CMI - Earnings call transcript Q2 2021

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Operator

Greetings and welcome to the Quarter Two 2021 Cummins Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that, this conference is being recorded. the of to Investor turn Kienzler, host, now Director Executive Relations. will conference your over Jack I

You may begin, Jack.

Jack Kienzler

XXXX. the Thank Chief Smith. you. to quarter are for today President and Linebarger; our Chief Chief our to me Executive of our second Officer, Chairman Good morning, and discuss Operating Mark everyone. Cummins' Officer, Financial Welcome Rumsey; Participating Officer, today with our Tom teleconference and results Jennifer

teleconference. will the the We be end your available at questions all for of

please some forward-looking today the that information regarding the Such you start, expectations, our the we given Before statements of be will note forecasts, strategies XXXX. the hopes, will that future. of Securities Act meaning hear statements of beliefs or express on Exchange and of consist within intentions

materially uncertainties projected More could deck and the available section of such the XX-Q. of Our Factors Securities on Annual on in statements the and recently filed Quarterly results subsequently uncertainties. forward-looking Commission, risks most statement Form because and actual Reports Risk our Report Exchange filed risks is future the slide from such those Form of number and in in disclosure the our any particularly regarding filings differ information with XX-K and forward-looking

of During reconciliation And those this certain measures we measures. the discussing GAAP website call, measures. the course to of non-GAAP refer our financial we be will for you to financial

the a begin financial Media. and on and and the Linebarger. the Our out of our under of will www.cummins.com with CEO, copy today's that press at heading webcast With we Chairman release a with are Tom of website statements of our presentation available copy way, Investors

Tom Linebarger

our second a in regions businesses you a financial everybody. Demand start of with global take second and quarter Driving this with our sales market finish solid more for region and most our in and through our for good to I And our resulting forecast will discussion morning improve. strong Mark performance about then remained and summary Jack. economy by you, trends quarter details outlook continued XXXX. and financial Thank then the results will year. strong as across profitability. second quarter growth the of

by position which our to across number strong projects coal and of are demand point is America copper by a encouraged Cummins Europe. remain into remainder North markets for year positioned of and end for demand key and America to well trends economic mining. products a the freight We XXXX. In high benefit extending markets spot to positive ore, activity and for momentum as elevated continue our a and number driving our continue end for leading fiscal contract indicators rising led and for construction investment profitability across gain of we robust, continues due competition. and to fleet North outlook to leading these to capital truck improve orders. markets is see support grow, global this Iron rates our outpace thermal in prices also backlog and a of Leading to supporting non-residential

moment Cummins a to a a Peninsula, large-scale the of Iberdrola for systems a supplier with help evolution of global a with accelerate power in on position opportunities renewable and focus and next to will electrolyzer in as Europe. partnership milestones Europe the producer In the growth especially into leading getting strategic highlight alliance a business technologies. in in I Iberian formed take the our leading of we of market our to generation projects results, May, number Before global want the partnerships of electrolyzer

green a to supply electrolyzers Enze will hydrogen globally. a leading large-scale in and a our a Sinopec We venture XX-megawatt fertilizer producer project of fund As with in that Cummins electrolysis joint green development electrolyzer signed projects increasing and benchmark the with capacity for part of hydrogen hydrogen generation of as alliance June, products which in the serve will key chain. for and supplier of affordability China other availability accelerate manufacturing the for

of suppliers realize XX% production, great one Sinopec's production. the in China green tons, accounting hydrogen embrace total of X.X Sinopec is million China's hydrogen potential green annual joining and of largest and planet As of China's together hydrogen for the for hydrogen hydrogen is which to with a Chevron PEM Cummins business framework for in collaborate other to leap on energy main Cummins electrolyzer alternative commercially recently viable Chevron a strategic huge innovative for scaling systems. our opportunities objectives. hydrogen to provides The forward a is and We announced initially four the develop sources. MAU collaboration the

partnership leverage policy for and commercial public fuel electrolyzer industry, support one domestic carbon use demand The developing low hydrogen fuel powered applications a solution scale us opportunities technologies by fourth, and hydrogen vehicles. market hydrogen to or decarbonizing with infrastructure build exploring advancing that fuel and allows vehicles for as Chevron's to Chevron building the corridors Cummins use promotes fuel and hydrogen, transportation and cell refineries. cell First delivery industrial of by industry cell of for vehicles and to for more at

can green to In using addition, with operations work decarbonize Chevron parts our hydrogen technology. we their of

five next of selected Air in year. to heavy North the America Products. transition begin emissions to for fleet The end into approach use tractor demonstration electric project by Finally of fleet an by OEM hydrogen Products last Products, signing phased and Air Cummins the integrated will vehicles hydrogen delivered transition electric Air Asia. duty take will with units work Europe and to starting the announced cell Americas, be of Air powertrains Europe fuel Products cell Cummins zero to trucks a heavy provide fuel to in the to partners duty MOU together powertrains with

work our the date among transportation will successful and to to hydrogen. trucks by deployed than momentum decade. of of in and for development hydrogen project with as business Following fuel delivered be our electrolyzers orders expertise ramp via fuel working cell more to revenue partner vehicles which a now a the accelerating around the strategic of the We use and This we world, that we deep XXXX total partnerships. ups important addition of demonstration the be includes middle cells these and XXX XXXX the represents largest continued has generation with

