Thank you for being here. Good morning, and welcome to the CNH First Quarter 2024 Results Conference Call. Please be aware that this call is being recorded. I will now hand it over to Jason Omerza, Vice President of Investor Relations. Please proceed.

Thank you, Briana. Good morning, everyone, and we apologize for the delay. We'd like to welcome you to the webcast and conference call for CNH Industrial's first quarter results for the period ending March 31, 2024. This call is being broadcast live on our website and is copyrighted by CNH. Any other use, recording, or transmission of any portion of this broadcast without the express written consent of CNH is strictly prohibited. Hosting today's call are CNH CEO, Scott Wine; and CFO, Oddone Incisa. They will use the material available for download from the CNH website. Please note that any forward-looking statements that we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement including in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report on Form 10-K, as well as other periodic reports and filings with the U.S. Securities and Exchange Commission. The company presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP measures is included in the presentation material. I will now turn the call over to Scott.

Thank you, Jason, and thanks, everyone, for joining our call. Before we review the quarter, I would like to address my upcoming departure from CNH. First, I want to sincerely thank the team here for delivering three straight years of record sales and profitability and our notable transformation into a customer-focused, technology-forward culture. I'm proud of the team's accomplishments, especially the acceleration of our tech development, the successful deployment of CBS, and strategic sourcing to drive operational efficiencies and improve our through-cycle margins, which will surely be a key topic of our discussions today. I have full confidence in our strategy and our ability to achieve it even with slowing market demand. We were early to get after productivity, our cost reduction targets are achievable, and we are on track to deliver them. Our tech in-sourcing work is progressing, and we have a line of sight to execute everything we set out to do. I believe in the team's ability to continue delivering margin expansion while outselling our peers. Simply put, the business is solid. My reasons for leaving are personal and have nothing to do with the ag cycle, our strategy, or CNH's bright future. As of July 1, Gerrit Marx will rejoin CNH as the new CEO. Gerrit and I have worked closely together when he ran commercial vehicles for CNH and he has been CEO of Iveco since its spin-off in early 2022. He's a proven leader. He has my full support, and I am confident he will do well here. Now on to our quarterly results. We said the first quarter would be challenging from a demand perspective, and that is how it played out, especially in South America and Europe. We also noted competitive pricing pressure where dealers are working hard to reduce their inventories. Nonetheless, we've maintained much of our pricing and profitability gains with construction even increasing both their absolute profit level and their margin percentage year-over-year. Cost efficiency remains a priority for us in this environment. We were ahead of the curve on instituting hard but necessary programs such as our SG&A restructuring to respond to the realities of operating in a cyclical downturn. We will build on the cost reductions already implemented, and those savings will compound throughout the remainder of the year. And we continue to advance our tech stack, expanding our team and integrating solutions from our acquisitions effectively into our business. We announced exciting developments in satellite connectivity and off-board management earlier this week, and we will continue to leverage innovation as a competitive advantage. In line with our expectations, first quarter consolidated revenues were down 10%, and industrial net sales were down 14% as the industry adjusts to even lower demand and to dealer inventory levels. We proactively addressed South America dealer inventory last year and furthered those efforts in the quarter. Industrial EBIT margin was just under 10%, down 180 basis points compared to last year. Despite the lower shipments, decremental margins were in the mid-20s, reflecting the positive price realization and cost reductions. Competitive pricing pressure was the most acute in South America, but the team there is doing a great job managing the situation and keeping our operations profitable. Adjusted EPS was $0.33, down just $0.02 from a year ago. Throughout the quarter and across all regions, we saw decreased demand in the end markets. However, our retail deliveries in the quarter outperformed the overall market. Despite production cuts in the quarter, we did not achieve our desired reductions in dealer inventories, so we still have work to do. We continue to lean out and simplify our organization. We completed the first phase of our restructuring program in Q1 and further actions such as combining and rationalizing our commercial back office operations are on track. We plan to conclude the restructuring program in Q2, but not our focus on cost. Derek Neilson and his agriculture team continue to execute in the quarter, achieving favorable price realization despite lower demand by working with our dealer partners on effective sales programs. Construction gross margins and EBIT margins were both up 150 basis points in the quarter. Although volume and mix were challenged, particularly in Europe, Stefano Pampalone and his team’s focus on quality and cost efficiency continues to support improving profitability. Our Financial Services business delivered strong results. Their net income grew on larger receivable balances, and despite some increases in delinquencies, we have a very strong credit portfolio. As we look at our strategic priorities, I want to start with some recent developments on the tech side. Our obsessive focus on customer-centric development has shown us the importance of being the easiest to use OEM. This week, we introduced FieldOps, our brand-new web and mobile digital app. FieldOps will lead the industry in usability and intuitive design. Everything farmers need to run their operations will be at their fingertips with a dramatically improved look and feel. The FieldOps interface simplifies farm management and makes data accessible from anywhere, all with fewer clicks to accomplish every task. It also streamlines our internal workflows as our universal approach to tech development means there is one single app for all customers. The FieldOps web and mobile apps launched in June, and the overall customer experience is already garnering rave reviews from our beta testers. This week, we also announced our collaboration with Intelsat, which brings multi-orbit satellite connectivity to more of our customers' machines so they can access our full suite of precision offerings from remote locations. We have been judicious in our approach to connecting agricultural space. We needed to partner with technology that would work in farm severe operating environments. Intelsat's antennas have been proven in critical applications and inhospitable conditions, so we can bring them to market quickly with confidence they will perform. We also serve customers in areas where low orbit satellites do not consistently reach Intelsat's multi-orbit constellation of satellites by its greater coverage with a stronger connection. Becoming a more productive company is a key part of our strategy, and successfully executing our cost reduction program plays an important role. We continue to drive production cost savings through procurement, logistics, and manufacturing efficiencies. Some of those savings are held on the balance sheet at the quarter, and as we build inventory for the coming season, we are confident in our full year targets. The absolute dollar impact of these savings is somewhat contingent upon production levels, which we will adjust as industry demand necessitates. As mentioned earlier, the first phase of our restructuring program has been implemented, and we have imposed strict discipline on our discretionary spending. We are already working on additional projects such as expanding support operations in low-cost countries. I will now turn the call over to Oddone to take us through the financial results.

