AGCO Corporation (AGCO) Earnings Call Transcript & Summary

All right. Good afternoon, everybody. Thanks for joining. Seth Weber, machinery analyst with Wells Fargo. Very pleased to have with us on stage team from AGCO, Chief Financial Officer, Damon Audia; Vice President, Investor Relations, Greg Peterson. Gentlemen, thank you for coming, participating. For those not familiar, AGCO is the largest pure-play farm equipment company. The company has an increasingly balanced regional revenue and margin mix. They've been a big beneficiary, big -- it's been in the precision ag movement, which we think they're targeting about $1 billion of revenue over the next couple of years for that category. And it also has some self-help margin and market share components to the story. So gentlemen, thank you for coming again, and I look forward to the dialogue.

It's glad to be here.

So why don't we start there's obviously -- there seems to be some decoupling going on, right, with some farm surveys have come back a little bit more cautious in various regions around the world. But your sales and your orders, your margins, your pricing are all kind of better, good, better -- getting better, good visibility through the year. Can you just talk through that dynamic of this kind of these seemingly different trends that are out there?

Yes. So I think, Seth, if we started -- I mean, at the commodity price level, commodity prices are still very strong. Corn, I think yesterday is around [ $6.15 ]. The futures were around [ $5.50 ]. And when you look at that price for the average farmer, that's going to deliver relatively strong farm income for them, especially as their input -- there are other input costs like fertilizer, diesel have been coming down over the last 1 year. And so although we don't expect farmer income to be at the same level that it was last year, we still expect farmer profitability to be very strong this year, and that's driving them to continue to reinvest into their businesses and things -- increasing their orders for large ag equipment. When we look at the age of the equipment out there relative to the past cycles, that large ag equipment is still very aged. So there's still opportunity for that to come back into more with the traditional level. And then you layer on the incremental technology that's being added to the equipment versus where it was several years ago, or significant incentives for those farmers to want to upgrade their equipment. So when we look at that as a sort of the highest level, it lends itself to a strong macro cycle. When we look at some of the more near-term issues that we think give us this opportunity for the cycle to stay into '24 and maybe beyond, if you look at the stock-to-use ratios, they're still relatively low versus historical standards. You have people talking about increasing their stock for political or for food security, or countries talking about increasing the reserves. We know that as China has started to reopen after COVID, increasing consumption going there. We think about the input or the source, the Ukraine, which used to supply 13% of the world's calories, even though they're exporting a little bit, it's significantly less than where it used to be. And even if that conflict was to end tomorrow, that 13% is not coming online anytime soon. So you have all these macro factors layer on things like the ethanol consumption, focus on renewable diesel, putting more and more demand for the commodities, which should lend itself to strong commodity prices for an extended period of time. So we sort of feel -- we feel more optimistic that, that commodity price could lend itself to further strong ag demand into the future at the large ag space. The small ag's a little bit different for us, I think on a global basis. We have seen that market come down in most parts of the world as we go back into the COVID era, there was a peak demand as you saw homebuilders, landscapers, novelty farmers really driving small ag demand as interest rates have increased around the world as GDPs have slowed, a lot of that has put pressure on those smaller ag consumers who are more influenced by things like that. We've seen that come down last year. We expect that market to go down again in 2023 but being offset by large ag demand. So when we look at it overall, we feel good about large ag. No surprise in what we're seeing with small ag. When we look at our order books, again, that sort of lends itself or reaffirms our beliefs. So if we look at Europe, where our order book is done throughout -- through the end of 2023. We haven't quite seen farmers invest or put orders in for '24 yet sort of the timing or the uncertainty of what the markets will hold. If we look at the U.S., again, we're booked through '23 and for some large ag, already booked into 2024. And I think as you heard and we said this on our call, we've actually curtailed our large -- our order book in the U.S. in order to make sure we're improving our customer service. And I'm sure we'll talk about that. But part of that was delivering on that customer experience so when we tell the farmer, he's getting his product or she's getting her product in August. We historically -- we were then coming back and saying, "Oops, it's September, October." And so as we try to focus on improving customer service, we've sort of curtailed the order book in the U.S., but still seeing very good demand, especially for the large ag side of the house there. And then in South America, we've been limiting that order book to 1 quarter in advance. So as we said on our call, when we opened our order book for the third quarter, that order book filled up in 1 day. So again, another signal that the markets are staying strong. We're seeing good demand. And again, it lends itself in our belief that we can see this cycle going into '24 and hopefully beyond, but hard to predict that far out at least right now.

