Conference Transcript - AGCO 2026-09-10

Steve Volkmann, Analyst — Jefferies

All right. Good morning, everybody. I think we're going here. So let's kick this off on day two of the industrials conference, the Jefferies Industrials Conference. Welcome on behalf of Jefferies. I'm Steve Volkman. I cover sort of a wide swath of industrial companies now. I guess that's what we do here. We're very pleased to kick off day two by welcoming Agco to the dais. And so we have Eric Canciotto, who's the CEO. Indira Agawal is the CFO, fairly newly minted, so we'll go easy on her today, and very pleased to welcome them. Greg Peterson is here as well to back clean up if necessary, and we're going to run this like a fireside chat, so we'll have a bit of a sort of an interview process here, I guess, and we would welcome very much any questions from the field here, so if anybody has one, I'll come up for air in 10 or 15 minutes and give you an opportunity to chime in. So with that, welcome. Thank you guys for coming. Thank you. So let's maybe kick it off. You know, there seems to be a general improvement in attitude around agriculture. Generally, we had a couple other companies here yesterday. I can't quite remember who they were, but they seem to be fairly upbeat relative to this sort of cycle bottoming trend. So maybe let's just start off, Eric. I mean, what's your view of the cycle and where we are?

Eric P. Hansotia, CEO

Yeah, you know, we talked last year even that a lot of the fundamentals were setting themselves up to establish a bottom. And we were actually even expecting a little bit of recovery this year with the Iran war, the bottom extended. But when you look at the, what do we look at? We look at the age of the existing fleet in farmers hands. It's as old as it's been. We've got the dealer inventories and used equipment down to target level. So the pipeline is cleaned out. And now we're starting to see recovery in commodity prices for greens. And so there was a tension in the system of farmers wanting to buy, but they needed to have some profitability come back into the system. Now if the grain price is recovering, there's profitability. And I was just at Farm Progress Show last week talking to a number, several hundred farmers and dealers, and the enthusiasm was like we haven't seen in several years. They were excited to be able to come back into the market, excited about a lot of the new technology that we've got either on our products of Fenton Massey or our precision technology business, PTX. Now, we also think that it's predominantly a North America situation right now. It's much less positive in Brazil, and kind of Europe is in the middle. Brazil's got some headwinds of high interest rates and then the uncertainty around an election coming up with kind of polar opposite candidates and uncertainty who's going to win. And Europe's in the middle.

Steve Volkmann, Analyst — Jefferies

We don't have those polar opposites here, so that's not a problem.

Eric P. Hansotia, CEO

That's fortunate for the U.S.

Steve Volkmann, Analyst — Jefferies

So maybe digging a little deeper, though, it seems like a lot of the improvement in crop prices especially has been driven by lower yields globally, which pose an interesting question, right? Because they're going to get less volume, but they're going to get more price. But you believe the net is a positive outcome in that scenario?

Eric P. Hansotia, CEO

Yeah, especially in the U.S. market, just because of the way the financial model works. The government contribution toward farming shows up mostly in subsidized crop insurance. And so most farmers have crop insurance, and that means that if I have a bad crop year, I've got crop insurance as a safety net below me, and I'll have an average or an okay outcome. If someone a little ways away from me has a good year, they're able to recognize the higher prices and good profitability. So safety net for the losers, essentially, if you want to call it that, and the winners get to participate. So North America, with their high participation rate in crop insurance, really makes the most out of a market like this.

Steve Volkmann, Analyst — Jefferies

Okay. So there's a lot of questions and focus right now on what we might call early order programs or next season ordering, whatever you'd like to call it. Any updates for us relative to what you're seeing there?

Eric P. Hansotia, CEO

Very early days on our early order programs. And relative to our competition, we don't have as many customers that sign up for early order programs. So it's not as great of an indicator for us. But some of our competitors have spoken about what they're seeing and our trends are similar. So we're seeing stronger early order programs. And we think that's just one more signal that in the U.S. market, you know, there's enthusiasm in the marketplace. And then the Purdue index went up just a few days ago as well, which is a sentiment index of farmers and view of the future health of the industry. So a lot of indicators are all pointing in the same direction.

Steve Volkmann, Analyst — Jefferies

And I'm sure you saw the USDA up the farm income number yesterday, albeit slightly, but at least it's going in the right direction.

Eric P. Hansotia, CEO

That's right. And there's still the potential for another demand driver from biofuels.

