AGCO Corp at Citi Global TMT Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kyle Menges - Citi - Analyst : Anyway, I think we can kick it off with just an overview of the company and I think the different brands in the portfolio and especially now, you've evolved the portfolio to much more of this precision tech orientation. And I think it'd be helpful to keep us off with an overview of that.

Question: Kyle Menges - Citi - Analyst : That's helpful. And can you talk about how big the Precision Tech side of the business is today in terms of revenue? And I know you have some 2028 targets out there. And then on top of that, what sort of different revenue models and pricing models are you exploring with some of these new Precision Tech offerings, like especially maybe talk a little bit about the model with outrun how you're charging for that new technology. And I know you're playing around with you and your peers with subscription models versus maybe just kind of paying upfront, paying per acre. So talk a little bit about that and so -- yes.

Question: Kyle Menges - Citi - Analyst : Could you talk about weak ag market right now? How is the Precision Tech revenue is still -- so is it still growing this year? Could you talk a little bit about that?

Question: Kyle Menges - Citi - Analyst : That helps. And I also noticed the parts business has been pretty resilient. I think it was about flattish if you adjust for currency in the quarter. So I guess do we think about that kind of maybe up or down, maybe flattish, low single digits. And then you also talked about, I think there's an incremental opportunity pushing more into e-commerce. Could you talk a little bit about that as well?

Question: Kyle Menges - Citi - Analyst : That's helpful. Maybe we could talk now, I think, about margins, and you mentioned some of these portfolio changes you're making and strategic pushes in those three areas. Talk about the step change you're seeing in margins cycle over cycle. And it's looking like, I think, the 9% margin that you're guiding to this year to be potentially the new trough level for margins. So I think that would be helpful if you could unpack that a little bit.

Question: Kyle Menges - Citi - Analyst : Looking forward to that in December.

Question: Kyle Menges - Citi - Analyst : And then I think we could touch on the Trimble deal a little bit more. And just I think -- just help us understand really what that deal is doing for the -- I think the growth of the company, but then also just the competitive positioning. And I think a lot of people think that other players in the market have this massive lead over some of -- some other players, but it seems like that the competitive differentiation, perhaps in technology is narrowing over time, especially with you guys now acquiring Trimble. And talk a little bit about that.

Question: Kyle Menges - Citi - Analyst : And so how is that progressing? We're still in early stages, but starting to bring those two channels together. Could you talk a little bit about that?

Question: Kyle Menges - Citi - Analyst : And is the biggest opportunity for merging the dealer networks? Is that in North America? Or is that pretty spread out across the globe?

Question: Kyle Menges - Citi - Analyst : Yes. Makes sense. And can you talk a little bit more about the tech stack integration. So I was at the Tech Day and I noticed that there's a few different tech platforms that you're trying to bring into one. So could you talk about your confidence in being able to execute on that? And then I think you did have some targets on a timeline of when you think you'd be able to achieve that.

Question: Kyle Menges - Citi - Analyst : Got you.

Question: Kyle Menges - Citi - Analyst : I'll stop opening it up for any audience questions or I can keep going. We got one in the back here. Unidentified Participant Just curious if you could spend another minute just on the integration and the selling into the dealers for your solution plus the Trimble solution. Is there going to be like one solution for the case dealers and another solution for the New Holland dealers? Because that was one of the nice things about the parent company before as you would sell to them, and they would figure out sort of how it goes downstream to the dealers. So just talk to us a little bit about that. And then is there any opportunity with dear dealers as well when you sort of think about the new offering that you have?

Question: Kyle Menges - Citi - Analyst : Any other questions? Microphone is coming. Unidentified Participant Just your capital allocation priorities going into this year and '25?

Question: Kyle Menges - Citi - Analyst : All right. I guess I'll continue. I think --

Question: Kyle Menges - Citi - Analyst : I think coming back to the prior question on inventories. Just doing the math on -- so North America, I think that seems to be the area where there's more to do on bringing the inventories down. So I want to take them from eight months to down to five to six months. Just thinking through the math if retail is down 15% this year, your production is going to be down 25%. Does that get you to that five-, six-month range of dealer inventories exiting the year? Or do you think that some of that work to bring down the inventories is probably going to spill over into 2025?

Question: Kyle Menges - Citi - Analyst : I think that's a good segue. I don't want to put you guys on that outlook for 2025. But I think maybe I can phrase the question in a different way. If you look at the different geographies and especially Europe, which is about 50% of the business, and that's, I think, going to be down for the fourth straight year in a row or something like that this year. Which markets feel like they're closest to bottoming out in 2024?

Question: Kyle Menges - Citi - Analyst : And turning to margins quickly. So -- and really focusing on, I think, on the EV margins, which have actually held up pretty well this year. I know you are getting some -- it seems like some mix benefit from sense outgrowth, especially over Massey and Valtra. So how do we think about those margins maybe resetting into next year as the mix perhaps rebalances out a little bit?

Question: Kyle Menges - Citi - Analyst : And then on PTX Trimble, those margins. So I had originally guided to those margins in the high 20s. It seems like -- over the long term, that's pretty easily achievable. But maybe talk a little bit about what's dragging on the margins this year, especially having some churn with the CNH business and then also from my understanding, it is a higher fixed cost business, more SG&A costs. So maybe talk a little bit about some of those impacts to PTX this year, but maybe how I could look into next year as you lap some of these headwinds that you're seeing this year?

Question: Kyle Menges - Citi - Analyst : Yes, makes sense. We've got a couple more minutes if there's any other questions from the audience. All right. It doesn't look like it. Last thing on the margins. You did announce this restructuring, so taking out some of the salaried workforce. You highlighted that it would be more so next year a benefit of about 100 basis points margin improvement. And you also talked about taking out those salaried workers and opportunities to actually replace some of that work, some of the back office work with AI and generative AI, maybe talk a little bit about that? And then how you reached that decision, and then the margin benefit into next year from those moves? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 3:40PM, AGCO.N - AGCO Corp at Citi Global TMT Conference

Question: Kyle Menges - Citi - Analyst : All right. Well, we're up on time. Thank you guys so much for being here at the conference. Thank you.