Good conference. It's good. Nice to be here.
Great. All right, perfect. Thank you. So thanks, everybody, for joining us. My name is Angel Castillo, and I'm the Morgan Stanley machinery analyst, and it's my pleasure to have with me today Damon Audia, CFO of AGCO, as well as Greg Peterson, VP, IR, with AGCO. Before I dive into the Q&A, I just wanna read a quick disclaimer. So for important disclosures, please see Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. I just wanna remind the audience, you know, we wanna make this as informal as possible, so just if you have any questions, just raise your hand, and we'll get you a mic to ask your question. So with that, again, Damon, thank you so much for joining us.
It's great to have you here.
Thank you.
So maybe just to dive in, listen, there's clearly a lot of debate as to the cycle, right? And particularly as we head into 2025, what that's gonna look like for agriculture, so I wanna maybe tackle that a little bit by region.
Sure.
Maybe starting with the one that gets the most play but perhaps not the most significant one for you, given that you're more European exposed. But North America, you know, that's an area where, again, that's where the kind of investor focus tends to be. So from an inventory perspective, can you talk about just, you know, what the kind of setup is right now in terms of inventory, dealer inventories, how you guys are managing it?
Mm-hmm. Yeah, so if we think about where we were at the end of the second quarter, North American dealer inventories were around eight months. Little bit lower on the large ag portion of the business, a little bit higher on the small and medium ag portion of the business. Our target is to get to around six months. As we've said, sort of as we think about trying to get to there by the end of the year, that's probably a little bit at risk. You know, we're just as we look at the industry challenges, you know, we also have a little bit more of an elongated supply chain versus maybe others, as our wheeled tractors come in from Europe, so there's about one month on the water.
Our low-horsepower tractors come in from Japan, from India, and from Brazil, so we have a little bit longer supply chain, so we wanna get to six months, but we're probably gonna see that bleed over into twenty twenty-five here, based on what we see right now.
Perfect. And maybe just, you know, to the extent that that impacts your views on pricing or the industry dynamic there, I think that's where probably the most skepticism is in terms of, you know, investor base, thinking that there might be a little bit more pressure on the pricing side, right? Yet, what I hear when I speak to the companies is a little bit more discipline around the pricing side on North America. So can you kind of talk about, you know, what are you seeing, both in the new and used side, and maybe what the ag strategy is?
Yeah. So if we think about pricing, our total company outlook for the full year is net zero pricing. Positive when we think about it relative to inflationary headwinds. If we sorta unpeel that, looking at North America, we're positive year to date, and we expect to have positive pricing for the full year coming here in North America. And so we've. Overall, we continue to look at using the production lever as a way to try to reduce the dealer inventory. Again, our industry as a whole sort of learned some lessons during the prior downturns. Again, I think you're seeing AGCO cutting production up to 25% this year, being much more aggressive at the speed and the severity of the cuts, you know, really trying to get it out via the production.
If we think about things like the discounts, you know, we're using it selectively to drive some retail sell-out to help balance the dealer inventory. It's not necessarily... You know, in our industry, it's a competitive dynamic, and so, you know, raising or cutting prices to gain share is really somewhat of a temporary phenomenon. For us, it's... You know, we're definitely much more focused on trying to reduce our production to get that dealer inventory at a healthy level as we go into 2025.
And, and-
Did you wanna go into the retail, or sorry, the-
The used
... the used equipment?
Yeah.
Again, another good sign for us as we think about why this downturn could be different than the prior ones. If we look at the amount of equipment in the used equipment channel, it's up a little bit versus the pre-COVID levels. But if we think about the pricing of the equipment, it's actually still relatively high versus the historical standards. And so again, what you're seeing is a little bit of a different dynamic, this downturn versus the prior industry downturn. You know, we, as the industry, last time, got into a little bit of a bad behavior. We tended to run production probably longer than what we should have, and as a result of that, we created these short-term leases, one-year, two-year leases.
And so as those rolled over into the used equipment market, put a lot of pressure on pricing, gave farmers who would normally buy new equipment an option of buying one-year-old, maybe two-year-old semi-used equipment, and it really elongated the downturn we went through. The industry stopped doing those, and so when you look at what's flowing into the used equipment market, generally speaking, it's much more traditional three- or four-year-old, five-year-old equipment. And so when you're seeing that in that pricing, again, it's an important variable for the farmers 'cause most large ag equipment, when a farmer comes in and buys a new high-horsepower equipment, he or she is generally trading in one, and so they're looking at that delta of new versus used. And so the fact that those pricing, that price is holding up is a good sign for us here in North America.
