relatively, it’s trending towards – a little more towards neutral from red hot. But that doesn’t concern us at this moment. We’re still seeing strong order rates coming in and we’re growing share in most of our brands across Europe. So the business – the industry is pretty healthy and we think with this grain restriction, it’ll remain healthy. And we continue to grow share. Global wheat stocks are down for the fourth straight year, which is the primary crop in Europe. So that just gives you an overall sense for as that commodity’s tight, further restrictions really pushes price up.

Yes. Okay. And then just kind of mechanically from a quarterly earnings perspective, historically and seasonality has kind of gotten mixed up a little bit here recently. But historically, fourth quarter is typically the highest. Do you still expect that this year the way you have the plan laid out?

Yes. I think, Tim, as we think about the seasonality of the business, again, we’ll see how the second half unfolds. I think as Jamie asked the question, revenue wise Q2 and Q4 tend to be our strongest quarters. If we think about the margin wise, Q2 has been an exceptionally strong quarter here at 13.1% for all the reasons we articulated on the call. If I look forward here to the back half and the fourth quarter, we do have a little bit of a – we had a very strong fourth quarter last year given the sort of the supply chain challenges and the very rich mix that we saw with that front product portfolio last year. So as I think about the second half between engineering spend increasing a little bit of the mix, I’m not sure we’ll necessarily have it as our strongest margin quarter. But I think it’ll still be one of our top two quarters for sure.

But by design, last year, we were running the catch up all through the year and we had a big surge at the end of the year last year. By design, we aim to be much more building to demand through the course of this year and we’re doing that so far. So we don’t want to have this kind of spike at the end of the year that is a catch up mode. We want to be building to customer demand, and that’s – with supply chain easing, we’re doing a way better job of that this year than other years.

Thanks for the time.

The next question is from Larry De Maria with William Blair. Please go ahead.

Thanks. I had two interrelated questions. First, on Fendt obviously highlighted ongoing strength there. Can you sort of discern a little bit between channel fill and retail sales there? Because I know you’re obviously building out the distribution, which you’ve talked about. But how much of the growth is going to fill the channel versus sell-through? And second part on IDEAL, I think up 75%. Can you put a little bit of that in perspective just to kind of help us understand the materiality of that? Because I think it’s from a small base in terms of that’s needle moving or if that’s just from a small base that’s nice for now and more important in a couple years? Thank you.

Yes.

Go ahead.

I think, Larry, if you think about Fendt for us, again, as we alluded to, very strong performance here. If I think about it in the North American market, it was up several hundred units year-over-year of sales. So I think we’re up about over 150% in North America. I would tell you a high percentage of that is actually retail. So our retail was up right around 100% as well. So you’re seeing a little bit of that channel expansion that you’re talking about as we fill and bring on new dealers, but we’re seeing a high retail concentration as well there. So good getting it out to the farms. And word of mouth, building the momentum as we talked to the farmers. As you saw on that Tech Field Day, that farmer, he heard about Fendt and word of mouth as his neighbor had one. So again, part of that Fendt experience really helping grow the brand recognition out there and getting it into the ultimate farmers. IDEAL to your point, I would tell you it’s lower numbers. So we are seeing good growth, good percentage, but it is still smaller numbers that we’re building off of here on the IDEAL combine.

And just to put a few numbers behind that. If you go back to 2018 when we really started globalizing the Fendt business, we had North America coverage something in the 40% range, now it’s up to 75%. In South America, we had essentially zero. We just – we weren’t in that market with Fendt, and now we’re at 70%. So we’ve gotten to the point where we’ve got much of the important market covered. We still want to grow that to about 90% in both cases. But we’ve got a lot of good dealers in the areas where it’s important. And so channel fill isn’t – I mean, we still have lower inventory than we want at those dealers, but a lot of it’s going right through to retail as Damon said.

Okay. Very good color. Thank you very much.

The next question is from Tammy Zakaria with JPMorgan. Please go ahead.

Hi. Good morning. Thank you so much for taking my questions. So I was hoping to get more color on the flat production hour growth outlook for the back half. What is expected to – what is it expected to look like for small versus large ag? If you could give some details.

Yes. I think Tammy, just a couple comments on the production. Again, we’re reflecting or forecasting relatively flat production year-over-year. And again, as a reminder, we had the cyber event in the second quarter, which took our production out. We really increased production in the second half of last year to recover. So we didn’t do the normal summer shutdowns, preventative maintenance as we were trying to recover on that loss production. This year, again, you’re seeing a relatively flat production, based off of the higher capacity, the higher demand. But we are still implementing some of these preventative maintenance periods, the European holiday. If I look at it, large versus small ag, I would tell you large ag is running strong. Probably more capacity, CBT related capacity coming on large ag where you are seeing some of the production coming down is going to be on the smaller ag part of the business there.

