Good morning, and welcome to Deere & Company Q2 earnings conference call. Your lines have been placed on listen-only until the question-and-answer session of today's conference. I would now like to turn the call over to Mr. Brent Norwood, Director of Investor Relations. Thank you. You may begin. Hello. Also on the call today are Ryan Campbell, Chief Financial Officer, Josh Jepsen, Deputy Financial Officer, Kanlaya Barr, Director of Corporate Economics, and Rachel Bach, Manager of Investor Communications. Today, we'll take a closer look at Deere's Q2 earnings, then spend some time talking about our markets and our current outlook for the fiscal year 2022. After that, we'll respond to your questions. Please note that slides are available to complement the call this morning. They can be accessed on our website at johndeere.com/earnings. First, a reminder, this call is being broadcast live on the Internet and recorded for future transmission and use by Deere & Company. Any other use, recording, or transmission of any portion of this copyrighted broadcast without the express written consent of Deere is strictly prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call. This call includes forward-looking comments concerning the company's plans and projections for the future that are subject to important risks and uncertainties. Additional information concerning factors that could cause actual results to differ materially is contained in the company's most recent Form 8-K and periodic reports filed with the Securities and Exchange Commission. This call also may include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, GAAP. Additional information concerning these measures, including reconciliations to comparable GAAP measures, is included in the release and posted on our website at johndeere.com/earnings under Quarterly Earnings and Events. I will now turn the call over to Rachel Bach. Thanks, Brent, and good morning. John Deere completed the Q2 with sound execution despite being constrained by persistent supply challenges. Financial results for the quarter included a 19.9% margin for the equipment operations. Ag fundamentals remain solid with our order books largely full through the balance of the year and demand starting to build for our model year 2023 products. Furthermore, the construction and forestry markets also continue to benefit from strong demand and price realization, contributing to the division's solid performance in the quarter. Slide three shows the results for the Q2. Net sales and revenues were up 11% to $13.37 billion, while net sales for the equipment operations were up 9% to $12.034 billion. Net income attributable to Deere & Company was $2.098 billion or $6.81 per diluted share. Taking a closer look at our Production and Precision Ag business on slide four, net sales of $5.117 billion were up 13% compared to the Q2 last year, primarily due to price realization and higher shipment volumes. Price realization in the quarter was positive by about 11 points. Operating profit was $1.07 billion, resulting in a 21% operating margin for the segment. The year-over-year increase in operating profit was primarily due to price realization and higher shipment volumes, partially offset by higher production costs and higher R&D spend. The production costs were mostly elevated material and freight. Supply challenges also contributed to production inefficiencies, driving higher overheads for the period. The increased R&D spend reflects our continued focus on developing and integrating technology solutions into our equipment and unlocking value for our customers. Operating profit for the quarter was also negatively impacted by an impairment of $46 million related to the events of Russia and Ukraine. Next, Small Ag & Turf on slide five. Net sales were up 5%, totaling $3.57 billion in the Q2 as price realization more than offset negative currency translation. Price realization in the quarter was positive by just over 8 points, while currency translation was negative by about 2 points. For the quarter, operating profit was down year-over-year at $520 million, resulting in a 14.6% operating margin. The decreased profit was primarily due to higher production costs, specifically materials and an unfavorable sales mix. These items were partially offset by price realization. To share more perspective on the current global ag and turf industry and fundamentals, I'm happy to be joined today by Kanlaya Barr, Director of Corporate Economics. Kanlaya? Thanks, Rachel. Turning to slide six. I would first like to take a few moments to talk through some points that are influencing the global industry. Global stock for grains and oil seeds have declined over the past three seasons, and we expect to see significant less production and export out of the Black Sea region. On the demand side, there was an increase of imports into China as China's hog herd recovered. Both supply and demand factors are leading to higher crop prices as reflected in the recent WASDE release. Meanwhile, growers are experiencing input cost inflation and availability concerns, most notably with fertilizer. Row crop producers are experiencing higher input costs. Many purchased input in advance of the recent inflation and are marketing their crops at elevated prices. As a result, growers continue to experience strong profitability and cash flow. While farmers expect another year of high input costs in 2023, global grain overseas prices have risen enough to deliver healthy margin profit into the next season. With respect to farm equipment, two consecutive years of industry-wide production constraints have resulted in further aging of the fleet. The higher-than-average fleet age, coupled with low channel inventory, is contributing to pent-up demand and is likely to remain beyond fiscal 2022. With this backdrop of continued strong ag fundamentals, we expect U.S. and Canada industry sales of large ag equipment to be up approximately 20%. Order books for the remaining of the current fiscal year are mostly full, and we already see signs of strong demand for model year 2023 equipment, with some order books opening in June. Small Ag & Turf industry demand continues to be forecasted to be about flat this year. We are seeing moderate increases from our hay and forage segment, while consumer products are lower due to supply constraints and low inventory in the channel. Rising interest rates will likely impact home sales and home improvement spending in North America, although we expect them to remain elevated. Equipment in inventories remain well below