Tim Thein: Okay. And then, yes. Got it, thank you.
Operator: Thank you. The next question is from Kristen Owen with Oppenheimer. You may go ahead.
Kristen Owen: Thank you so much for taking the questions and happy Thanksgiving. Wanted to ask on the broader capital allocation question, just given the outlook, you’ve got operating cash flow conversion, greater than 100% guided in 2024. So my question is twofold, first, on the internal investments. Can you talk about the technology spend through the cycle and how you’re prioritizing those projects? And then externally maybe touch on the dividends, given the 25% to 35% payout ratio at mid-cycle, how we should think about that influencing your dividend outlook next year? Thank you.
Josh Jepsen: Hi, Kristen. This is Josh. Thank you for the question. I’ll start with our the R&D side, so yes, we’re – we’ll be up slightly from an R&D perspective, so we’re talking $2.2 billion or more. A tremendous amount of that continues to be focused on what we’re doing from a technology perspective and bringing Sense & Act technologies across our portfolio, across the enterprise, autonomy significant opportunities there and as Brent mentioned, we saw good progress this year there as well. And we have significant opportunities there. We’re talking – we spoke to a dealer principle a week ago and he talked about being out with customers here over the last month and every single customer across many different crops in-production systems all asking about autonomy.
So we know the appetite there and then labor challenges being faced by our customer base, so that remains very real. And we also have some significant new product development coming where we’re integrating hardware and technology over the course of the next couple of years. So there is a tremendous amount of focus from an R&D perspective on that. And as you’ve heard us talk about before, we’re continuing to think about alternative propulsion solutions that are going to reduce emissions and reduce cost for our customers and we’ve got to focus in that space, for sure. As it relates to the dividend, we’ve mentioned, we’ve taken it up nearly 20% this year. I think that underlies the confidence we have and where we are and where we’re going. As it relates to our payout percentage in the range, we’re still working our way through that range to the bottom of that and recognize overtime as we continue to execute the way we are, that range will continue to move.
So that is something we likely chase as we demonstrate and deliver continued structural profitability, but I would say all-in all, given the cash we expect to generate we’ll be able to handle all of our use cash priorities from investing in the business, organic and inorganic the dividend, as well as using residual cash to repurchase shares and we think over the long-term, we can drive value enhancing actions there. So, thanks, Kristen. We’ll go-ahead and jump to our next question.
Operator: Thank you. The next question is from Jerry Revich with Goldman Sachs. You may go-ahead.
Jerry Revich: Yes, hi, good morning, everyone and happy Thanksgiving. Nice to see the production cut in the business before used inventories got out of hand the way they did in prior cycles. I’m wondering if you could just unpack 15% to 20% production cut in large ag and how you’re thinking that will drive a balancing in used inventories because obviously used inventories are at absolute low-level, but rising rapidly off the bottom. So, what’s the level of comfort based on your modeling that the 15% to 20% cut is going to get us where we need to be versus needing to cut production further if used inventories continue to build, would love to hear how you’re thinking about all of that?
Brent Norwood: Yes, good morning, Jerry and happy Thanksgiving to you as well. There’s a couple of puts and takes as we think about production for next year. Certainly, we and the industry at large have benefited from some of the constraints – production constraints over 2021, 2022 and 2023. Certainly didn’t feel like a net benefit during those years, but the constraints that we faced as an industry during that time period, limited the amount of new equipment that we introduce to the fleet in a short period of time and I think ultimately, we’ll see that have a dampening effect on the cycle itself. As it relates to used, we have seen used get depleted significantly during those lean years in 2022 in the first part of 2023. Some of those used inventories have started to come back up in the early part of 2023 and this is where a dealer response has been really phenomenal in terms of their proactive engagement to keep those used inventories well below historic target averages.
And so we look at combines, I think something that 40% below the historic average there, I mean tractors were around 20% below the historic average. Part of that was again our dealers being proactive, but then also in the back half of 2023, we did increase our incentive spend on used to help dealers, manage that used inventory. And I think the other part of the story here is just around how we’ve changed some of our leasing options relative to the last cycle. We go back to 2012 and 2013 and 2014, John Deere and the industry a large was engaging in a lot of short-term leases that produced machines coming back to OEMs within one years or two years and that exacerbated some of the used inventory balances that we saw at the end-of-the cycle. And so as we intend to produce in-line for new next year combined with better inventory management on one side, we think that balance of new and used should be relatively healthy going into 2024.