Thank you, Scott, and good morning, good afternoon to everyone on the call. First quarter industrial net sales were down 14% year-over-year to $4.1 billion. This decline was mainly due to lower agricultural volumes in all regions, partially offset by net price realization. Adjusted net income decreased by 11% with adjusted EPS down $0.02 to $0.33. Higher net income from financial services, lower tax rate from discrete tax adjustments, and lower share count, all contributed to the relative strength of the unit's earnings per share. Industrial free cash flow was an outflow of $1.2 billion, and an outflow is normal in Q1 as we will finish good inventory in support of the Q2 selling season. And this year, we had additional working capital impacts from lower production levels. In agriculture, the net sales decrease of 14% in the quarter was driven by lower volumes and the year-over-year impact of inventory changes. The earning inventories grew significantly in the first quarter of 2023 as our supply chain was dramatically improving, while in 2024 delivery levels slightly decreased at the global level. Lower sales volumes were partially offset by favorable price realization despite some fierce competitive pricing pressure, especially in South America. Gross margin for agriculture was 23.8%, down from 26.2% in Q1 2023, but up sequentially from Q4. The main driver for the margin compression is the lower volumes with production hours 22% lower compared to the first quarter of 2023, which impacted fixed cost absorption. However, we were able to reduce product costs for the manufacturing efforts despite continued labor pressures. As Scott mentioned, not all of the product cost actions implemented in Q1 were realized in the quarter P&L due to company inventory holding those savings on the balance sheet until they are sold to dealers. The SG&A savings of $33 million reflects our restructuring program and helps mitigate the decremental margins. Adjusted EBIT margin was 12.5%, 100 basis points lower than last year. In Construction, net sales for the first quarter were down about 11%, mostly due to lower volumes with net pricing about flat. Gross margin increased by 150 basis points to 17.4% as improved product costs more than offset the volume impact. Adjusted EBIT also benefited from the lower SG&A expenses ending the quarter at a 6.7% EBIT margin, well above last year's group levels. Net income of our Financial Services was $118 million, a $40 million increase compared to Q1 2023. The notable improvement was mostly driven by solid market gains, but the adjustment to higher interest rates is now largely completed on the receivable portfolio. We also had improved volumes across regions and a favorable effective tax rate. Retail originations in the quarter were $2.5 billion, up $300 million compared to the same period of 2023, as we continue capturing a high percentage of our end customers' equipment financing needs. The managed portfolio at the end of the quarter was nearly $29 billion, up over $4 billion compared to the prior year. You will note that delinquencies ticked up in the quarter, which is normal when market contracts. Higher delinquency rates are in pockets of our portfolio and mainly in South America, where we are seeing more frequent late payments, but no increase in credit losses so far. The delinquency rates we are seeing now are at the same or lower levels than in previous downturns. Our credit reserves are properly set to protect our future profitability. Finally, just a quick note on our capital allocation priorities and specifically, on shareholder returns. We repurchased over $580 million worth of stock in the first quarter as we completed our $1 billion extraordinary buyback program and moved on to the new $500 million program in March. We continue to buy shares now, and we pay our annual dividend of about $600 million in the coming weeks. CNH is a cash-generating business, and net M&A needs, it is our goal to return to our shareholders nearly 100% of industrial free cash flow through dividends and share buybacks.

