Good day, and welcome to the Corteva Q2 Earnings Conference Call. Today's conference is being recorded. I will now turn the call over to Megan Britt, Director of Investor Relations for Corteva. Please go ahead.

Good morning, everyone. Thank you for joining the second quarter 2019 earnings conference call for Corteva Agriscience. We're making this call available to investors and media via webcast. We have prepared slides to supplement our comments during this call. These slides are posted on the Investor Relations section of our website and through the link to our webcast. Speaking on the call today are Jim Collins, Chief Executive Officer; and Greg Friedman, Executive Vice President and Chief Financial Officer. In addition, Tim Glenn, Executive Vice President and Chief Commercial Officer; and Rajan Gajaria, Executive Vice President of Business Platform, will join the Q&A session. During this call, we will make forward-looking statements regarding our expectations for the future. I direct you to Slides 2 and 3 of our earnings release for our forward-looking statement disclaimers. All statements that address expectations or projections about the future are forward-looking statements. These statements reflect our current expectations that are not guarantees of future performance and are subject to risks and uncertainty regarding assumptions. We urge you to review our SEC filings for a discussion of some of the factors that could cause actual results to differ materially. We are providing information on a pro forma basis, prepared in conformity with regulation FX in order to provide the most meaningful comparison. So please take note of the pro forma basis discussion and our earnings release and slides. Unless otherwise specified, all historical financial measures presented today exclude significant items, which can be found in the schedules that accompany our earnings release. We will also refer to non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release and on our website. Turning to the agenda for the call today, Jim will share accomplishments on our priorities for shareholder value creation and provide perspective on the quarterly financial results, market backdrop and revise full year guidance. Greg will then review our second quarter and first half financial results by segment. Following this review, we will take your questions before wrapping up the call. With that introduction, it's now my pleasure to turn the call over to Jim.

Thank you, Megan, and thank you also to those joining our call today. Earlier today, we reported the second quarter results for Corteva, our first quarter reporting as an independent company. Two months ago, on June 1, we completed the separation of Corteva from DowDuPont, a culmination of 3.5 years of journey and a significant milestone for our milestone for our employees, our customers and now, we are pleased to say, our shareholders. With our spend, we created a new kind of ag company. A global pure play, built on a foundation of industry leadership and focused on bringing new and integrated solutions to farmers, enriching the lives of those who produce and those who consume, and ensuring progress for generations to come. That is our purpose. And in our early days, as a public company, have deepened our resolve on delivering on that purpose. The unprecedented market backdrop for the second quarter presented considerable challenges to our customers and, in turn, to us; flooding, planting delays, prevented planting, delayed deliveries, insect pressures, trade-related market disruptions, the list is long and exceptional when viewed from the lens of history. In 150 years of tracking data in our industry, the events that transpired in North America region this season are without precedent. Now amid these historic events, both our spend and market disruptions, we've worked hard to deliver progress this quarter on our priorities for shareholder value creation noted on Slide 4. These priorities continue to guide our actions and underscore the quality of the results that we are targeting. First, two announcements this quarter reinforced our commitment to return the excess cash to shareholders. In June, we announced the authorization of a share buyback program to return $1 billion to shareholders, which we expect to complete over the next three…

Thank you, Jim. Turning now to Slide 8 for a summary of our second quarter results. Please note that all the periods, except for the three months ended June 30, 2019, are on a pro forma basis for operating EBITDA and operating EPS. As Jim mentioned, the effects of our North America business from unprecedented weather-related events continue to impact our overall results for the second quarter via delayed planting and lower-than-expected planted area in corn, soybeans and canola and missed Crop Protection applications. Net sales of $5.6 billion were down 3% versus prior year on currency headwinds of 2%, a 1% decline in local price and volumes that were essentially flat. Excluding North America, Rest Of the World volumes were up 14%, led by strong early demand in Latin America Crop Protection products, including 73% year-over-year growth in sales from new products worldwide. This includes products, such as our Isoclast insecticide and Zorvec fungicide. Competitive pricing pressure in North America soybeans coupled with higher replant in corn, more than offset the price improvements we achieved in Asia-Pacific from broad-based demand from new products across several crops and market. For Rest of the World, we recorded organic sales growth of 17% in the quarter versus prior year. Turning to operating EBITDA, we reported $1.45 billion or a 6% decline versus the second quarter of 2018 on a pro forma basis. Overall, declines were led by lower margins in Seed from the impacts of replanting corn and pricing pressures in soybeans. We delivered $115 million of synergies in the quarter, and currency was a headwind in the quarter. Our operating EBITDA margins were equally pressured by headwinds within Seed, driven by the overall North American market. This more than offset the 150 basis point margin expansion we delivered in Crop Protection…