And then you look at the age of the equipment. Again, we go to that prior downturn, the age of the equipment went from old to average to young.
Mm-hmm.
We go through this one, you know, we, as an industry, couldn't produce to the demand levels we saw 'cause of supply chain constraints, and so we sort of shaved off that peak in 2021 and 2022. So when we look at the average age of the equipment here in North America, it went from old to average.
Right.
Again, there's statistically there still shouldn't be some opportunity for farmers to replenish their equipment to get it to that young, if you believe in those long-term averages.
Yeah. Oh, that's, that's very helpful. And maybe just to kind of continue on that, because you mentioned market share. You know, the dynamic there, obviously, of your strategy around Fendt, and I think-
Mm-hmm
... also at Farm Progress, you talked about Massey Ferguson's strategy as well. But one of the things that was notable was you made it clear that you're not gonna use the discounting lever as a means of growing your market share and driving that you know, incremental growth in those businesses. I think you'd mentioned in one of the meetings, you know, you have been having some success with the Fendt market share. So can you kind of talk a little bit more about that strategy? How do you grow those businesses, grow the market share, and you know, keep from pulling perhaps on that lever?
Yeah. Fendt is obviously one of our three growth sectors. We're seeing good growth in Fendt North America and South America. It's not leading by price. Fendt leads by value. And if you think about it from a price point standpoint, Fendt price is above the competition. You know, I use my automotive analogy, but if you think of Mercedes-Benz and BMW, Porsche tends to price, you know, slightly above those two, but it's still a volume-oriented brand. Fendt is the best of the best, and so when we go to the farms, and we try to conquest the farms, you know, you're selling the overall value. And what does that mean for a farmer? Well, it means you're gonna pay a little bit more upfront, but you get better fuel efficiency. So those tractors idle at a much lower RPM.
You're spending less on your diesel fuel for the course of the year, or several years. You look at the warranty. Here in the U.S., we talk about the Gold Star warranty, so that's three years bumper-to-bumper parts, service, maintenance, where if you're looking at the competitors, it's two years, and you're probably paying some sort of your for the maintenance or for the service upgrade. So for that farmer who may be concerned, he or she's locked in for three years with no cash out of pocket. So I have better performance, I have better parts and service or the Gold Star warranty. I usually have better technology, and then you layer on that CVT transmission. So if you're thinking about if you're towing a planter, again, when you feel your car change gears, that CVT is seamless.
So if you're towing an implement, you know, you're not getting that start, stop, so you're getting better planting throughout the field, driving better yield. All of those things conveying the value for the farmer of this is why you want Fendt versus the competition, and we're seeing good momentum.
What about the Massey side? The strategy there to double that brand.
Yeah. So Massey, again, especially here in North America, we think about that business, historically have been a little bit low to medium horsepower. You know, there is a price point for these medium to large ag farmers where Fendt may be too technology-rich, too high of a price point. So you see Massey moving into some of the higher horsepower segments. You saw the new 9S launch at the Farm Progress this year. Last year, we announced we showed the Massey sprayer. So again, a little bit more of the volume-oriented, straightforward, dependable farmer who's not looking for the technology-seeking type farmer, but more looking for good quality, not an opening price point. And when we segregate the market, we'd say probably half of the market are these Fendt technology-seeking type farmers. The other half are more straightforward, dependable Massey markets.
So you're not really seeing a cannibalization between those two brands, but really trying to target two farmers. But with Massey, it's growing into that segment that we really didn't have products to offer several years ago.
How are you seeing that market share, you know, the ability to capture market share in this downturn? Is that evolving or changing versus, you know, where we were perhaps at the end of 2023?
Yeah, I'd say it's going a little bit slower. You know, given the environment, the number of deals that are out there now are fewer than what it would've been a year or two ago. You know, I think the environment, again, that last marginal sale is a lot more important now than what it was two years ago. But we're still seeing good momentum. We're still penetrating the farms and creating more of mixed fleets. Again, you know, when we talk about growing share, I think it's important for our investors to understand, you know, this isn't necessarily walking in and taking over a farm from, you know, every aspect of his or her fleet. But generally, farmers who are, you know, using if they have 500 tractors, you know, they'll rotate their tractors, let's say, 20% per year.
Mm-hmm.
