Corteva Inc

Results of Operations

Net Sales

Net sales were $4,492 million and $4,884 million for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily driven by a 9 percent decrease in volumeand a 2 percent unfavorable impact from currency versus the prior period, partially offset by a 3 percent increase in price. Volume declines were against a strong prior year comparison primarily due to farmer purchases of crop protection products closer to the application window and impacts from the crop protection destocking and unfavorable weather in EMEA, partially offset by growth in North America from higher corn deliveries. Price gains were driven by continued execution on the Company’s price for value strategy, led by seed in EMEA, partially offset by competitive market dynamics in North America and Latin America for crop protection products. The unfavorable impact from currency was led by the Turkish Lira. The portfolio and other impact was driven by the biologicals acquisitions.

1. Represents U.S. & Canada.

2. Europe, Middle East and Africa ("EMEA").

Cost of Goods Sold

COGS was $2,550 million (57 percent of net sales) and $2,771 million (57 percent of net sales) for the three months ended March 31, 2024 and 2023, respectively. The decrease was primarily driven by lower volumes and ongoing cost and productivity actions, partially offset by higher input costs, which are primarily macro-economic driven and is expected to subside for crop protection in the second half of 2024. The macro-economic driven trends are due to inflationary pressures impacting raw material inputs, freight and logistics.

Research and Development Expense

R&D expense was $332 million (7 percent of net sales) and $316 million (6 percent of net sales) for the three months ended March 31, 2024 and 2023, respectively. The increase in R&D expense is in support of the company’s long-term growth plans and was primarily driven by an increase in salaries due to merit increases and higher headcount and the associated spending on third-party research costs.

Selling, General and Administrative Expenses

SG&A expenses were $736 million (16 percent of net sales) and $726 million (15 percent of net sales) for the three months ended March 31, 2024 and 2023, respectively. The increase was primarily driven by incremental costs from the Stoller and Symborg acquisitions and an increase in commissions and bad debt expense, partially offset by a favorable impact relating to deferred compensation plans due to market impacts and a decrease in variable compensation.

Amortization of Intangibles

Intangible asset amortization was $177 million and $160 million for the three months ended March 31, 2024 and 2023, respectively. The increase was primarily driven by the full quarter impact of amortization relating to the intangible assets recognized in connection with the Stoller and Symborg acquisitions, which were completed on March 1, 2023.

Restructuring and Asset Related Charges - Net

Restructuring and asset related charges - net were $75 million and $33 million for the three months ended March 31, 2024 and 2023, respectively. The charges in the first quarter of 2024 primarily relates to charges associated with the Crop Protection Operations Strategy Restructuring Program consisting of severance and related benefit costs and asset related charges. The charges in the first quarter of 2023 primarily related to costs associated with the 2022 Restructuring Actions. The charges in the first quarter of 2024 and 2023 also include non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits and previous restructuring programs.

See Note 5 - Restructuring and Asset Related Charges, Net, to the interim Consolidated Financial Statements, for additional information.

Other Income (Expense) - Net

Other income (expense) - net was $(99) million and $(71) million for the three months ended March 31, 2024 and 2023, respectively. Higher other expense was primarily driven by an increase in net exchange losses and tax indemnification adjustments related to changes in indemnification balances as a result of the application of the terms of the Tax Matters Agreement between Corteva and Dow and/or DuPont. The increase in other expense was partially offset by the recognition of an indemnification payment negotiated with prior Stoller owners.

See Note 6 - Supplementary Information, to the interim Consolidated Financial Statements, for additional information.

Interest Expense

Interest expense was $41 million and $31 million for the three months ended March 31, 2024 and 2023, respectively. The change was primarily driven by the interest relating to the Senior Notes issued in May 2023.

Provision for (Benefit from) Income Taxes on Continuing Operations

The company’s provision for income taxes on continuing operations was $106 million for the three months ended March 31, 2024 on pre-tax income from continuing operations of $482 million, resulting in an effective tax rate of 22.0 percent. The effective tax rate was unfavorably impacted by geographic mix of earnings, as well as withholding taxes on repatriation of cash held outside of the U.S. primarily from current year earnings. Those unfavorable impacts were partially offset by net tax benefits associated with changes in accruals for certain prior year tax positions.

The company's provision for income taxes on continuing operations was $169 million for the three months ended March 31, 2023 on pre-tax income from continuing operations of $776 million, resulting in an effective tax rate of 21.8 percent. The effective tax rate was unfavorably impacted by geographic mix of earnings. Those unfavorable impacts were partially offset by net tax benefits associated with changes in accruals for certain prior year tax positions, as well as from stock-based compensation.