normal and are unlikely to begin recovering until 2023. Now moving on to Europe. The industry is forecasted to be up roughly 5% as higher commodity prices strengthen business conditions in the arable segment. We expect the industry will continue to face supply-based constraints, resulting in demand outstripping production for the year. At this time, our order book extends through the duration of fiscal 2022 and even into early fiscal 2023 for some product lines. In South America, we expect industry sales of tractors and combines to increase by approximately 10%. Despite low below-trend crop yields due to weather, our customers are very profitable this year, benefiting from high commodity prices. Our order books reflect this strong sentiment and are nearly full for most product lines. Industry sales in Asia are forecasted to be down moderately as India, which is the world's largest tractor market by unit, moderates from record volume achieved in 2021. I will now turn the call back to Rachel. Thanks, Kanlaya. Moving on to our segment forecast beginning on slide 7. Production and Precision Ag net sales continue to be forecasted up between 25% and 30% in fiscal year 2022. The forecast assumes about 13 points of positive price realization for the full year, which will allow us to be price cost positive for the fiscal year. Additionally, we expect roughly 1 point of currency headwind. For the segment's operating margin, our full year forecast remains between 21% and 22%, reflecting consistently solid financial performance across all geographic regions. Slide 8 shows our forecast for the Small Ag & Turf segment. We expect net sales in fiscal year 2022 to be up about 15%. This guidance includes over 8 points of positive price realization and 3 points of currency headwind. The segment's operating margin is forecasted to be between 15.5% and 16.5%. Although price cost remains positive for the year, supply challenges as well as higher material and freight costs are expected to continue to put pressure on margins. Changing to Construction & Forestry on slide nine. For the quarter, net sales of $3.347 billion were up 9%, largely due to price realization and higher shipment volumes. Operating profit increased year-over-year to $814 million, resulting in a 24% operating margin. During the quarter, there was a one-time gain of $326 million investment re-measurement from the Hitachi transaction. Results were also impacted by a $47 million impairment related to the events in Russia and Ukraine. Excluding those special items, operating margin would have been 16%. Higher production costs and an unfavorable product mix were detrimental to the quarter results. The production costs were mainly a result of higher material and freight. Now let's take a look at our 2022 Construction & Forestry industry outlook on slide 10. Industry sales of earthmoving equipment in North America are expected to be up approximately 10%, while the compact construction market is forecast to be flat to up 5%. End markets for earthmoving and compact equipment are expected to remain strong as U.S. housing market is forecasted to remain elevated. Oil and gas activities continue to ramp up and strong CapEx programs from the independent rental companies drive replenishing efforts. Compact construction equipment inventory levels are extremely low due to supply constraints affecting those product lines. In forestry, we now expect the industry to be flat to up 5%, and global road building markets are also expected to be flat to up 5%. Road building demand in the Americas remains strong, while China and Russia markets are down significantly. The C&F segment outlook is on slide 11. The year's Construction & Forestry 2022 net sales continue to be forecasted up between 10% and 15%. Our net sales guidance for the year includes 9 points of positive price realization and 2 points of negative currency impact. The segment's operating margin outlook has been revised to a range of 15.5%-16.5%. The update reflects the one-time gain from the Deere-Hitachi transaction and the impairment related to the events in Russia and Ukraine that occurred in the Q2 of 2022. The normal course of business continues to benefit from increases in price and volume. Shifting over to our financial services operations on slide 12. Worldwide financial services net income attributable to Deere & Company in the Q2 was $208 million. This was a slight decrease compared to the Q2 last year, primarily due to the higher reserves for credit losses, partially offset by income earned on a higher average portfolio. For fiscal year 2022, we maintain our net income outlook at $870 million, as the segment is expected to continue to benefit from income earned on a higher average portfolio balance. Slide 13 outlines our guidance for net income, our effective tax rate, and operating cash flow. For fiscal year 2022, we are raising our outlook for net income to be between $7 billion-$7.4 billion, reflecting the one-time items in the Q2 of this year. The full year forecast is inclusive of the impact of higher raw material prices and logistics costs. At this time, our forecasted price realization is expected to outpace both material and freight costs for the entire year. The first Q2 are expected to be our most difficult material and freight inflationary cost compares, while the Q3 comparison to last year should improve slightly. As we progress into the Q4, we expect those material and freight comparisons to improve even further. We also expect shipments to be more back-half weighted than we've seen historically as we work through a backlog of partially built inventory waiting for supplied parts, and while seasonal factories will continue to produce without the typical shutdown periods. Moving on to tax, our guidance incorporates an effective tax rate projected to be between 22% and 24%. Lastly, cash flow from the equipment operations is now expected to be in the range of $5.6 billion-$6 billion. The decrease in the forecast reflects the increases in working capital required through the year. At this time, I would like to turn the call over to Ryan Campbell, Chief Financial Officer, for comments. Ryan? Before we transition to the Q&A portion, I would like to make a few remarks on our results and the opportunities ahead of us. Reflecting on the Q2 results, as we indicated in our prior earnings call and outlook, the supply chain-related constraints continued through the quarter and will not likely abate during this fiscal year. With respect to our forecast, excluding the special items in the Q2, our operational