And so as we're building the Fendt reputation, the Fendt experience, that farmer who maybe buys 100 tractors that year, first year, they buy 25 of Fendt and 75 of their incumbent brand. They test the fuel efficiency. They see how does it work on their farm with their products, their crops? Are they getting the value that they thought? And then that next year, if it delivers, which we're confident it does, instead of 25, they buy 50, 75, or 100, and slowly continue to create the mixed fleet, as an option for them to get the performance they're looking for. And that's when we talk about layering on why the Trimble acquisition was so important, 'cause then they start talking about the data. "And I need to be able to go between brands.
I wanna make sure all my data's together." Trimble's bringing that mixed fleet data service to them, where now you can be agnostic as to the type of product you're using, but your data sort of works across any brand, 'cause Trimble was that mixed fleet provider with 10,000 makes, 10,000 models. So it didn't matter what color tractor, what color combine you were using-
Right.
... Trimble worked, and that's where our service offering now with Fendt products, coupled with Trimble, lets you create a mixed fleet that you don't lose the data by having to go from brand A to brand B.
Right. No, and I definitely wanna get back to some of the offerings, because I think you had also announced some Farm Progress that I thought was interesting.
Mm-hmm.
But maybe, sticking with this, just the last one on North America. Early order programs or on the seasonal, you know, larger equipment, what are you kind of seeing there in terms of, you know, early reads into fiscal year 2025?
Yeah. So our early, early order programs are a little bit more focused only on our seasonal products, so our track tractors, our combines, our sprayers, and our planters. That window will just be opening up sort of right around now.
Mm-hmm.
Still too early to tell.
Okay, got it and maybe switching over to Europe, I think you've historically described this as one of the less volatile markets versus the other regions. Can you just talk about what's the latest there? I think your inventories are kind of in a better place, but as we think about, you know, indication into 2025, what are kind of the early signals in terms of direction that you're seeing?
Yeah, Europe is usually the least volatile of the three major markets we play in. Again, we talk about relative to mid-cycle. You know, we as a total company were 105 last year, down to 90 this year. Europe usually ebbs and flows between 90 to 110, so it doesn't really get too high or too low because there's such a high percentage of the farmers' income that comes through the subsidies. So they tend to be a much more consistent or less volatile buying pattern there. If we think about the dealer inventories, we're at four months. That's optimal for us. Fendt's a little bit below that. Massey and Valtra, the two volume brands, are a little bit higher.
So we got a little bit of adjustment to do, but as we think about that, it's, you know, relatively good position going into 2025. Again, generally speaking, if you look at the number of registration units, it's at a pretty low point right now. You look at that CEMA index or the barometer, it's at a relatively low point. Usually, those things turn around fairly quickly. You know, we're not giving an outlook for 2025, but as we think about Europe, again, seems to be in the best position inventory-wise. It seems to be the most stable part of our business here. So, you know, hopefully, not a lot of downside risk to Europe, but, you know, we'll see how things unfold the next month or two.
Yeah. And that's 50% of your revenue, correct?
Correct.
One interesting thing that I find about Europe is, you know, it's the least volatile, but it's actually the most fragmented of the regions. Can you talk about maybe what allows for it to be perhaps showing a little bit more discipline or a little bit narrower of a kind of volatility, when you would kind of expect, you know, theoretically, that the more fragmented, you know, market is probably gonna face more competition, more, you know, lack of discipline, and yet it seems to have a little bit narrower?
Yeah. I mean, you have a fairly mature distribution market or channel in Europe, and so, again, the market, there are four major players there. Again, all of us are competing, but the share and the distribution network seem to be fairly mature. And again, because the underlying European farmer, you know, he or she is getting a large percentage of their income from subsidies, they tend to be much more consistent. They don't tend to be as much feast or famine as you would see in South America, so they tend to be more consistent with their purchasing behaviors. We are seeing very good market share growth in Europe. If you look at our European business, margins have stayed strong.
You know, overall, the business has stayed strong, and we're seeing Fendt really do well in Western Europe, and part of that is the new product mix that we're seeing. The new Fendt 700 Gen7 is doing great. Fendt 600 is doing great, so we're seeing sort of a flight to quality, as again, Fendt's that premium producer in Europe as well. So good share capture there, and I think more of a mature, relatively disciplined environment in Western Europe.
That's very helpful. And I guess, as you think about, you mentioned the market share of Fendt, you know, that's been continuing very well. Is there an ability to do consolidation in the industry in Europe, or is it just about taking share, you know, kind of over time with the product offering, with innovation?
