CNH Industrial N.V. Reports Third Quarter 2023 Results

Q3 consolidated revenue and net income both increased by 2% year-over-year

Amid softer demand in certain product categories and South America, segments improved profitability by executing cost containment actions

Agriculture segment adjusted EBIT margin up 50 bps year-over-year to 15.3%, despite net sales declining by 3%

Construction segment adjusted EBIT margin up 360 bps year-over-year to 6.3%, with net sales increasing by 6%

Announcing immediate restructuring program to be followed by a thorough review of SG&A cost structure

Basildon, UK - November 7, 2023 - CNH Industrial N.V. (NYSE: CNHI / MI: CNHI) today reported results for the three months ended September 30, 2023 with net income of $570 million and diluted earnings per share of $0.42 compared with net income of $559 million and diluted earnings per share of $0.41 for the three months ended September 30, 2022. Consolidated revenues were $5.99 billion (up approximately 2% compared to Q3 2022) and Net sales for Industrial Activities were $5.33 billion (a decrease of approximately 1% compared to Q3 2022). Net cash provided by operating activities was $232 million and Industrial Free Cash Flow absorption was $127 million in Q3.

Financial results presented under U.S. GAAP

CNH achieved record margins in our Agriculture and Construction segments, even as some markets began to soften. Balancing continued investments in iron and technology with aggressive cost containment positions us to maintain our full year adjusted EPS target of around $1.70 and demonstrate higher through-the-cycle margins. We will complement our continuous improvement initiatives with targeted restructuring to enhance operational efficiencies and optimize our organization. Our precision technology evolution is accelerating as we execute our longstanding plan to reduce our reliance on third parties. I would like to thank our employees and dealers for their unyielding commitment to ensuring CNH and its brands deliver for our customers.

Scott W. Wine, Chief Executive Officer

2023 Third Quarter Results

(all amounts $ million, comparison vs Q3 2022 - unless otherwise stated)

US-GAAP
		Q3 2023		Q3 2022		Change		Change at c.c.(1)
Consolidated revenue		5,986		5,881		+2%		%
of which Net sales of Industrial Activities		5,332		5,396		(1)%		(3)%
Net income		570		559		+2%
Diluted EPS $		0.42		0.41		+0.01
Cash flow from operating activities		232		272		(40)
Cash and cash equivalents(2)		2,979		4,376		(1,397)
Gross profit margin of Industrial Activities		23.9%		23.0%		+90 bps

NON-GAAP(3)
		Q3 2023		Q3 2022		Change
Adjusted EBIT of Industrial Activities		657		670		(13)
Adjusted EBIT margin of Industrial Activities		12.3%		12.4%		-10 bps
Adjusted net income		570		557		+13
Adjusted diluted EPS $		0.42		0.41		+0.01
Free cash flow of Industrial Activities		(127)		202		(329)

Net sales of Industrial Activities were $5.33 billion, a decrease of 1% when compared to the corresponding period from the previous year. This decline is mainly due to lower industry demand in Agriculture, especially in South America and in EMEA for combines. Pricing continued to be favorable for both Industrial segments, and Construction net sales grew by approximately 6%.

Net income was $570 million, with diluted earnings per share of $0.42 (net income of $559 million in Q3 2022, with diluted earnings per share of $0.41). In Q3 2023, the impact of adjusting items on net income and diluted earnings per share was neutral. In comparison, in Q3 2022, CNH Industrial N.V. reported adjusted net income of $557 million and adjusted diluted earnings per share of $0.41.

Gross profit margin of Industrial Activities was 23.9% (23.0% in Q3 2022) with improvement from the corresponding period from the previous year in both Agriculture and Construction, reflective of favorable price realization and of improving operating performance.

Reported income tax expense was $171 million ($192 million in Q3 2022), and effective tax rate (ETR) was 25.8% (26.3% in Q3 2022) with adjusted ETR⁽³⁾ of 25.7% for the third quarter of 2023 (26.2% in Q3 2022).

Cash flow provided by operating activities in the quarter was $232 million ($272 million in Q3 2022). Free cash flow absorption of Industrial Activities was $127 million. Consolidated Debt was $25 billion as of September 30, 2023 ($23 billion at December 31, 2022).

The Company has initiated an immediate restructuring program targeting a 5% reduction in salaried workforce cost. This will be coupled with a comprehensive rightsizing of the Companys cost structure to be implemented early next year. Between the immediate reductions this year and the additional actions next year, CNH expects a run rate reduction of 10-15% on total labor and non-labor SG&A expenses. The Company expects to incur restructuring charges of up to $200 million.