All right. Thank you, Oddone. Reviewing the full year outlook for agriculture, our forecast for tractors is largely in line with previous projections, albeit moving more towards the lower end of our range. We have reduced our expectations for combined industry volumes in both EMEA and South America. In aggregate for our key markets, we now estimate that agriculture industry retail sales will be down about 15%, putting us at the low end of our previous guidance. Consequently, we are lowering our 2024 agriculture net sales forecast to decrease by 11% to 15% from 2023, now down from a previous projection of down 8% to 12%. This reduction pertains to lower industry demand and our intention to keep channel inventory in check. With this lower volume, we will decrease our EBIT margin forecast by 50 basis points to between 13.5% and 14.5%. In Construction, we have slightly improved our industry forecast for heavy products in North America but marginally lowered the projection for light equipment in APAC. In the aggregate, we still expect industry volumes to be down about 10%. We are reaffirming our net sales and EBIT margin forecast with sales down 7% to 11% and EBIT margins flat year-over-year at 5% to 6%. Combining the agriculture and construction net sales forecast, industrial net sales are expected to be down 10% to 14% versus last year, with industrial free cash flow now estimated at $1.1 billion to $1.3 billion. We've also driven the EPS projection by $0.05 to $1.45 to $1.55. What I would like you to take away from our call today is that we are on track to execute our strategy which will see us through the downturn while strengthening our position for the inevitable upswing. We have built a leaner and more resilient company that puts our customers at the center of everything we do. We have a deeply ingrained focus on margin and market share improvement as we continue on the path of marrying great iron with great tech. We've simplified our capital market profile with a single listing in New York, and we have an experienced team who under Gerrit's leadership will take CNH to even greater heights. Gerrit and I have worked together since I joined CNH and he is not only a strong operator and a highly respected colleague, he’s a good friend whom I have tremendous confidence in. I'm grateful for my time at CNH and would like to sincerely thank our hardworking team. I will remain a significant shareholder and a cheerleader. Thank you all. Briana, that concludes our prepared remarks. If you could open the line for questions.

Your first question comes from Mig Dobre with Baird.

It's a shame to see you go, and I understand your comments about the circumstances around your departure, but I do want to ask, timing-wise, you're stepping down here before we're really kind of seeing the fruits of your labor. You and the team over the past couple of years have done a lot to transform the business. So I guess two questions around that. As you're sort of looking at the execution or operating momentum, how do you sort of frame that relative to your expectations when you first designed the strategy and the plan? And the second thing is, how is Gerrit coming into all of this, right? I mean how familiar is he with the strategy that you put in place? Is it fair for shareholders to expect Gerrit to maybe take the company in a different direction than the course that it's in? What is your communication with him been so far?

