Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to AGI's first quarter results release and conference call. [Operator Instructions] Thank you. Mr. Tim Close, you may begin your conference.

Good morning. Thank you for joining Steve Sommerfeld and I this morning to discuss our first quarter results. Let's jump right in to talk about our status during his COVID crisis. We have issued a number of press releases over the past weeks pertaining to our efforts to deal with and mitigate the impact of this global pandemic. We formalized all efforts, all related efforts, under our preparation with progress initiative: to first ensure we're doing everything possible to keep our employees and their families safe; and secondly, once we are certain we could safely and responsibly operate in this environment. We moved to ensure that we're doing everything we can to minimize the impact of the crisis on our business, prepare for the substantial uncertainties before us and also look for opportunities to continue to advance our strategic projects and to gain progress even in a crisis. The vast majority of AGI has continued to operate since the onset of COVID. As previously discussed, we'd had temporary production suspensions in Italy, India, Brazil, France, and we have had a brief suspension at a number of locations in the U.S. The international suspensions were generally driven by national or local policies implemented across all industries. The interruptions in the U.S. have been driven by presumptive irrational positive cases of COVID within the facility. Now we implemented extensive policies and procedures early in this crisis to enable us to continue to operate. Essential services declarations granted us the right to work. However, our actions to create a safe environment and maintain the confidence of all of our associates allowed us to operate. Our team in Italy were on the frontline very early in this crisis. In February, we reacted quickly and started developing sanitization, distancing procedures and robust communication policies. As the intensity increased in the surrounding area, we expanded our policies and continued to operate through the worst period of the crisis. We suspended production for 3 weeks in Italy following the national shutdown orders, then we ramped our production back towards normal levels. We immediately implemented the procedures learned in Italy and Brazil, France and India, and then throughout North America. Today, we are operating at 50% capacity in Brazil, 75% in India, and 80% in France and Italy, and operating fully in North America. We have very strong backlogs in Brazil and EMEA and expect to bring those facilities to 100% by as early as next week. Now let's turn to review our actions across AGI during this crisis. Our engineering, design and quoting teams have been working very effectively throughout the crisis to minimize the disruption for our quoting and sales intake and efficiently move projects in our backlog due to the ongoing work on our production floors. This work continued during all production suspensions, which enabled a more rapid ramp-up as we return to work in affected locations. Our sales efforts have been minimally impacted through our portable farm equipment. In fact, we've increased our direct support and training efforts to our dealers to ensure they have the products they need. Sales on the commercial side continue with design, engineering and quoting activity with customers all going virtual. Having sales teams in each region has had substantial benefits as our relationships are well established, allowing us to remain connected with relevant people and groups at each customer and customer facility, globally. The timing of order intake varies year-to-year. However, as an indicator of the current environment, our order intake is up 10% in the period from March 1 through to the end of April. Maintaining momentum in this environment is a direct result of our robust relationships, our move to regional sales and engineering hubs, our comprehensive product lines, our efforts to step up our support of our dealers over the last number of years and we expanded training and bulk of the support we are providing now. Our marketing efforts quickly pivoted from preparing for many trade shows in our industry to bringing on material and experience online and virtual. Earlier this week, we launched AGI Live, a series of teachings on our product lines and capabilities. Attendance for these events has been robust from across our dealers and customers. Although everyone misses being able to see our products, our virtual experience actually adds much more value as we're able to cover product detail and answer many questions in an open forum where everyone benefits from the group's questions and experience. We will build on this experience going forward and be a significantly positive addition to our customer experience, another component of our preparation with progress initiative. Given the global uncertainty, we have moved to prepare AGI for a deep and extended crisis with a long tail and the possible impacts across our markets. There are simply too many unknowns in terms of market impact, customer behavior, ongoing shutdowns as well as the societal and government reaction to this unprecedented event to do any less an aggressive preparation. At the same time, we believe we are positioned well globally. We are a key component of the essential global food infrastructure. We believe our customers will react to this crisis by increasing investment in facilities, to increase their capacity, account for ongoing changes in trading patterns by building in new regions and substantially increase the automation of all their facilities to lower operating expenses, increased throughput, thereby, increasing their productivity and certainty of operation in good and bad times. We continue to be very positive on our strategies moving through and post COVID. From a cash preservation perspective, we have prudently scaled back CapEx and limited new hires. We also moved early and aggressively to work with our banking partners to prepare for the worst. We have started to review our banking facilities at the end of 2019, given our plans for growth and in a very favorable credit environment. That review led to favorable amendments, and we also extended the maturity of our bank facility in March 2025. Upon the onset of COVID, we immediately reopened discussions with the banks to put in place another amendment to directly address the possible implications of this crisis. That review resulted in an amendment which suspended our senior debt covenants, added $100 million in direct liquidity with the addition of FCC to our syndicates and provided a stepped approach to covenant resumption that includes adjustments for COVID-related impacts on our EBITDA for Q1 and Q2. In line with our preparation with progress initiative, we also reduced our dividend by 75% in order to provide additional liquidity and resources while also moving forward on key projects. Given that we continue to operate in all regions, our demand remains stable, and we had acted quickly and extensively to address cash preservation and liquidity. We believe we can also advance our strategic projects to emerge from the crisis and progress in this difficult year. These projects include the replacement and automation of key production equipment in our portable farm equipment business; creation and build-out of our digital tools for dealers, including product configuration, dealer sales and trading portals; the build of our credit business in Brazil; and the move and expansion of our AGI SureTrack teams, including our IoT hardware assembly and manufacturing as well as our firmware and software development groups. These initiatives are key to our success moving forward with great momentum in each of them. As discussed and as we all know, there are simply too many unknowns for us to be specific about the outlook for the remainder of the year. We are aiming to provide as much transparency as possible as we move through the crisis with a focus on the facts and fundamentals where we do have visibility. Backlogs remained solid across AGI. And as mentioned, order intake since the onset of COVID is 10% above the same period in 2019. There is variability within this order intake number with North America farm intakes stable on top of a strong backlog. North American commercial intake is stable on a flat year-over-year backlog and international intake is up substantially on top of an already strong backlog. Given this backset, we remain positive on our ability to manage through this environment, mitigate the overall impact on AGI and emerge from the crisis, prepare to resume our growth across revenue, margins and strategic projects. Now turning to an update on the rework issues that we experienced on the commercial project as we reported in 2019. We have increased our allowance for the cost associated with this project by $4 million. Our original assessment of expected cost was based on extensive review of the project. However, as we moved through the rework, we determined that more expensive work was required to properly execute on our commitment to our customer. Labor and material costs have also increased much more than expected. We have now substantially completed the design, engineering and material production, providing visibility in all parts of the project. And therefore, we are comfortable that this updated estimate is complete and appropriate. With that, I will turn the call over to Steve who'll review the quarter in more detail, and then we'll take some questions.