Steve Volkmann, Analyst — Jefferies

So E15 all year round would be a really big stimulant that's in the farm bill. if and when that passes that could be a big boost or tailwind for farmers good so we're webcast here I just want to give you an opportunity anything interesting that has come up since the second quarter call that you'd like to call out or how are we doing on third quarter outlook yeah I would say as Eric alluded we were at the farm progress show so the positive sentiment in North America We haven't seen it in a couple of years, so we had a pre-VIP event.

Indira Agarwal, CFO

There were 300 people. We closed deals, so there's positivity in North America. The optimism is good. Brazil is a wait and watch. Farmers are waiting for that certainty out of the elections. They want to see more on farmer economics. They want to see some trade policy, and Europe is in the middle, So the grain rally, the timing of the grain rally and where the European farmers sold their harvest was before the grain rally. So there's also a little bit of farmer sentiment, cautious sentiment from the diesel and the fertilizer prices. So the way we talked about it in our second quarter earnings call, in terms of Europe being flat, North America large ag being 15% lower, and Brazil 5% to 10% lower, is still the right way to think about this. But there's optimism in North America region, so it's kind of a mixed bag.

Steve Volkmann, Analyst — Jefferies

Okay. All right, good. And I think you alluded to the second quarter, you saw some weakness, I think specifically in Germany, which maybe you hadn't expected. has that proved to be sort of temporary, or is there more to it?

Indira Agarwal, CFO

So in the second quarter, we saw a German industry decline of 15%, even though at Covi grew market share. But the third quarter is mostly a European shutdown for us with the production shutdown, dealers, farmers. It's kind of the Europe market comes to us still. So we'll find more in September, so we'll provide a better update with a third quarter earnings call.

Steve Volkmann, Analyst — Jefferies

Okay. All right. Good. So let's maybe zoom out a little bit and talk about some of the things you can control. So you've been focused on a number of growth initiatives that sort of are above and beyond the market, maybe just for this group, if you want to kind of highlight those, and we'll dig in a little bit as you do.

Eric P. Hansotia, CEO

Do you want to start?

Indira Agarwal, CFO

Yep. So we've been on a transformation journey with our cost efficiency. So from a billion dollar of SG&A, we've been trying, we've been working hard to rewire the business. And the trough was the best time to do it, to take cost out. So by the time we exit 2026, we'll be upwards of $200 million in cost efficiency savings. So that significantly improves our operating profitability leverage as we navigate and we get prepared for the upcycle. On the other hand, as tariff uncertainties are fluid these days, we are also laser focused on finding cost actions in terms of our sourcing, in terms of our manufacturing footprint, manufacturing efficiencies, logistics. So we are looking forward to all of this. These are all of the controllable actions, and we started ahead, and we are poised right for recovery.