Yeah, I mean, I think generally speaking, there's, you know, three major players, and then in Europe, you have Claas, which is another, a major player in Europe, but maybe not at the same scale globally. You know, there's always sort of, I'd say, modest consolidation of implement manufacturers, but, you know, of the big three or the big four, you know, again, that there's three publicly traded companies. There's one privately held company. I think that's, you know, family-run business, and decide if they want to, you know, consolidate, and if so, we're always... You know, we've grown through acquisitions as a company, and so we're always gonna be inquisitive, but, you know, that's more for the other side to decide if there's an opportunity for efficiencies through consolidation.
Right. Maybe pivoting to, to South America. I guess, or before I move on, any questions from the audience? I think we have one up here, if we could get a mic down here. Yeah, I think it's for the webcast. I don't know if we're doing one for this, but... Oh, it's, it's actually all the way up. Or go ahead. Sorry.
Good.
There we go.
The Trimble acquisition, could you talk about that and about your tech stack and how that differentiates from, your competitors?
Yeah. So with the consolidation of the Trimble joint venture here in April, it really became sort of part of the cornerstone of one of the pieces that we were missing as you start to think about the guidance, the telemetry. So coming from that satellite down to the rooftop, and what we now control as part of the joint venture is all aspects of the ag technology that Trimble used to have. And so, you know, it's really helping us in two ways. One is we think about AGCO. One of the differentiators for us is this mixed-fleet, retrofit mindset. You know, we have our own separate distribution channel versus the new equipment channel, very much a mixed-fleet, retrofit mindset with Precision Planting. Trimble was the other one, which was probably the well-known brand that was also mixed-fleet retrofit.
We've now brought Precision Planting and Trimble together under the PTx portfolio, creating the industry leader in mixed-fleet retrofit. So combining those two, very little product overlap, and so what you've looked at their technology, from their data management system to their water management system, their WeedSeeker product, coupling with our product portfolio, very little product overlap, so now giving the farmers a really one-stop shop for all the technology around the crop cycle. So very excited that those two are coming together. The dealer channels were very complementary. Again, with Precision Planting, very strong in the U.S., looking to really expand in Europe. With their Vantage channel, the Müller team there, very strong in Europe, looking to grow here. Again, we talk about $100 million of synergies after 30 years was our plan.
I'd tell you, more than half of that was coming through cross-selling between the different brands. So good momentum, good excitement from the farmers who now have this, again, mixed-fleet mindset, reinforcing what we were doing already with Precision Planting. So great and sort of near-term opportunities. Industry is a challenge right now. We're working through some of the historical, how they sold with CNH. That churn is happening this year, but we've signed up over 200 CNH dealers to be PTx Trimble dealers. So very excited about the opportunity on that.
If we think about the future, and one of the reasons why it was important for us as well, as we start to think about the future of technology and autonomy, again, knowing today, not as critical, 'cause we do more edge processing, but as you move into the autonomous state, where you need to know where the vehicle is, having that connectivity becomes a much more important thing. So now building our autonomous platforms, and I'm sure we'll get to it, Farm Progress, we just showed OutRun, which is the autonomous grain cart, having that connectivity, and that's what Trimble brings to the table for us, is allowing for us to keep that real-time connectivity through that system. You know, it was really important for us as we were building out the autonomous platform between now and twenty thirty. So short term, great opportunity.
Long term, even more critical as we think about the automation that's coming.
... I think we have over here.
Could you just help us understand what's going on with TAFE and where you're not seeing kind of eye to eye?
Yeah, so, I mean, maybe for the broader group here, TAFE, which is a large, privately held Indian company. You know, TAFE, we have multiple different relationships with them. We historically have bought low horsepower, low tech tractors from them that we would then sell in countries like Mexico, South Africa, U.S. We bought last year about $170 million of equipment from them. We also historically would license the Massey Ferguson brand to them in India. We own 21% of TAFE, they own 16.3% of AGCO, and then as part of an agreement that we have with TAFE, they have a member on our board. And so there's four different facets of the relationship.
As we've said on a couple public calls here, you know, we were working with TAFE through supply chain challenges. You know, they were not performing to our standards. We had been working with them to try to improve their performance, their delivery, their quality. Unfortunately, despite multiple conversations about trying to get better, they were not able to meet the standards, and so in April, we gave them notice that we were gonna be terminating those supply contracts with them, and those have a window of when they'll expire, so that $170 million that I bought from them, you know, we're working to bring alternative suppliers online to be able to provide our dealers those type of low tech, low horsepower tractors in those markets, so we're working through that.