Okay. That's great. Maybe if we could just tie back to a couple of things you just mentioned. Can you talk to on the U.S. orders that you're taking for '24? Can you talk to the pricing that you're taking into those orders?

Yes. So we do have some incremental price increases. Again, if you look at the way that we tried to handle pricing as a company, we generally try to cover inflationary cost plus some sort of holding our margins. And we use our input costs in many ways, coupled with what the market demand is to set our pricing. And if you go back a couple of years ago, when pricing or when inflation was quite high. Last year, our pricing was around [ 24% ]. That was to cover a lot of these inflationary headwinds that we were seeing and deliver a little bit of a net pricing positive. So we did that in 2022. When you look at what we've talked about this year, we said our pricing will be around 8%. And again, that is in order to offset the material cost inflation we're seeing and net a little bit of positive margin performance. As we look into 2023, I think what you're seeing is material costs coming down so I would tell you the pricing, although we're not ready to go out with a forward look for '24 pricing. But just looking at the input costs tend to coming down, you're probably going to expect to see the pricing levels come down a little bit lower than what you're seeing today at 8%, but a little bit will depend on where those material costs are. Our goals are always to again, if inflation is 3%, hopefully getting pricing something north of 3%, if inflation is 1% or 2%, something north. And so we'll sort of see what our material costs look like. But when we set our new pricing for '24, we're looking at what our input costs are, making sure that it's sort of net pricing or margin positive.

Okay. And then on the low horsepower side, like you said, it's been going on -- going down for the last year to -- what are you doing from a production perspective? And can you talk about dealer inventories in the channel on the low horsepower side?

Yes. So again, generally, what I'd say at a high level, dealer inventory around the world on the small ag is sort of at the optimal level or maybe a little bit high right now as we sit here at this time of the year. But again, if you think about North America, for example, this is their peak sellout season as the farmers are starting to sell. So again, not surprising that the low ag is a little bit above the inventory levels, the optimal inventory levels there. But we are adjusting our inventory or our production schedules on small ag. I think the good news for AGCO is that we don't make all of the small ag. We do buy from third-party suppliers overseas. And so our ability to reduce our orders from them gives us a little bit more flexibility. We're not dealing with the absorption, we -- maybe other companies are on the small ag. We do make some in South America, and we do make some in China, but we're adjusting production there. The other place where you probably see some small ag inventory build, and you may touch on this is in South America. Given the financings that are then out there, we have seen some buildup in the small ag as the small farmers were waiting to see if there was any government incentives. So as I'm sure, if we talk about that, Greg will sort of fill you in the details, but we're hopeful that, that sort of works through with some of the recent announcements by the Brazilian government.

Greg, you're up. So what -- can you talk about the dynamics in Brazil with the financing programs? What's going on there? Is something that you think could bleed into the high horsepower market?

Yes, absolutely. So Brazil is a little bit different in that the only subsidies that the Brazilian farmers get are these lower interest rate loans. There's a couple of different programs that the Brazilian development bank funds. There's a program for small farmers called PRONAF. They're all kind of under the Phenome umbrella. But the PRONAF program is a program, as I said, for small farmers, interest rates have been about 6% and it should back up and talk about the fiscal year for Brazil is the July 1 through June 30. So we're just getting to the end of a fiscal year. And what happened with that small loan program is that it ran out of money in January. And because the interest rates are so attractive, if you go to a commercial bank, it's 15% or 16%. This loan program for small farmers is 6%. Most of the farmers that are going to buy tractors in that category as much as 90% go through that program. So the program ran out of money, and they've basically been sitting on their hands, waiting for more funding to come along. The good news is the Brazilian government last week announced $800 million of additional funding to kind of get the program through until the next fiscal year starts. So it sounds like a lot of money, but it really is going to have to last for the rest of June and most likely through most of July. So how that has impacted the industry and our business and demand inventories, we -- and I think not just AGCO, but the industry continued to produce tractors in the first quarter deliver them to our dealers. So our dealer inventories increased in the first quarter. So we haven't really felt that yet in terms of AGCO results. So next year, or next quarter or in the second quarter, I should say, we'll start to feel that in that we have lowered production. So you'll see that in our second quarter results. Now as these loans are going to start to be processed, we would expect to see that outflow out of our dealer network, the retail demand pick up. And so late probably this month and probably more so in the third quarter, we should see some improvement in the small ag sales. So that's kind of the picture on the small ag. The big ag, also, there's a program funded by the Brazilian bank called Moderfrota. Those interest rates of roughly 12% this year, much closer kind of to the commercial bank rates. What's happened really over the last 3 or 4 years is the bigger farms have kind of weaned themselves off that program. In fact, there's actually a limit now that the Brazilian bank have put in. I think it's -- if a farmer sales are over $10 million, then they don't qualify for that program anymore. So we talk a lot about the [ Mogi das Cruzes ] region in Brazil, kind of that Midwestern region. Most of the farmers there don't qualify. So the fact that, that program is run out of money hasn't really impacted that business and demand is continuing strong. That just coincidentally, that program ran a money in October, and we won't see replenishment until the new fiscal year funds arrive. Like I said and like Damon has said, demand is very strong for the large ag guys, margins are really good. So we expect that to continue through at least the third quarter when we have orders.

