Deere & Company - Earnings Call - Q3 2025

Executive Summary

• Deere delivered a revenue and EPS beat amid a challenging backdrop: Q3 net sales and revenues were $12.02B and diluted EPS $4.75, versus $13.15B and $6.29 last year and above S&P Global consensus; management emphasized disciplined inventory execution and technology adoption as offsets to macro and tariff pressures.
• Consensus vs actual: EPS $4.75 vs $4.63 estimate*; revenue $12.02B vs $10.33B estimate* — a broad-based beat driven by Financial Services strength and resilient Small Ag & Turf margins despite lower shipments.
• Guidance narrowed: FY25 net income now $4.75–$5.25B (from $4.75–$5.50B), effective tax rate cut to 19–21%, and Financial Services raised to ~$770M, reflecting higher tariff costs and improved credit loss provisioning outlook.
• Stock reaction catalyst: Clear beat and narrowed guidance with explicit tariff headwinds; tactical pricing/incentives in Large Ag and C&F and accelerating adoption of See & Spray/automation should frame estimate revisions and near‑term narrative.

What Went Well and What Went Wrong

What Went Well

• Broad beat vs consensus: EPS and revenue beat S&P Global estimates as disciplined execution and inventory management supported results while Financial Services net income rose 34% YoY to $205M.
• Resilient margins in Small Ag & Turf: Operating margin held at 16.0% (vs 16.2% LY) despite lower volumes; tariff pressure was offset by lower warranty and production costs.
• Technology adoption and utilization rising: “We’re seeing…increasing utilization and proven in-field effectiveness of advanced technologies—such as See & Spray and Harvest Settings Automation” (CEO John May), with >5,000 JDLink Boost orders and 30% more acres run on See & Spray 2024 units this season.

What Went Wrong

• Segment pressure, especially Large Ag and C&F: Production & Precision Ag margins compressed to 13.6% (22.8% LY), and Construction & Forestry margins fell to 7.7% (13.8% LY) on lower volumes, negative price realization, and higher tariffs.
• Tariff headwinds escalated: ~$200M impact in Q3; ~$300M YTD through Q3; FY25 pretax impact now ~ $600M, reflecting higher reciprocal rates and steel/aluminum tariffs.
• Customers remain cautious, particularly in North America: Elevated used inventory, higher rates, and trade uncertainty dampened ordering; price incentives were deployed in earthmoving to counter competitive pressure.

Transcript

Operator (participant)

Good morning and welcome to Deere & Company's third quarter 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. Josh Beal, Director of Investor Relations. Thank you. You may begin.

Josh Beal (Director of Investor Relations)

Hello, welcome, and thank you for joining us on today's call. Joining me on the call today are Josh Jepsen, Chief Financial Officer; Cory Reed, President, Worldwide Agriculture and Turf Division; Production and Precision Ag, Americas and Australia; and Chris Seibert, Manager, Investor Communications. Today, we'll take a closer look at Deere's third quarter earnings, then spend some time talking about our in-markets and our current outlook for fiscal 2025. 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 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 statements concerning the company's plans and projections for the future that are subject to uncertainties, risks, changes in circumstances, and other factors that are difficult to predict. Additional information concerning factors that could cause actual results to differ materially is contained in the company's most recent Form 8-K, risk factors in the annual Form 10-K, as updated by 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 U.S., 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 Chris Seibert.

Chris Seibert (Manager of Investor Communications)

Good morning, and thank you for joining. John Deere's third quarter performance reflects the company's focus on disciplined execution amidst challenging market dynamics. Despite headwinds from tariffs, Deere's equipment operations delivered a 12.6% operating margin in the quarter. Global uncertainty and difficult fundamentals continue to weigh on customer sentiment in many of Deere's key end markets. However, over the course of the quarter, we also saw better-than-anticipated demand in several segments, reflecting pockets of optimism across the business. After a slow start to the year, turf and compact utility tractor shipments in North America were better than expected, reflecting improvement in consumer confidence and favorable weather conditions. Year-over-year retail sales also increased for both tractors in Europe and earth moving and forestry equipment in North America, reversing several quarters of flat or declining sales. Amidst this backdrop, Deere's performance continues to demonstrate strong financial results.

Production costs, inclusive of tariffs, remain favorable in our ag and turf businesses as a result of disciplined management, efficiency gains in our factories, and favorable material costs. The actions that we've taken over the past 18 months to manage inventories across the board have resulted in significant year-over-year declines across all business units and geographies, positioning the company well to respond to inflections in market demand. The additional incentives we have deployed are providing support to customer buying decisions in the current interest rate environment, notably in North American earth moving and the used equipment and the used agricultural equipment market. Clearly, higher levels of global uncertainty persist; however, our order books remain solid. Select markets are showing early signs of positive inflection, and importantly, we remain well-positioned from both an inventory and structural cost perspective to respond when demand growth returns.

We now begin with Slide 3 and our results for the third quarter. Net sales and revenues were down 9% to $12.018 billion, and net sales for the equipment operations were also down 9% to $10.357 billion. Net income attributable to Deere & Company was $1.289 billion or $4.75 per diluted share. Diving into our individual business segments, we'll start with Production and Precision Ag on Slide 4. Net sales of $4.273 billion were down 16% compared to the third quarter last year, primarily due to lower shipment volumes and unfavorable price realization. Price realization was negative by just under one point. This is a result of incremental pool funds we accrued during the quarter to support our dealers' efforts to aggressively address used inventory levels in North America. Currency translation was slightly positive. Operating profit was $580 million, with a 13.6% operating margin for the segment.

The year-over-year decrease was primarily due to lower shipment volumes and an unfavorable sales mix. Next, we'll turn to small ag and turf on slide 5. Net sales were down 1% year-over-year, totaling $3.025 billion in the third quarter due to slightly lower shipment volumes, partially offset by currency translation and price realization. Price realization was positive by about half a point. Currency translation was also positive by roughly 1.5 points. Operating profit declined slightly year-over-year to $485 million, leading to a 16% operating margin. The decrease was primarily due to tariffs, partially offset by lower warranty expenses and lower production costs. Slide 6 gives our 2025 industry outlook for ag and turf markets globally. In the U.S. and Canada, we continue to expect large ag equipment industry sales to be down approximately 30% in the fiscal year.