Thanks, Tim, and good morning. Sales and adjusted EBITDA in the first quarter of 2020 were $228 million and $25.7 million, respectively, consistent with recent guidance. Lower adjusted EBITDA compared to the $30.6 million recorded in Q1 2019 was anticipated due largely to the second-half weighting of our commercial sales order backlog and our ongoing investments in internal projects, including our technology platform. It is important to note that our Q1 2020 results reflect COVID-related production suspensions in Italy, France, Brazil and India, which negatively impacted our results in Q1. AGI sales in the quarter increased $12.7 million or 6% over Q1 2019 due to strong farm sales in the U.S. and the recent acquisition of Milltec in India. The Company's EBITDA margin decreased to 11.2% in Q1 2020 from 14.2% in 2019. EBITDA margins in the first quarter of our fiscal year are typically lower due to seasonality, and the decrease in 2019 was due to the production, supply chain and delivery inefficiencies caused by COVID-19 as well as the impact of lower commercial sales volumes in the quarter and AGI continued investment in its technology platform. AGI's loss per share of the quarter of $2.61 per share includes significant noncash mark-to-market losses related to foreign exchange translations and the Company's equity compensation swap. Our financial disclosure also includes the calculation of adjusted net income with adjusted noncash items as well as certain other charges. Adjusted profit per share in the quarter was $0.38 per share compared to $0.27 per share in 2019. With respect to outlook, as it stands today, planting conditions in North America are substantially better than a year ago. Our farm backlog is higher than it was at this time in 2019 and farm new order intake in April '20, consistent with prior year. Likewise, our commercial backlogs are significantly higher than the prior year with particular strength internationally. For the balance of 2020 and relative to 2019, we expect our adjusted EBITDA margin will continue to be influenced by sales product mix and investments in our technology business and internal projects. This impact on margins was more pronounced in Q1 and Q4 given the lower volumes in both periods. In addition, COVID-related production suspensions and related expenses have impacted Q2 2020 and there may be additional impacts as we move through the balance of Q2 and H2 2020. Commercial order intake for the balance of the year is uncertain as the world react to COVID. Overall, our total sales order backlog is 9% higher than a year ago, and we are positive on the resilience of the business in a difficult period. A final comment and to add to Tim's comments, with respect to the amendment to our credit facility announced on April 29, in light of the substantial uncertainty caused by the emergence of COVID-19, we moved quickly and proactively to make changes to the facility. It was simply prudent to plan for the worst and the expansion of the credit facility and amendments to the covenant provide AGI with significant flexibility and liquidity should we face a prolonged crisis of COVID-19. We remain well within pre-existing covenant levels, and subsequent to the facility expansion, we have over $200 million of undrawn revolver capacity plus $100 million of untapped accordion. With that, I will turn it back to Joanna for the Q&A.