Thank you, Greg. With that, let’s move on to your questions. I’d like to remind you that our forward-looking statements apply to both in our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions.

Thank you. [Operator Instructions] We’ll take our first question from David Begleiter with Deutsche Bank.

Thank you. Good morning. Jim, just in 2020, I know it’s early, but on a very high level, could you just help us think about how the EBITDA might look in 2020 versus 2019, given the benefits from some cost savings, productivity and some maybe higher planted acres? And maybe some headwinds from some higher costs? Thank you.

Great. Thanks, David. Yes, directionally, we think about going into 2020. Obviously, we’ve got to factor in what it – what’s the impact of the North American market in 2019 and what return we can expect as that market comes back to us. Clearly, we’ll continue to have the synergy programs, that we talked to you about, flowing through the momentum that we’re carrying through from 2019, and we’ve given guidance on kind of what to expect year-over-year in that area. It comes down to also then the market backdrop, what can be expect around commodity prices on corn and soy, and given the focus on planting intentions. And as we sit here today, we’ve got a couple of big markets still to clear through. We’ve got to finalize the North American market that we have in the ground right now. There are obviously going to be questions about the actual harvested quantities of grain versus the acres that got planted. So quality as well as yield is still a big question. And then we have a strong Latin American market to work through, both the summer and the spring seasons down there. So all in all, it could be shaping up to be a strong season as we see some snapback and a few of the things that I’ve talked about really start to add to our results in a very positive way. So we’ll – we’ve obviously not given any guidance for 2020 here at this point, and we’ll be back as we close out the year to kind of set that up. I don’t know. Either, Greg, anyone else add anything. Great.

Our next question we’ll come from Jeffrey Zekauskas with JPMorgan.

Thanks very much. So two questions. What are the key regulatory approvals that you’re awaiting? And when do you expect them, in rough terms, to occur? And secondly, you talked about doing $1.9 billion to $2 billion in EBITDA. What kind of operating cash flow does that generate? Or on a normal basis, what’s your target for operating cash flow divided by EBITDA?

Great. Thanks, Jeff. We had a number of new registrations that occurred for us here in the first half of 2019. So we’re carrying some good momentum. Some of those were key active ingredients in our Crop Protection business. We got the full and unrestricted registration in North America for Isoclast insecticide, which will allow us now to start to ramp that product as we go into 2020. Your question on what are the big ones that we’re waiting on, I’d say the one that would kind of be at the top of my list right now would be Conkesta, which is the protein for aboveground insect control in Brazil. And from like in-country cultivation perspective, that product is ready to go. What we’re really waiting on is that really important China as well as European grain import tolerance. And in my conversations with folks that are involved in that trade negotiations with China, we know that these traits are on the list and have been discussed as opportunities once a trade deal gets finalized, there’s an opportunity for China to go ahead and approve the import of those, and that would really give us the green light. So that’s really it. We’ve got another – number of other, small or minor registrations that we’re still tracking, but we feel really good about the status of that regulatory portfolio and our teams around the world are executing really well. Maybe I’ll ask Greg to take the cash flow question?

Yes. Sure. Thanks, Jeff. The cash flow conversion ratio that we’re targeting is above 50% and that should be – and we plan to achieve that in 2020 as our cash flow normalizes. As you would expect, in 2019, we did have some onetime cash needs that are reflected, regarding our spend as well as our integration. Those are one-time cash uses that will be completed in 2019. So moving to 2020, we should see a more normalized cash flow. We will have some seasonality in our cash flow, just driven by our industry. But we are targeting that 50% cash conversion ratio.

Our next question will come from Vincent Andrews with Morgan Stanley.