Agriculture
		Q3 2023		Q3 2022		Change		Change at c.c.(1)
Net sales ($ million)		4,384		4,501		(3)%		(4)%
Adjusted EBIT ($ million)		672		666		+6
Adjusted EBIT margin		15.3%		14.8%		+50 bps

In North America, industry volume was up 19% year over year in the third quarter for tractors over 140 HP and was down 7% for tractors under 140 HP; combines were down 4% from prior year. In EMEA, tractor and combine demand was up 4% and down 18%, respectively. Industry volume in Europe alone was down 7% for tractors and down 40% for combines. South America tractor demand was down 16% and combine demand was down 47%. Asia Pacific tractor demand was down 10% and combine demand was up 33%.

Agriculture net sales decreased for the quarter by 2.6% to $4.38 billion primarily as a result of lower industry volume, mainly in EMEA and South America partially offset by favorable mix in North America and continued price realization.

Gross profit margin was 25.6% (25.0% in Q3 2022) up 60 bps as a result of favorable price realization in all regions and diminishing production cost inflation.

Adjusted EBIT was $672 million ($666 million in Q3 2022), with Adjusted EBIT margin at 15.3% (14.8% in Q3 2022). The reduced volumes due to industry headwinds were compensated by better mix, higher gross margin, and slight reduction in SG&A expenses, while R&D investments continued growing and accounted for 5.5% of sales (4.3% in 2022). Income from unconsolidated subsidiaries increased $56 million in the quarter, primarily from our JV.

Construction
		Q3 2023		Q3 2022		Change		Change at c.c.(1)
Net sales ($ million)		948		895		+6%		+4%
Adjusted EBIT ($ million)		60		24		+36
Adjusted EBIT margin		6.3%		2.7%		+360 bps

Global industry volume for construction equipment was down 13% year over year in the third quarter for Heavy construction equipment; Light construction equipment was down 3% year over year. Aggregated demand increased 2% in North America, decreased 3% in EMEA, decreased 27% in South America and decreased 13% for Asia Pacific (excluding China, Asia Pacific markets decreased 1%).

Construction net sales increased for the quarter by 6% to $948 million, driven by favorable price realization and positive volume/mix mainly in North America, partially offset by lower net sales in other regions.

Gross profit margin was 15.9%, up 330 bps compared to Q3 2022, mainly due to favorable product mix and price realization.

Adjusted EBIT increased $36 million due to favorable product mix and price realization, while SG&A and R&D spend was flat year-over-year. Adjusted EBIT margin at 6.3% increased by 360 bps vs the same quarter of 2022.

Financial Services
		Q3 2023		Q3 2022		Change		Change at c.c.(1)
Revenue ($ million)		653		482		+35%		+33%
Net income ($ million)		86		86
Equity at quarter-end ($ million)		2,610		2,207		+403
Retail loan originations ($ million)		3,043		2,478		+23%

Revenues increased 35% due to favorable volumes and higher base rates across all regions, partially offset by lower used equipment sales due to decreased operating lease maturities.

Net income was $86 million in the third quarter of 2023, flat compared to the same quarter of 2022, primarily due to favorable volumes in all regions, partially offset by margin compression in North America and higher risk costs.

The managed portfolio (including unconsolidated joint ventures) was $26.8 billion as of September 30, 2023 (of which retail was 65% and wholesale was 35%), up $5.6 billion compared to September 30, 2022 (up $4.7 billion on a constant currency basis).

At September 30, 2023, the receivables balance greater than 30 days past due as a percentage of receivables was 1.6% (1.3% as of September 30, 2022).

2023 Outlook

Given the softening of end market conditions, predominantly in South America, the Company is modifying the 2023 outlook for its Industrial Activities as follows:

• Net sales⁽⁵⁾ up between 3% and 6% year on year including currency translation effects

• SG&A up no more than 5% vs 2022

• Free Cash Flow of Industrial Activities⁽⁶⁾ between $1.0bn and $1.2bn

• R&D expenses and capital expenditures at around $1.6bn

Adjusted diluted EPS is targeted at about $1.70.