Demand continues to be pressured by high interest rates, elevated used inventory levels in late model year machines, and trade uncertainty, which is partially mitigated by tight global stocks for grains and oil seeds, stable farm balance sheets supported by strong farmland values, and the distribution of government funds. For small ag and turf in the U.S. and Canada, industry demand is now projected to be down 10%. Dairy and livestock fundamentals remain strong, while capital investments in the segment remain muted due to high cost of expansion. Soft consumer confidence and elevated interest rates continue to weigh on purchase decisions in turf and compact utility tractors. However, we saw improved sentiment and better-than-anticipated retail sales during the quarter, which supported our upward revision to the full-year outlook. Shifting to Europe, sentiment is trending favorably, driven by strong dairy fundamentals, stabilizing interest rates, and an improving arable outlook.

We now expect the industry to be flat to down 5% in fiscal year 2025. In South America, we continue to project industry sales of tractors and combines to remain flat in 2025. Positive sentiment in Brazil is supported by record crop production, improved corn and soy profitability levels, and continued expansion of production rain acreage in the region. However, high interest rates, which continue to increase over the quarter, and questions related to trade policy with the U.S. are causing some caution in the market. Industry sales for Asia are now expected to be flat to up 5%, driven by an improved outlook for the Indian tractor market. Moving on to our segment forecasts beginning on Slide 7. For Production and Precision Ag, our net sales forecast for the full year remains down between 15% and 20%.

The forecast assumes roughly one point of positive price realization, offset by one point of negative currency translation. For the segment's operating margin, our full-year forecast remains between 15.5% and 17%. Slide 8 covers our forecast for the Small Ag and Turf segment. With projected improvements in Europe, India, and North American turf and compact utility tractors, we now expect net sales to be down about 10% this year. This guide includes a half a point of positive price realization, as well as half a point of positive currency translation. The segment's operating margin is now forecasted to be between 12% and 13.5%, in line with the improved sales outlook. Shifting now to Construction and Forestry on Slide 9. Net sales for the quarter were down 5% year-over-year to $3.059 billion, mainly due to unfavorable price realization. Price realization was negative by just under five points.

Negative price in the quarter was driven by incremental incentive programs deployed in the North American earth moving market, where competitive pricing pressure persists. Currency translation was positive by roughly 1.5 points. Operating profit of $237 million was down year-over-year, resulting in a 7.7% operating margin, primarily due to unfavorable price realization and tariffs. These changes have been partially offset by a favorable product mix. Slide 10 provides an update to our 2025 Construction and Forestry industry outlook. Industry sales for earth moving equipment in the U.S. and Canada are still expected to be down approximately 10%, while compact construction equipment in the U.S. and Canada is now expected to be flat to down approximately 5%. Construction markets remain stable, with employment at all-time highs and construction backlogged at above-average levels. U.S. government infrastructure spending remains elevated and continues to provide support to the industry.

On the other hand, single-family housing starts, along with investment in multifamily and commercial real estate markets, are slowing due to higher interest rates and broader economic pressure. Additionally, equipment replacement in the rental industry remains muted. All of these factors continue to drive caution in the market relative to capital investment. However, odd activity over the course of the past quarter has trended more favorably. Global forestry markets are expected to remain flat to down 5%. The projection for the global road building market remains roughly flat. North America is slightly lower year-over-year; however, growth in Europe and a slight recovery in China are contributing to keep industry levels roughly unchanged from 2024. Moving on to the Construction and Forestry segment outlook on slide 11. 2025 net sales estimates remain down between 10% and 15%.

Net sales guidance for the year now includes flat currency translation and about two points of negative price realization, driven by the competitive pricing environment in earth moving in North America. The segment's operating margin is now projected to be between 8.5% and 10%, reflecting higher levels of tariff costs and lower price realization. Transitioning to our Financial Service operations on slide 12. Worldwide Financial Services net income attributable to Deere & Company in the third quarter was $205 million. Net income was higher due to lower provision for credit losses and prior year special items. For fiscal year 2025, our outlook increased to $770 million. Revised estimates for S&G spending and provision for credit losses in 2025 drove the improvement from last quarter's forecast. Next, slide 13 outlines our guidance for Deere & Company net income, our effective tax rate, and operating cash flow.

For fiscal year 2025, we tightened our outlook for net income from last quarter to now be between $4.75 billion and $5.25 billion. Our forecast for net income is largely unchanged quarter over quarter. Recall, the top end of our guide from last quarter reflected a scenario where tariff rates moderated. Next, our guidance reflects an effective tax rate between 19% and 21%. Lastly, cash flow expectations from the equipment operations remain in the range of $4.5 billion-$5.5 billion. This concludes our formal comments. We'll now shift the discussion to address a few topics specific to the quarter. Starting off with Deere & Company's performance in the third quarter, net sales declined approximately 9% year-over-year, and we saw operating margin come in at 12.6%. Josh Beal, can you provide some additional color on what happened this quarter?

Josh Beal (Director of Investor Relations)

Yeah, absolutely, Chris. There's definitely a lot going on in the quarter and plenty to unpack. You mentioned uncertainty in your opening comments, and I think that's probably a good place to start. Given challenging industry fundamentals and evolving global trade environments and ever-changing interest rate expectations, our customers are operating in increasingly dynamic markets, which naturally drives caution as they consider capital purchases. The best way for us to function as a business during times like these is to focus on what we can control, namely execution items like production, inventory levels, and cost. Starting with production, our factories are running well across the business. We're delivering to our production plans, hitting our retail sales targets, and that's allowing us to sustain and even improve upon the significant inventory reductions that we've driven over the past couple of years. That is true across all three of our business segments.

In large ag, we're done with underproduction this year and are happy with where new inventory levels are positioned across the globe. Just to give you a sense of the work that we've done, in North America, 220 horsepower and above tractor inventories are 45% lower year-over-year, and combine inventories are down 25%. Large tractor and combine inventories in Brazil are down over 50% from their peaks in late 2023. Tractor and combine inventories in Europe are down 10%-5% over the past 12 months. These improvements aren't isolated to the large ag business. In small ag, less than 100 horsepower tractor inventory in North America is down 30% year-over-year, including sequentially down 15% in the past quarter. In earth moving, our North American field inventories are between 25% and 30% lower year-over-year.