guidance remains roughly unchanged. I wanna commend our employees, dealers, and suppliers for their efforts to support customers and deliver products as quickly as possible in this dynamic environment. Given the strong fundamentals in agriculture, coupled with the underlying supply constraints, we do not see the industry being able to meet all of the demand that exists in 2022. While difficult to quantify exactly the impact of this, we expect 2023 to be another strong year of industry demand. Strategically, each day that passes gives us more confidence in our Smart Industrial strategy and our recently announced LEAP ambitions. While we are hard at work managing our operations in this dynamic environment, we are also executing on our strategy. Our production systems teams continue to identify and execute against opportunities to drive both economic and sustainable value for our customers and their operations. This is even more critical in an environment where inputs are significantly increasing in cost and/or hard to come by. Thanks, Ryan. Now, before we open the line for Q&A, I would like to dive deeper into a few important topics for the quarter. Let's start with our full year revenue guidance. The top-line forecast implies a H1 shipment schedule that is higher than the H1. Brent, what factors led to this, and how does Deere plan to deliver on a back-half loaded year? Yeah. First let's spend a few minutes talking about some of the factors in the H1 of the year. T he Q1 was unusually low due to the work stoppage that we experienced. We expected the delivery schedule would be seasonally different earlier in the year. we also had two large new product programs that were ramping up to full production in the H1 the X9 combine and the 9R tractor. our production plans always reflected higher volumes of these products later in the year. typically, we have some of our seasonal factories that take shutdowns in the H2 of the year. However, this year, we'll see some of our PPA, Production and Precision Ag factories, producing through much of the Q3 and Q4. overall, we expect to have more production days in the H2 of 2022 than the previous year. We expect to grow production progressively from the Q2 through the Q4, meaning we expect Q4 to be our highest revenue quarter for the year. Additionally, supply disruptions led to inefficiencies at factories, resulting in unusually high inventory of partially completed machines. As soon as we get parts, we will be able to complete and ship product, providing confidence in the H2 shipment schedule. Our guidance does contemplate getting enough parts to fulfill the production schedule. As Ryan mentioned, we are collaborating with suppliers and our factories and are working hard to make sure we get there. This is Josh. One thing to add there, and we're seeing some of this play out in the AEM retail data as well, where you see some categories down year to date, but choppiness in the month-to-month retail. The decrease in certain categories is not reflective of changes in demand, but more, the challenges we're seeing in getting product shipped, and not just us, but across the industry given the current environment in supply. Great. Thank you. Next, let's discuss how margins will progress throughout the year, especially in the context of price and material and freight costs. Can you talk a little bit more about how we should think about margins in H2 versus the H1? Brent, how do you expect the rest of the year to unfold? We experienced the most difficult material and freight compares in the H1 of 2022. Lagging contracts on steel means we've seen progressively higher costs since Q3 of 2021. O ther costs are ramping as well. Commodities such as copper and aluminum, electronics, and even things like labor and energy are increasing. We'll begin to anniversary some of these cost increases in the third and Q4, so we'll see easier compares relative to the previous year. Freight remains elevated too. R ecent COVID lockdowns in China have caused delays in shipping globally, compounding some of the previous logistics bottlenecks. W ith the supply chain backed up, we're utilizing significantly more air freight solutions, and we expect this to continue throughout the H2 of 2022. In addition to material and freight, overhead has increased. This has come from the choppiness in the supply base and is particularly evident in the number of partially completed machines in our inventory that are missing parts required to be complete. So while the compare gets easier, we probably won't see much moderation in material and freight costs this year. F ortunately, price realization should get progressively better, potentially making the Q4 the highest margin period for us, which is a bit atypical. We have managed our order books differently than we have in the past, enabling us to adapt to changes in inflation. As noted earlier, we expect our price for the full year will more than offset increases in material and freight. Thanks, Brent. Let's take a closer look at ag fundamentals. Kanlaya, can you share more insight? Sure. Let's start with the global stocks of grain oilseeds, which we have seen decline over the last three seasons, and that's driven by both the supply and demand side. Now looking at the demand side, we experienced a large increase in Chinese imports, and that starting in the crop year 2021 as China's hog herd recovered from the African swine fever. Now on the supply side, the world's experiencing a significant damage to crop in two consecutive years. That was in crop year 2021 and also crop year 2022 as well, and in multiple locations in North America, South America, parts of the CIS. Together, strong demand and declining supply led to the higher price that we're experiencing over the past two years. Now, expected lower production of crop from the Black Sea region add to the challenges that the ag sector already faces. The region accounts for almost about a third of global wheat export as well as a notable source of corn exports. USDA's forecast production and export for wheat and corn to be almost 50% lower for 2022-2023 crop year from the Black Sea region. In fact, the potential export loss could impact two crop years. As a result, right now, wheat ending stocks among key exporters could fall below 50 million tons, which is the lowest level in 15 years. Now, looking at the fertilizer prices, which have climbed and some markets are experiencing scarcities of these critical inputs. Persistent fertilizer constraints and high price will lead the supply chain to adjust, but this is