At the same time, we gave them notice of our intent to cancel the licensing of the Massey Ferguson brand in India, and we said we'd be looking at an alternative, for that going forward, post the expiration of that notice period. We've also then gone to the ownership, and again, you know, our goals would be that since we don't have an operational relationship with us, there's no need for us to be owning 21% of TAFE. So we'd like to exit that, and, you know, again, we're working with them, whether there's a make sense for them to own AGCO, and then the board position obviously would connect with the ownership. There was a 13D that was filed a little bit over a month ago.
Again, if you read through the 13D, it was referencing, you know, things related to the supply contract, that maybe the board and management didn't act in good faith. You know, we're trying to work through that. You know, we understand some of their pinch points or what they're looking to do, and, you know, we're hoping to come to an amicable resolution. You know, it's just so challenged. It's a little bit unfortunate that it's in the public domain versus being done sort of behind the scenes, but it's a lot more than just a equity ownership in the two. There's operational, you know, absorption issues at play here at that side. So, you know, those can influence things maybe a little bit more than just pure financials.
Perfect. Any other questions? Now, I wanted to move on to the Precision Ag side. Particularly, you mentioned, you know, the PTx announcement, the cart, autonomous cart. I guess I wanted to dig in a little bit more, not just from, you know, what you're seeing in terms of the early kind of insights from investors, or customers to, you know, to the take rates on products like this, but also the receptivity to, you know, more of the kind of subscription models around some of these products.
Yeah, so I think, you know, a lot of focus, if you, if you were at the Farm Progress show, but if you went to the PTx booth, I think you saw a lot of traffic, a lot of foot traffic going through the PTx, the booth, as farmers are very excited about how they drive better productivity, better yield, lower input costs, especially in this environment? And, you know, and that's where Trimble, the old Trimble products and the Precision Planting products have really gained a lot of traction. Because, again, unique facet in that you're able to buy these lower entry point modules to drive yield.
So rather than buying a brand new $450,000 planter, you know, for a farmer who may be a little bit more cash constrained, you know, he or she has the ability to buy a module, a couple components to drive better yield or lower input costs, sort of test it out. You know, if you think about our Cornerstone module, you can bolt it onto your existing metal or your existing iron. So again, you're reducing your price point, but yet hopefully getting some incremental value and also getting to see it with your own eyes through the course of the planting. So really good interest in that retrofit, the replacement market. If you think about what we announced, the exciting part was the combination of PTx Trimble. We announced the OutRun, which is the autonomous grain cart.
And so again, you know, that was our old JCA Technologies that AGCO had acquired several years ago. We've put that into the joint venture. Together, that group was able to get that to market here at Farm Progress. We're seeing a lot of excitement for farmers because when they're in the midst of the harvest, getting that crop off the field in a tight window is when they're gonna maximize their yield. But they'll also tell you that's when they're the most resource-constrained. And so now they have a choice. I take that operator out of the grain cart, and at our Tech Day, we showed two grain carts moving simultaneously with the farmer controlling both of them in the middle of the combine.
So he or she could be running the combine, one grain cart coming next to the combine, getting unloaded, the second one in an autonomous fashion, going out to the truck to get unloaded. So he was running, or she was running three different pieces of equipment, all from the cab, taking that labor cost down... or, you know, allowing that labor to do something else, and at the same time, that combine's never stopping. So they're getting it off the field, they're getting it out when they need it, and they're not sort of dealing with the, the labor constraints that they normally deal with. So a lot of excitement. We're demoing it at about 12 farms or testing it in right now in Nebraska with 12 different farms. Then we'll go more into full commercial sale next year.
The pricing, again, you know, we hear a lot from farmers, "I like to buy it upfront. You know, I have my good years when I'm profitable, I wanna spend the money then, and I get into my years where I'm maybe a little bit more difficult. I don't wanna have to come out of pocket for, for cash, and I got to fertilize my field in good years or bad. I got to buy my seeds in good years or bad, so I don't wanna pay more than I have to." We're trying to create, at least with Outrun, we have a hybrid.
Yeah.
The farmer buys the equipment upfront.
Yeah.