In short, we feel like the hard work that we've done and the tough decisions we've made across the business over the past two years have us set up to respond as end markets inflect.

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

This is Cory. I want to take a second to double down on that point. We as an organization have intentionally and proactively responded to this downturn faster and more aggressively than ever before. The results of that work are apparent in the reductions that Josh just mentioned. We obviously don't have a crystal ball to know definitively when markets are going to turn. However, we know that when that happens, nobody's better positioned to respond to it and to respond to the demand than us.

Josh Jepsen (CFO)

This is Jefferson, and I agree with Cory's point. On top of that, the underproduction we've done this year in Small Ag and Construction & Forestry should be a year-over-year tailwind to our production as we move into 2026, as we're enabling both businesses to build in line with retail demand next year.

Josh Beal (Director of Investor Relations)

Thanks, guys, for that color. Continuing with the theme of what we can control, the other big area is costs. It starts with our factories. Our facilities have been running efficiently. We've taken costs out of our operations as we've adjusted to lower unit volumes this year. As a result, when you look year-over-year, we're seeing favorable overhead comparisons. On top of that, our supply management team, in partnership with our supply base and our internal product design engineers, continues to work diligently to drive material costs out of the business. We're seeing that favorability again this quarter. Chris, you said this earlier, but I think it's notable to repeat that our ag and turf business remained production costs favorable in the quarter despite the impact of tariffs and inclusive of that impact.

Chris Seibert (Manager of Investor Communications)

Thanks for all your comments here. Can you please also unpack the impact on margins in the quarter?

Josh Beal (Director of Investor Relations)

Yeah, absolutely. There are really two significant callouts here. One is tariffs and the other is price. Starting with tariffs, that's obviously additional costs this year, which is contributing to the higher decremental margins. Tariff costs in the quarter were approximately $200 million, which brings us to roughly $300 million in tariff expense year to date. Based on tariff rates in effect as of today, our forecast for the pre-tax impact of tariffs in fiscal 2025 is now adjusted to nearly $600 million. The primary drivers for the change from last quarter are increased tariff rates on Europe, India, and steel and aluminum. The other notable change this quarter was price realization. As you mentioned earlier, Chris, we saw a negative price in the quarter in both construction and forestry and large ag. Let's start with construction and forestry.

The price actions that we took in the quarter were reflective of a need to be aggressive on price in the North American earth moving market, where competitive pressure has been tougher. Importantly, what we saw was a favorable market response to these actions, as our retail settlements were up mid-single digits year-over-year in the third quarter. On top of that, we've seen a pickup in our order book, where on a percentage basis, we're up mid-teens year-over-year. Additionally, the continued strength in customer backlog, ongoing infrastructure spending, and a potential boost from recently enacted bonus depreciation give us optimism for earth moving retail demand as we exit 2025. Shifting to large ag, the negative price that you saw in the quarter was primarily driven by actions taken to address used inventory in North America, which remains our top priority in the region.

Specifically, we added incremental pool funds to the North American channel. It's important to note that the accrual for these programs drove pricing negative in the quarter, but that we've maintained our 2025 full-year guide of approximately one point of positive price. The best way to think about that is we had room in our incentive budget to continue to support a healthy market and that we're putting those funds to work in the area of highest impact. Certainly, we have more work to do to improve used inventory levels, but it's also important to note that we are seeing progress. As we've talked before, late model equipment has been a particular challenge in North America. Therefore, it's notable that over the course of the quarter, inventory levels of used model year 2022 and model year 2023 ADAR tractors and combines decreased by over 10% for both product lines.

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

This is Cory again. The improvement that we're seeing in late model year equipment is encouraging. There's demand for these model years in the secondary market, and we're seeing that equipment move. The progress isn't limited to just tractors and combines. Since the beginning of fiscal 2025, used Deere sprayers in North America are down 20%, and used Deere planters are down over 30%. We're seeing the secondary market get healthier, and we remain committed to supporting our customers and our channel to continue that progress.

Josh Jepsen (CFO)

This is Jefferson. We should also mention the role that John Deere Financial is playing in supporting the used market. Pool funds can be deployed by our dealers to buy down rates our customers pay when they finance used equipment purchases, which is particularly valuable in a higher interest rate environment. John Deere Financial's introduction of a split-rate financing tool where dealers buy down the interest rate for the first two or three years of a five-year note is proving to be particularly effective. The tenor of the lower rate term is a good fit for trade cycles of many customers, and the cost of the rate buy down is less expensive for our dealers, enabling their pool fund dollars to go further.

Chris Seibert (Manager of Investor Communications)

Thanks all for that color on the quarter. Let's shift gears a bit to looking ahead. Despite uncertainty around global trade, we're starting to see some positive trends in the ag industry, specifically outside of North America. Josh Beal, can you please elaborate a bit on why this is the case and what that means for us?

Josh Beal (Director of Investor Relations)

Sure, Chris. Let's do a quick walk around the world. In Europe, we continue to see robust cash flows in the dairy sector. Arable cash flow is also projected to improve as we see a recovery in yields in key markets following a challenging production season last year. Stable wheat and canola prices at supportive levels are adding confidence in the region, along with stabilizing interest rates. All of this is supportive for demand, which has driven a pickup in order activity for mid-size tractors. In that segment, we've seen strong reception for Deere's recently introduced new lineup of 6M tractors, which are receiving high praise from customers and dealers alike. Moving to Asia, the improved outlook is mainly driven by India. Crop acreage has remained steady, support prices in agricultural credit are increasing, and growing conditions have been favorable in the country.

In South America, our projection for the year remains flat. In Brazil, the sentiment is best described as cautious optimism. Growers are expected to be more profitable this year, driven by improved margins and strong production. High interest rates in the country, however, do somewhat temper expectations, along with U.S. tariffs, which could be particularly impactful on coffee and citrus growers. In Argentina, grower sentiment is increasingly positive, as above-average yields and permanent reductions in export taxes are supportive for the industry. North America continues to be the most affected by trade dynamics, which translates to caution for equipment replacement. On a positive, global stocks to use ratios remain at low levels. Even if this year's Brazilian and U.S. corn crops are at the upper end of yield projections, global stocks to use would still be in line with historical averages. U.S. corn and soybean consumption levels are strong.