likely gonna take some time. If you put these factors together, while rural crop producers are experiencing high input costs, many have purchased inputs in advance of recent inflation and were able to market their crops at a high price, which helped mitigate the higher input cost. Also, a tight global supply will likely remain supportive of prices next year, which is helping to sustain farmer profitability. Now, given this backdrop of elevated commodity prices, combined with two consecutive years of constrained machinery production, we have older fleet age and low channel inventory. The fundamentals for agricultural machinery remain favorable. Thanks, Galia. Maybe just to punctuate all of that, we're seeing strong demand as we look into model year 2023 orders and even begin to take orders in 1Q 2023 for certain products in different geographies. We're expecting continued demand to be a tailwind going into 2023. As a follow-up to that, our technology helped alleviate some of the pressure that Kanlaya talked about on the input costs by enabling the customer to use less while still achieving yields. That's right. Traditionally in ag, to boost yields, we've seen an approach that had to be do more with more. With both rising input costs, our customers are looking at how they can do more with less, and they're looking to us and the strategy that we've been talking about over the last few years. Using less inputs, but not losing out on yields or in some cases, using less input and increasing yields. For example, we introduced a product called ExactRate last year, which applies liquid nitrogen at the time of planting. This helps our customers get more precise with fertilizer usage, which has been a unit input experiencing rapid inflation this year. Not only can this reduce the cost, but also improves our customers' nitrogen efficiencies, unlocking significant environmental benefits, as well as helping yield by applying nutrients when the seed needs it most. Not only do we see continued strong demand, but the demand for our Precision Ag solutions as our customers look for opportunities to do more with less. Thanks, Josh. Speaking of precision ag and technology, Deere announced a few acquisitions during the quarter. Ryan, can you share more? Sure, Rachel. Consistent with the themes that we previously discussed of digitization, automation, autonomy, life cycle, electrification, and sustainability, we've executed during the quarter to expand our access to talent, technology, and business opportunities in these areas. I'd like to highlight one investment, GUSS Automation, which is a pioneer in semi-autonomous spraying for high-value crops. GUSS Automation brings an in-depth knowledge of HVC customers and innovative solutions that deal with some of the most pressing issues facing that segment today. We look forward to working together on further collaboration with the Deere sales channel and in other areas that drive value for HVC customers. I highlight this investment as it is illustrative of the new Smart Industrial strategy focused on production systems. Our teams work to deeply understand customer production systems and how to deliver better outcomes, both from an economic and sustainability perspective. We work to deliver a differentiated solutions. Sometimes we'll design and deliver that solution organically. Other times we'll invest, partner, or acquire unique capabilities to accelerate that delivery. Overall, you'll see us continue to aggressively expand our capabilities to deliver differentiated customer value, and we will dive deeper into this at our Tech Day on May 26th. Now we are ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedure. In consideration of others and our hope to allow more of you to participate in the call, please limit yourself to one question. If you have additional questions, we ask that you rejoin the queue. Thank you. Caroline? Thank you. We will now begin the question-and-answer session. If you'd like to ask a question or make a comment from the phone, please press star one and record your name as prompted. To withdraw that request, you may press star two. Once again, that's star one. Our first question comes from Jamie Cook from Credit Suisse. Your line is open. Hi. Good morning. I guess could you just talk through, obviously the Street views the Q2 as a miss, how the quarter came in relative to your expectations. Can you just quantify the inventory that you have that you're still waiting for parts? I'm just trying to figure out how big of a deal that is and was that the entire cut to cash flow. Thanks. Hey, Jamie. Yeah, thanks for the question. with respect to the Q2, there's a lot of different variables going on there. certainly inflation has been broader based than just steel. We're seeing it impact a lot of other commodities. I think we see continued pressure on material costs that have kind of led to some of the margin performance in the Q2. I think in addition to that, just with the delays and delinquencies we're seeing in the supply chain, we're utilizing a lot of additional premium freight right now. So that's also having an impact on our results for the quarter. Really, the biggest challenge, though, as we noted in the Q2, was the number of partially completed machines that you referenced, Jamie. in many cases those partially completed machines will drive poor overhead absorption. They also give us a lot of confidence in the H2 production schedule because we do have confidence that we'll be able to complete and ship and ultimately retail those parts in the H2 of the year. to give a little bit of an idea of the size of that, I mean, you could certainly look at the change in inventory that we had on the balance sheet sequentially in the Q2 from the Q1. if you go back in history, typically you don't see an increase in inventory in the Q2. That'll give you a little bit of an idea of the magnitude that we saw of those partially completed machines. Yeah, Jamie, it's Josh. Just to pile on what Brent mentioned there, that those machines sitting waiting on parts, if you look at the back half of the year increase year-over-year in the H2, it represents close to 25%. As Brent mentioned, getting those out gives us a significant jump on the back-end-loaded sales. Okay. Thank you very much. Thank you. Our next question comes from Kristen Owen from Oppenheimer. Your line is open. Great. Thank you for taking the question. Josh, you talked about some of this in some of the commentary that you made, obviously a lot of noise in the retail statistics and the industry sentiment indicators