This is Jeremy Rosenberg on for Vincent. Thanks for taking my question. I want to start on Seed. If we expect yields to be lower, let’s say, in the U.S. maybe there’s going to be more demand in LATAM. I mean some kind of pull forward the demand in North America in the fourth quarter. Just looking at your existing Seed inventories, whatever is produced this year, are you at all worried about a potential shortfall in Seed production in the U.S. that could potentially force you to do some winter production in South America? And just more generally, how are you thinking about your Seed production cost into next year, just given these moving parts? Thanks.

Great. Thanks for that question. You’re right. The early part of this season as we were working to shore up our planting plans and working with key growers across the North American market to kind of nail down acres and get our production – kind of our production plants up and running. The good news about kind of our approach is, we’ve been doing this a long time, and we have a pretty broad footprint of production facilities kind of across North America. So as we saw those early rains starting, I can’t say enough about our production team and how quickly they were able to relocate acres out of some of the hardest-hit states, Indiana, Illinois, even that Western Ohio area where we’re pretty hard hit. And that allowed us to go in favor Seed production markets where we can take some of those extremes out of play. And – so we’ve got good footprint in Nebraska, Iowa and other markets. So at this point right now, we feel like we’ve got the right amount of Seed in the ground for production, given where we think the market will turn out to be in 2020. And our early monitoring would suggest that the quality of that production is about where we would expect it to be. And so right now, we’re not factoring in any big changes to our cost of goods on the Seed side, going into 2020, except maybe for the commodity price impact that might flow through. And in terms of winter production, right now we don’t see any need or any plans to do that. But part of the reason why we don’t think we’ll need that in corn is we’ll have some carryover. We got returns back early enough. We got it into storage to help protect the germination rate. And so that will allow us to make sure we’ve got some additional quantities of Seed beyond our production out there. And on soybeans, we were right on top of the season there. So we feel good about where we’re sitting.

We’ll go next to Steve Byrne with Bank of America.

Thank you. Yes. I wanted drill into seed pricing a bit. How much was soybean seed pricing down year-over-year? And what’s driving this? Is this just a mix shift down the price card? Or is this competitive dynamics between the various oversight tolerance traits that are out there that could actually worsen with the entrance of Enlist E3?

Yes, Steve. Thanks for the question. So North America, obviously, was a really tough market. And as we – as the season unfolded. And so you had a few dynamics going on there. You did – we did have that weather affects, replant rates, seed that we were swapping out as we tried to help with maturity ranges. And so you see some of that effect clearly in our corn pricing. On soybeans, the key – one of the key factors there was a really strong competitive environment that unfolded as you had quantities of seed out chasing fewer and fewer acres as that season unfolded. And we feel pretty good about the way we performed but we also felt like we needed to meet some of that competition, some of that demand to essentially hold where we are in the marketplace. The A-Series soybeans performance continues to be kind of at the top of the pack in terms of the comparisons. And we feel really good about the competitive side of that from the product performance. So we weren’t going to let a lot of acres walk away from us. And then the other thing we talked about in our results is, we actually have a little more of our soybean business left report as we had seed deliveries that occurred into first part of the third quarter and you know from our revenue-recognition approach that we deliver – when we deliver seed, we report that revenue. I’ve got Tim Glenn here with me obviously, our – Head of our Commercial Teams, and he was right out there in the middle of all that. Tim, you got anything else us to add?

Yes. Jim. I think you hit on many of the big points. But I’d emphasize that last fall we had really exceptional product performance with our A-Series soybean. So we had strong demand. One thing you’ve got to remember, when we were actively selling soybeans in the season, farmers were at a really difficult spot. Soybeans were really out of favor and a lot of uncertainty because that was kind of maybe the most severe impact from the trade disruption. So it was a tough environment. We definitely had some aggressive competitive actions. And I think part of that was a result of some of the – really strong performance that we saw on our product line. And I would emphasize one other part is, it was a tough production season for us. And so we ended up selling more, what I would describe as, reduced quality soybean. So that we had to make a price concession on that. So we definitely felt competitive pressure. We definitely had a difficult environment in terms of farmer’s attitude towards soybeans. But that – the fact that we did have to sell some lower germination beans and make a price concession impacted our price. The one my thing I would emphasize is, from a technology adoption, we didn’t see farmers trade down on technology. We saw them sticking with our leader products. And our technology mix actually ended up very close to what we had anticipated. So we didn’t see necessarily a behavioral change from farmers but it was definitely a challenging season on multiple fronts for soybeans.