Eric P. Hansotia, CEO

And so that's a lot of hard work on the bottom line. Well, at the same time, we're doing a lot of hard work on the top line. So we've got our three growth levers that we've been talking about for several years, making progress on all three of them. The first one was taking our premium brand, Fent, which is the best of the best products for the most demanding customers in the market, Taking that from a European business to a global business, bringing it largely into North and South America, gaining a lot of share again in North America this year. Our large ag portfolio is now up to 11%. We didn't even exist in the market five or six years ago. And so making good, sustainable progress in that growth vector through a few things. Great products. We've got the best products in the marketplace, highest technology, best support. We've got the best support package in that we have a three-year bumper-to-bumper warranty, and our distribution model has been redesigned. We call it FarmerCore. And so instead of having a brick-and-mortar model where the farmer has to come to a dealership to research the machine, get their parts, get their service, we turn that 180 degrees and say we're going to remotely monitor all the equipment. We're going to provide digital connectivity in terms of being able to order parts online, service online, research a machine online, things like that. But then anything that we see in the farm, either maintenance or repairs, we proactively call the customer and say, how about we take care of that for you? And next Tuesday, it's going to rain. Let's come out Tuesday. They say, great. We come out. We do all the work on the farm. And then once we maintain or repair our machine, we ask the farmer, what else can we help you with? And we can do about 85 percent of the maintenance and repairs on all the competitive equipment on that farm. So instead of the farmer coming to a brick and mortar, we come to them. Instead of maintaining and repairing the product, we are maintaining and repairing the farm. And so it's a fundamentally different strategy than our competitors. And those dealers that our average dealer in North America is already 65% of their work is on the farm, not at the shop. Our best dealers are at 75%. We want to keep pushing it. And we've only had this out two years. Those dealers that are on the front edge of this have a net promoter score, which is our customers' feedback on how they like the experience, four and a half points higher than the others. And our dealers have one and a half points market share than those that haven't been adopting as much. So customers like it, dealers like it, they're adopting it aggressively. I talked about the North American number. South America is just the same from 2024 to 2025. South America service truck adoption went up almost 30%. By the end of 26, it'll be off that base. It'll be up about 40%. So both dealer organizations are moving forward quickly. The customers, once they experience this whole different way of working, really appreciate it. So that's topic number one of growing our FENT business through products and a different distribution. Number two is our PTX business, precision technologies multiplied. We are the largest precision ag business in the world. About $900 million in revenue today. We've had about six acquisitions we've put together. And once again, we're doing this business differently than anybody else. There's a part where we put that technology on our machines, and that's all completed. There's a part where we sell to other OEMs. We have about 100 other OEMs that buy directly from us the technology, and they put it on their machines. But then the real difference is on what we call retrofit, where we have a whole separate dealer channel. These dealers don't sell tractors and combines and sprayers. They only sell retrofit technology. And what that means is they'll go out to a farmer who's got a five-year-old competitive planter of one brand or a seven-year-old competitive sprayer of another brand and upgrade that machine with new automated feature and giving that existing machine new life, new capability, ability to do something in a smart way. So that whole retrofit business is a payback for the farmer about one to two years. It's a way lower cost way to get the latest technology than buying a new machine. High growth, high margin, and one that is less cyclical. We see that only dropping about a third as much as the regular OEM business. So that's number two. And then our third one is parts and service business, moving that from a reactive to a proactive business and anticipating when the customers are going to need through remote monitoring, rapidly growing our e-commerce business, and so on. So those three growth drivers are also all hitting nicely and driving a higher margin business where our margins in this business cycle are twice what they were in the last business cycle. Our business at the trough now is performing like the last cycle at the peak, and we've made commitments to get to 14% to 15% margins by 2029. through these growth letters and the cost savings that Indira talked about.

Steve Volkmann, Analyst — Jefferies

Great. So maybe let's dig in a little bit to those. When you talk about the PharmaCore project, when we talk about that with some other players in the industry, they say, well, we have trucks too. Like, what's the big deal? So what's the big deal?

Eric P. Hansotia, CEO

Well, the big deal is what's the priority? What's the focus? So all dealers had some remote service fleets, but they had their predominant asset base was fixed brick and mortar assets and the predominant mode was bringing the customer to the dealership our predominant mode is to do all the work on the farm these are heavy service trucks that can do pull an engine do a transmission do all the electronic diagnostics they can do everything they can weld they can do everything out on the farm and so our whole mindset is everything gets done on the farm and the other piece is mixed fleet Our competitors just do not operate that way. Our technology strategy is mixed fleet. Our distribution support strategy is mixed fleet. And our data platform, which we maybe will talk about later, is mixed fleet. So the ability to take data off of all these machines from any brand, have the farmer analyze their farm, and then send data back, a task file back, to any of the machines, regardless of brand. So the whole business is set up in kind of a symbiotic way where we're managing the entire farm, regardless of how it's constructed across the mixed fleet, which is fundamentally different than how the rest of the industry operates.

Steve Volkmann, Analyst — Jefferies

Okay, fair enough. I guess less capital intensity for the dealer as well, right?

Eric P. Hansotia, CEO

Way more flexible. They love, you know, a brick and mortar operation is very fixed. It's a fixed cost and it's fixed location. It's fixed everything. Whereas trucks, if the west side of the territory is hot for these couple of years, you focus over there. If the east side then becomes hot later on, you can bias over there. You can flex up and down more easily. The technicians like it because they can operate right out of their home. They don't have to come into the office every day. And so it's something that customers really like. Dealers like the asset efficiency, and we like it because of the strategic differentiation.

Steve Volkmann, Analyst — Jefferies

So where are we with coverage now? Do you have enough trucks? Do you have enough dealers? Is there still work to do there?