However, the persistence of lower commodity prices continues to result in tighter margins for our customers. Recent ag policy legislation has been positive, and potential developments in trade agreements and demand for renewable fuels could also be supportive. However, until there's more stability in the industry, we'd expect customers to continue to take a measured approach to capital investment.

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

This is Cory again. I'd like to add a couple of additional points on North America. First, when we talk about sentiment in the region, we need to differentiate between the U.S. and Canada. Canadian growers are benefiting from stronger prices for small grains and oil seeds, which make up over half of the crop receipts in Canada. Weather conditions have also been favorable, driving expectations for better crop outcomes. Lastly, used equipment levels are in better shape in Canada than in the U.S. Even in the U.S., sentiment is different across the region, across the various regions. Growers in the West are doing better, and we've seen improving confidence in the Midwest, with potential for strong yields in corn and soy fueling optimism. In fact, several Midwest dealers have mentioned recently seeing increased quoting activity over the last 30 days.

The Southeast region is facing the most pressure, where cotton economics are challenging at the moment.

Chris Seibert (Manager of Investor Communications)

Perfect. Thank you for that background here. Now, with that context on fiscal year 2025 and your comments around the current market environment, I'd like to shift to our model year 2026 early order programs in North America. Josh Beal, can you give us an update on where we are now?

Josh Beal (Director of Investor Relations)

Yeah, sure, Chris. Let's begin with level setting on where we are with regards to timing of the various North American early order programs. The early order program for sprayers opened in mid-May and actually closes today. Planter early order program opened at the beginning of June and will close at the end of September. Lastly, combine early order program just opened at the beginning of August and will run through the middle of December. The structure for all the early order programs was a little bit different this year, as we generally shortened all the programs and introduced more flexibility for price adjustment, given potential tariff changes. The announced list price increases for the active phases of all early order program products are between 2% and 4%.

As a side note and as a reminder, North American tractors are on a rolling order book with roughly four to five months of visibility, providing confidence in our production plans as we close out the fiscal year. In terms of early order program progress, let's focus on sprayers, which, as mentioned, just closed today. Based on the results of the early order program and expected order intake post-early order program, which is based on historical activity, we project model year 2026 sprayers to be down roughly 20% year-over-year.

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

Thanks, Josh. I'd like to jump in with a little color on the sprayer early order program and what it might mean for North American products or other product lines in North America. We need to first keep in mind that sprayers are cycling on a different timeline than other products. Given the timing of the model year 2024 early order program, along with the excitement for new technology in the product line, sprayer demand was actually up year-over-year in fiscal year 2024, while tractors and combines were down over 20% in the same year. Essentially, in 2025, sprayers are in year one of a down cycle versus year two for tractors and combines. Additionally, as we've discussed, we currently have more uncertainty than ever in the North American ag market, which translates to the broadest range of outcomes for a following year than we've had in a long time.

With the early order program timing, customers are contemplating purchase decisions with a lot of unknowns for the year-end, and as a result, many are preserving optionality. Depending on when they get greater clarity, customer ordering decisions for other product lines could be made under very different conditions. Because of this, I wouldn't over-index on what sprayer results might mean for other products in 2026. Our focus in alignment with our dealers right now is on the controllables. Priority number one is jointly addressing used inventory levels. As I mentioned earlier, we've recently seen promising momentum on quoting activity. While uncertainty remains, we will continue to run our factories lean, maintaining the flexibility needed to respond quickly. Our disciplined approach to managing new inventory, along with our focus on used, positions us well as this cycle turns.

Chris Seibert (Manager of Investor Communications)

Thanks for that perspective, Cory. My final question is on technology. Last quarter, we talked about milestones we've reached with our Precision Ag Solutions. Josh Beal, are there any recent changes or interesting facts you can share with us?

Josh Beal (Director of Investor Relations)

Yeah, absolutely, Chris. Let's first talk about adoption. During our June investor event in Brazil, we shared regional adoption statistics forJDLink Boost our satellite connectivity solution for areas where cell coverage is not sufficient. Approximately 70% of the acres in Brazil lack reliable cell coverage, which is why we focused on that market first. However, we've also been taking orders in the U.S. since January and went live this summer with availability in Canada, Australia, and New Zealand. Across those four geographies, we've just crossed 1,000 units ordered, and combining that with South American demand, we've surpassed 5,000 global orders in this first year of availability. Demand for Precision Essentials, our bundle of foundational precision technologies, continues to be robust as well. Since launching the offering last year, we've had 21,000 orders globally.

Notably, adoption of Precision Essentials has been a catalyst for greater engagement in the John Deere Operations Center. Since its launch, Precision Essentials has brought over 2,400 new customers into the John Deere Operations Center. For those that were already in Op Center, we've seen a 35% increase in their engaged acres and a nearly 50% increase in their highly engaged acres since adopting the solution. That's contributing to overall engaged acre growth, where we've now surpassed 485 million acres across the globe, 30% of which are highly engaged.

Josh Jepsen (CFO)

This is Jefferson. That reminds me of one point to add. Earlier this year at Balma, we showcased the John Deere Operations Center for road building, highlighting our ability to leverage investments that we've made in large ag and export and extend them to other segments. The road building Operations Center adoption metrics to date are impressive. Over the course of the year, we've more than doubled active road building organizations to nearly 3,000 in the Operations Center.

Josh Beal (Director of Investor Relations)

Thanks for that add, Josh. It's really powerful to see how the adoption of Deere tech is scaling across other production systems. Transitioning to utilization, I think we should highlight the in-season results of See & Spray that we've seen thus far. We've talked previously about the increased number of See & Spray units in the field this year. Beyond that unit growth, what's been particularly encouraging has been the higher levels of utilization that we're seeing this year from our 2024 cohort of machines, which are now in their second use season. On average, 2024 See & Spray units are running the technology on 30% more acres this year. Additionally, these same customers have added incremental See & Spray units to their fleet this season. This is evidence of the value that our customers are seeing in the technology.