But then, because of the software, the upgrades that are going through, we're offering the farmer sort of three versions to buy in on an annual package. So, you know, for these big farms, they can buy unlimited number of hours, 'cause if this is getting bolted onto a tractor, that tractor's not in an autonomous mode twenty-four hours a day, seven days a week. So you don't want it-- you know, you don't wanna pay continuously-
Right.
You wanna pay that when you're using it. So you can buy unlimited hours-
Mm-hmm.
You can buy a prepackaged number of hours, or you can pay as you go. So it's gonna be depending upon the farmer: are they really gonna trust it, or do they wanna experiment?
Right.
but that's sort of more of an annual subscription, and we think the combination of the two will give the farmers the ability to sort of lower their annual cost, but still get the technology upgrades as we refine the algorithms in the software.
Right
... but yet still do the purchase of the equipment upfront. You know, our thesis for those farmers, like the rest of Precision Planting, is how do we get you a one- to two-year payback?
Mm-hmm.
Again, you know, even with the upfront cost and subscription, how do we keep you sort of in that, let's say, maximum of a two-year payback, is sort of how we're trying to price that for them.
Yeah. No, that's very helpful. And then maybe just one last one on the precision ag. Just, you know, you had a goal for $2 billion in precision ag by 2028. You've mentioned Trimble, you mentioned Precision Planting. How do you think about your technology stack, where you are today in terms of, you know, your capabilities? And, you know, as you look to achieve that $2 billion number, how much of that is maybe organic or inorganic, and, you know, what. Again, maybe where is the white space around the tech stack?
Yeah. So if we think about the tech stack, once with the combination of, of PTx Trimble coming into the portfolio, no real gaps for us from a technology stack standpoint. That doesn't mean that we're not gonna stay inquisitive. Again, there's lots of things that we're doing, and if you think about, there's three hundred and fifty tasks in the cab that need to be automated. We're working on all of those, but there's a lot of small entrepreneurial companies that may be working on something as well. And if they're a year or two ahead of us, you know, do we partner with them or do we buy them to accelerate that task? And, again, you look at some of the smaller acquisitions, like JCA, you know, we've been able to absorb them with our cash.
We'll continue to be sort of opportunistic in that regard, but nothing that we have to have. If we think about, you know, the $2 billion, it's all organic. You know, that is not assuming any inorganic opportunities. You know, the goal for us is gonna be continuing to add new products. If we go back, Precision Planting used to introduce one or two new products when we first acquired them. Now, we're moving three or four per year. With PTx Trimble coming in, we wanna move that up into the high single digits, you know, close to nine or ten new products a year. That sort of continuous innovation on that retrofit is really what's gonna help drive that, coupled with it, then moving into the OEM channels. Again, we service an array of OEMs, you know, around the world.
Trimble had over a hundred OEMs that they were servicing, and we haven't lost any of them as part of PTx Trimble. Precision Planting was serving several other OEMs. And again, so we have this mindset of really being farmer-focused, and whether we're serving them directly through the retrofit channel or serving some indirectly through other OEMs, we're somewhat indifferent, as long as the farmer's getting more productive at the end of the day.
Perfect. And then, maybe just with the last minute we have, just shareholder returns. You know, how are you thinking about that, particularly given the cycle and the, you know, some of the pressures that we're seeing in the market today? Just how are you thinking about the shareholder return?
Yeah. So we continue to stay diligent in our capital allocation. You know, I think with the Trimble acquisition, we added about $1.6 billion of debt on the balance sheet, and we also announced at that time that we'd be putting our grain and protein business under strategic review. We've subsequently announced the sale of that. You know, we said at that point, we'd likely use the majority of those proceeds to pay down debt. So, you know, debt pay down becomes, you know, an increased level of focus for us. That's $700 million of gross proceeds. That'll go down to pay down some of the Trimble debt that I used. Then we think about R&D. You know, that's a primary focus for us. We've increased our R&D around 60% over the last couple of years.
We wanna stay focused on increasing that or at least maintaining that focus. CapEx is, has been up. I'd say that's gonna be relatively consistent. Then we get to the inorganic opportunities. Again, if there's bolt-on acquisitions, after that, we've been very good at returning capital to shareholders. We've increased, up until this year, the quarterly dividend in the last couple of years. We keep paying that, and then we've been opting, given the ownership and the question that showed up, related to TAFE. You know, we've been opting to do a special variable dividend annually. So this year we did $2.50.
We've done $16 in special variable dividends or about $1.2 billion over the last four years, and we choose to do that in lieu of a share repurchase program, you know, given the ownership concentration that we currently have.