Eric P. Hansotia, CEO

Coverage is good. We have our large ag coverage in North America is over 80 percent. Same thing in South America. We're really working on penetration. And so one of the things we did this year is we worked with our biggest dealers and said, you've got to step up your game in terms of performance. We've invested heavily in redesigning all of these products for FENT, and you've got the best of the best products now. Then we invested over $2 billion in our tech business to give you a data platform that's a mixed fleet and cutting edge technology, that's in place. And we've invested in the service parts business where we've got the top performing better than any other competitor on parts fill rate. When you want a part, it's there for you. All of these investments are done. They're working. And in some of our big dealers, they had still low market share. And so we said, this is a line in the sand time. You have got to step up your game. And actually you're going to lose some of your territory depending on how you react to this this conversation you're going to lose a little bit or you can lose a lot and so they all had to come up with a plan about increasing the number of sales people they had and trucks and parts drop boxes and all these types of things increase their training and they all reacted they said this is something we don't want to lose and so they lost a little bit of their territory we gave that to the adjacent dealers that were performing better so it's kind of a we all got We've all got to perform higher now that we've been making these investments. We've got to make them pay off.

Steve Volkmann, Analyst — Jefferies

Let's switch to PTX because you mentioned that the aftermarket piece of that business is kind of the sharp end of the spear. And given sort of the weakness in the cycle, what are you seeing specifically there?

Eric P. Hansotia, CEO

Well, we're investing right down through the – as this market has been cooling off, we've been going full speed ahead on innovation. So we launched 14 products last year, 12 products this year. The innovation engine is really cranking. And what you think about first is modules, tech modules that go onto an existing machine to make it have new capability. That's the core of our business. But the other big investment is on data platform. We call it, there's two of them, Farm Engage for machinery management and Panorama to manage a farmer's agronomic data, like as planted, as sprayed, what their harvest data is, those types of things. And those two data platforms work with any brand of equipment, inbound or outbound data. So the innovation engine is going very well. Probably the long pole in the tent is building out this unique channel. We've said that we're creating, unlike any other competitor, we're creating this set of dealers that that's all they do is sell retrofit technology. and that takes some time because what we inherited was a whole coverage of global dealers for precision planting and a whole coverage of global dealers for Trimble. They laid on top of each other but they didn't have the puzzles didn't line up and so you have to go in area by area and have conversations with a few different business people to say hey what can we do in this area how do we merge you together so that you become what we call a PTX elite dealer and the elite dealer has the full portfolio. Everything that Precision Planting used to have, everything that Trimble used to have, they have it under one roof and selling it all and supporting it all very, very well. We've got about almost 90 of those in place now. That's about 50% of the global market covered. Our aim by the end of this year is to have about 120 of them established. That'll be about 60% of the market covered. We had about another year or two to get that up above in the 80 to 90 percent of the market covered range because we can't just snap our fingers. We've got to work through step by step. And every situation is different about who wants to grow, who may want to sell, who wants to merge, all that kind of stuff. And so it'll take a little bit of time. But once it's done, we've got this innovation engine that's cranking out solutions to the toughest problems all the way to full autonomy solutions combined with our own tech channel that's unique in the marketplace and a data platform to support it, it's going to be a very strong moat business that will grow to $2 billion. We've committed to growing this business to $2 billion by 2029.

Steve Volkmann, Analyst — Jefferies

Okay, good. One question I get a lot, we'll use the boilerplate from the 10Ks. Some of your competitors are bigger and have more resources than you do. How do you sort of stay neck and neck from a technology perspective? And do you feel like you are?

Eric P. Hansotia, CEO

Well, I mean, if you just take a look over the last 10, 15 years, this question comes up often. And you'd say, well, what's the result been? It's not so much what goes in the pipe, it what comes out the pipe that matters. And I'd put our innovation team up against any in the industry. I think our team is more, you know, we've committed with our strategy to say we're the most farmer-focused company in the industry. We spend more time right at the farm understanding the pain points and innovating solutions, whether it be in product or data or in support, to solve those solutions. So our mindset is very farmer-focused instead of being product-focused company. And if you look at the results in ways of measuring innovations, first of all, we cover, you know, we're upgrading, refreshing. We've got the best tractors. We are the planter expert. So our products have stayed fresh. And then when you look at the innovations, AE50 is the one in North America. We routinely win the most of those each year. We're the leader over the last five years. We've got the most awards of AE50. Same thing in Agritechnica. One of the competitors that spends multiples of what we spend has gotten zero to one or two of awards. And we get more like five to eight awards each year. So the industry recognizes the innovation muscle that we have and just the DNA inherent in the company. And that's what gives us so much confidence. We continue to invest. In PTX, we're investing 12% of sales on innovation. It's a tech company, so we're investing in it like a tech company. So I have no concerns about our ability to out-innovate our competitors and solve the biggest problems.