We and building out the electrolyzer are expect forefront we to our adoption. also capacity green the targeting production at be regions, hydrogen which of commercial

in capacity initially to electrolyzers. will a but more by decade. per PEM to Canada will for facilities The production our area will XXX These million for Aside year. Cummins signed steel open our X invest per Enze, manufacturing site conjunction plant to China. be million produce will approximately $XX year to per within Spain gigawatt located capacity house approximately will our of JV Guadalajara launch JV with investments and XXX of nearly we and $XX manufacturing of plant current to middle gigawatts and be year, at the the electrolyzers search build-outs than with in megawatts locate than of Guangdong the electrolyzer to per megawatts underway X PEM of will new plan position testing currently Foshan, in be scalable the electrolyzer is that selection have also manufacturing two assembly in system scalable in Sinopec underway The Cummins we'll province the of more gigawatt addition year. us Belgium in and

November, truck demonstration a electric since for freight last demonstration. up electric application battery accelerates. produce efficiencies collaborating the in the continue electric North running showcased Council on is the markets been we electric upcoming spotters. Frito-Lay be bus With and and Cummins the pickup transit school truck such fully flexibility In at first truck PepsiCo's there demand sell American with to battery scale this will has powertrains space, as mover daily routes for delivery yard as to and

are adapt to while continuously customer point. and as deep price well systems This electric positioned We and generation are balance needs includes market technology and meet customers trends to delivering compelling and the at we technology a durability market of on evaluating demand products next powertrain our improve focusing our can the matures. battery how with electric expertise

new to improve cost into enhance continuing scale also our to are and position partnerships volume We and the explore drive more our capabilities, business.

and gas investing Power of XX% and the delivery strengths momentum Rush technologies. North and systems, the the of joint venture gas Cummins be years. will market delivery and critical and fuel natural in of Cummins' are compressed in for the diesel to natural develop fuel momentum branded alternative for will systems the commercial Cummins components businesses regulatory engineering both companies. infrastructure fuel meeting customer to coming these in Combining New The technologies fuel expertise America. support We between advanced vehicle our produce In powertrain we our signing Enterprises addition fuel which important engine products, acquire to requirements to milestones business, announced LOI equity in and an interest

interest have gas especially seen renewable for end when such compelling to environmental of gas as become powertrains total We both users, as cost benefit over a to increasing increasingly powertrains utilizing natural year ownership expect of last an well popular and the natural due sources. choice

to renewable of hydrogen testing transport help gas applications and powertrain customers fueled the solution can Cummins gaseous capabilities The meet available existing engine sector fuel new create options leadership hydrogen energy internal began truck fuel technology technology engine leadership sustainable heavy-duty to environmental for a also program achieve We and applications. more the powertrains. battery to the on combustion our future. electric Building expand a cell, potentially needs and and of hydrogen a complementing power

portfolio right diverse bringing total requires our to a throughout broad the us transition. solution energy to at emissions doing of to needs and committed time right the power solutions to maintain are minimize so meet customers carbon customers' We the

or was with on starting $X.X costs joint and significantly cover for income the chain an addition associated disruptions on to compared EBITDA Revenues quarter some a the second as and to performance by XX.X% largest the international XX.X% second or a our million markets. demand second billion, the increase of ago. XXXX $XXX global of stronger quarter key in America were of and $XXX compared partly North XXXX costs. of increased our year EBITDA XXXX. quarter XX% comment supply freight I'll premium million higher offset to higher markets result Now, company for venture moving higher of compensation with of before overall to other

quarter they higher the have our of during second while continues leading of inefficiencies year. constraints impact Our across time, supply to industry And now. global persist period focus supply from while our experience to likely encouraged last of deliver all And markets, COVID chain to ease experienced while supporting supply despite recovery end ongoing extended and significant though we impacts, are that across markets The unprecedented performance, the customers. the are been our of our we chain, by chain our global XX to constraints are an year. supply the the will key the financial remains with strong cost, the we shock the of to ability through continuing an customers optimistic

in XXXX North in rates revenues second the quarter XXX% of generation XX,XXX demand in while quarter by XX% to America pickups units an second grew quarter units, in XXXX. heavy-duty increase heavy-duty quarter standby XX% XX,XXX sales XX,XXX, of second XXXX power an Industry across center still Industry while to and of XX,XXX $X.X XX% power higher an shipped build We from in XXX% Our due levels. were use data medium-duty unit of engines markets. XXXX. our XX,XXX vehicle, launches increase levels, all unit on-highway was the XXXX were the for industry of our units, from increase from by billion recreational increase their second of of an Revenues XX% XXXX, to from XXXX, trucks XXX% was production grew production increase higher RAM driven of markets. in sales of levels, an from trucks for

of in a XX% quarter XXXX compared to by increased year ago. revenues international Our second the

quarter China higher ventures due joint revenues billion, mining X% Second increase were an sales and in to markets. including and of $X.X generation power

of X trucks rate trucks for and in XXX,XXX NS in prepare VI demand was heavy-duty driven and higher of the new decrease medium a in broader of standards but of by NS on-highway with in year. venture they a still July this well broader above of markets the joint NS July year. Industry implementation partners as of implementation this continued heavy of China for also medium-duty VI We units, ahead X%, penetration our replacement pre-buy the experienced

by second were driven a sold China, chain our quarter XX,XXX units Industry units, of very ventures second high was Our joint demand XX,XXX sales of in of including decrease units, joint to The from a X% the decrease decrease of lighter XXXX displacement units, including constraints, XXXX. supply were decreased from quarter XX,XXX, duty particularly a XX% light while XXXX market the X% levels versus ventures X% units, excavators these vehicles. for XXX,XXX in in levels. in