We’ll go next to Don Carson with Susquehanna Financial.

Jim, a couple of questions on corn. This was the first year of your new, multichannel strategy in North America in corn. What was the impact of this change in channel strategy? Did you see an increase in share? And given how big you are in – with the Pioneer brand in terms of going direct to growers, you must have a pretty good feel for what actual acres are? Some of the fertilizer companies are talking about acreage planted as low as 85 million to 87 million and maybe a snap back to 95 million next year. Would you agree with that assessment?

Yes. I’ll start with your – second part of your question and maybe, I’ll toss it over to Tim to talk about the multichannel results here. So on acreage, you’re right, with our Pioneer brand, we do get a good sense of what’s going on. It’s really hard for us to talk about that number, we’re still waiting on USDA survey data. They’ve gone out and decided that they wanted to completely resurvey because some of their information coming in didn’t make sense. And a lot of that is caught up between the actual what was planted versus their intentions to plant versus previous year. So we’re sort of trying to sort through what is the basis that we’re working off of here, is it intention? If I just keep it really simple and I think about what was planted last year versus this year. In corn, we could be down a couple of million acres year-over-year. I think when it all sorted out, there were strong intentions early. But when it actually settled, I think we could be down just a couple of million or so, a few million. And in soybeans, again, we still have a little bit of business to finish up here as we closed out the first part of the third quarter. So we’re still getting data on that. But we could be down as much maybe as 10% in soybeans, which will be helpful around carryover and other things like that. So – but it’s still too early to really call it, and we’re all waiting to see what USDA says here in a couple of days. And then, Tim, do you want to talk about multichannel a little bit?

Yes, I will. Don, good question. The – how – what I’d emphasize is, we – as we went into the season, we were going through a very insignificant reorganization of our regional brands, that multichannel approach. And – so we reduced the number of brands, we did some consolidation and that created disruption in the marketplace in terms of existing relationships in terms of dealers and customers. We had anticipated that we would lose some volume through that process. And I would describe what's happened through the process is very consistent or maybe even a little bit better than we had anticipated in terms of retention of our dealer network as well as retention of customers. So I think it's going well. On the retail side, this year was really about preparation for the future. So, we were actively repositioning the Mycogen brand in retail. Part of that process is kind of turning over the product portfolio, and we're mid step from that. Last week, I had the opportunity to participate in a kickoff meeting with several of our key channel partners at the western Corn Belt there at Johnston and we were in – we were kind of reintroducing the Mycogen brand to them, sharing what our plans for the future are for the brand. We introduced 42 new hybrids, so really excited about the products that we're putting on the table for them, and also working on building our business plans for 2020. So, 2019 was really a transition year for Mycogen and 2020 is about really going out there and aggressively ramping up in the channel as we build that brand. And the thing I would emphasize is, as we think about 2019 and how the Seed here turned out, we've had very good insight, as you say, into kind of our relationship with farmers. We felt very comfortable how our order activity for both corn and soybeans have proceeded throughout the year. And as we went through the changes in the spring, obviously a lot of farmers, they were switching hybrids, potentially switching crops or flat-out going into prevented planting. We feel comfortable with how things have turned out. So we have a good understanding of the numerator when you talk about share, the denominator is a little uncertain right now but we feel like we've fared very well through the transition this spring and all the changes. And I think that direct relationship with farmers really played out in our favor.

Thank you. We'll go next to Joel Jackson with BMO Capital Markets.

Hi, good morning. One of your Seed competitors was talking about a bit of a price compression in some of the Xtend premiums. Could you give us a little bit of update on what you're seeing on pricing for Xtend? And maybe how that will carry through for pricing for E3? Thanks.