[Operator Instructions]. First question from Jacob Bout from CIBC.

I want to go back to your comments on backlog, seeing that it's up 9%, it seems like the majority of that is driven by much higher backlog internationally. The question really is just on the risk of changes to this backlog in the international? And also, are you seeing any cancellation orders or orders being pushed out right now?

Yes. Jacob, we are not seeing any cancellations. We have not had any cancellations nor do we think there's a risk of that happening in our backlog.

Okay. If we go back to the second half of last year and with what was happening in the trade wars, the majority of the change in the outlook had to do with the international side. Is that correct?

I think that's a fair characterization. If you look back over the history of that trade tension, we really started doing prior to '17, we've been building for a while. I think there was an ongoing assumption across many industries and groups that it would come, it would be resolved and not lead to the kind of tariffs that we saw being implemented in '19. And so many and most of our customers were progressing through projects in CapEx quite normally through that period up until early in 2019. But then it sort of escalated beyond everybody's expectations. The industry and many industries took a pause in that allocation of capital. I think the -- what we saw was, by the fourth quarter, the new normal race was tension. And so everybody got back to business and started and resumed the projects that were on the drawing board, so to speak.

So, if you look forward to the remainder of 2020, what in your mind is the biggest risk?

Outside COVID? There's the unknowns in this -- that are just pretty substantial. We see our customers fundamentally being driven by the usage of their facilities. And when you look across inputs, fairly relatively normal usage in volumes and getting to the field, seeding [indiscernible] being planted. And then likewise, all of the grain infrastructure and that grain are being used and being used heavily around the world. And then the pre-processing space being tested on volumes that need to get to home consumption and much more use of processed food in that consumption. So the -- fundamentally, that infrastructure is being used as much more than it has in normal regions. So that meets ongoing CapEx and decisions around both maintenance and growth capital required for that infrastructure. So, the fundamentals remain stable or solid. And so our risks are around the ongoing impact in terms of production, and in the near term, the reaction for customers as they look at their own capital availability. Steve, do you want to add anything to that?

I don't think, Tim. I think you described it correctly. The take -- the order intake on the commercial side in the near term, which were COVID related, we're monitoring closely. That have potential to influence commercial sales in the second half of 2020.

But overall, right now, you're seeing fairly rational behavior?

Yes. No, absolutely. Per my comments, what we had been -- in the prior calls, we noted more so than ever we've been very -- we've been looking order intake across every product line of the region. And right now, it's continued since the onset of COVID at a very stable level. With the needs, overall, it's up over the same period prior year. So we continue to see fairly normal behavior, a normal behavior, as our dealer levels and our commercial pipeline around the world.

Okay. And then just last question, maybe how -- what you've learned from this pandemic so far? Any changes to how you're operating longer term, more working from home, robotics, investment in digital platform? What are you thinking right now?