I'm really thankful for the impressive work the team has done in expanding margins and becoming more customer-focused. I'm comfortable leaving because the team has cultivated a strong culture centered on customers and margin delivery, which will persist. I have a significant interest in the company's continued success, and Gerrit and I have been communicating regularly since the announcement. While he didn't lead the agricultural businesses, he has been involved in the operating reviews and understands our approach well. He will certainly have his own perspective, but our overarching strategy focuses on margin share, market share gains, and margin expansion. Those objectives won't change regardless of who is leading the company. The approaches to achieving these goals may evolve, but the momentum from the construction results delivered by Stefano's team and Derek's accomplishments over the past three years will continue to drive us forward, with or without my presence.

Understood. And my follow-up. Maybe a question on dealer inventories. I'd love to get your perspective as to what you're seeing in the channel. And I'd appreciate it if you could comment by geography and also by segment. I'm curious about what you're seeing in construction as well as agriculture.

I'll start with construction. Stefano and his team continue to perform well. Last year, we may have overestimated agricultural shipments, but construction did not face that issue. The strong retail performance in the fourth quarter put us in a much better position overall for construction, so we will focus on demand in that sector throughout the year. On the agriculture side, we had a good market share performance in the first quarter, but even with significant production cuts, we did not reduce dealer inventory as much as we intended. We need to address this in the second quarter. Combines are facing the most pressure, with used inventory increasing and demand significantly decreasing, so we will make adjustments moving forward. Interestingly, the North American tractor market remains robust. We are committed to reducing dealer inventory primarily in the second quarter, with some likely extending into the third quarter, but overall, I believe we are in a good position.

Your next question comes from Jamie Cook with Truist.

Scott, sorry to see you go because you've done a great job with the company. So I guess my first question, just on production cuts, Scott, I know you said you have more to do in the second quarter. Can you talk to how much you think you're going to underproduce retail demand? And do you still think that you will be in a position where as we exit 2024, that we should be able to produce in line with retail demand, given your view of the market today? And then my second question, given the stock underperformance based on concerns about the magnitude of the downturn and management changes that weren’t expected. I'm kind of wondering how you guys are thinking about utilizing your balance sheet. I know you've done a lot in terms of share repurchase. A lot of that was associated with the delisting, but just to give the market confidence, I guess, that there still is a cost and market share story there. So I'll wrap up with those two.

Thanks, Jamie. We are very optimistic about the production adjustments. Derek and his team are primarily focused on agriculture but have carefully assessed our ongoing production for the next three quarters. While we cannot predict the market with certainty, we believe we will be able to ship according to demand not only in 2025 but also later in 2024, which gives me confidence. Oddone, would you like to discuss the share buybacks and our current status?

Yes. So I had in my prepared remarks that we completed the $1 billion program. We started a new $500 million in March, and we are bearing on that program. We're going to pay $600 million in dividends this year. So if you add that up, it's a considerable amount of money that is going out to shareholders. And if we consider the behavior we are having now on share buyback and our dividend, we don't expect to change our dividend policies. Basically, almost 100% of our free industrial cash flow will be devoted back to shareholders if we exclude any M&A that we may have considered, and we don't have any large M&A upside right now.

Your next question comes from Nicole DeBlase with Deutsche Bank.

I guess maybe starting with picking up where Jamie just left off on production and agriculture. Is the expectation that the worst year-on-year production decline occurs in the second quarter? And then guys kind of get back to more modest declines in the third quarter, just maybe putting a finer point on the quarterly cadence in the ag segment?

Yes, that's true, and it's also true because of the comparisons year-over-year, that the comparisons get a lot easier for us in the second half. But also we're pretty confident. The production cuts are one half of it. The other part is driving retail, and I'm really confident in how the team is working closely with our dealer partners to make sure that we accelerate and capture every one of those where we can. I will, since I mentioned it, talk about the fact that we're not going to chase and we’re going to be disciplined. When some of our competitors discount things to get sales, we are not going to do that. I think you see the price realization that we are talking to; we are being disciplined on managing price.