Steve Volkmann, Analyst — Jefferies

And you have a new executive in charge of that business now with whom most of us are familiar. What are his marching orders here? What's going to delineate success from failure for him?

Eric P. Hansotia, CEO

Yeah, so if you take a look, Damon Audia, who used to be the CFO, one of the brightest guys I've ever worked with, we've moved him into a business role. And we've been planning to do something like this for quite some time. and that's why it was such an easy transition with Endear because Endear has been getting ready for stepping into this role and is a natural, absolute great fit for being our next CFO. But Damon's mission is to deliver on the strategy. So there's no hard right or hard left turn. It's accelerating progress. So the innovation engine is going well. Keep fostering that. The talent we've retained, keep inspiring and firing them up and then accelerate the development on the channel. Grow our OEM partner base, but really make progress on closing out these elite dealer conversions. Okay, good. And deliver, but the bottom line is deliver a high margin business that's in the mid 20% operating margin. It's a, it's over 50% gross margin business, mid to high 20% with a $2 billion top line by 2029.

Steve Volkmann, Analyst — Jefferies

And the top line today is?

Eric P. Hansotia, CEO

But a little under 900 million. But we're at 85% of the mid-cycle. That $2 billion is a mid-cycle number, so we're a little bit apples and oranges there. If we were at mid-cycle with today's business, we'd be over 1.1, be 1.1, 1.2 billion.

Steve Volkmann, Analyst — Jefferies

Got it. Okay, good. So let's take a moment here. Does anyone have a question from the field? It is early. All right. Insufficient caffeination, I guess, but I can keep going. um let's switch uh again um a lot of focus on inventory levels both new and used can you just kind of take us around your key markets and let us know what you think the situation is so since the start of the year we've done a lot of work in managing our inventory levels down to our target sequentially so if we look at north america our target is six and at the end of second quarter, we were below seven.

Indira Agarwal, CFO

So we've made a lot of progress. One thing to highlight is our dealer inventory levels are forward-looking on 12 months of supply. So as the industry comes down, we are working harder to make sure the dealer inventory levels are at target. When we talk about Brazil, South America, our target is three months, and we are at about three and a half months. One important thing to note there is when we started the year, the dealer inventory levels were more skewed on aged older equipment. And that was on the non-tractor side. So the combines, sprayers, planters. So we had to work through the year providing incentive programs that were targeted to help our dealers move that inventory. So as we've gone through the year, the dealer inventory levels are getting to the normal level, but as we get closer to our targets, that pricing leverage improves for us because those discounts will start to moderate. Then we shift to Europe. Europe is where we talked about Germany as well. So this is where it was accumulation of dealer sentiment, cautious dealer sentiment, cautious farmer sentiment. So our target is four months. Our dealer inventory level was three and a half months. So we were much below target. So that shows that there's a healthy dealer channel level. So in a mid to long term, that will help us with improvement, with kind of absorption once the industry is ready, once demand will pull through. So overall, we've done a lot of work. One of the things we want to highlight, too, is because this is a forward-looking number, sequentially, if we look at units, we've made a lot of improvement to units like North America. North America, just in second quarter, in terms of units, that was a 7% reduction in units. And that was largely led by large eggs. So a lot of work, and we continue to stay very disciplined with our dealer inventory. We've grown North America's share. We've protected our pricing while normalizing our dealer inventory level. So that shows to the strength that we sell on value, the pharmacy value of our offering. And it's not as if you're loading the dealer channels or discounting. So we are working our way through, and we've made substantial progress in 26.

Steve Volkmann, Analyst — Jefferies

So what's your current view on production in the sort of end of this year relative to retail demand? Are you back to kind of even there?

Indira Agarwal, CFO

So as we've worked through this year, so North America, we were underproducing to retail by approximately 10%. We were underproducing in Brazil by about 15%. So as those dealer inventory levels work to those target levels, the idea would be, the plan would be to produce to retail as we start 27.

Steve Volkmann, Analyst — Jefferies

Okay. So what do you think the full 2026 underproduction is?

Indira Agarwal, CFO

I think in the ballpark, it will be in the ballpark of the 10, 15% for the full year.