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

Josh, let me add something here related to our new precision harvesting features as well, which we introduced this year and are just starting to put to work in the field. We recently visited a large customer running the tech, and they're seeing an over 30% increase in throughput, measured in bushels per hour, with the use of harvest settings automation. Additionally, they reported more than a 20% increase in machine productivity, or acres per hour, through the use of predictive ground speed automation. This is consistent with early season reports that have come in from the John Deere Operations Center, but it's always positive to hear it firsthand from a customer.

Chris Seibert (Manager of Investor Communications)

Thanks all. Really exciting news here. Josh Jepsen, before we open the line for questions, would you like to share any final comments?

Josh Jepsen (CFO)

For sure, Chris. I'd like to start by expressing my appreciation to the Deere team for their tenacity and commitment to executing in the quarter. This helps all stakeholders, but specifically our dealers and customers, to navigate through the current environment. The team's performance in the near term, focused on the things we can control, has prepared us well for the future. Through disciplined management of structural costs and the dedicated effort alongside our dealers to manage inventories, we've done the hard work to enable continued success going forward. There's still a fair bit of uncertainty as we look ahead to next year. However, given reduced field inventory levels, our expectations to build to retail demand across all our businesses will be beneficial, particularly in areas where we're seeing positive momentum as we finish 2025.

In addition, we maintained our focus on the future by investing in and delivering products and solutions to our customers that are driving meaningful outcomes, reducing costs while improving productivity, yields, and profitability. Delivering these outcomes in a down market enables the company to accelerate adoption and utilization of these solutions as market dynamics improve, driving further confidence in our ability to outpace historical performance going forward. We've managed downturns and trade uncertainty before; that's part of our DNA. At the same time, we've structurally improved the business, allowing us to maintain robust levels of investment necessary for future growth. Ultimately, we remain incredibly well-positioned and committed to delivering long-term value for our customers and shareholders.

Chris Seibert (Manager of Investor Communications)

Thanks, Josh. Now let's open it up to analyst questions.

Josh Beal (Director of Investor Relations)

We're now ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedure. In consideration of others and 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.

Operator (participant)

Thank you very much. As we are beginning the question and answer session now, if you would like to ask a question, please press star one. Please take a moment to unmute your phone and record your name clearly when prompted, that is needed so you know when your line is open. To withdraw your request, press star two. Our first question today is from Tami Zakaria with JPMorgan. Your line is open.

Tami Zakaria (Executive Director and Senior Equity Research Analyst)

Hey, good morning. Thank you so much for taking my question. My first question is on your comment that you want to produce to retail demand next year. Just so I understand, in a scenario where, let's say, retail sales are up 5% or up 10%, are you expecting your production to be up similarly, or could it be up more because you're underproducing this year?

Josh Beal (Director of Investor Relations)

Yeah, hey, Tami, thanks for the question. First and foremost, as we mentioned in the comments, we feel really good about the progress that we've made thus far in fiscal 2025 on our inventory levels in the field. As we mentioned, that's really across all three segments. Large ag was in good shape to start the year. We've continued to bring that down. In small ag and turf and construction and forestry, both of those businesses, we did about 10% underproduction this year in fiscal 2025. We've seen inventories come down, as I mentioned, small tractors in North America, less than 100 horsepower tractors, down about 30% year-over-year, 15% sequentially in the quarter, so really good progress. We'll do a little bit more in Q4 there, but we've made really good progress, and again, about 10% underproduction.

Construction and forestry, that was really front half loaded, really in the first quarter we did that underproduction. As a setup to your question, what that means for 2026, large ag pretty much in retail this year, so whatever happens with retail next year, that'll be the change, so plus five in your hypothetical would be pretty similar on the large ag side. Small ag and turf and construction and forestry, they'll get some lift building in line with retail next year, again, down 10% to retail in both of those segments this year, so there's some potential left as we build in line with retail in 2026. Thanks, Tami.

Tami Zakaria (Executive Director and Senior Equity Research Analyst)

Understood. Thank you.

Operator (participant)

Our next question is from Angel Castillo with Morgan Stanley. Your line is now open.

Angel Castillo (Equity Research Analyst)

Hi, thanks for taking my question. I just wanted to expand a little bit more on the early order programs. Completely understand your comments on why we shouldn't extrapolate sprayers, but if you could maybe talk a little bit more about just what you're seeing in planters, which are maybe a little bit further along, and maybe just even very early days on combines, and also just the commentary you made on quoting activity, to the extent that you have the ability to kind of see how those are trending and how much better that might be versus sprayers, that would be helpful.

Josh Beal (Director of Investor Relations)

Yeah, sure, I'll start, and Cory, feel free to add in here. I mean, planters, Angel, we're a little bit more than halfway through the program at this point in time. I think it's fair to say, given the uncertainty in the market the past month and a half, two months, we've been cautious ordering on the planter side, and candidly, customers have the optionality to wait till the end of that. We'll typically see a ramp up towards the back part of the early order programs, especially in an environment like this. Early days on the planter program, and then combines, as we mentioned, it opened on August 1, so very, very early. Early returns are good, but it's early in that segment, and I think don't read too much into that either as well as we need to see that play out over the next several months.

Cory, any additional thoughts on what we're seeing?

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

No, I think you summarized it well. We expect, based on where all the external policy factors are, that people are going to wait and see a little bit, but we've been pleased as we've opened the combine program with some of the response that we've seen.

Josh Jepsen (CFO)

Yeah, I think the other thing we're watching too is, particularly here in the Midwest, we see relatively large production. We think we're going to have good yields, and one thing that's true over time is more bushels will drive better outcomes for customers, which can in turn drive demand incrementally, whether that's pulling used equipment into the harvest or purchase decisions post-harvest, new and used. There's a lot to see here, and we'll learn a lot here over the next 60 days. Thanks, Angel.

Angel Castillo (Equity Research Analyst)

Thank you.

Operator (participant)

Our next question now is from Steven Fisher with UBS, and your line is open.

Steven Fisher (Managing Director and Senior Equity Research)

Thanks. Good morning. It seems like the implied pricing in PPA in Q4 is positive, and I guess it's a range depending on how you're around it, but curious to know what the puts and takes of that inflection are in terms of passing along tariffs versus removing any discounts related to kind of helping incentivize the used sales, and how well do you think the market can bear that higher pricing at this point? Thank you.