Got it. That's helpful. And then just one on construction. The margin performance was really impressive there this quarter. You guys have still maintained the guidance for 5% to 6% for the full year, which implies a step down from first quarter results. I guess what's driving that?

Well, first of all, you can't not recognize the significant improvement in margins as Stefano and his team have delivered. But the reason we didn't raise it is that a good bit of the beat in the first quarter was related to ongoing strike impacts that we had in the first quarter of last year that don't repeat throughout the year.

Your next question comes from David Raso with Evercore.

I'm just trying to square up in agriculture. The sales guide is down 13%, but your end market outlook is down 15%. Obviously, the parts business itself doesn't move around as much as unit forecasts for the industry, the complete goods. In the fourth quarter of last year, you did underproduce retail. So I appreciate those two offsetting factors. But when you're thinking about the rest of the year, I don't think pricing is that high. I'm just trying to make sure that we're level-setting where you expect inventory to end the year. Just the math isn't working for me as easily as I would have liked.

Well, that needs some mix in there. There is a market share consideration, and we expect to gain market share to outperform the market this year. If you look at how we behaved compared to the market last year in some parts of the world, starting with South America, we have space to recover into production or sales. It’s a question of stocking and destocking the dealers. We kept our dealers' inventory basically flat this year. It was slightly down this quarter. And we expect to have inventories at the end of the year lower than where they were at the end of last year.

And don't forget, our penetration of technology sales is improving as well throughout the year.

Yes. I mean, it feels like there's at least enough market share there to have to put that into the equation because when you look at the mix, it's actually high-ticket items that are down more than the low-ticket items, right? Brazil combines, really combines around the world as well as even within North America. It's the larger tractors that are down. That's why. But obviously, there's a market share component there. Lastly, on the margins for the rest of the year in agriculture, if you square that up with what you're trying to insinuate on Slide 9 of how much savings are left for the year? And I know that covers both segments. So I guess the question is on price and price costs in general, does the math suggest we are not changing the price outlook? So I'm just trying to square all this up.

No, it hasn't. It hasn't. I mean, we still have the same consideration in pricing that we had before, modest, very modest price increase, but some price increase and continued reduction in our cost of production, and then a positive impact of our SG&A actions.

Your next question comes from Mike Shlisky with D.A. Davidson.

Scott, I'll add my best wishes to you as well. I wanted to talk quickly on pricing in agriculture. You mentioned positive pricing in the quarter. And I know that's just wholesale, not necessarily retail where there was some discounting happening around the world from your competitors, but I would just say that you're broadly speaking, when you price to farmers, you're not looking to play that game right now. Is that implying that maybe you're trying to keep things open for some growth in 2025?

I mean, obviously, we're going to do everything we can to position ourselves for growth in the years ahead. But right now, it’s just being disciplined on price realization. And like I said before, we were mostly covering costs before. But Derek and his team have really done a nice job. It's a region-by-region execution. We don't have a universal policy. I think what we're striving to do is get price where we can, get price where it makes sense, but get market share and retail acceleration to the extent we can. I think the team has done a really good job region by region executing that strategy. We're comfortable that as we exit the year, and again, I'm most proud of what the team has done in South America, having us in a very good dealer inventory position. So as soon as that market turns, we'll be able to take full advantage of what happens. I think it's reasonable to assume that what we did in the first quarter with pricing will maintain throughout the year.

Okay. Great. And then a follow-up on how you grow your tech stack. I guess I'm curious with the Intelsat agreement, are there any one-time costs that will take place this year or next to get either the software or the hardware upgraded on current systems and any future systems that get sold to farmers here? Or is it kind of baked into each individual sale or some other way to account for layering in Intelsat capabilities?

No. The reason we chose Intelsat is due to their proven durability, which reduces the amount of validation work required. I'm hesitant to describe anything as plug-and-play nowadays, but this is about as close as it gets. Mark Kermisch and his team have done an excellent job assessing the opportunities and confirming that we can implement this successfully. Brazil will be the first market to see the benefits, which will occur later this year.

Your next question comes from Kristen Owen with Oppenheimer.