Just going back to your comment about second quarter, you made this dislocation, is that part of your guidance?

It is, yes. At this point already. It was reflected in our guide.

2023 projected results.

Yes. Maybe if we could just take it back to AGCO specifically for a minute. You guys -- at your Investor Day, you talked about outperforming end markets by 400 or 500 basis points or the industry, maybe can you just kind of walk us through the various components of that? I know some of it's Fendt, some of it's Precision, but just kind of update us on how that's going and maybe try and fill in some gaps there?

Yes. So if we think about what we communicated at the December Investor Day is we know we're cyclical, and that's not going to change the business we play in. But given the 3 growth vectors that are differentiators for AGCO, we would expect those 3 growth factors to help us outpace the industry 4% to 5% regardless of where we are in the cycle. And so what we said of those 3, the first growth vector is our parts business, high margin. That business has been growing sort of in the high single digits over the last couple of years. So as we have tried to focus on 2 different transactions in the parts business, AGCO selling to the dealer, the dealer selling to the farmer. Today, both of those are around 80%. So we have 80% of that dealer's business. The dealer has around 80% of that farmers' business. By increasing our fill rates to the dealer, we're seeing significant improvement in our connection to him or her. We have the industry-leading fill rates in the U.S., in Europe and data is now available. We believe we have the industry-leading fill rates in South America as well. So really trying to focus on that so that dealer has the part that he or she needs when the farmer calls and then leveraging more of the connected machinery, understanding what the machines are doing, sort of preventative maintenance or understanding if there's an error code and connecting that to the dealer, so he or she is able to service the farmer better, really making a concerted effort to leverage the data to help that dealer connect with the farmer, improving his or her fill rate to the farmer. And then equally as important is when that tractor moves from the first owner to the second owner staying connected because of the data, the machine data and knowledge that, that dealer is able -- or the new dealer that moves out of that state or out of the dealership staying connected with the new dealer so he or she is able to service that second owner of that tractor or that piece of equipment as well. So we've seen good growth. That's a great margin business for us. We've seen good growth, and that business grows, generally speaking, agnostic of the cycle. So good times are bad. We've seen that market grow and given our increase folks to that we continue to see that as a market that will outperform the general industry and again, above-average margin business for us. Second one is our Precision Ag business for our Precision Planting business. What we have said and Seth, you alluded to this last year, our Precision Planting and our Fuse business together, which we would call Precision AGCO was about $700 million. Our 2025 target is $1 billion. So we would expect that to grow at around 15% per annum. First quarter was around 30%. I would say more of a year -- weaker year-over-year comp because of the chip issues. But we expect that to be in around the $800 million to $850 million range this year, but growing to about $1 billion. That is heavily focused on retrofit. So the aftermarket business and what's unique about our Precision Planting business. When we talk about retrofit, they're OEM-agnostic. So they can put this retrofit equipment on any OEM planter or other piece of equipment. And so for us and for farmers, who are looking for lower investments, faster payback, this Precision Planting business offers them, generally speaking, a 1- to 2-year payback and usually a lot smaller investment than buying a new Momentum Planter so they can go out and they can buy a couple of modules. They can see the return on investment, whether they put that on a couple of rows or they only buy a couple of the different offerings and really see either the value and incremental yield or the savings in reduced input costs. And so that Precision Planting business and overall Precision AGCO, we see that growing again somewhat cycle agnostic. We're increasing the penetration rate here in U.S. seeing good growth in South America and now just really starting to build into the European business, where we start to see that being a real opportunity, especially given some of the government mandates on reducing chemical usage and other things to drive more of a sustainability perspective, Precision Planting really playing well into that channel. So we see that growing at sort of around that 15% rate and likely doing that regardless of where we are in the cycle. So those both again, a high-margin business. And the third part is our Fendt business. Now Fendt will be cyclical. We know that. It's a new equipment sale. But what we're doing that we think will differentiate versus the cycle is the share capture because we've created a full portfolio of Fendt, adding the combine, adding the planter, adding the sprayer alongside the really strong tractor brand, we now have a full portfolio for our dealers to offer to the farmers. So we see share capture opportunities with offering the full Fendt portfolio. And then here in the U.S. and in South America, where Fendt is relatively new offering to the marketplace, we are still seeing significant white space opportunities. So if we think about North America, today, we have about 75 dealers in the U.S. We cover 70% to 75% of the white space in North America. So we see opportunities to further expand our white space opportunities with more dealers coming online. And then those dealers who we already have in place, they're somewhat capacity or limited in their products because of the strong demand. So if the markets were to slow down, incremental capacity, we see share opportunities for those dealers in their markets today above where they're at. So we think that plus what we're doing in South America, where today, we have just over 25 dealers, and again, around 70% to 75% of the markets of the white space covered, we see growth opportunity there. That growth or that share capture, we expect that to happen somewhat regardless of where the market is. So when you look at the share capture with Fendt, the Precision Ag growth growing 15%, parts high single digits, all 3 of those high-margin businesses. We expect that growth to sort of help outpace the market 4% to 5%. And that's also helping contribute to those mid-cycle margin targets that we talked about going from 9% mid-cycle up to 12%. About half of that is coming from those 3 growth factors.