that we're seeing coming out. Just given the ongoing production challenge, how do you think investors should interpret some of those readings in the context of some of the demand commentary that you've made? With respect to the retail data we're certainly not surprised to see it come in a little bit choppy this year. As certainly we're dealing with delays and delinquencies in the supply base. I presume that most of the industry is as well. given the number of partially completed machines, I think we'll continue to see that data come in waves and be a little bit choppy as we get through the rest of the year. certainly, with respect to market share on any given month, it's really a function of who can produce what that month. Again, that'll be a little bit choppy. certainly particularly in the Q1 we probably outperformed our own expectations there with respect to what we could deliver given the work stoppage. I'd say other than that, we feel like we've been holding our own in terms of retailing machines. We do have a couple of standouts though and bright spots. ADTs in particular is a product line that we've had a lot of success outperforming the industry in terms of production. Mannheim Tractors is as well. If you look at the H1 of the year we've picked up a little bit of market share on the 8Rs, and then also in Europe, for our high horsepower tractors and certainly look to holding onto that lead as we produce through the back half of the year. Yeah, Kristen, as it relates to demand piece specifically we have not seen that shift or change or cool in as it pertains to large ag in particular. Anecdotally, for example, in Brazil as we open month to month we filled a month's production in a day when we opened it. A s we start to get ready for early order programs we're anticipating strong activity as we're talking to dealers who are already out working with customers. We think that demand environment continues and provides a good tailwind for 2023. Yeah, Kristen, it's Ryan. Maybe just to add. some of the customer sentiment surveys can be driven by just the overall volatility in the environment and the input pressures and concerns that customers may have with respect to that. Ultimately, demand comes from the actual economics, which we see continuing to be favorable. Thank you so much. Thank you. Our next question comes from Stephen Volkmann from Jefferies. Your line is open. Hi, good morning, everybody. I kinda wanna go back to this H1, H2 thing if we could. It feels like a lot of what you're planning on requires the supply chain to sort of improve going forward and get you those parts you need to get those parked vehicles shipped. I'm curious, As how did that play out in April? 'Cause it feels like it actually maybe deteriorated a little bit, but correct me if I'm wrong. Then secondarily, you know, just how much visibility do you have on that in the H2 to give you that confidence in that kind of ramp that we're seeing? Yeah. Thanks to you for the question. You know, I think you know, with respect to the supply base, you know, we have seen you know a supply base that got, I would say, progressively worse over the course of 2021. And then really since the Q1 of 2021, we characterize the supply base as just kind of persistent challenges. We wouldn't say that it's necessarily deteriorated over the course of 2022 or gotten better. It's just been persistently challenging throughout the Q1 of the year. We would expect to see that continue, that same environment to continue over the Q2. Our guidance does contemplate kind of a similar level of choppiness in the supply base as we progress through the year. We don't necessarily see it moderating or getting better. You know, I think what's a little bit interesting is some of the root causes have changed quarter- to- quarter, but the end result has been the same, right? In the Q1 you know, we were primarily grappling with, you know, Omicron and a high degree of absenteeism. You know, in the Q2, you know, we spent a lot of our time responding to, you know, recent global geopolitical events, you know, as well as lockdowns in China that are, you know, having an indirect impact on us through just the bottleneck of global logistics networks. You know, when we think about the rest of the year, though, we would expect to see that continue a bit. You know, our guidance, you know, certainly contemplates that. We think the current conditions do support our Q2 production schedule. You know, we do have confidence that we will get the parts that we need to complete those machines that are currently in inventory, ultimately having those ship in retail, mostly in the Q3, maybe a little bit in the Q4 there. Okay, thanks. Thank you. Our next question or comment comes from Tami Zakaria from JP Morgan. Your line is open. Hi. Good morning. Thank you so much for taking my question. I think you mentioned you're taking orders for 2023 in Europe and order books are opening next month for North America. What's the pricing you expect to realize for these products next year, given this year is shaping up to be a really strong year in terms of pricing? You know, with respect to order books, before I even get to fiscal year 2023, you know, it's just important to note, you know, fiscal year 2022 is largely complete at this point for most of our product lines. You know, we will have our early order programs open up for crop care in early June, which is fairly typical for our planters and sprayers. We would expect combines to begin sometime in the fall period. Again, that's fairly standard for us. You know, for our rolling order books, you know, we'll see Waterloo open up here in the next couple of weeks. Mannheim is actually already open up for fiscal year 2023, and we're about a quarter full for the first year or for the next fiscal year there. You know, importantly, we are putting pauses in all of these order programs so that we do maintain a little bit of flexibility in pricing as we have an eye towards you know how material and freight costs are fluctuating into next year. You know, with respect to our crop care early order program, where we do have prices set, you know, we are seeing pricing for crop care products in the high single digits% for next year. You know, we would expect pricing to be above trend line for those products going into next year. Got it. Thank you so much. That's super helpful. Thank you. Our next question or comment is from Joel Jackson from BMO. Your line is open. Great. Thank you for taking my question. Maybe asking Steve's question a slightly different way. When