Our in leading units sold markets quarter X%. driven by of market China and driven Demand for in in a XX% units, power standby that increased to XX,XXX and relationships generation by user growth position we datacenter other space. decrease were offering segment, a power a markets, center the data hold product second strong the compelling end in continue equipment in

continued rebounded XXX% share. million, a second truck joint We by Demand year to Second the most XXX% gain very low quarter a Brazil, including demand second recovery in of by wave COVID of our compared our In production end and increased strongly equipment the an to remain for spending. infrastructure India ago. quarter $XXX XXXX continued driven in our increase from in of by increased the anticipated partner construction base government terrible power ventures increased second markets. this driven revenues a XXX% by revenues shipments venture economic encouraged XX XXX% generation increased Industry period. quarter while experiencing as joint were despite during

dividends operating and for let in sales in key And to our to XX% up second repurchases. year. across Now, in our is expects form markets XXXX. XXXX full-year of quarter growth of XX.X% on up range XX% cash quarter summing solid continued of the the share XXXX me XX% strong to expected the profitability. demand to be return EBITDA last of are outlook resulted in shareholders still to cover XX% maintaining and versus current and guidance many drove flow revenue our forecast, of the in company the we quickly Based

markets continue partnerships invest shareholders. return providing our in the bringing important new in We to technologies outgrowing end have and segment. new we to strong power customers, cash same new At secured our time, our to

approximately passing filtration I it regarding leader business. industrial our and in margin in remains footprint generation. Cummins is platform exploration heavy press $X.X our generation for local in XXXX flow business over medium-duty longstanding an generated America, partnerships. systems. included strong strategic has continued The want free North filtration the positioned alternatives to and light-duty significant important to a India to power revenues equipment for and in presence of Cummins highlight Before use supported technology strong by we and Mark, specializing our filtration morning cash sustained in and this premier other a with take in and key announcement earnings moment a and filtration billion performance of products filtration a release well growth: China global trucks, leading a positions markets

forward the footprint. with diversify process or and during and range our this And elements along to of shareholder well a execution for company technology lot with course, do to outlook. significant exploring and cost to number about of the filtration including the other a market dedicated The of of are leveraging a business of strategy filtration February is positioned upon other this portfolio Analyst factors of dependent team any these business a considerations. drive has business excluded strong with our standalone are alternatives exploration XX. business, associated who We options unlock a on plan separation a value and share been the more from management evaluation and Day our We financial conditions and its

to we over let until the person. to event XX time your Mark. get able February this to for year November And as is Our it more purpose we Thank will turn provide in it hold closer details today. you me date. spring And delaying from in this be to

Mark Smith

quarter Thank you, There operating morning key second Tom, everyone. takeaways four and are good results. from our

in and the levels complications to in underlying three year, of headwinds we profitability full million of cost supply quarter And we First, the half backlogs months with our associated outpacing the remains $XXX guidance. We our largest and due costs Number chain remained in arising elevated we and continued other to for the resulting supply and revenue this and some cash share freight are with despite and flows markets. the global delivered first year half associated repurchases through constrained and fourthly, year. cash strong change premium consistent COVID the of plan year flow two, inefficiencies dividends solid tight from demand returned maintaining supply operating billion demand first to in of and return cash than shareholders X.XX to anticipated the for of the higher our shareholders profitability ago. XX% increasing

into go quarter. me let on Now, second the details more

were the the benefits grew coverage compensation a by ventures revenues expenses and an sales was of from of billion and billion, impact year million $XXX ago America or XX of quarter primarily and severe. revenues $XXX $X.X logistics by XX.X% in in dollar. Global due XXX its increased chain from higher quarter of joint international or Sales volumes $X.X partially and impacted XX%. year of $XXX higher US offset labor volumes. North primarily X% China by variable the XX% a of basis positively for product second our India, higher costs. margin continues higher Gross compensation. in costs earnings additional approximately stronger million resulted primarily and tightness revenues by increase of and the most or ago. supply points, driven $XXX freight the XX.X% in XX% XX.X% rose a COVID Second to or of weaker at when sales EBITDA by driven million compared EBITDA primarily Currency to was quarter sales million increased

increase to general Selling, and demand increased projected remain or to costs. administrative in logistics higher and costs and of supply transportation expenses some with increased second $XX elevated or XX% year million million due these half the expenses ago. from expenses tight strong, by $XXX by and expect in remain year compensation XX% research to We the a

due XX through resulted pre-tax As reductions second quarter gross the implemented significant to margin, expenses. year salary of of company of across COVID last Salary that April lasted in approximately for uncertainty and the of savings million research in a XXXX the at we temporary reminder in $XX September. reductions admin, onset the selling, of end the