Income (Loss) from Discontinued Operations After Tax

Income (loss) from discontinued operations after tax was $47 million and $(8) million for the three months ended March 31, 2024 and 2023, respectively. The after-tax benefits recognized during the three months ended March 31, 2024 primarily relate to a favorable adjustment of certain prior year tax positions for previously divested businesses. The benefits were partially offset by charges recognized related to the MOU with Chemours and DuPont, relating to PFAS environmental remediation activities at Chemours' Fayetteville Works Facility. Refer to Note 13 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements, for additional information.

EIDP Analysis of Operations

As discussed in Note 1 - Basis of Presentation, to the EIDP interim Consolidated Financial Statements, EIDP is a subsidiary of Corteva, Inc. and continues to be a reporting company, subject to the requirements of the Exchange Act. The below relates to EIDP only and is presented to provide an Analysis of Operations, only for the differences between EIDP and Corteva, Inc.

Interest Expense

EIDP’s interest expense was $41 million and $44 million for the three months ended March 31, 2024 and 2023, respectively. The change was primarily driven by the items noted above, under the header "Interest Expense," partially offset by no interest on the related party loan between EIDP and Corteva, Inc. during the first quarter of 2024 as it was fully repaid in the fourth quarter of 2023.

See Note 2 - Related Party Transactions, to the EIDP interim Consolidated Financial Statements, for further information.

Provision for (Benefit from) Income Taxes on Continuing Operations

EIDP’s provision for income taxes on continuing operations was $108 million for the three months ended March 31, 2024 on pre-tax income from continuing operations of $489 million, resulting in an effective tax rate of 22.1 percent. EIDP’s provision for income taxes on continuing operations was $166 million for the three Months Ended March 31, 2023 on pre-tax income from continuing operations of $763 million, resulting in an effective tax rate of 21.8 percent.

EIDP’s effective tax rates for the three months ended March 31, 2024 and 2023 were driven by the items noted above, under the header “Provision for (Benefit from) Income Taxes on Continuing Operations”.

See Note 2 - Related Party Transactions, to the EIDP Consolidated Financial Statements for further information.

Corporate Outlook

The global outlook for agriculture is stable with mostly constructive fundamentals in 2024. There was record-setting demand for grain, oilseeds, feed and biofuels in 2023 and we expect that to grow in 2024. On-farm demand for inputs remains healthy and farmers continue to prioritize the need for top-tier technology, despite the normalization of commodity prices. The global Crop Protection market remains imbalanced after the significant destocking in 2023, however we expect to see market growth in the second half of 2024.

The company is reaffirming its previously provided outlook for the full-year 2024 and expects net sales in the range of $17.4 billion and $17.7 billion and Operating EBITDA in the range of $3.5 billion and $3.7 billion. Operating Earnings Per Share is expected to be in the range of $2.70 and $2.90 per share, which reflects higher earnings, partially offset by interest expense and a higher base tax rate. Cash provided by operating activities - continuing operations is expected to be in the range of $2.1 billion and $2.6 billion. Free cash flow is expected to be in the range of $1.5 billion and $2.0 billion. Refer to further discussion of Non-GAAP metrics on pages 46 - 48.

The above outlook does not contemplate any extreme weather events, operational disruptions, significant changes in customers' demand or ability to pay, or further acceleration of currency and inflation impacts resulting from macro-economic driven trends. Corteva is not able to reconcile its forward-looking non-GAAP financial measures, except Free Cash Flow, to its most comparable U.S. GAAP financial measures, as it is unable to predict with reasonable certainty items outside of the company’s control, such as Significant Items, without unreasonable effort (refer to page 48 for Significant Items recorded in the three months ended March 31, 2024 and 2023). However, during 2023, the company committed to restructuring activities to optimize the Crop Protection network of manufacturing and external partners, which are expected to be substantially complete in 2024. The company expects to record approximately $180 million to $230 million net pre-tax restructuring charges during 2024 for these activities. Additionally, the company expects to record approximately $60 million for non-cash accelerated prepaid royalty amortization expense as restructuring and asset related charges. See Note 5 - Restructuring and Asset Related Charges - Net, to the interim Consolidated Financial Statements, for additional information.

Reconciliation of Forward-Looking Cash Provided by (Used for) Operating Activities – Continuing Operations to Free Cash Flow 1

1. This represents the reconciliation of the company’s range provided for its forward-looking non-GAAP financial measure relating to Free Cash Flow. Refer to further discussion of Non-GAAP metrics on page 46.