Steve Volkmann, Analyst — Jefferies

So if 27 were flat, sequentially, you'd have that tailwind. we will have the tailwind.

Indira Agarwal, CFO

So it's just not that industry lifting on us, that producing to retail will give us better volumes, will give us better absorption. And with some of the market share gains we've had and protecting pricing and mix, all of this will set us up constructively in a different point for entering to 27 as compared to when we entered 26. So even if industry stays flat, there's more upside in terms of leverage for where we are.

Steve Volkmann, Analyst — Jefferies

Great. So you mentioned pricing a couple times in that answer. So let's dig in there as well. You have a global footprint and one that's a little different than others. Maybe first, just talk about how tariffs are impacting you.

Indira Agarwal, CFO

So tariffs on a full year gross basis, it's about $115 million is what our tariffs were in the second quarter, we did get refunds of approximately $20 million on IPA. So net fiscal year 26 was about $95 million was our tariff headwind. And look forward, I would say given the tariff environment now, we are watching 301, we are watching Canadian tariffs, I would say $100 million is still the baseline for us to look forward. So one of the things that we do have to remind ourselves is we've done a lot of work on the tariffs, as I mentioned before we are not looking to pass all of the tariffs to our farmers that's not the prudent way to do it this is where we go back to our cost base to say what are we doing in terms of sourcing and manufacturing efficiency logistics supply chain and layer it all over all of the opex efficiency work that we've done great all right one more chance from the field anybody all right great there's a mic so just hold on one second yeah just a quick question on competition um how do you use competition i'll just repeat it for the webcast yeah the question is how do you

Eric P. Hansotia, CEO

view uh competition from china especially at the low end yeah two different answers is it here yet today not so strong are we paying a lot of attention to it absolutely yes um so we we feel like brazil is probably the most likely entry point if you look at if you go down to brazil and you look around and how much how many Chinese cars are already there it's a market that's comfortable with that it's a and it's a it's a focus area it feels like from the Chinese competition but we're also seeing them trying to get into into Europe as well so we're we're paying a lot of attention to that looking at what we need to do with our cost structure and our value proposition to make sure that we shore up the position where they're most likely to enter the typical playbook that we see companies like that using are coming to the much lower cost, but not much lower performance. So still has a fair number of features set. The challenge they're going to have to work through is in farming, it's a high trust environment. So what's the support network? Do you have onsite parts and those types of things? And what we've seen so far is that's their biggest struggle. The product will get there over time, but it's the rest of the infrastructure that is, I mean, as challenging as it is to take our Fent brand that is well known and bring it into North America and South America and grow, and we have a full parts network, a full dealer organization, all of that, to bring a brand new brand into a new market with no supply base, no parts network, no dealer organization, no support capabilities, it's not, you know, automatic. So this will take some time, but we're not discounting it either.

Steve Volkmann, Analyst — Jefferies

We're taking it very seriously. anyone else all right we have three minutes left so this might not be fair but there's been some change in your ownership structure and that's allowed you to be more aggressive with share repurchases so I guess the the meat of the question is share repurchase versus M&A how are you thinking about capital allocation so in the second quarter we did approximately three hundred forty five million dollars in shape share repurchase so ownership structure you're referring to the fang in our neck, which was Taffy, who was also an activist shareholder, a largest shareholder.

Indira Agarwal, CFO

We've been able to come to an amicable settlement now when we do a share repurchase. They're required to proportionately participate. So out of the $345 million, $50 million was Taffy. So when we think about capital allocation, it's always been a balanced framework for us. We want to continue to invest in our business to support that long-term growth and competitiveness we want to be able to pursue targeted technology capabilities investment grade balance sheet is important for us because it helps us navigate the down cycle while we can strategically invest when the opportunity shows up and return of capital to shareholders so when it comes to mna we are more biased towards technology capabilities that will help us accelerate the ptx roadmap that eric talked about i have both strength the data or the software layer So we look at M&A and share repurchase as not being mutually exclusive. It's the value of the opportunity set, and we'll continue to assess based on cash generation, liquidity, operating needs, and what leverage is. So it's balanced, and we'll stay tuned.

Steve Volkmann, Analyst — Jefferies

All right, good. Well, with that, maybe we'll wrap up then. Thank you guys so much. Appreciate the insights, as always, and thanks, everyone, for your attention.

Indira Agarwal, CFO

Thanks, Steve. Thank you, Steve.