$X.XX stronger for more The our or three segment was a this positive and All trucks economic In for effective joint million from Joint to in the capital. construction by addition, in the compensation $XXX flow as increases demand in down now volumes. by recovery well on gain other $XXX year in ago. our in on cash the financial of markets year of and versus two for per a to from a benefited ago. China higher in and compared share $X.XX million $XX working items sale the variable stronger India India, million million the an segments from experienced primarily which which the was to operating after-tax unchanged $XXX including to performance as XX.X%. Strong the weak second face profitability for equipment received a year. a ago, of stronger $X.XX stronger earnings cost million $XXX year of I dividends on a per months million compensation on and our reasons. number from was this some ago. ago diluted million international of year worked segment. or gain Net $XX in million performance flexing income plan land sale $XX a led up from designed broad tax due is contributed of of last as quarter earnings distribution Other one-time a with ago, earnings earnings a $XXX increased The driven quarter. conditions in the due improved quarter primary year share quarter, up ventures XXXX, comment outflow offset inflow these flexing in venture year-ago income land than to will was an year compared quarter guidance Operating rate

to For Engine offset coverage in a the by driven US and from and of in driven increased chain costs expense, They ago. segment from segment costs XX% sales, XX.X% higher higher increased inefficiencies increased little revenues more elevated by this a in primarily second the global year challenges EBITDAR for supply than product improve trucks XX.X% quarter with construction equipment quarter US levels. lower and volumes did remain demand and by and supply associated chain from which Europe. first although

XX% a from ago the the for full range stronger We revenues in to be XX% margins XX% due as segment and a North EBITDA up America. expect XX.X% primarily of of XX% and revenues year Engine increased sales be to to and year EBITDAR XX.X%, distribution performance to in increased XX% from to percent

our sales quarter, maintained increased at segment stronger to driven business, XX% increased partially midpoint In North the by in XX.X% the the be X% to of from to to costs. have components XX% XX.X% to We for America. up growth for in revenue second product by offset EBITDA higher be and of outlook revenues volumes guidance. X% benefits margins our primarily coverage demand the trucks stronger due EBITDAR of

at coverage generation Power volumes equipment. quarter, full second and Systems expenses. increased EBITDAR the segment For for XX% the from expect revenues XX.X% increase stronger of we and midpoint. XX% revenue EBITDA components power the XX% driven to primarily in to the of and to be demand XXXX, due lower to the XX% In to year sales by product mining higher XX.X% global benefits increased

XX% to electric with invest as products $XX our in of our Power Power XX% EBITDA revenues the range the up XX% margin scale of line $XXX grow currently XX% increased stronger project unchanged battery $XXX million losses be New of year, million, to Systems the EBITDA of fuel remains guidance revenues be and to between between half quarter and to XX.X% continue to in and losses $XXX of new EBITDA XX% guidance to $XXX up the of and the year million for percent Total we adoption segment EBITDA of million to the the range first XX% company cells. for for the ahead million XX%. Power XX.X% technologies. up with million. New was full-year. EBITDA in sales. we $XX new of sales margin and to We expectations revenues to and revenues was and due In maintaining of Full systems XXX% in are widespread

in Some key expect earnings up emissions in markets, the We construction levels of the ventures sales primary in in second factors the expected Highway half of July. new for demand decline compared adoption coming profitability truck the chain. the industry of the Stronger-than-expected second construction is X%. in earnings year to the truck forecast. in of softening And truck expected to for high of of first guidance of reason XX% all-time joint with following global decline our in be of pace in now national half production to performance to on the improvement demand the and influenced venture the and our North China America. the off rate Standard especially the the year. Joint demand X The China from the anticipate equipment second increase in regulations quarter XXXX ease supply in in down China prior of are broader also expected half of we in

costs. their delivering through number to earnings. up $XXX $X.XX important the mix items, strong discrete I a our throat. were supply guidance at a and repurchases in million in geographic excluding $XXX needs to XX.X% approximately XX.X% share constraints in exceeds expect performance. be chain quarter for second to we $XX delivered expected markets we supply end the and to total ago from the Capital the expenditures cash customers our financial Excuse summarize, products due employees of year continued full-year shareholders quarter capital meet We $XXX expenditures pointing currently for in of from million is results global elevated million million for thank strong our half. ongoing full To for prior to down while high my the rate the to our into to of the of year. second of bringing want quarter, our demand first our me and billion tax $XXX despite the returned Demand be returns to effective commitment dividends Our for our of to XXXX. solid dry range

to leadership position company invest a the advancing do the so our we and while And core We business, power up company some profitability through increase to to for new the that continue our earnings power additional of of extend the we'll to further continue our This partnerships customers to the technologies, time of sets in position new today. come. continue range technologies develop for growth.

the future uncertainty periods and can sustain important over Jack. Our for to Thank strong that back through And over balance sheet generation flow economic excess it for you I'll of your focus to on improving performance cycle and turn cash investments today. cycle shareholders. and distribute cash consistent interest we

Jack Kienzler

call, queue. our for one And we of if first related Out ready consideration to please yourselves have limit questions, Mark. you you, and follow-up. additional rejoin Operator, now the ask the Thank I on to that question a others you question. are would