Well, continued. I'd say the one thing I noted in my comments were on the marketing side, the engagement side. It will have a long-term impact on our industry and others. We did have -- our industry is very used to trade shows very extensively. Those have changed over the years and -- but still extensive use of it across the industry. We have hundreds of them around the world each year, and we're seeing that go virtual and actually being embraced in a virtual environment. It does -- rather than kicking the tires, so to speak, at a trade show, it's a different form, a different environment for customers to -- for us, number one, to talk about detail of the products in our services; and then for customers to benefit from that detail but then the questions that they each have, based on different experiences on the line. So whereas, at a trade show, it's more one-on-one and fairly brief people. Unbearably, it's either too hard or rain. So it doesn't give -- it is not conducive to a detailed conversation. And so seeing that go to the online environment is a very -- it is a significant positive for I think for us and probably other industries and businesses. I think that is -- that will continue post COVID, and we're -- we've been investing in the tools to enable that for quite some time now, over the last 18 months or so, to be able to bring detailed training and product demonstrations online. We've been building with our dealer portals to be able to offer training to them through those portals. Product configurations, 3D templates and views of our facilities and capabilities when we move into the commercial side. So what I see is, COVID is in line with the sort of trend over the last number of years. It's just accelerating the adoption and use of different or better tools. And that acceleration, I think, across the board, is an important theme and will impact everybody's lives and everybody's business and in our business. And that's one example. I mean, with that acceleration, we'll have a positive impact on productivity for us, for our customers, shorten the time frames for design of facilities. And so we're looking for every way to learn in this environment and then implement that learning across our business as we go forward. And the old adage of never let a good crisis go to waste is fair in line as we try to mitigate, prepare and progress.

The next question comes from Michael Doumet from Scotiabank.

So just a quick question, just to start us off here. So the comment relating to your manufacturing currently running at 50% to 80% of capacity in Italy, France, Brazil and India, is that reflective of demand levels? Or are there limitations to production due to certain ongoing safety protocols?

Okay, Michael, it's Steve. That's related to the production suspension. So it's different by country, but to resume production is a process. It's not a switch and flip. So as we brought the team back ramping up production, it takes some time to get back to 100%. It's not reflective of demand.

It's okay. Can you just comment on demand levels versus your production capacity in those regions?

Sure. The backlogs are very high. Tim referenced them in his opening comments, in particular in EMEA and Brazil. And our overall international backlog is very high. Our order intake internationally since the beginning of 2020 and actually late in 2019 is well above the prior year as we emerged from kind of the impact of the trade noise, and that was also referenced in the MD&A.

Okay. And then maybe just on the safety protocols and social distancing that you've implemented in some of your facilities. Can you give us a sense on how they're impacting productivity in North America? And I guess in the next couple of months, is there, in your view, a way to sort of reduce that inefficiency over time as you go back to normal demand levels?

Yes. It's pretty minimal. We for a number of our plants are quite automated. And so there's already a fair amount of distancing. We don't have operations where people are unavailable. So we have been able to space out -- the areas of concern were more around break rooms, lunch rooms, washrooms, hand washing stations we've put in, expanded those and/or restricted converging to any area of convergence. And then implemented PPE across the board, temperature checks in and during and pretty extensive policies across the board to enable us to keep working at similar levels. Where appropriate, we would stagger some shifts, but for the time being, the cost and productivities had a relatively minimal impact.

Okay. That's good to hear. And maybe just focusing on the cost side a little bit. I mean can you talk about some of the initiatives that you've implemented? Give us a sense for maybe how you think or how we should think about gross profit margins and SG&A and how this should flex with sales in the upcoming period?

Sure. So Tim described the COVID impact on our production as minimal, I would agree. Going forward, in Q4 and Q1 of our fiscal year, which are lower volume quarters for us, Michael, the point I was trying to make in my opening comments were, our investments in technology and our internal project will have a more pronounced effect on a percentage basis in those lower volume quarters. Going forward in 2020 with the COVID uncertainty, which may impact our second-half commercial volumes, that certainly used to be a factor when you're modeling how you believe margin percentage, will transfer us or progress through the balance of 2020. The decrease in Q1 of 2020 compared to last year was roughly 300 basis points. And you would not expect our tails to be wide in higher volume quarters, Q2 and Q3.