looking at the back half shipments, how do you envision the cadence of the ramp higher? Maybe where are you run rating today versus the level that you expect to get to in the Q4? Yeah. Thanks John for the question. You know, with respect to our cadence, you know, we do expect to see a slightly different seasonal pattern than maybe what many investors have come to expect from Deere. You know, some of this had really been in our plans all along with the work stoppage in the Q1 and the new product programs that we're launching, like the X9 combine and the 9R tractor. We'll see production progressively ramp each and every quarter two, three, and then ultimately leading to the Q4, which should likely be our highest quarter with respect to production. Part of what's boosting that as well again is just the completion of those, you know, semi-completed machines that are currently, you know, on Deere lots in our inventory. You know, that will also help. You know, keep in mind too, when doing a comparison of 2021 to the back half of 2022, you know, most of our UAW factories were shut down for the last couple of weeks of October. That's gonna give us a significant higher number of production days in the Q4 of 2022 than what we saw in 2021. Those are some of the things that are impacting our back half of this year relative to what folks saw in back half of 2021. Thanks, John. Thank you. Our next question comes from Timothy W. Thein from Citigroup. Your line is open. Great. Thank you. Good morning. I just wanted to circle back on the comments on the spring EOP and the pricing that's been communicated to dealers. Josh, historically, how good of a reference point, obviously, you know, a lot of different products within PPA. But how good of a just proxy should we think of that to the segment as a whole? i.e., those, you know, planters and sprayers relative to large ag as a whole. Yeah. You know, with respect to our EOP programs and how that serves as a proxy for, you know, other large ag product lines, you know it's a really important first data point for us. First from just a demand perspective. You know, typically what we see in the early order program for crop care does have some correlation to what we'll see for combines and tractors as well, just from an overall demand perspective. You know, as it relates to price increases, again, I would say that, you know, the pricing that we see for our crop care products, you know, planters and sprayers, you know, generally fairly correlated to the pricing we'd see for large tractors and combines in the North American market. You'll see different pricing as we look through other regions. You know, as you think about a market like Brazil, we have maybe the most, you know, dynamic pricing capabilities there due to the way that we manage our order fulfillment process. You know, due to higher inflation there and fluctuating FX, you may see pricing in Brazil different and detached a little bit from what we do in our North American market. You know, other than that, I would say the read through from our crop care products to other, you know, North American products is generally pretty good. Hey, Tim, this is Josh. One other thing to add too that we'll watch really closely is what are we seeing with, you know, technology uptake in that early order program. Particularly when you look at planters and sprayers and given the increases in input cost and what we can deliver from a value point of view. You know, we would say our value proposition on a lot of those things has gotten even better with higher input costs and being able to be more precise and more accurate to deliver better outcomes for our customers. You know, as we roll those out here, we'll be watching that closely too, because we think there's a tremendous amount of opportunity with those features and tools. Thank you. Thank you. Our next question comes from Jerry Revich from Goldman Sachs. Your line is open. Yes. Hi, good morning, everyone. I'm wondering if you could just talk about for the Construction & Forestry business, now that you've completed the excavator technology acquisition. What's the impact on the margin profile of the business? Can you update us on your Smart Industrial strategy for C&F specifically now that you have that entire product suite? Yeah. Thanks, Jerry. You know, with respect to our Construction & Forestry division, you know, this is really the Q1 that we're operating post the joint venture that we've historically held with Hitachi. Maybe just a quick update on how that's going so far. You know, this, we still have a supply agreement with Hitachi, and they're still an incredibly important partner to us, as we transition during this time. You know, so far that has been a really great partnership and operations have run very smoothly out of our Kernersville factory in North Carolina. So things are going really well on that front. You know, certainly, you know, longer term, you know, we would see this as margin accretive to us. You know, the way that we've accounted for that historically has, you know, put the excavator product line for us at a lower margin relative to other, you know, larger moving equipment. We do see an opportunity to improve that, certainly. You know, in the short term, though, it may be hard to ferret out exactly what the, you know, impact to margins is given the noise of the gain on the remeasurement. You know, ex that, you know, I think we'll see a little bit of margin accretion this year. Really it's the out years where I think that will continue to deliver for us. Yeah. On the technology side, Jerry, I think, you know, like in ag, this is where technology can play a huge role in driving profitability and sustainability for our customers and importantly safety as well. You think about labor challenges, skilled labor on the job site. You know, a tool like SmartGrade, you know, effectively automates the job that someone with, you know, not a tremendous amount of experience can get in and perform a job as well as an experienced operator. You know, reducing rework in a time like today when contractors have more jobs than they can do. If I can reduce rework because I'm automating parts of the production system, that allows our customers to get more done. You know, the Smart Industrial strategy and leveraging technology into construction, earthmoving, road building, is a big opportunity. We're at the very early stages of this, but a lot of opportunity to create value for our customers and we're gonna, you know, continue to methodically work through that. Bringing the excavator