And Scott, also best wishes to you. I wanted to ask about the market share comments. This being obviously one of the two biggest drivers that you have going forward. You highlighted the outperformance relative to industry in the first quarter. Just wondering how much of the market share gains that you're seeing are from this recovery given last year you mentioned you're still comping some of the strike implications. What are you regaining there? And how well positioned are you from a market share perspective? Do you anticipate that this will be incremental market share versus just making up what you lost? And then I have a follow-up question on the tech stack.

Well, we made up throughout the year last year. I was really proud of the work the team did to just accelerate our production throughout the year. I think we're there again, about to make it to demand. It's a street fight out there. A lot of what we've done is just driving customer-centric focus. I think you're seeing that play out with our dealers as we're able to win more of those battles throughout the year. But I mean, don’t expect big, I mean it is a battle. I'm not suggesting it's easy, but I think what you saw in the first quarter is the team’s ability to execute that. What we've guided is the expectation that this will continue. The product portfolio is quite strong right now. As you've seen with some of the announcements of late, it's just getting better. We feel like technology is improving, the product portfolio is getting better, and the team's execution is getting better. If you do all of that, you can expect the market share to improve.

Right. So then a follow-up on the tech stack. I sort of talked a little bit about the Intelsat being as close to plug-and-play as it can get. I mean, is there an incremental modem? Or maybe help us understand how you actually go about implementing that and how that fits in with the integration of Raven and Hemisphere GNSS, sort of what that unlocks for you on a go-forward basis?

It is something we have to do. The ruggedness we discussed has been addressed; for a long time, we have figured out how to integrate various cell phone signals into our operating system. Mark and his team are confident in their ability to integrate this smoothly into both AFS Connect and PLM Connect in the future.

Your next question comes from Tami Zakaria with JPMorgan.

Scott, congrats on completing a very successful time leading CNH. I'll miss you but best of luck for the next chapter. My first question is, can you comment by geography, what you expect total sales decline in the agriculture segment to look like for this year? You're guiding to down 11% to 15% in ag sales. Can you give me some color on how we should think about North America versus South America versus Europe for the year?

Well, South America is where we are seeing the highest declines in percentage terms. Europe, as we commented, we also see industry down, in particular in the combine market. North America, in percentage terms, declines are lower, but of course, the market is larger. So I would say the declines are across the board; they're more intense in South America right now. We may recover at the end of the year. But that's what we have. But I would say in every region, we have to find improvements.

Well, again, we had some benefit in the first quarter compared to the year before that didn't have the Burlington costs in there. So that's part of the reason we're not guiding it. We do expect that pricing pressure will be greater in construction than it is in agriculture. So we're going to have to fight that battle to the extent we can. But you cannot talk about construction without looking at how the portfolio expansion is helping drive both sales and margin. The relocation of production to low-cost regions has helped drive improvements.

Your final question comes from Michael Feniger with Bank of America.

Scott, you were more cautious on the ag cycle, getting CNH in a better position for the downturn kind of became clear. Just where we stand today, 450 corn, rates potentially staying higher for longer. If there's no significant change within some of these variables, is it tough to grow on that in 2025? I'm just curious what you feel like your key customers should be kind of keeping our eye on as you're trying to position the company for 2025, leaving it in a good place.

Well, I've tried, obviously, coming into this business, there was a lot to learn. But if I learned anything, it's not to comment or opine on the ag cycle. So you're not going to trap me into saying something about 2025 on this call.

Fair enough, Scott. We discussed margins and some insights on market share. I'm interested to know, looking beyond 2024, which regions and product groups do you believe have the greatest potential for gaining market share? Is it through new product launches and your efforts with Raven? Do you think that progress is already underway, or are there additional strategies that need to be implemented to significantly increase market share compared to when you first joined the company a few years ago?

The term we like to use is great iron and great technology. When I started, people often remarked that we have great iron but wished our technology would improve. This improvement is essential for our future market share. Recently, we’ve made announcements indicating progress. We believe our technology is improving, our product portfolio is getting stronger, and our team's execution is enhancing. All of these factors are promising for our potential to increase market share in the future.

There are no further questions at this time. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.