It's okay. And maybe just to sneak one last one in. I guess for you, Steve, again. I mean, how do you feel about your accounts receivable right now, both in terms of speed of collection and collectibility? And also just given still prices look to be bottoming, are you guys contemplating stocking up at some point in the near term?

We haven't noticed a marked change in our accounts receivable collections. Our paging categories on a percentage basis are very consistent with prior periods. Inventory, we're always in the market, assessing current spot prices, assessing forward-looking information and we'll buy strategically when we feel it's appropriate.

The next question comes from David Newman from Desjardins.

This is Chi Le speaking in for David Newman. So our first question is maybe just diving in a bit on the backlog, how do you see the backlog progress by month in 2020, and is there any change in May? And secondly, while it is greater towards the second quarter of 2020, do you see any deferrals into 2021 and maybe more after that?

I caught the first part of that question. I think I missed the second part, but the backlogs have been stable. We came into 2020 with good strong backlogs across the board, and then order intake has also been stable, so we've maintained those backlog levels through to now and into May. There hasn't been a change to that as we move into the first couple of weeks here. I did miss the second part of that question, Steve. I don't know if you got or if you can repeat?

Yes. So the second part is, maybe you can talk more about what -- while it has been weighted towards the second quarter of 2020, do you see any deferrals into 2021 or beyond?

Nothing out of normal. Projects can move in any year. But these were projects that we were booking at the end of 2019 and just given the natural design and production cycle were weighted to H2, no, we don't see any change to that.

All right. And the next one is on AGI Brazil. So you noted before that it is at the inflection point. Maybe just talk more about that in just the epidemic or the supply chain disruption and peak ability to realize the goal and infection at all?

We're well supplied there from -- across our components and raw materials, and backlogs are high. We expect Q2, as we've noted in prior comments, is a seasonal low period in Brazil. But we see our backlog is strong heading into Q3 and into Q4. So no, we very much maintain that inflection point perspective. And we're seeing both farm and commercial quoting and backlog growing sequentially.

Right. And maybe the last one. So how much was the EBITDA drag that you realized on in Q1? And when do you expect to see the breakeven of public contribution there from an active SureTrack?

Did you catch that? The Q1 in terms of Brazil, you're talking specifically on both?

No, sorry, the AGI SureTrack.

AGI SureTrack, sorry, just my line is not good. Yes. Look, we changed that business as a subscription model. And so we've got substantial growth in the customer base there. And sales on a, sort of, retail equivalent are growing rapidly, increased pace over the 70% we noted in 2019. And the change in the subscription model doesn't mean that we have a negative impact on EBITDA in 2020. As we grow the overall business that will reverse and have the net positive contribution as we go into 2021.

So how much of backlog in Q1?

Well, that we haven't disclosed precisely. In Q4, it was $2.7 million for the quarter. We guided in Q4 that the quarterly amount in 2020 would be less than that, and it would decline as we progress through the year.

The next question comes from Greg Colman from National Bank Financial.

Just starting with the backlog. You mentioned that the backlog is up 9% year-over-year. Can you discuss a little bit the margin profile of the backlog projects as it compares to the margin profile through your share of revenue?

Yes, sure. It was a bit long-answered question, I think, Greg. So our farm backlogs are very strong. Maybe I'll start there. Our portable business is very busy, especially in the United States, which has traditionally been one of our higher-margin product lines. Our farm business and storage systems in the United States and Canada, higher than the prior year. And we look back to 2019, the flooding in the U.S. and the uncertainty that caused with respect to our backlog and our sales had a negative impact on margins in 2019, which we expect to improve on in 2020 with more predictable sales on a better operating environment. Our international margins are up significantly. Brazil is up significantly. We anticipate a higher margin in Brazil compared to 2020 as we continue to advance our operations and sales in the country. The balance of the international business, I would say is, in general, the general comment, consistent with prior years.

Got it. Steve, that's good color. Just on the CapEx side, you mentioned growth CapEx of $15 million for the year and normally you've been spending 1% to 1.5% of revenue. I'm not going to ask you, obviously, to call out a revenue number because of the unpredictability of the year and the COVID situation. But could you give us an idea if you expect maintenance spend to be in that normal percentage range because this is not obviously a normal year? Meaning, could it be percentage-wise higher or lower than what you've historically seen?