Josh Beal (Director of Investor Relations)

Yeah, thanks for the question, Steve, and there's a few things going on there, so I appreciate the opportunity to unpack this. If you recall, in the fourth quarter of 2024, we put some additional incentives in place for pool funds at that point in time, so comparably, you've got a lift in the fourth quarter of 2025 just with that timing aspect. The additional thing we're seeing in the fourth quarter of 2025 is pricing on some model year 2026 pricing is starting to come through. We'll start to ship model year 2026 sprayers in the fourth quarter of the year, which average pricing on sprayers for next year, 4%-4.5%, so some of that price comes through. In addition, pricing for model year 2026 equipment in Brazil will start to be shipped in our fourth quarter as well, so that'll provide a lift year over year.

Josh Jepsen (CFO)

Hey, Steve, this is Jepsen. One thing I'd add to that, I mean, Josh mentioned starting to ship model year 2026 in Brazil and in North America, but Brazil, coming off of last year where we ran some negative price, this year we're mid-single digits positive, so that's returned, which is a good thing, and given the growth in that market for us over the last decade, it was more meaningful when we look at price. Thank you.

Steven Fisher (Managing Director and Senior Equity Research)

Thank you.

Operator (participant)

Our next question is from Tim Thein with Raymond James. Your line is open.

Tim Thein (Managing Director and Senior Equity Research Analyst)

Thank you. Good morning. The question is on the cash flow guidance. They call it a billion-dollar range with just a quarter left. I'm curious how much of that reflects maybe potential difference in outcomes with respect to channel inventory. I guess you are saying that you're kind of done underproducing, but obviously the fourth quarter can always have some variability with production, how you're thinking about channel inventories and an initial look into 2026. There's a lot there, but maybe just help us with why with a quarter left there's such a wide range in operating cash flow guidance. Thank you.

Josh Jepsen (CFO)

Hey, Tim. It's Jepsen. I'll start with that. I think one is we feel good about where we're projected to end the year on inventories. Beal went through a list of the reductions we've made. For example, if you look at 220 horsepower and above in North America, we're right around right now, 20% inventory to sales, which year-over-year is exactly the same from an inventory to sales perspective on a percentage basis. It's lower on an absolute unit perspective. We've driven down inventory, so we feel good about where we're going to end there. We've got a little bit of work to do on small ag and turf that Josh mentioned, but we've seen really good progress and we've seen retails pick up. We feel like we've got an appropriate forecast there of what we'll hit.

I think the cash flow range we just left unchanged, just acknowledging the uncertain environment. Had we tightened it, the midpoint would not have changed. Really not a lot of movement in our forecast from a previous quarter to today on cash flow. Really good quarter that gives us confidence in how we keep operating there, generating cash to keep funding the business. Thanks, Tim.

Tim Thein (Managing Director and Senior Equity Research Analyst)

Thank you.

Operator (participant)

Our next question now is from Kyle Menges with Citigroup, and your line is open.

Kyle Menges (VP of Equity Research Analyst)

Thanks for taking the question, guys. I was hoping if you could just comment a little bit more on CMS. It seems like the order book's improving nicely, yet a lot of pricing competition is still in the market. Just curious how you're thinking about pricing, if you think that your price realization could improve a bit and maybe turn positive next year, and I guess just what pricing is in that order book. Thank you.

Josh Beal (Director of Investor Relations)

Yeah, thanks, Kyle, for the question. You're right. If you think about what happened in the quarter to start, we put some additional incentives in the market, and we were encouraged by the response. As we mentioned, retail sales in the quarter up in North America, earth moving year over year. I think that's the first quarter up in about 18 months. We were positive and pleased with the inflection point that we saw. Obviously, it's been a price-competitive segment, and what we did in the quarter was reflective of that. We expect to see some price moderation in the fourth quarter as we've accrued this current level of incentives in Q3. We'll see where the market goes in 2026. Obviously, there are some headwinds from tariffs that are in play, and we'll see how that plays out.

Josh Jepsen (CFO)

Hey, Kyle, this is Jepsen. I would just add to that to double down on what Beal said. The price level we've seen, we've seen obviously competition has been strong, but we've seen the market reacting. Underlying contractors have work. They've got more backlog than they've ever had. I spent a fair bit of time with contractors here over the course of the summer months, and there's a lot of activity. Labor's still a challenge, so there's work to be had there. A little more competition as it comes to bidding, but there's plenty of activity, and I think we saw a strong quarter from a retail perspective. Orders that Beal mentioned earlier picked up as well. I think the fundamentals there are solid.

I think bonus depreciation, this is an area where we could see that benefit us as we get through the end of our fourth quarter in the calendar year. There's a number of green shoots as it relates to the demand there, and I think finding some stability from a price level perspective will help us there as well, and that's what we're expecting here as we get into the fourth quarter. Thanks, Kyle.

Operator (participant)

Thank you. Our next question now is from David Raso with Evercore ISI. Your line is open.

David Raso (Senior Managing Director and Partner)

Hi, thank you for the time. I'm just trying to get a sense of how much you're embracing some of the positive comments you've made, say, international quoting, the inventory, but balance against what is still obviously a very huge market for you in North America and the U.S. market in particular. Just right now, obviously looking very challenged. When you think about the seasonal movement of your large ag business, the revenues usually go down 25%-30% from fourth quarter to first quarter and then bounce, say, 50% from one Q to two Q. That's a normal seasonality. We now have your implied fourth quarter. I know it's early. Early order programs could influence things. I get it, but I'm just trying to make sure I understand the North American concerns that we all have.

How much are you embracing some of the international to still think about those seasonal patterns as still holding as we start to model 2026? Thank you.

Josh Beal (Director of Investor Relations)

Yeah, thanks. I appreciate the question, and I think you're seeing some of that difference even here in 2025 as we look at the fourth quarter, and you mentioned it. I mean, based on our guide, our expectation is sequentially we would see an increase, kind of high single-digit increase in large ag sales into the fourth quarter, and some of that is that, call it North America versus rest of the world dynamic that you're seeing. We're actually increasing shipments in Brazil, South America in the fourth quarter, as we've seen some green shoots down there. With North America being down a greater percentage this year, that's driving some of the change in normal seasonality in the fourth quarter. We'll see how that plays out for 2026.

