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- **Inventory Target Raised**: FY2026 inventory reduction target increased to $150M, with aged inventory down $94M in five months.
- **Equipment Margins Improved**: Q3 margins 8.1%, up 70bps YoY, but expected to moderate to 7% in Q4.
- **Europe Outperforms**: Romania-driven Europe segment revenue +88% Q3, but FY2027 growth expected to slow.
- **Challenges Ahead**: Domestic ag and Australia segments face weak demand; construction segment stable but constrained by interest rates.
- **Valuation Allowance Impact**: FY2026 EPS guidance includes $0.35-$0.45 non-cash tax expense, highlighting cyclical pressures.


**【CEO Summary Section】**
- **Inventory Optimization Progress**: Total inventory reduced by $98 million YTD, exceeding the $100 million target. New target set at $150 million for FY2026. Aged inventory reduced by $94 million over five months.
- **Equipment Margins**: Improved to 8.1% in Q3 (vs. 3.1% in H1), driven by favorable sales mix and inventory quality. Expect moderation to ~7% in Q4 due to multi-unit deals and aged inventory sales.
- **Customer Care Initiative**: Parts and service businesses generate over half of gross profit, stabilizing revenue amid weak equipment demand. Focus on extended warranties and preventative maintenance to drive long-term growth.
- **Footprint Optimization**: Divested non-core stores in Germany and U.S., and expanded dual-brand strategy in Australia (6/15 locations now offer New Holland equipment). Acquired Heartland Ag Systems to access self-propelled sprayers and fertilizer applicators.
- **Market Outlook**: Domestic ag and Australia segments face challenges due to low commodity prices and government payment delays. Construction segment stable but constrained by interest rates and project timelines. Europe's Romania market boosted by EU subvention funds, but growth expected to slow in FY2027.

**【CFO Financial Commentary】**
- **Q3 Financials**: Total revenue $644.5M (-4.8% YoY), gross profit margin 17.2% (vs. 16.3% YoY). Equipment margins improved 70bps to 8.1%, driven by domestic ag margins rising to 7% (vs. 3.1% H1). Operating expenses $100.5M (+1.7% YoY) due to variable compensation and transaction costs.
- **Balance Sheet**: Cash $49M, adjusted debt/Tangible Net Worth 1.7x (below 3.5x covenant). Inventory reduction efforts lowered floor plan interest to $10.9M (-24% YoY).
- **FY2026 Guidance**: Construction segment now expected to decline 5%-10% (vs. prior 3%-8%); Europe up 35%-40% (vs. 30%-40%). Adjusted EPS guidance reaffirmed at -$1.50 to -$2.00 due to $0.35-$0.45 non-cash valuation allowance.

**【Q&A Highlights】**
- **Parts & Service**: Service revenue flat YoY despite 30% decline in large ag equipment sales. Initiatives to boost take rates on extended warranties and PMAs aim for mid-single-digit growth over time.
- **Construction Segment**: Q3 decline driven by wheel loader backlog resolution. Expect stabilization in FY2027 with potential rate cut support.
- **Europe Outlook**: Romania's stimulus-driven growth (+88% Q3) expected to slow in FY2027. Europe ex-Germany may decline 20%-30% YoY, while Germany to be divested.
- **Inventory Management**: Unit-based inventory reduction outpaces dollar-based metrics. Aged inventory reduction critical to normalizing margins. Interest expense mitigation a key focus.
- **Government Payments**: Soybean assistance flows slow, with no significant impact on Q3 farmer cash flow. Commodity prices remain below breakeven, limiting equipment demand.


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