Operator

Jamie Instructions] with [Operator question Suisse. Cook ask Our first you comes from your question. Credit Jamie, may

Jamie Cook

filtration in good this of more is this on can just business, I us you remind of thoughts business obviously on and company growth lot spent interesting thinking you business that quarter. inorganic the Systems asset of just New been wondering likely of that the technology? opportunity today, lot here appreciate of more Cummins with else. public in there next part any or this of being over a perhaps standalone relationships term a to a second earning I have that margins terms and on just Thanks. go of about the as emerged. guess, timing sort Systems has Tom, as Hi, potentially and achieve color a this your a Power I'm question, are the Is morning this profit and to the organic. some what the could nice could question you're strategic Power would where couple versus accelerate, XX or where et would its someone And be the that guess business longer New it business my then cetera of I XX months

Tom Linebarger

morning Jamie. you. Thanks, to Good

that me question your is Components profitability in business it's filtration is the logic and over we've filtration let cash strategic the much performance. its is by well great as financial And very very answer business, line is that done great simple, the profitable, its or last The flow, pretty segment improved leadership team the a terrific similar. So a as business, are few performance really with operating years, improvement first. business with really, start the of the in and which way that lot

size markets it's other that bigger and to feel to so clear. diversification cylinders it could there the a shareholders' the platform where diversification, our can to the number in us that those to and all has more logic the filtration and when the for looking like primarily they company is markets. part using to innovations capital to analogy and of end but or that And is on just forward take look end on for is engine come we opportunities other stand of technology now we it of global is plans own challenge technology footprint an level its the or the that Whereas our grow What be other value another performance clear think we think look segments opportunities significant truck limited really in though in us. like company about business for operating look, shareholder invest segments, are front in to

on sale or for some know, to, everything elevated it. just though We We're confront to the can to a potential kind already. point our industry, owner do is decarbonize achievements for significantly can to availability organic, option. drive do lack at of some from do we have to scale value are when us for position there that is in. trying we're of The the gained infrastructure in the to it and electric a much a exploring, section options, application in achieved of opportunities, to of separately were that inorganic the on it's effectively we're almost area. what inorganic too. technology and we and do that the we all products, actually the comments for me heard can better most make down you an But we here then the industries we and want realized to to most scanning true battery cost the that and help, exploring an always those as position longer we're of scale more us all to there no and we said, on Then no need advantage that's direct that shareholders fast-moving think that best can be get technology. were assets if that we that really we'll enough much is industrial that a part acquisition point automotive going scanning mention we less hydrogen you time, that mover always we're then And the and the New acquisitions that The is get in on those create proud business we're owner, Power about other what a strategic the shareholders. where partnership with management so and electric, we're that the the lot so partnerships just focus if to a and silly. view isn't There that's to it. depends operate from team can and markets both much going value are and we're of can the can no can of for outstanding. know viable to product volume always be options thanks of all first do And do What spin looking commercial, not, some now doing those are your scale whether are us they valuations is other common of that fuel too strategically strategic we doing are best and development why is where do options, We really it we when we the a is is forward. think all so Again, from milestones, just There of such just is regard business. great. We

Jamie Cook

the you. I color. appreciate question. a ask thank Okay, I'll someone let else

Tom Linebarger

right. All

Operator

Our next is Ann question your comes your from Ann Duignan live. with JP question. Morgan. Please line proceed with

Please with proceed your may. You question.

Ann Duignan

little that didn't it, didn't the JV the JV fundamentals. your the us that color back performance but fully the maybe know you're little comments color I bit of I and could of in income JV on income and maybe just you QX on income beyond more raise on a consolidated seeing there India, a through, JV bit and in said I'm what sorry, the driven China work. just hit I you button, income. and was maybe Apologies, the more most from walk see mute

So that will be helpful. Thank you.

Tom Linebarger

Thanks, Ann.

million in of half about income delivered was we're under of guidance million over up with expecting performance from off XX% of half the just just the of earnings second the XX%, first ago half we down year, to between $XXX that the and JV $XXX the of midpoint So first million $XXX a year. and in drop we're to year which the

robust. the complicated see very the latest that's slowing say up think orders demand In underlying and with forecast. it's our end early construction to where truck. but year, too started have We absolute we India It's with situation. both is conviction some But we'll for COVID to for been yet

across is [ph]. So should contributor yes, a China bigger of think we improve, course India earnings

Operator

with question you ask from your Jerry, Goldman next may Revich Jerry comes Sachs. question. Our

Jerry Revich

I'm just on an you and do to just hi, to for And the for we Thanks. if if wondering electrolyzers partnership, Really Sinopec can update you we about Yes, morning the expect order everyone. us bookings, of good look out. talk give about nice quarter. the additional were what as when hear pipeline, that size bookings us the in you folks