Results for the Nine Months Ended September 30, 2023

(all amounts $ million, comparison vs YTD Q3 2022 - unless otherwise stated)

US-GAAP
		YTD Q3 2023		YTD Q3 2022		Change		Change at c.c.(1)
Consolidated revenue		17,895		16,608		+8%		+8%
of which Net sales of Industrial Activities		16,062		15,189		+6%		+6%
Net income		1,766		1,447		+22%
Diluted EPS $		1.30		1.06		+0.24
Cash flow from operating activities		(608)		(886)		+278
Cash and cash equivalents(2)		2,979		4,376		(1,397)
Gross profit margin of Industrial Activities		24.5%		22.2%		+230 bps

NON-GAAP(3)
		YTD Q3 2023		YTD Q3 2022		Change
Adjusted EBIT of Industrial Activities		2,034		1,753		+281
Adjusted EBIT margin of Industrial Activities		12.7%		11.5%		+120 bps
Adjusted net income		1,756		1,518		+238
Adjusted diluted EPS $		1.29		1.11		+0.18
Free cash flow of Industrial Activities		(414)		(453)		+39
Adjusted gross margin of Industrial Activities		24.5%		22.4%		+210 bps

Agriculture
		YTD Q3 2023		YTD Q3 2022		Change		Change at c.c.(1)
Net sales		13,201		12,600		+5%		+5%
Adjusted EBIT		2,063		1,755		+308
Adjusted EBIT margin		15.6%		13.9%		+170 bps

Construction
		YTD Q3 2023		YTD Q3 2022		Change		Change at c.c.(1)
Net sales		2,861		2,589		11%		+11%
Adjusted EBIT		176		90		+86
Adjusted EBIT margin		6.2%		3.5%		+270 bps

Financial Services
		YTD Q3 2023		YTD Q3 2022		Change		Change at c.c.(1)
Revenue		1,805		1,419		+27%		+27%
Net income		258		263		(5)

Notes

CNH Industrial reports quarterly and annual consolidated financial results under U.S. GAAP and EU-IFRS. The tables and discussion related to the financial results of the Company and its segments shown in this press release are prepared in accordance with U.S. GAAP. EU-IFRS reports will be published on approximately November 8, 2023.

1. c.c. means at constant currency.
2. Comparison vs. December 31, 2022
3. This item is a non-GAAP financial measure. Refer to the Non-GAAP Financial Information section of this press release for information regarding non-GAAP financial measures. Refer to the specific table in the Other Supplemental Financial Information section of this press release for the reconciliation between the non-GAAP financial measure and the most comparable GAAP financial measure.
4. Certain financial information in this report has been presented by geographic area. Our geographical regions are: (1) North America; (2) Europe, Middle East and Africa (EMEA); (3) South America and (4) Asia Pacific. The geographic designations have the following meanings:
   1. North America: United States, Canada, and Mexico;
   2. Europe, Middle East, and Africa: member countries of the European Union, European Free Trade Association, the United Kingdom, Ukraine and Balkans, Russia, Turkey, Uzbekistan, Pakistan, the African continent, and the Middle East;
   3. South America: Central and South America, and the Caribbean Islands; and
   4. Asia Pacific: Continental Asia (including the India subcontinent), Indonesia and Oceania.
5. Net sales reflecting the exchange rate of 1.09 EUR/USD
6. The Company is unable to provide this reconciliation without unreasonable effort due to the uncertainty and inherent difficulty of predicting the occurrence, the financial impact, and the periods in which the adjustments may be recognized. For the same reasons, the Company is unable to address the probable significance of the unavailable information, which could be material to future results.

Non-GAAP Financial Information

CNH Industrial monitors its operations through the use of several non-GAAP financial measures. CNH Industrials management believes that these non-GAAP financial measures provide useful and relevant information regarding its operating results and enhance the readers ability to assess CNH Industrials financial performance and financial position. Management uses these non-GAAP measures to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions as they provide additional transparency with respect to our core operations. These non-GAAP financial measures have no standardized meaning under U.S. GAAP and are unlikely to be comparable to other similarly titled measures used by other companies and are not intended to be substitutes for measures of financial performance and financial position as prepared in accordance with U.S. GAAP.

CNH Industrials non-GAAP financial measures are defined as follows:

• Adjusted EBIT of Industrial Activities under U.S. GAAP is defined as net income (loss) before the following items: Income taxes, Financial Services results, Industrial Activities interest expenses, net, foreign exchange gains/losses, finance and non-service component of pension and other post-employment benefit costs, restructuring expenses, and certain non-recurring items. In particular, non-recurring items are specifically disclosed items that management considers rare or discrete events that are infrequent in nature and not reflective of on-going operational activities.
• Adjusted EBIT Margin of Industrial Activities: is computed by dividing Adjusted EBIT of Industrial Activ