Got it. So large ag production hour should be positive in the back half.

Yes. And that is somewhat flat.

Got it. Thank you so much. That’s helpful. And if I could ask one more, what’s the pricing expectation again for the back half for large versus small ag? It seems like for the back half, low to mid-single pricing is what’s embedded. But is it going to be similar for large versus small?

Yes, I don’t – we don’t really break it down that way, Tammy. I think your assessment for the second half in the low-single-digits is right, but it’s going to be product by product and we really don’t break it out large ag versus small ag.

Okay. That’s fair. Thank you so much.

The next question is from Seth Weber with Wells Fargo Securities. Please go ahead.

Hey guys, good morning. I wanted to just ask about your nine months of coverage comment for the North American backlog. Can you just frame that for us? Is that like on a relative basis versus historical? Is that about where it typically sits? Is it better than average, worse than average? Just any kind of framework for that nine month number or even versus last year? Thanks.

Well, it’s interesting to decide what typical is anymore. If we say it’s during COVID, it would be less, but prior to COVID it’s probably twice what we would normally have. So that’s what we’re seeing is we still actually would like to get that backlog down and not have to have farmers wait as long as they’re waiting right now for their demand. There’s a lot of thirst for the new technology we’re bringing out on the products and we’d like to be able to get that to them faster. So it’s still probably twice as high as we’d like it to be and have historically been.

Okay. Thanks. And then just on the parts revenue up 9%, I assume you’re pushing pricing on parts as well. So I’m just trying to understand was – is parts volume up? Was parts volume up in the quarter or is it down?

Yes. Seth, the pricing isn’t too much different whether you’re talking about whole goods or parts. We’re saying 8% for the full year, it was double digits in the first half. Probably not as much on the parts side, so we do have modest volume growth year-over-year, but not to the extent that we’re having the whole goods growth now. And that’s normal. I mean, parts typically are more stable over the cycle. So in times when demand for equipment is stronger, you don’t see that same pull through on parts or they’re typically steadier. Similarly, when demand softens for big equipment or equipment in general, parts tend to stay more stable. So it’s just kind of the nature of the beast.

Helpful. Okay. Thank you guys, I appreciate it.

Good.

The next question is from Stephen Volkmann with Jefferies. Please go ahead.

Great. Good morning, everybody. Most of my question has been answered, so maybe I’ll try a big broad brush, Eric. I guess, the elephant in the room is just the cycle question, right? And I’m curious if you have any updated thoughts on just where you think we are on the cycle here? And you’ve given some sort of qualitative thoughts, I guess, going forward about market share gains and precision and biofuels. Can 2024 be an up year for the industry? Or is it too early to tell?

It's too early to tell, but it still can be a very good year. We see a lot of indicators that are tailwind indicators. We've had a couple of good years in a row, but the average – just a couple more to give you. If you look in the U.S. and the high horsepower area that's still growing. Small ag is cooling off. We've said that, but high horsepower is still growing. The average age of the high horsepower tractor in the U.S. is about 7.5 years based on our data. The historical norm, if you look on over a number of years is more like 6.5. So it's still – it's still a pool of equipment that needs refreshment. Not to mention all of the technology, the rate at which we're bringing out technology on the new products and the artificial intelligence features on those products is bringing new productivity enhancements to the farmers that even if they didn't have to refresh, there's new features that give them a good ROI. Used equipment levels are still about 50% below what they were in 2018 or 2019. So those are kind of things that we're watching that say, does this market have room to still be a good market next year, and they look like they are when you look at the machinery When you look at the grain I've already talked about the impact of the Russian blockade of Ukraine, all indicators we've seen say prices will go up on grains about 10% to 15% because of that, and we're starting to see it, especially on wheat, wheat moved up a lot. We're seeing record heat waves going through much of the growing portions of the world, North America, Europe. And although August is an important month, we've got to get through that. It has not been good for crops and there's a potential downside coming on that. So lots of indicators that say 2024 could still be a very good year.

Great. Okay. Thank you. And then maybe a Damon question. I think we've talked in the past about some productivity challenges due to the supply chain volatility that we've been seeing. And I guess that's improving. But is there still some productivity to come as supply chains kind of finally get normal again? Or are we sort of through that already?