Tom Linebarger

from Jerry, bookings doing electrolyzer data, been is haven't if to like those and that. reported we we something we you'd though to take that markets. in What have not see see but I can that do start publish can

can on got what that, your really can't that as I for announcement be planned with its will I it project say Spain we've So and my is for bookings I mentioned But the is answer quarter. the that fertilizer the Iberdrola in question kind. the largest of

where, idea, ramp that driving, are and money in renewable same that's to decarbonize we industrial power up that supporting really hydrogen. already, combination uses primary of now the is significant combined hydrogen industrial so of demand some projects driver see uses European of especially decarbonizing in seeing low cost the is in we beginning Europe with And Europe, of China, of form

there it's So already SMR PEM takes chain, the makes hydrogen, But power supply by zero consumers and driver electrolyzers or low biggest of electrolyzer of supply gas screen then natural and renewable And people today. using already that's lot. it this produced of, is through hydrogen terms big chain carbon the like a in the ours. kind hydrogen carbon

Jerry Revich

there it can are about? to traditional Air about truck announcement can that business evolving versus or initial hydrogen OEM Okay, partnerships be thank your model business any hydrogen you. model retrofit on on talk orders? primarily just your with that is Products, you How Is going you And talk then, truck I'm Powertrains? wondering anticipated

Tom Linebarger

going We vehicles, is electric similar. a fuel powertrains. are cell very These will purpose think be to to have not the are business retrofit these for be vehicles model built vehicle

yet. to you of advantage our I'd makers development. the development the infrastructure has we of vehicles or under the truck will an in put be still is the already and say infrastructure not that. cell that least in take the a powertrain version can the out or rapid guessed, a still truck early versions infrastructure big rate reasonably at in the now, the electric are small have trucks then electric you prototype in there that's put As fuel electrifying But productionized electric at either relatively area and is And volumes. And Most truck. been fully electric

that more resources. demand with fuel all gas? very use trying over partnerships So, will them improve 'Do diesel? to partnerships My believe I much scarce Renewable we with first, just we forming the demand. is at you be on with their figure I developing [ph] and second cell since do ready we is trucks. reason isn't already to expect OEMs deliver and haven't is when engineering So, there those us And I which platforms do everyone's time. Fuel view that out truck there to do natural can't [ph]?' cell work will advanced ones those to what seen electric? on be once, makers to vehicles do third And

about well, cells. make end-user really fleet their we're high-quality company, that's fuel wants knows So, Products, hydrogen why and excited to like Air

that's So, fulfill makers' I increase truck order. to how interest to think in out going to trying this figure

Jerry Revich

Tom. Thanks,

Tom Linebarger

Yes.

Operator

next proceed David your comes from Our with Please, question Raso question. ISI. Evercore with

David Raso

you at to expect good sort of the half to Hi, and ability comment, to we When the your supply of early Trying year in XXXX about the you the into your with think that pricing. second the of end that to about morning. should the you XXXX? price more from chain made continue part and the look comfortable, feel chain constraints what and through of supply year, makes are you the market hearing ability react

Jennifer Rumsey

bit what David. little about comment now. Yes, I'll a seeing Jennifer right here. we're

As keep Tom, to we across Mark has our first industry, you the fit really and demand supply. and with it's from ability up ramping to see, the chain heard paved happening supply up aftermarket

like and working XXXX. industries done through did improving in so we the a suppliers teams back closely the places to the deliver Microprocessor into industry and other half have Our our phenomenal impact to that the continues quarter, results easing with quarter-over-quarter, second biggest and other constraint. that in minimize that be many to of customers the job in year see we

with had Our and the of to in see COVID demands will slightly, we relatively half picture microprocessor the June but delayed the in expected That's second ease supply we Malaysia. broader are of think small improvement in some year. on that

hedging from and XX to really that pricing those prior see down our year seeing looking we're and basis XX with aftermarket. basis and are end our markets things is half of price XX first improvement and mitigate right to that anticipating we're we also in we to side, possible point materials, on we're a chains for this points So, and supply favorable the and perspective, positive some price costs second in and fit be that the our ease. now logistics because as freight to From at in seeing material where guidance, increased working contractual the surcharges premium of cost

do more year. won't to more cost coming some comment expect getting both end down half on recovery, some see we and So, at second of improvement this point, the we but XXXX and of the

David Raso

thank you much. right, very All

Operator

Our your comes proceed with from Steven Please, Fisher question question. UBS. next with

Steven Fisher

good morning. Thanks,

about follow quarter sounds know of up costs. talked discussion of first cost the it to some million we related about in $XXX the and that I to wanted like Just see they're coming what of quarter down going with can quantify next you a the where the you that you bit. if that and experienced in in couple second quarters? little logistics Wondering

Jennifer Rumsey

Yes.

come So, slightly costs those second quarter. we down did the see in

$XXX due the each some in more, we for our in the came business projecting some the that we saw again logistics but do costs is guidance, increase of million prior improved than $XXX what half incremental seeing. Overall, second full issues though, the Our that engine just Systems million and improve that cost more we're components based the to year. in business on expect which in business, year, to quarter Power we're into