in-house is a key step to unlock more value there. Thanks. Thank you. Our next question or comment comes from David Raso from Evercore ISI. Your line is open. Hi. Thank you for the question. Can I first get a clarification of something that was said earlier? I think, Josh, you mentioned the machine still waiting on parts. If you look at the back half of the year's year-over-year growth, it represents close to 25%. Do you mean 25% year-over-year growth just from those machines shipping? Or do you mean of the needed growth in the back half of the year, you know, roughly a quarter of it, 25% of it is gonna come from the machines that are, you know, waiting for a partial- Yeah, the latter. Of the growth that we see in the back half, a quarter of it is effectively represented by those machines waiting on parts. That’s helpful. That’s the genesis of my question. It looks like the sequential growth from, say, the Q2 run rate for the rest of the year. I mean, it’s principally in Production and Precision Ag. And if you look at what’s needed in the H2 of the year, you basically need to be about 23% higher 2Q to what you average in 3Q and 4Q. It may be helpful for us. Can we just break that down? It sounds like the inventory part could be, you know, 10% of it, 10 or 11, let’s call it, using your math of that 23 sequential. Can you help us with the two other key pieces you alluded to? Pricing maybe is adding more dollars sequentially, right, from 2Q to 3Q. Also the production day comment, the shutdowns. Can you help us a little bit with what level of production day you'll have, you know, H2 versus, say, what we ran in 2Q? 'Cause I think getting that 23%, I mean, those are the three buckets, right? It's partially build inventory. Hey, we're gonna not take the shutdowns that we usually do, and then you get a little better pricing. Yeah. David, thanks for the question. You know, you're absolutely right. You know, price is certainly a component of it. You saw us raise our price realization forecast for Production and Precision Ag, from 10% to 13%. You know, if you look, year to date, for Production and Precision Ag, I think we've averaged close to 10% in the H1 of the year. The implication on the last two quarters is we'll get a little bit more than that. That's part of the explanation for the higher revenue year-over-year. You know, with respect to the shutdown periods, it really varies factory by factory. You know, some factories shut down for, you know, a couple of weeks, and others shut down for more or less than that. It really is dependent on what factory we're talking about. You know, net-net, you know, the minimization of factory shutdowns, plus, you know, the lack of a work stoppage that we experienced in October of 2021, you know, all contribute to higher production days, you know, year-over-year that help us support the build schedule that we have currently in place. Thanks, David. Thank you. Our next question or comment comes from Michael Feniger from Bank of America. Your line is open. Hey, everyone. Thanks for taking my question. There's a lot of commentary right now in the market with consumers, quote-unquote, "trading down." Obviously, farmers are facing higher input costs, or there was reference to the sentiment indicators for farmers have weakened. I'm curious from your vantage point, have you seen any evidence of farmers trading down in just certain areas? I recognize that Deere's technology helps improve efficiencies for farmers, but is there any sticker shock being observed there? Are farmers trading down in certain product categories, you know, to kinda compensate for the higher input costs? Thank you. Hey, Mike. Thanks for the question. You know, with respect to price, you know, so far what we've seen in 2022 is, you know, it hasn't had much of an effect on demand. You know, as we noted, you know, we're already seeing, you know, indication of interest for 2023, even though some products may be above trend line price realization already for 2023. You know, certainly, you know, the material and freight inflation that we're experiencing on our end is real. When we price for the following year, we take that into account to make sure that, you know, we maintain our price cost ratios. You know, if you think about the large ag customer, too, you know, machinery is still a relatively smaller portion of their PNL. You know, the bulk of their variable cost structure really relates to seed, fertilizer, and chemicals. I mean, the inputs is where, you know, the bulk of their variable costs have always been. Those variable costs are increasing at a much more significant rate than machinery costs. In many cases, you know, you know, our machinery is lessening the usage and reliance on some of these inputs. The more inflation that we see in, you know, chemical and fertilizer costs, in many cases, the more valuable our equipment has become to them. You know, I would make just kind of one other point on that. You know, we have seen significant appreciation in used pricing as well, which has really been helpful for our customers who are purchasing new equipment. It's had the impact of limiting that trade differential for them, which has helped us get the price we've been able to get this year, and I think will be helpful as we look towards next year as well. Hey, Mike, it's Ryan. Maybe just quickly, we see our take rates for our tech that allow our customers to manage their P&L better. They continue to be very strong, and we would expect them to get stronger. If anything, we see customers trading up, not down. Thank you. Our next question comes from Steven Fisher from UBS. Your line is open. Great, thanks. Good morning. You know, Brent, you just made a comment about used values in general. I guess I'm curious what you saw with used values in the quarter. Was there any particular strengthening there? And if so, should that be an incremental benefit to the Finco? I guess related to that, I saw that you raised the provision for credit losses, but was that just for Russia, or can you talk about, you know, why that would be, and how that might kind of reconcile or relate to any sort of farmer income and farmer confidence? Thank you. Yeah. With respect to used pricing, you know, we've seen it be pretty strong really for the last 12-18 months. I wouldn't say we had any change from that pattern in the Q2 It's been pretty strong and consistently outpacing pricing for new equipment. You know, as it relates to John Deere Financial, you know, we'd say that, you know, we've really benefited from a higher average portfolio