Yes. So Steve, we are still experiencing supply chain challenges here. We're a lot better now than what we were a year ago. And I mean, just to put it in perspective, and you've sort of seen it in our performance, and Eric alluded to that fourth quarter spike last year. But if I look at our semi-finished inventory, that we had at the end of last Q2 last year. we've reduced that by about 60% year-over-year with that semifinished product. Again, a lot of that is due to the supply chain improvements. And as Eric said, trying to get a better cadence of our sales you saw in Q2 and – in Q2, Q3 and in Q4. So we're seeing significant improvement. We are not where we want to be yet. What I would tell you, if we were dealing with 10 suppliers per factory last year this time, we are still dealing with one or two. And so we still have disruption in the flow in the factory, we still have the rework to get things on to the tractors when they show up for the combines. So there's still opportunity for further productivity, further volume output as the supply chain continues to normalize, but it's getting better.

Great, thank you guys.

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

Hi, good morning. Thank you for taking the question. I wanted to ask you specifically about some of the outlook for the back half in South America. I mean you did previously call out some of the financing headwinds, the small horsepower tractor incentives but specifically around like Argentina being an offset there, there's an election coming up in that region. Just any sense of what you're hearing on the ground that could influence deliveries in the back half of the year.

Yes. I think, Kristen, for us, as we've alluded to in the last couple of quarters here, the – we've been very strong with our pricing and that the demand that we've been seeing has allowed our team to really hold on to some of the more traditional discounts or incentives they would provide dealers. As we think about the changes that have come out with the financing plan here, we're optimistic that the small horsepower tractors will start to pick back up. But again, we just look at the overall market conditions there, we sort of expect to see the teams getting back to that more traditional level of discounts here that they would have sent the dealers within the back half of the year. Argentina definitely continues to be a little bit more of a challenging market. It's being more than offset by the strength in Brazil. But overall, we still feel good about the South American market. It's still our strongest market as we look at 2023 here, but probably a little bit weaker from a margin perspective as we move into the back half of the year.

That's really helpful. And then if I could follow up on the nine months coverage in higher horsepower. Just any indication of pricing in that order book? How much of that is sort of resuming that normalized level, 3% to 4%? Or if you're able to see something a little bit better than that in the order book? Thank you.

Yes. So Kristen, most of those are 2023 orders. So we've talked about kind of the level of pricing for this year. And this year, that implies kind of mid-single-digit pricing in the back half of the year. So going into next year, we'll have some carryover from the back-half pricing, and then we'll likely add some incremental pricing on that based on market conditions for the new orders that will get under the 2024 order program.

Right, thank you so much.

The next question is from Steven Fisher with UBS. Please go ahead.

Thanks. Good morning. Just to follow-up on South America. Now that the financing situation there has been clarified in Brazil, have you seen already a pickup in the activity there? And was that financing uncertainty only impact on the smaller ag piece in the second quarter because it seems like you still more big ag equipment than you expected?

Right. So Steve, the way that – there's a couple of different pieces of that program. One is geared towards the smaller farmers that ran out of money in January. And those guys tend to use – they're very heavy users of that program, so 90% roughly of the equipment purchased by small farmers goes through that FINAME program. So they definitely waited as we got into really first quarter and here in the second quarter. And we have seen pick up. One of the things that our sales folks locally in Brazil have been doing is to help with the AGCO Finance folks process those applications because the administrative process in Brazil is not smooth. So one of the things we're trying to do is facilitate the rapid fulfilling of those loans. And so that's going on as we speak. But our expectation, as Damon said, is to see some improvement for the small stuff. Now the bigger stuff or the bigger farmers caps out at about – the threshold is about $9 million of gross sales for farmers. So that's still somewhat big. But those guys only use the program, it's about 60% or 70% of the purchases that happen to go through that the FINAME program for the bigger farmers. So a lot of those guys were still using or are – and will continue to still use commercial bank funding. And then if you get into the bigger kind of the megafarms in the Montegrosso region, a lot of those guys have not used the program. So they've continued to order. So it's really a mixed bag as we think about Brazil.

Yes. And I think, Steve, as we alluded to, I think it was on Jamie's question, the first half versus the second half margins. Part of our expectations are, as Greg alluded to, with this funding now available, these lower horsepower tractors should pick up volume-wise, which is a little bit margin dilutive for the South American region, given the strength of what we saw here in the first half.

Okay, thank you very much.

The next question is from Jerry Revich with Goldman Sachs. Please go ahead.

Hi, this is Clay on for Jerry. Congrats on the strong Precision Ag sales in the quarter. I was just curious on how we should think about production capacity in the precision ag product lines and here now and then moving forward towards the 2025 target? Thanks.