Steven Fisher

helpful. very That's

Tom Linebarger

word that. about Maybe more just say to one

of think and COVID we of system just around outbreaks balls shortages, companies, like I variant the because keep now the things. curve the other see delta the a world more continued lot we labor see throwing into

to $XX to go be in of quarter we had then the And costs as $XXX in some and gone. Jen it quarter million first the second a expected these so, from million mentioned,

we're year. about almost talking $XXX for the now million so And

cost earn what able to have despite that opportunity forward to quarter. and by hit to just guess our price fact, that whereas adjustments improves up plant. I and the we as I in to material in we get the finding add our incremental our thing to generally margins going be I teams in been move we'll a So, We've we ways in highlight get least that's as which able to forward big therefore the is the revenue The we so contractually out by want real to cost And big company really a products the wanted think, continues good said, Jen be expected. can, aftermarket margins it. effort to at still other we clear, in do sheer I that

running and of it. escalator, decent guess I you will, of we're up and if So, down kind a doing job

where all markets to And the changing if so, lousy is the same the under operating - than lousy start time. still at and get we're better even things base as those conditions better seeing they stay gets our in disruptions stable. supply better stable Even

So, What wherever the up driven. all being are just seeing we costs new the of them doing improvement are it's better. we're seeing it's flare is, where

Steven Fisher

bigger if you're wondering lagging follow-up weakness a just you make a Tom. And on somewhat of I'm spending on the your Thanks, tides and positively demand trucks turning second sensing half. second of in are maybe might anticipating half actually? for sense. picture that sort may of and kind construction makes indicator influence infrastructure in weakness that equipment the there know I more China. a any then It policy

Tom Linebarger

Yes. question. It's a good

continue are boost policy what's but happening that activity would internationally going I immediately, government to prior Chinese there, the I especially demand. be given to to on officials say my ways to concerned conversations based economy try believe a out just with and [ph] course prognosticator, that they As are of where figure I'll about economic is this, to

of and reverse. a business do before. moving won't to to time it then think then all off to offset aren't changing happen us of wrong of this is hasn't this The talking to the signals point, as yet, of grow we might going and during government but it fell a that China and is that doesn't it said the keep structural see to about emission evident lot China responses a been said called lot sort year. mean the to We've and like entirely fall We've your we this going we've off and issues I some. standards So, increases the try see trucks. price some it's what and We'll possible.

going generally think change, of last prices we go of bought People is second speaking half last of what to this are lot first with a So, trucks up. year, emissions that this year. year, half

and also see we just diminishing - demand diminishing expectation likely not see to see the beginning excavators - we and So, most that. demand signs are as of trucks, we

in to demand And still think see so those the at start we'd effect. change to the I fourth drops quarter take policy quarter least and things started until third if the even some now,

Jennifer Rumsey

the add. products this in year just NS really that VI with We launching submission. we're the I'll for China feel well-positioned

have customers well We take really some both out buy. does the and treatment we'll of to outgrowth start in will after also see course, transmissions with we and that business in products the to that start position and So, that there us think components have good increasing effect we market there.

we about So, we're in where market. feeling are that good

Steven Fisher

Perfect. Thank you both.

Operator

question. proceed Our next question comes from Ross Gilardi with of Bank America. Please, with your

Ross Gilardi

everybody. you Good morning, okay? Hi. me Can hear

Tom Linebarger

Ross. How doing? are you Yes,

Ross Gilardi

that years? already. collaborations target is the if go within in and a issues wondering got like to on all have wins, just event years but sales collaborations point? in you've five Thank the announced that very you hydrogen and wondering me in hand - years. year on within $X electrolyzer and you you. five hopper there you wanted wrong, takes subject it earlier how have I'm visibility all wins realize you've you've to based the Tom. that billion all much an in that lot was I Great, this I for the like seems that Correct target this hosted in timing already $XXX case I'm do announced, fluid just take forth, feel but you if got and so that I target say even unpredictable this million there at to to to your had it back you five is think I already the upside

Tom Linebarger

our things, question, of answer company is a startup. it's old The new Day. Ross. already a industries and The the depend will XXX-year-old if decarbonizing you from orders great Again, this engine an over I on it answer Yes, using give of all Hydrogen CEO significantly depends aren't policy on the been the orders green there our or China, from of because that in And yet, orders. all of that demand But hand we see is project aren't your gave in-hand. They the point of we all I as we yet. in though, have don't we to the says, investments the there but company think promised, engine these estimate orders orders thing take actual and these will partnerships CEO sum of the has done. where same which encourage it's money but projected hydrogen, European not our at hydrogen

say, So, exceed 'Do engine it significantly. I'd you target and says I that's orders the ask you feel at in guys CEO we're about going as But The ask me over why you no. Power, hand?' New like, have good when I think really our to if

Ross Gilardi

just do into outlook all see things, in you've just do sort quarterly a based on everything but Power? they XXXX? Also nearer some for you we take lot. unchanged your of do point Okay, inflection rate revenue New When announced. then and term. a for run And thanks That's kind this helpful. in year. think the of see a meaningful lot step-up, real sort of these time, kept rate run the just of I year realize next You quarterly a at

Tom Linebarger

fastest. Let by is get going is the that's else the revenue there. our is guidance to thing But XXXX we basically is going this electrolyzer until driven us This on hold think we guidance most the be what demand. Everything kind of moving.

built, those You but are of which just all infrastructure fuel EVs coming us. are a electrolyzer said, down, long cell right I time. that your trucks all the moving, the that's know cost being is driven point, front by thing takes to moving as The are in being demand of

can we the get projects subsidies place. of in money European locked the all if down, So,

to time have we down yes, produce we we these see to the units. give As work I XXXX, we to are as like projects you we to need well you get What but to my from to quarter 'It's the of and to that of work it. think need quarters means remarks, yet building work that, and visibility exactly that understand tell I So, before you, with we'll and quarter.' to some we I'd that. that do say some capacity regard give the locked heard us ourselves, some these do to question this but definitely the

Ross Gilardi

Thanks so much.