Thanks, Joel, for the question. Great to hear from you. We were talking a moment ago about pricing and competitive pressures that went on in the market. And it really was about, kind of, tied to that whole Xtend portfolio. So – and we feel good about our conversions, we feel good about our product performance. And as we've talked before, we're about 65% or so of lineup converted over to that. So when I look overall kind of at soybean pricing, we were probably down 0.1% kind of year-over-year and that is a direct response to that competition that was going on in that market. So hard for me to talk about kind of what – where others were, what motivations were. But I can tell you we have some of the best-performing products in our A-Series lineup. And that really allowed us, I think, to hold our own in a lot of cases when things got really tight. And then on your pricing around Enlist, it's a little early for us to be talking about how we're going to price that product. We – we've got some great demonstration going on out in the marketplace. We have a lot of really strong pent-up farmer demand that's coming to us about their excitement about the system, and we'll take a fresh look at that here at the year-end and compare that to, okay, what varieties are we going to have available, what are their performance attributes in terms of yields and Seed packages that will be on board. And then we'll set the price accordingly along with all the benefits that the Enlist system brings in terms of convenience, ease of use, peace of mind, those type of things.

We'll go next to Christopher Parkinson with Credit Suisse.

Thank you. Just given the optimism for 2020 that everybody's talking about. Just how should we think for the potential sets on your 4Q order book versus what will actually end up boosting 2020? On one hand, I think we're facing a very tight fall application, which may limit preliminary decision making. But on the other, farmers are naturally going to what the best hybrids as early as possible and lock those in. So I know it's tough to calibrate, but just any initial thoughts on this evolution will be appreciated. Thank you.

Thanks, Chris. Yes, as we think about the second half of 2019, we've factored in, what we believe, is an appropriate level of – we've got some great tailwinds coming from product pipelines. We've still got synergies to deliver it at the end of the year. And that is then tempered by some concerns that as this season will very naturally go long, just because everything got in late and farmers are going to – they'll keep crops in the ground as long as they possibly can to milk as minute degree days right out to the end as possible. And that could close windows that would allow for fall-applied Crop Protection as well as nitrogen product. So – but we feel like we've called that right, and that's the second half that we've outlooked basically around sales – about reported sales down about 3% versus previous year. And it puts us on a full year basis of about flat when you look at just price volume. So we think we've got that dialed in. In terms of cost for setup for 2020, and question earlier was about, if you have any issues around winter production, we don't think so, we think we've got the right seed in the right place for what we're going to need for 2020. And then all the other reasons why we might see a return to something more normal in North America

Our next question will come from Jonas Oxgaard with Bernstein.

Hi, good morning guys. Two parter on Enlist, if you don’t mind. The first one is just a technical. What is a unit? And how many of those do you sell in total? But then the real question is, what kind of pricing did you see on Enlist so far, premium over the other varieties? And do you expect that to maintain or improve next year?

Great. Yes, Jonas, a unit that we talk about, that’s a bag of seed. In corn 80,000 kernels, in soybeans…

140,000.

140,000 kernels are seeds per bag. And in soybeans, a unit of one bag of soybean seed will plant about one acre of field. So the seed industry typically talks in terms of units. It’s a standardizing way to talk about our lineup and our products. And when it comes to product lineup, maybe I’ll start. But I’ll ask Rajan or Tim – maybe Rajan to say a few words. We’re clearly in the mode right now of exploring the integration of that trait into the elite Pioneer and Corteva germplasm that we have in house due to the timing of the merge and any trust windows. We were sort of precluded from having any really good conversations and understanding of that technology until the deal closed last – in September of 2018, so we – 2017. So we really have – now just had this one first good season to take a strong look at that. And so as we begin to ramp in 2020, we’ll utilize germplasm that that Dow already had, that our scientists had and had began that work in the Mycogen brand. Some of our partners out there are – the other regional brands have had a look at that and had begun working with it, and we’ve got some partnerships with others there we can in-license technology for a few years until we can get that breeding engine that everybody really knows and respects out there in the market. So we can get that breeding engine up and running and start those conversions. So we might go through a couple of years where you’re going to see a Corteva branded, Pioneer, Mycogen branded lineup in Enlist that won’t compete with the elitist of products that are out there, but it won’t take as long to get right back up on that curve. I don’t know. Rajan, anything else you’d add?