Obviously, a lot of quarters to go, a lot of months to go before we have full sort of clarity on where we land on early order programs for next year. As we mentioned, there's caution right now around ordering, just given the uncertainty in the market, and we have seen some more green shoots, both in Europe and in South America. Thanks, Dave.

Operator (participant)

Thank you. Our next question now is from Paddy Bogart with Melius Research. Your line is open.

Paddy Bogart (Equity Research Analyst)

Good morning. Thanks for taking my question. There's been a lot of talk about AI agents performing more complex tasks and assistance semi-autonomously, and I was wondering if you guys see the opportunity for Deere's farmers might be able to utilize the agents to make using the advanced technologies easier in terms of recommendations, prescriptions, and what might be a timeline for Deere's investing in that. Thanks.

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

Yeah, Patty, this is Cory. I think, first of all, you're seeing a lot of AI in the form of machine learning that's showing up in our current products. If you think about See & Spray, if you think about Furrow Vision, a number of the products that we have that are in the market, I think you point out a tremendous opportunity for the next generation of efficiency in agriculture will come from the analysis of the large data sets. If you look, we're sitting now at the 480 million acre mark, multiple passes across that.

Farmers who want to be able to use that data, compare to others like them, to put themselves in a position to start using artificial intelligence and tools like it to be able to inform their decisions going forward, will have access to those tools, and it's something that we're investing in today to be able to do.

Paddy Bogart (Equity Research Analyst)

That's great. Thank you.

Operator (participant)

Thank you. Our next question now is from Kristen Owen with Oppenheimer. Your line is open.

Kristen Owen (Executive Director and Senior Analyst)

Hi, good morning. Thank you for the question. I wanted to ask about your updated tariff assumptions. I think you said $300 million year-to-date, realized $600 million now for the full year. Just can you help us bucket that in terms of those direct tariffs versus maybe some of the steel and aluminum impact, any non-regardable actions you've taken to mitigate that, and how that is allocated among the business units given the implied Q4 decrementals? Thank you.

Josh Beal (Director of Investor Relations)

Yeah, thanks, Kristen, for the question. Maybe just walking through some of the components first and foremost. Prior quarter, our full year guide was about a $500 million tariff impact pre-tax, and we've now increased that to $600 million for the full year. Again, quarter by quarter is about $100 million of impact in Q2. We saw about a couple hundred million impacts in Q3, so our expectation for the fourth quarter is about $300 million. If you think about the changes, the $100 million increase quarter over quarter, the biggest drivers there were a higher reciprocal rate on Europe, as well as steel going from 25%-50% and a higher rate on India too. Those were the three big drivers. Now as we break down that $600 million impact, Europe and steel combined are about 50% of the impact.

If you add in India and Japan, you get about two-thirds of the impact from those four areas. Those are the biggest drivers, and again, the biggest change was some of the change in those reciprocals over the course of the quarter. From a mitigation standpoint, a number of things happening. First and foremost, we've talked previously about doing a lot of work on USMCA certification, particularly in Mexico, where we do have quite a few both complete goods and components flowing over the border. Made a lot of progress there, significantly reduced that exposure with the certification. In addition, we are making some no-regret sourcing decisions where we can on components to move things around as we work to mitigate the exposures. We've talked a little bit about the price that we've embedded in some of our early order programs for next year, helping to offset as well.

Those are the pieces that were taken, those actions were taken. Obviously, a very dynamic environment, but that's where we stand today.

Josh Jepsen (CFO)

Hey, Kristen, this is Jepsen. I would say Beal's last point is a key one. We need some stability. We need to settle, and we need to know where we're at from a tariff perspective before you can take some other actions, but there's opportunity for us. I think the other thing to maybe look at and just step back on, if we look at the full year for equipment operations, and if you take tariffs out, our decremental margin's about 40%. Given the mix, given where North America large ag is, doing a 40% decremental there, we feel pretty good about it. If you zoom into production and precision ag for the full year, ex-tariffs, you're about 45%.

Similarly, with the mix, with some of the incentives that we put into the market to make sure we're thinking long-term and moving used, we feel good about the performance, the things we can control. We'll work through the tariff costs that we have and both mitigate and make different decisions as we go forward. We feel good about the performance to date, and we're going to keep at it. Thanks.

Operator (participant)

Thank you. Our next question now is from Chad Dillard with Bernstein. Your line is open.

Chad Dillard (Senior Analyst)

Hey, good morning, guys. Thanks for taking my question. My question is about the incremental pool funds that will be deployed to address the used equipment situation. If you guys are discounting used and raising new prices, what does that mean ultimately for the farmer and the trade cycle?

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

Yeah, I think, first of all, the pool funds give the dealers flexibility to be able to put the customers into a machine, be able to make the trade, and be able to help offset some of what they're seeing in terms of higher interest costs. We've seen adjustments in the market relative to used pricing. We've started to see those prices now come back. You look at the spreads between what you've seen in retail versus auction price, they've stabilized. We've seen increased quoting activity. With that quoting activity now, what pool funds do is give our customers and our dealers the opportunity to agree on a rate that's attractive to them going forward. We mentioned the tremendous work that's been done to reduce used inventories. A lot of that's come from the use of that flexibility.

The good news is we've got a huge crop in the field right now. We've got used inventory, and we're seeing a lot of pricing activity. We made the decision to put those pool funds in so we could give our dealers the tools to be able to move as much of that used as they possibly can and be able to put ourselves in a great position as our customers close out the year. In the North American market, they're seeing yields higher than expected. They're seeing good tax policy, and they're trying to make a decision right now on, can I come in, update a little bit, get myself through this year, and by the end of the year, we think we're going to start seeing some tax-based buying decisions.

The longer term on the commodity side will be based on how we see these things like tariffs change and what we see in terms of trade deals. We've got eight of nine countries right now, and most of those are including commodity programs inside of them. As we see those kick in together with RVOs, we think we're going to see some really good demand in the future. It's just a question of how it turns. We don't know when that detail will be ready for everyone to see the response in demand, but we think we're positioned as well as we can be to respond when it does.