Tom Linebarger

Thank you, Ross.

Operator

question. question next Please, Our Melius proceed Wertheimer your Rob with with Research. from comes

Rob Wertheimer

a on you, in Thanks. the know well. of I to it's keeping invest the I feel most up you those whether if drive the whether how of Power you cells, can of a others? motors, new some understand stuff. in had a et Can it's had couple to, on you whether go question as and you but show versus us cetera. engines on Then you're comments to maybe things don't Tom New those thank sort you overview trains, helpful could on And have to you whether leading electrolyzers, to for willing world, the it's lot have batteries, fuel characterize ask where I - choose you I can if were you a confident. old further, feel in - I and strong Are updates. step but you the

Tom Linebarger

not, other conversation we're is longer which be by we're a would significant disputed in where about area sure, where Yes. industry, That leading each competitors Ross. the and definitely technology I'm

this it say me way. Let's

industry. position we or applications anybody That power powertrain power in technical significant as to developing built we whatever has I applications a a a the time the been winning where from up us understand demand market, think has than we understand We it ways the which understand in train. in advantage do. the ends have in that well because what better which the over the gives actually long

kind powertrains, in that invested technology I'd we the as that of that or straight hydrogen in battery investment anybody those units of experience application cells say thing and thing, fuel the to in vehicles. Not meaning have electric cells is Second both battery industry. as significantly fuel we've commercial in much but

markets. not behind who's industrial we're So, commercial, anybody in

are think believe quickly. is So, we but industry well-positioned, the moving I I also that

advantage on strategic As be the in on remarks, and factors to hydrogen, what how and to industry is, going require us are depend the gained versus products is only the other cost pretty that win be of going but my the cost where created. a development, infrastructure I said advantage of will other whole to participants not bunch about electricity product is where nimble what of the how be think you about will

carbon powertrains cost to engine the significant we not that's about both So, the that also are a That's you're of I the technologies, bit to my one why to a fuel how EPA, use That's all that's and pile not we customer, in right either I this they pile and improvements it's we're now, need you heard a engines bit comments on on and think whether still they make and of natural a in [ph] on a know sure place because we to we're I big moving one us them, meanwhile, forefront diesel all those; you're So, advantage. say forefront BEV these that's we is think we why down or lower cell little think in can fuel environment.' in the stay carbon just hybrid investments, keep get thinking at to produce about than or investing regulator, at to and at market. these trying strategy puck low important make on why that hybrid gas winning because significantly of and lot pollutants. thinking for a them engines worth like to cheaper. a and feel depending we're operate sure understand like to but where or are impact 'I significantly them criteria either how how I lot positive of

Rob Wertheimer

truck, you've guys and the All a easier and kind have all to the side, whole if already. to our thank happens? investments maybe diesel? what coming medium-duty on bit, fence will time do in that's on some guess side we, I willing Should it right. little be don't tail is engine. we don't I a of understand. just helpful of your that scale the on provide on diesel or those How the Then flip I of if announcement about as I to another than willing a a how to answer a this expect one. characterize opportunity is you Are That But you risk-sharing? of to was go and expertise done there stages end big last there, mandates you're know auto, stop may you. I the there know and will we tough forward how You lot long do think on see and of the guess of do sort

Tom Linebarger

It's for Thanks question. great Rob. Yes, that. a

very in application. XXX cars of Our view of a or is preservation market difficult There of the there's like and has the just scale. A than diesel. and it's for so achieve applications we the demand And one longer It's diesel around years them diesel sit the thousands complicated. lot and is that are to of so of not some because hundreds tail and people one applications. each be because these. will hope where It's end expected. There's that's many not unique

the time technologies move customers and other these the drive lower just not going demand curve, as to helping so investment as or lasting diesel less are that are see and hybrids, renewable actually way how criteria do use it diesel and because utilization through well this trying that's in carbon to hydrogen or long have think And of natural that's in engines, or allows way investment people good engineering a to those out, an to for carbon going things through gas we ICE invest in purchases. both to trying applications why cost a we down out decarbonize move pollutants is and it to delay

good - It unfortunately how and So, that time. on mean customers, we a for really people And answer last investment long it's think last if long about will simple is a to is depends complicated. a you them. want both a it regulators long likely that for answer, that's curve for how time the of all and

a And a last these and the mean all and application, largest truck volume, XXXXs. happen around those the one-truck starting applications, the way new volume. carbon sooner applications of that's small curves it now accumulation those you unusual all If the introduced of But lower long the means all be time. ones going than our might to diesel very through the are is kind

Rob Wertheimer

Wonderful. Thank you.

Operator

question-and-answer remarks. management We of session. turn to I the have end for the call will And now closing over the reached

Jack Kienzler

always attendance, for has thank everyone as our today. you, be and available good. in for Cummins. We after I great interest you Very your that your Thank concludes and and I a the everyone, questions hope call will teleconference per usual day. appreciate

Cummins (CMI) 3 Aug 212021 Q2 Earnings call transcript