Yes. We've got a huge factory coming online at Precision Planting. It's 500,000 square feet. We're putting the equipment into it right now. The building is done. It looks fantastic, and it's going to be – it will be way more than we need in the short-term, but we expect to grow into it in short order after we acquired those six other companies and can consolidate into it. So that's coming online this fall, and we don't see capacity constraints there in terms of our internal capacity. The big issue that we've had in the last couple of years of semiconductor chips, and that's moderated significantly. So relative to precision ag, we have a good runway ahead for growth.

Yes. And I think, like, just for us, we still expect to be up in the range of $800 million to $850 million in sales this year. So we were $700 million last year on our precision ag. Our goal right now is $800 million to $850 million. So we feel we're well on path to deliver that $1 billion target by 2025.

Or maybe even sooner.

Great, thanks.

Our last question today comes from Chad Dillard with Bernstein. Please go ahead.

Hi, good morning, guys. Thanks for squeezing me in. I just had a question for you guys on small ag. First of all, can you just quantify what share of the business it represents? And then can you just talk about where you are on your destock and whether you expect to be done by the end of the year?

So the small ag definition, Chad, is a little flexible, but we would typically somewhat say between 25% and a third of our business is small ag. It's a little bit different in the U.S. and that there are – there's a distinct category of compact tractors, which is sub 40-horsepower tractors not very much not a ag-related kind of part of the business. But globally, kind of outside of North America, it's – the small midsized stuff is tied a lot of times to dairy and livestock. But globally, the number has come down over time. I'd say if you go back 5 to 10 years, that number was probably closer to 40%. But with a lot of the new product introductions and a lot of the focus on technology, we've shifted our mix, especially in South America, but globally, kind of away from the small ag into the bigger farms.

And I think, Chad, to your question on the inventory of the destocking, again, we're watching the dealer inventory levels very closely around the world here. And as we've talked, we know that those inventory levels are up to what we would consider the more optimal level. Two things that we're doing here. One is, I think Tim had asked the question, we are slowing the production for what we produce low-horsepower tractors. We are sort of slowing that down just to make sure that we don't build up dealer inventory stock in that particular segment. And I think you know we also buy a lot of these low horsepower tractors from third-party manufacturers. So we don't actually produce them, but we source them. We've slowed the order board for those as while helping continue to adjust the inflow of product here to try to keep that dealer inventory at the optimal level.

That's helpful. And just one last question on your engineering expense over the medium-term. I guess like how should we think about the appropriate level of spend? Should we be thinking about the second half of the year, like that should be a good run rate on a go-forward basis?

Yes. I mean we continue to increase our engineering expense annually as we are focused on increasing the technology development here. As I said earlier this year, we're going to be up $100 million. I think the rule of thumb going forward is around 4% of sales. We've been trending a little bit lower than that the last couple of years. Given we've been trying to hire as fast as we could. But as everyone, no surprise, it's hard to get a lot of these top-tier engineers, but we're ramping that up. But I would tell you sort of rule of thumb for the outer years is around 4%.

Great, thanks.

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

I'll close the day by saying thank you very much for your participation and your support of AGCO. It was a really good call again today. We're very proud of how we've started 2023 as a record quarter in many ways, and we're setting ourselves on a trajectory to deliver another record year. And we have higher and higher confidence that we're going to deliver on all of the commitments that we've made to you over this last year or two. The key to our success is the continued execution of our Farmer First strategy. Our focus is on growing our margin-rich businesses like Fendt, parts and service and our Precision Ag smart machine business. We've been investing heavily in the last few years, like Damon was just talking about. And in 2023, we're making even bigger investments to continue the development of these farmer-focused solutions that are solving critical farming problems, many of them with very short paybacks. And I was glad to see many of you on the farm being able to see those in – live and in action. We demonstrated the overall strategy and these products at our technology event and we were using precision ag tools to really engage strongly on sustainability, putting more and more of our technology efforts there, capturing a lot more data and helping our farmers make the transition to not only more productive farming, but also more sustainable farming. Lastly, the large ag markets continue to be strong globally. Farm fundamentals are healthy and supporting farmer investments. Over the last few quarters, we've touched on many factors supporting our markets, including growing populations, changing diets, low stock-to-use levels, healthy commodity prices and more. All of these trends give us confidence that our industry could stay strong for some time. We look forward to seeing many of you at the Farm Progress meeting in August 29 in Decatur, Illinois. Thanks again for a good session today.

Thank you for joining the AGCO Second Quarter 2023 Earnings Call. The call has concluded. Have a nice day. You may now disconnect.