So, Jim, I think you’ve covered it. Just a couple of things to add. One is, Jonas, just do want to reinforce the importance of Enlist as a system. So when we think about our product lineup, we need to talk about our [indiscernible] chemistry, and they’re very excited about that. From a capacity standpoint, the product is working very well in the field for cotton, as you know. From a germplasm perspective, Jim covered it. I think really, we’ve got top-quality germplasm. We’re progressing Enlist with that and even the partnership that we have with MS Tech I did want to reinforce. We get very good quality germplasm, working with our partner, MS Tech. So excited about the entire system. The portfolio that we will be able to bring to the market and seeing how we can ramp up enlist starting next year.

And our final question will come from John Roberts with UBS.

Thank you. Can you hear me?

Yes. Good morning, John.

Good morning. Last night, on the results for CF Industries, they indicated the damage to the U.S. corn market spend so unprecedented that it could take more than one-year for the U.S. markets to recover? I don't know if you would agree with that, that maybe we are headed for a couple of year’s above-average planting and maybe above-average trend on pricing for the foreign input market?

It’s a great question John. We’ve seen years before where we had maybe not as late and as big a decline as we saw in 2019. And I've seen the next year every bit is good, if not even better. So given the amount of work that growers have done to improve drainage and the equipments that they have and the performance of our products, it feels like to me that almost every year, short of anything on the downstream market demand side of all of this, it feels like that we've got a lot of capacity and a lot of capability. And there's a little bit of land, I would say, in that Nebraska market where you had the horrific flooding and you had some sandy – some sand that got up out of the rivers and kind of got into some pretty good farmland and growers are working hard to try to save that. But when you think about that total of all the millions of acres that are out there, you won't really feel that piece nearly as much. So I would say, no, I would believe that this market could come right back to where it has been previously and it's really just a function of how many acres go in the ground and the yield that will able to get out of those acres.

So – just I wanted to let you know that we can take another question.

Okay. We probably have time for one more question.

Great. And that will come from P.J. Juvekar with Citi. Please go ahead.

Good morning, P.J.

Thank you. Thank you for taking my question. Good morning Jim and Greg and Megan. Just a quick question on CPCs you mentioned high inventories and pricing pressure. I mean have you already seen that pricing pressure? Or do you think that is yet to come for the next season? And then secondly for Rajan, how big is your seed treatment business today? And how big you think it can get? Thank you.

Great, P.J., yes. So on Crop Protection Chemistries, clearly, inventories in North America are going to be a little bit elevated just because we didn't create the pull through on those early spring-applied chemistries as well as – we've got a really strong business in the nitrogen-fixing area. So on inventories and quantities and volumes, we'd say, we're probably a little elevated going into the fourth quarter. And we've dialed in the fact that if acres go long and late, you may not get some of that late-season prep work that growers have traditionally tried to do to maybe take some of the heat off of the spring season, get some fall-applied chemistry that goes out and get the fall-applied nitrogen and our nitrogen-fixation products. But we think we've got that dialed in about right for our outlook. The thing about price, if I think about the rest of world, we had a great start in Latin America, channel inventories there don't appear to be elevated and are right about where they need to be. And you look at our results in rest of the world, we have some pretty strong overall performance. And when I think about value and pricing and how that business really turned out pricing Crop Protection was about flat for us globally and cut me up mid single-digits, if you just look at the rest of the world. So overall value there. And I'm sorry, what was the second part of the question?

Seed treatment?

Yes. Seed treatment. Rajan, you want to talk a little bit about our seed treatment business.

Yes. I just mentioned that. Very exciting actually, I think, seed treatment continuing to grow. We are expecting more than a double-digit growth this year and the first half, we have seen that growth across the globe but definitely pronounced in Latin America. And – so very excited about that, P.J. And just building on Jim's point about pricing, where we see the new products being launched, we are able to capture value in all parts of the globe and North America, given the market dynamics, it was tough but I think there is cautious optimism on Crop Protection pricing across the globe. For example, if you see Asia Pacific, the products of Spinosyn, which we are seeing there, they have seen as much as 10%, 11% price increase, a double-digit price increase, as a data point. So where there is value for new, differentiated product across Crop Protection, across the globe, we are seeing price increases.

So that’s our last question for this conference call. I'd like to thank everyone for joining us on the call today.

That does conclude our conference for today. Thank you all for your participation. You may now disconnect.