Okay. I mean, it's interesting. So your 12% mid-cycle is actually above your 11% guidance for this year, right? So what else -- I mean, there must be other -- because we're beyond mid-cycle from a volume perspective today, right? So what else is going on there?

So if I look at us today, again, our outlook right now, margin is 10.9%. Again, today, what we would tell you is the global market around is around 10.8%, maybe 10.9%, so we're above mid-cycle. When you look at that value creation line that we showed our investors in December, if I use last year's number as a baseline, we did 10.3% margin last year. And again, we were around that 10.8%, 10.9% cycle. If you look -- go down the slope of that line, that would have put our mid-cycle target or a mid-cycle number right around 9%. We're going to take that up to 12%. So that's the 300 basis points, half of that's coming from the 3 growth vectors I just touched on. The other half of it is coming from opportunity within our cost structure. Part of that is Massey Ferguson so that's our global brand where we sell Massey, competes at a different price point than Fendt. Think of that more as your volume brand, reliable accessible farmers who are looking for better value from not looking for the latest technology, all the bells and whistles, but more safe, reliable, dependable, we see lots of opportunity in that global brand in simplifying the platform, consolidating platforms improving the cost structure, optimizing the pricing, better optimization of the dealer network. So more of a cost play with Massey Ferguson. The second bucket on the cost is Grain & Protein. So that's been a business that's been a little bit challenged over the last couple of years. We worked through a lot of cost reduction, plant closures, consolidations, trying to optimize the footprint there. Last year was a challenging year because the steel prices with the grain silo business is -- it was also the business that was most affected by the cyber attack we dealt with last year this time. So as those 2 things are behind the steel prices have stabilized, we see good margin improvement in getting the Grain & Protein business up into the sort of the high single digits this year. So a margin enhancement year-over-year. And then the third bucket is more what I'll call is manufacturing efficiencies. Today, we're still dealing with supply chain efficiencies. A lot of the products that we're making, there's still rework attached to them. So the operators on the floor, they're not able to run effectively. They got to go into the yard when the part shows up and they may spend 30 minutes and they spent 3 hours putting that part on. And there's a level of inefficiency in the number of units that we're getting and the cost for each of those units because of that rework that's caught up in our current margin profile. So we expect that to normalize over the next couple of years and those 3 together should deliver that incremental 150 basis points that takes that mid-cycle up to 12%. That being said, like you said today, we're at 10.9% and we're above mid-cycle. And what we've said to our investors is if we were at this range today, that sort of puts our margins more in the mid-teens and a strong market condition as we deliver on those sort of 2 focal points on growth and cost.