Josh Jepsen (CFO)

Yeah, maybe the only thing I'd add to that, Chad, is just on the demand side and the fundamentals for customers. As we think about renewable fuels, Cory mentioned RVOs, but ethanol, E15, we've seen some bipartisan support here very recently for ethanol. I think the ability to see incremental demand for ethanol, and particularly as we think about energy being included in trade deals, represents an important opportunity for agriculture.

Chad Dillard (Senior Analyst)

Thanks, Chad.

Operator (participant)

Thank you. Now our next question is from Jamie Cook with Truist Securities. Your line is one moment.

Jamie Cook (Managing Director of Equity Research)

Hi, good morning.

Operator (participant)

There you go.

Jamie Cook (Managing Director of Equity Research)

Good morning. Sorry. Thanks for the question. I guess just drilling down on the big, beautiful bill, Jefferson, just wondering what your thoughts are in terms of implications for tax, for cash flow, and just any early indications you're hearing from customers, you know, more on the bonus depreciation side. Thank you.

Josh Jepsen (CFO)

Yeah, thanks, Jamie. I think from a tax perspective, there's a lot in there. I think we're still sorting through and how those things will impact. One of the big ones is R&D expensing versus capitalization. I think over time, that will be a positive for us. There's a lot of other puts and takes, but I think broadly, you'd say from a tax policy perspective, beneficial for the company as well as for customers. I mentioned bonus depreciation on the construction side where we see opportunities there. Cory, anything you'd add from your side?

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

Yeah, I think in the near term, the closest right now is we get ready to enter harvest. The big thing that's driving the demand side is what we're seeing in the size of the crop. The crop's large, and that means customers need more equipment and more throughput in order to get it in. As we close out the year, what we're going to see is buying that's driven off of those policies. We know as folks finish out their year in October, November, and they head to their accountants, they're going to measure the impact of those and have to decide that they do some year-end buying. We think we're positioned well on the year-end buying side, both on the use side.

We're seeing that quoting activity start today, but we think it'll carry through the end of the year because of what's going to happen with year-end tax buying.

Jamie Cook (Managing Director of Equity Research)

Thank you.

Operator (participant)

Thank you. Our next question now is from Jairam Nathan with Daiwa. Your line is open.

Jairam Nathan (Executive Director and Senior Analyst)

Hi, thanks for taking my question. I just wanted to understand the puts and takes in terms of margins for next year. I understand you'll be producing in line with retail, and that's kind of unknown. In terms of on the margin side between pricing, production efficiencies, if you could just give us the puts and takes.

Josh Beal (Director of Investor Relations)

Yeah, thanks, Jairam. I mean, a couple of points to start. We talked about the setup from a demand standpoint, and we obviously don't know where retails are going to go. I think there's some positive tailwinds in both small ag and construction and forestry when you compare the underproduction that we've done this year versus building a line next year. We'll see how those demand pieces play out for next year, but there's some inherent tailwinds just comparing, again, the underproduction this year to next. Thinking about price, obviously we don't have a guide for next year, but indications, as we mentioned, for early order programs next year in North America, list prices are between 2% and 4%. We've introduced large tractor pricing for 2026 as well. That's about 3% year-over-year. You're going to see some lift from a price standpoint.

We'll see where net net price lands, but from a list price standpoint, that's favorable and helps to offset some of the impact we've seen on tariffs this year, where, again, as we mentioned before, limited ability to price for tariffs in fiscal 2025, just given where our order books have sat. You'll see that start to come into the business in 2026.

Josh Jepsen (CFO)

Yeah, Jairam, the one thing I would add, this is Jepsen, is we'll continue our focus and execution on product cost reduction, production cost reduction, and just the focus there to continue to drive. We've had good success over the last two years of taking cost out, and again, that kind of fits in the bucket of things we can control. We may see inflationary pressures. We'll see ultimately what tariff regimes are in place and what that looks like, but we're going to keep executing on what we can. We've got new products coming, we've got new technologies coming, and we'll keep running our factories efficiently and lean as well. Thank you.

Jairam Nathan (Executive Director and Senior Analyst)

Thanks.

Operator (participant)

Our next question now is from Joel Jackson with BMO Capital Markets. Your line is open.

Joel Jackson (Managing Director of Equity Research)

Hi, good morning. When you talk about some of the caution you're seeing from the ordering and the different macro factors out there, can you maybe elaborate on what you're seeing from the end customers, from the dealers? You weigh that caution between sort of crop prices, a little bit lower corn price, and crop prices and big yield this year, and how that affects crop prices, and also on kind of the tariff uncertainties and different macro things that people read about in the paper every day at the farm level.

Cory Reed (President of Worldwide Agriculture and Turf Division, Production and Precision Ag, and Americas and Australia)

Yeah, I think we're sitting probably about where we'd expect. If you have customers that are concerned about what their end markets are going to look like in a tariff environment, they're waiting to see the outcomes of what these trade deals look like. The good news is the frameworks that have been announced are favorable. They include crop commodities. They also include energy, which is beneficial to us, but the detail's not known yet. If you're a producer sitting there trying to decide whether you move into your next used machine or your next new machine, you might do it because it's a crop-based necessity, something like the large yields that are sitting in the field. Otherwise, you're going to wait and see how these things play out, and that's kind of where they are right now.

They're waiting and seeing, and we think there's positive tailwinds from both what we see in the trade deals. We think there are positive tailwinds from what we see in tax policy. We think there are positive tailwinds from what we see in the RVOs that are going out there on renewable fuels. There's good things coming. It's a question of when does that relate to the demand that we see. If you look at overall demand for crop, it's continuing to go up. Even with the large expected crop, the demand is going up, and it's going to be tight in terms of stocks going forward. The future is bright. The question is when do we see that turn? What we can do is prepare ourselves for it and get ourselves positioned to respond when it happens.

Josh Beal (Director of Investor Relations)

Thanks, Joel, for the question. I think that wraps us up. We're just getting at the top of the hour, so I appreciate the time today, and thanks for joining us. Have a great day.

Operator (participant)

We are now concluded. Again, thank you for your participation. Please disconnect at this time. Thank you so much.