Eric Hansotia: You bet.
Operator: Our next question will come from Larry De Maria from William Blair. You may now go ahead.
Larry De Maria: Thank you. Good morning everybody. In the prepared remarks, you mentioned future cash returns based on cash flow gen investment needs, obviously, given the strong outlook, balance sheet, etcetera, can you discuss how you are thinking about it this year? Are you leaning towards a special dividend, maybe some buyback, or is there potential M&A out there?
Damon Audia: Yes. Larry, I think for us, as I have said in my remarks, we will stay disciplined on how we have approached this. We will look at our quarterly dividend on an annual basis as we normally have. Last year, we raised that 20%. We will look at that relative to our sustainable cash flow generation, see whether that $0.24 still makes sense. As we have talked before, we have an active M&A pipeline, looking for opportunities to accelerate our technology where we can buy that rather than having to invest and build it. And so we do have an active pipeline, and we will look at the potential costs associated with those acquisitions, along with the macro outlook. And as Eric said, we expect €˜23 to be good. We expect €˜24 to be good based on we see it today.
And so based on those things, that would sort of drive what we come down to on any sort of special variable dividend we would pay in 2023. Historically, our repurchases have been more in the line of keeping our shares outstanding at around 75 million shares. And so again, I expect as we look at €˜23 to probably follow that similar path. And we will revisit the special variable dividend, probably more in the Q2 timeframe as we have in the last couple of years.
Larry De Maria: Okay. That makes sense. Thank you. And then we have heard a lot about Fendt, and you guys have obviously grown that business quite a bit more to go. But can you sort of layer in the IDEAL combine? How is that doing? What’s the performance like? And are you bundling the combine with the Fendt tractors, or just maybe an overall update on there, because we have heard a lot about that for a couple of years and now here obviously a lot more about Fendt tractors? Thank you.
Eric Hansotia: Yes. The IDEAL combine, we walked ourselves slowly into the market to make sure that we had both great productivity and great reliability. This past year was the year where we really turned the corner on. We have always had a great performing machine, but we had some early reliability issues in the first couple of years. 2022 was a year where we felt really great about reliability in all the major markets. And so now we are ready to allow that product to ramp up more aggressively. And so we have got plans over the next couple of years to put more capacity in place and things like that. We generally don’t bundle it with other products. The bundling that would happen would be with our Momentum planter and the tractor. Those two often get bundled together. But the combine is one that will stand on its own and sell based on its own performance.
Damon Audia: And Larry, just to maybe give you a couple of statistics of the strength of the IDEAL combine, in both North America and South America, it was up over 70% in sales in €˜22 versus €˜21. So, it’s a very strong demand and performing quite well.
Larry De Maria: Prefect. Thank you.
Operator: Our next question will come from Seth Weber with Wells Fargo Securities. You may now go ahead.
Seth Weber: Hey guys. Good morning. I wanted to just ask about, there was a comment in the prepared remarks about limiting the order intake in North America. I wanted to just see if you could expand on that. Is that supply chain-driven? Is it AGCO’s production constraints driven, or just any more color around that? Thanks.
Eric Hansotia: Yes. I talked about it. There is a couple of dynamics at play here. One is that we are launching the Fendt product line, bringing on new dealers and getting that business accelerating. While we are doing that, we want to €“ we are taking on new customers as well with that product. And so we want to have a great first impression. The product impression has been great and the dealer service has been great. The fly in the ointment in that whole system has been our ability to deliver on time. That’s been our biggest negative in our ramp-up opportunity. And so because of that, we decided to, instead of having an open order book, we shortened the order book window to be able to give higher reliability on our commitment dates.
And this is happening with some of our competitors as well. It’s the volatility that still remains in the supply chain of suppliers having issues that then constrain our ability to finish the machine and delay the production. So, it’s all around that issue, nothing else.
Seth Weber: And that, Eric, that’s primarily a North America issue though, just on the supply chain?
Eric Hansotia: Well, it’s because that’s a growth market. The supply chain in South America is €“ we already €“ the order book, we already were going one quarter at a time. So, that was in place. Europe is a bit more of a stable market strategy, whereas North America and South America, it’s a conquest where we are adding a new brand to the market. And so we are establishing more new first impressions. And we want to be a little bit more cautious and certain with the delivery dates that we are giving in those markets because we are first, engaging with new customers. We want the entire experience to be positive. We had deep relationships €“ yes, the relationships in Europe are deep and long-lasting and they understand the one issue €“ they already know the product, they already know the dealer. It’s delivery uncertainty, and we feel like we can manage that in the relationship there. But we wanted to tighten it up in North America and South America.
Seth Weber: Got it. Okay. Thank you. And then just there are a couple of times your comments around the strength in Brazil. I just wanted to make sure €“ your guys, your dealers, the guys on the feet on the street, you are not hearing anything about any hiccups related to the election or any changes in sentiment around or pausing just around the election that occurred down there?
Eric Hansotia: I mean at a tactical level for a short period, there were disruptions in transportation and a few things like that because some of the streets were blocked. But that’s very €“ is very tactical, short-lived, kind of spot-related. Big picture, farmers are still making fantastic profits in South America. They are the ones adding more ground into production to feed the global demand gap that exists. And so farmer profitability is extremely strong. Demand pulling from that market continuing to grow. We expect a very strong year in 2023. And we don’t see anything of significance structurally coming from the new government to try and slowdown that vital part of their economy.
Seth Weber: I appreciate it guys. Thank you very much.
Eric Hansotia: You’re welcome.