Okay. Just a couple of points to follow up on that. So correct me if I'm wrong, the GSI business when you bought it was like a low double -- low teens kind of margin, double-digit low teens -- is that out of the -- is that no longer possible to get back there? Or do you think that -- because you're talking about high single digits now.

So the team sees a path. One step at a time, right? Let's -- the team did a lot to restructure the business here. We see good growth potential but before we reach out to the next target, let's deliver on what we said as we tell the team in Grain & Protein. You've done a lot to restructure business. There's been some reasons why it didn't perform last year with steel price with cyber. This is the year, hopefully, there's no sort of macro distractions, see the improvement there. What I would also tell you that, that business was influenced heavily by China last year because of the COVID lockdowns, the poultry business, the swine businesses have been challenged. So there are some macro things that can influence that. The team is doing a really good job also investing in technology. So as those sort of growers on the protein side are looking for more technology, some of the tech products that we've purchased really trying to create more connectivity, more data to help the farmers and the growers in that protein side, we see good growth potential. So I think we see a path there. It's not going to be in 2023, but we see a path to continuing to improve the margins.

Okay. And you mentioned I feel like the distribution conversation has been sort of an ongoing since I've covered the stock, this has been sort of part of the discussion, making it -- consolidating it, better capitalized, sort of just stronger -- fewer dealers with stronger dealers. Like where are we in that process?

Yes. So if I think about -- if I look at the U.S. market, which is probably the one where there's still the biggest opportunity to improve. If I think about Fendt, Fendt is sort of, as I said, 75 dealers, 70% to 75% of the white space, we're being very selective on who can be a Fendt dealer. We talked about introducing this new premium-priced brand into the U.S. market. Farmers have a level of expectation. We call it that Fendt experience. And that Fendt experience comes from your ordering, it comes from your service, it comes from the warranty and how fast you service the warranty. The dealers have got to be able to have the different -- be able to service in the time frame that we need them. They got to have the demo vehicles if a machine goes down, they have to have the right level of capital and the sophistication to offer that Fendt experience. So we're bringing on dealers, but they got to meet the standards. And even if you're a dealer who has 6 or 7 stores, all of your stores may not be able to offer Fendt, if it doesn't meet all those criteria in delivering that Fendt experience. So that's rolling out. I'd tell you, as I said, we're 70%, 75% of the white space, so still more room there. The bigger consolidation or opportunity is more on the Massey Ferguson side of the house, we reduced the number of dealers significantly over the last several years. I think several years ago, we were probably north of 1,500 today, we're probably around 500. There is still room for consolidation. We're still trying to create more of these professional dealers who are able to manage sort of from a service and parts absorption standpoint, have the capital to invest in products that we need, have the ability to grow. That takes time. Again, all of these are independent dealers, their franchises. And so working with them either identifying an opportunity for them to sell their business or helping them figure out what they need to grow to be part of our business in the future takes time. Again, it's a long process. We've made good progress over the last couple of years. I think if I look at the Massey Ferguson business here in America, there's still a lot of opportunity for us to get more into that professional dealer network and really shrink the number of dealers and create bigger, more professional dealers throughout Massey Ferguson. If I look at Europe, we've gone through, I think we're in a really good position there. I don't see a lot of significant change in that dealer network with what we've done between Fendt, Massey and Valtra and then South America, probably in between those 2, between North America and Europe. So a little bit more improvement in South America with Massey a little bit and then Fendt more on the growth side. Again, more in that [ Mogi das Cruzes ] region. As I said, we got about 25 dealers probably growing that this year and covering a little bit more of the white space, but still opportunity to grow even beyond 2023.

Okay. And I'm sorry if I missed this before, but did you talk about -- when we were talking about dealer inventory levels, could you talk about high horsepower inventory levels and the dealers you mentioned?

We didn't. Small horsepower, I would say, generally, at a high level, the high horsepower dealer inventories are probably a little bit below the optimal level. So we don't see the dealer inventories on high-horsepower rebuilding here in 2023, just given the level of retail demand that we're seeing relative to our order book. And so again, we still feel that, that high horsepower inventory is below the normalized run rate so likely an opportunity if the markets present themselves, there's more an opportunity to fill that dealer inventory to the optimal level in '24 rather than here in '23.

And when -- I understand the dynamic in Brazil with keeping the order books tight. But when will you open the order books for '24 more aggressively?

So in South America, we'll open them in the fourth quarter.

Okay. What about Europe?

Europe in the third quarter.

I mean Europe, you said it has...