Yes. We're taking a very hard look at all of our capital expenditures, all of our cash outlays. And maintenance CapEx is obviously a requirement to maintain our manufacturing business, but we are scrutinizing every spend. We would expect to be at the lower end of that range. But we obviously need to continue to invest in our facilities. The growth CapEx, $15 million for the balance of 2020, I believe we outlined it in our MD&A where that was to complete certain projects started in 2019, to invest in further production efficiencies and capacities in our portable business and in AGI SureTrack.

Got it. I'm sorry, that's a mistake on my side. That's $15 million for the last 3 quarters, so excluding Q1.

Right.

Okay. Got it. And would that include any additional M&A beyond affinity that was purchased in Q1 or would M&A be additive to that $15 million? And then also, would you anticipate executing on M&A?

The M&A is not included in that $15 million number. We are taking a pause on M&A as we assess the impact of COVID and the length of the COVID crisis.

Got it. Sounds good. And then, Steve, just a clarity on one of your earlier questions. You talked about 300 basis point margin compression in Q1. And am I understanding correctly that based on what you currently know, larger volume quarters like for Q2 for example, which is typically the biggest volume quarter, the margin compression year-over-year are likely to be less than that 300 basis point year-over-year margin compression we saw in Q1? Or am I hearing that wrong? Okay.

No. You've heard that correctly. Q2 and Q3 are similar volume quarters, our spend on certain investment, technology investments, the AGI SureTrack subscription model are somewhat fixed. So you would expect that the impact on a margin percentage basis would be less.

Got it. And then keeping on that theme, we're now well into the Q2 busy sales period here. Obviously, though, there was the noise at the beginning of the quarter with the roll in shutdowns and restarts. My question is this, not necessarily on a year-over-year basis because that's going to be a little bit tougher to call. And you also mentioned some good outlook as in your prepared remarks regarding the year-over-year. But on a sequential basis, every single year, in history, we've seen the Company grow sales from Q1 into Q2. Is there any reason that we wouldn't see that this year, i.e. where the roll in shutdown and restarts so substantial that it offsets the normal seasonality trends? Or were the roll in shutdown and start-ups not that -- not as big as that and the sort of growth in revenue sequentially is still very much in the cards?

Greg, so you're asking sequential from Q1 to Q2 or year-over-year?

Yes. Sorry, Tim, I used probably too much words for a simple question. Every other year, your revenues are growing from Q1 to Q2, but we had these shutdowns in early Q2 this quarter. I'm just wondering, does that take the sequential revenue growth out of...?

Yes -- no, no, I don't -- we anticipate Q2 to still relatively speaking, it's still going to be a bit up over Q1. The impact we have mitigated that impact and contained it. Internationally, we had Italy, it was 3 weeks and some ability to catch up in a higher automated facility, which we did over the last 12 months. And so we have some capacity to catch up. Beginning in Q2 and be seasonally low in Brazil anyway, and we're bringing on people now to ramp up to get our production at the door. So no, the impact on sales has been relatively contained.

Got it. And then just lastly, and I don't want to harp on this, but on the rework, the initial charge in Q3 was $7 million, went up to $10 million in Q4, now we're up to 14%. So it is growing at a decent clip quarterly. Obviously difficult to anticipate what the total cost is going to be, but can you give us an idea of when that's supposed to ramp up? How many more quarters are we going to be talking about the rework projects there?

Well, from many perspectives, we are substantially complete in terms of the credit for us, the critical areas that were necessary to get full visibility on the ultimate cost. So we're very comfortable now with this addition, complex project. And as we moved into it, we determined there was additional costs needed, material has been a critical component, those costs escalated. But the project itself will wrap some time in Q2.

Thank you. There are no further questions. You may now proceed.

Okay. Well, thank you for joining us this morning. We'll end the call there. And please everybody stay safe and look forward to seeing you in person at some point in the not-too-distant future. Thank you. Take care.

Ladies and gentlemen, this concludes the conference call for today. We thank you for participating, and we ask that you please disconnect your lines.