this year and very favorable credit conditions. You know, you'll see our provision for credit loss tick up a little bit in the Q2, and part of that was due to the events in Russia and Ukraine. Just a really tough compare to 2Q 2021, where as the backdrop was improving significantly, I think we had negative provision in the Q2 You're just seeing that normalize out. You know, our provision is still well below the 15-year average. You know, all in all, conditions for John Deere Financial remain very favorable. You know, maybe just a quick comment on the lease book as well. You know, we continue to see return rates decline. Really at this point they're almost, you know, for large ag, I would say almost, you know, approaching zero there. Then recovery rates on that which does get returned have been increasing, you know, for the last 18 months. The quality of the JDF portfolio is really good right now. You know, we expect to see that continue in the interim. Thanks, Steve. Thank you. Thank you. Our next question or comment comes from Larry De Maria from William Blair. Your line is open. Hey, thanks. Good morning, everybody. You made a comment earlier in the call that the average age was increasing, which is obviously one of the reasons why we're getting trade-ins, because farmers wanna, you know, younger, make their fleet younger. Can you talk a little bit, maybe more specifically on the average age? Also, you know, where we are now and how many years would it take, do you think, to get back towards some equilibrium kind of number, where farmers are comfortable? Thank you. Hey, Larry. You know, as it relates to the fleet age, yeah, we have seen it age out really since 2013. I think we've aged out every year since then. And really what's led to the further aging of the fleet these last two years has really been the industry's inability to meet demand in 2021 into 2022. Also overall, it's aged out a little bit, even in 2022, right? Which means we haven't kind of fully hit volumes to replace, you know, the equipment that's coming out of the fleet. You know, tractors is where we see the most aging in 2022. Combines, we actually did produce just enough to bend the age of the fleet down a little bit. We're still well above average there. You know, we at least produced enough to begin that process of replacing the combine fleet. Thanks, Larry. Thank you. Our next question or comment comes from Chad Dillard from Bernstein. Your line is open. Sorry, good morning, guys. I was hoping you could talk a little bit more about your industry view on small ag. It looks like you've kept volume growth, you know, flat, but we've seen in the AEM data that sales down sort of like mid- to high-single digits, at least on a year-to-date basis. Can you just talk about what gives you the confidence that we'll be able to kind of see growth in the H2? As it pertains to Deere, how are you guys thinking about restocking relative to retail demand? Yeah. With respect to our Small Ag & Turf business, you know, we've seen retail data come in really choppy there and in some cases down. I think there's a number of things that are impacting that in the interim. You know, first and foremost, you know, part of that is just exceedingly low inventory levels are probably starting to have an impact on retail settlements right now. That's been, you know, particularly as you get into things like utility vehicles, riding lawn equipment, compact utility tractors, those continue to be fairly scarce. That is impacting, I think, the number of retail settlements. Also, you know, we are seeing a little bit of an impact from just the late spring that we have here. You know, typically early springs drive a lot of sales for those types of equipment. That's certainly having an impact. You know, kind of further compounding the issue though is our Small Ag & Turf business has probably been the most impacted by acute shortages. Particularly here referring to riding lawn equipment and utility vehicles, where constraints around small engines has been a real factor limiting volume, not just for Deere, but for the industry as a whole. We you know, as we get through the year, you know, we continue to see that be a governing factor ultimately on where volumes can go for Small Ag & Turf. Kanlaya, anything you'd add to that? Yeah. Just to kind of give some ideas on where the market is right now. You know, when you look at the protein prices with beef, pork, and also poultry all at record high, and also milk demand continues to be very strong as well. That's gonna help support the and help offset the rising feed costs, so I think the margin in that market is still looking pretty steady. It looks like we have one last caller. Thank you. Our final question comes from Seth Weber from Wells Fargo Securities. Your line is open. Hi guys. Good morning. Thanks for taking a question. I guess just going back on the supply chain, I assume semiconductors is problematic. You know, is there anything else you'd call out there? Just related to the semiconductors, so is the assumption, is the message that the mix is disproportionately being hurt, you know, on the precision and the tech side, because of the semiconductor issue there, is that really weighing on mix, and that should get better in the back half of the year as well? Is that the right way to think about it? You know, with respect to the supply chain, you know, we are seeing issues being fairly broad-based. You know, our supply management team would describe it as Whac-A-Mole. You know, certainly chips are an issue and will probably continue to be an issue, you know, as we work through the year. You know, I would say so far, we've managed that and have been able to keep that from having a material impact on mix of any kind. You know, as we look to the back half of the year, I would expect us not to single out any particular area of the supply base just due to the broad-based nature of it. I mean, we're seeing challenges with castings and wire harnesses and hydraulics and pumps and tires, and it really just depends on the day in terms of what's causing challenges for us. You know, fortunately, our supply management team has really done an excellent job of working through each of these as they come up, and we've been able to solve them without any material work stoppages or any particular mix issues to call out. Thanks, Seth. Okay, great. Thanks, Brent. I believe that is our last caller. Thanks all. Appreciate it. Thank you. That concludes today's conference call. Thank you for your participation. You may disconnect at this time.