So Europe will probably open them up later on this summer. And then in the U.S., again, more in the, I guess, July, August time frame, we'll start to open them up. And again, remember, for us in the U.S., part of our decision was to limit our order book because of that customer experience, mainly related to Fendt again. When we look at the Fendt experience, great reviews from our farmers on the warranty, the product, the quality, everything has been great other than that delivery experience. And so we want to make sure that, that overall Fendt experience is delivering in all facets and so we've made the decision to sort of limit that to sort of ensure our confidence. And if we tell you July, tractor shows up in July.

Okay. Important part of the equation.

It is.

We have a couple of minutes left. I wanted to touch on -- well, any questions from the audience? [Audio Gap]

Yes. Well, I mean ideally, it's a much -- the addressable market is quite large for us. If I go back, maybe just around a year ago, that target was $800 million. We took it to $900 million maybe a year ago. And then in December, we took it to $1 billion. So we're seeing good growth. We're -- if you look at our revenue, the $450 million in Precision, heavily weighted here in the U.S., we're introducing new products in the U.S., so we see opportunity there. Radical agronomics, which is a soil sampling. It's just starting to go into the marketplace. South America, we're still building. Europe's effectively untapped right now. So we see good growth potential. I'll tell you, as far as we get confidence on our execution, we've been willing to raise that target as we've gotten clarity on the products that are being offered the acceptance rate for the farmers on what they're seeing. Again, a lot of this is -- you're asking a farmer to trust in the technology. And many of them, again, hesitant and the whole point of Precision retrofit is you can buy a modules, put it on 3 rows of your planters, see what it does or buy these modules versus the whole thing, see the return on your investment and then hopefully build out. But the adoption rate is sort of a question for us. We see the addressable market being large. It's more how the speed of adoption around the world is the big question for us.

Free cash flow question for you. So your free cash guidance for the year is, I think, $750 million to $1 billion. First quarter was a pretty significant negative. Can you just talk about the turn that gets you to that full year guide?

Yes. I mean we have a seasonal build here as we think about the spring selling season. So it's not uncharacteristic for us to build or use cash in the first half of the year, and most of our cash, not all of it comes back in the fourth quarter, that's sort of been our traditional seasonal pattern. For us, we're optimistic that, that pattern will continue. Part of it is also supply chains continuing to improve. And today, we still have a fair amount of work in process inventory. Ideally, we'd like to see that continue to improve and our factories performance flow-through improving, which will drop that water level of that work in process to a lower level. So we still feel good in the 75% to 100% of adjusted free cash flow generation.

Yes. Okay. Last one. Your R&D spend as a percentage of revenue has been creeping up over time, I think about 4% this year. Do you think it goes higher from here just to support all the Precision investments? Or will you be buying more technology? How are you thinking about sort of the next leg of technology growth?

So we've been running a little bit below the 4% the last couple of years. It's not by choice. It's more by inability to recruit the talent, the software engineers we're looking for. I would like -- ideally, we would target around 4% as our topline continues to grow. That absolute dollars means R&D is going to continue to go up. This year, it should be about $100 million more than what it was last year. So a big increase in the majority of that is related to technology-type investments or engineer work. So I think as you see our topline continuing to grow, we're going to say probably around that 4%, but absolute dollars will likely to grow in the concentration or mix continue to be focused on technology. We're not opposed to acquisitions. As you've seen, we've done around half a dozen acquisitions over the last couple of years. We continue to be active in looking at the funnel of different opportunities and if we're able to find an opportunity to buy someone who's 1, 2, 3 years ahead in his or her development of a product we're working on, and we can buy them at the right price and bring them in like we have with JCA, Headsight, Appareo, we're going to take advantage of that to accelerate our offering. The good thing about us, again, go back to that Precision Ag offering, because we go retrofit first, we tend to bring things to the market in the aftermarket first, sort of beta tested, if you will, with the farmers, see what's working. And then as we perfect it, we bring it into our OE channel, and it's worked very well for us. So we're willing to go out by those companies early stage if we find them, and bring them into the portfolio and then get them into the market as soon as possible and then slowly bring them into the OEM once we've perfected it. So we'll continue to be focused on acquisitions definitely in the tech space.

And you're still targeting the sprayer, the commercial sprayer 2024?

Retrofit 2024, OEM is 2026.

2026, okay. Yes. All right. With that, guys, thank you. I appreciate it, gentlemen.

Thank you, everybody. Thanks.