Earnings call transcript Q2 2023

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Operator

Good day, ladies and gentlemen, and welcome to the Cummins Inc.

Second Quarter 2023 Earnings Conference Call.

Our host for today's call is Chris Clulow, VP of Investor Relations. At this time, all participants are in a listen-only mode. [Operator Instructions]

to call like host. to now would turn over the your I you begin. Chris, may

Chris Clulow

you morning, Officer; for Great. to much. Chair Officer. me very Thank Good Rumsey, Jennifer Smith, today of Participating our discuss our today quarter Financial are our Chief everyone, to Cummins Mark second results Executive the and XXXX. with and teleconference welcome and Chief

available of all be to the will at end answer We the teleconference. questions

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

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

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

copy section are a the statements copy at financial with release of our the on available presentation press website Investor today's cummins.com. Our webcast and a within of Relations

us I you to and will Jennifer over turn to that kick Chair With CEO, of the our Rumsey way, out off.

Jennifer Rumsey

XXXX. year. then for end will second our will start with then you both forecast by with I market more discuss our discussion will outlook quarter Good through take our morning. financial summary performance a you, for and the of and our I'll of of quarter Chris. a details region. second Mark finish trends financial sales our I results, Thank

details quarter United a our company major Minnesota to take the second moment X, hydrogen. States a execution on to into electrolyzers, by to demonstrate to performance, manufacturing for of strategy. want that continued key April a Before On getting Joe in the few highlight Biden, the no-carbon from I events Cummins, technology facilities first tour location produce Fridley, President, U.S. Accelera our visited

feet electrolyzer Fridley Accelera with in to is XX,XXX the meet existing also initially a to to facility Accelera dedicating expand the power square electrolyzer Cummins production generation growing opportunity demand. reached over Fridley capacity the of the globally. million growing order milestone quarter. demand, that further totaling The along address facility will $XXX with help backlog at of of other the end added being

in the the XX.X% of and initial Lastly, million ATMU IPO, made on approximately business. with Atmus proceedings retained to symbol of issuance separation Exchange Technologies $XXX XX, be trading separation. hold the under the of debt began of Atmus as Atmus Stock public debt. the and shares. outstanding progress of The Atmus generated Cummins the Filtration ticker at on offering. of IPO debt added $XXX net Upon benefit the May the Filtration York full New the Cummins realizes continues On its completion proceeds Inc. will connection the Atmus IPO million

and XXXX our by be EBITDA a compared or Meritor, XXXX. billion the second of Revenues improved quarter to $X.X North America $X.X comment performance XX.X% strong billion largest of with the moving of the starting overall was our resulting an of our continued will XX% products pricing. second for strong for second some the to quarter of many key across in markets increase for of demand or the were I and quarter billion, the Demand XX% driven to in compared revenues Now international record on to of year markets, XXXX, markets. company $X.X ago. addition quarter cover regions, key before our and on

related of of indefinite results $XX Second XXXX million the million related the reserved to XXXX suspension to of million quarter in separation of $XX of offset which amounts the related in Filtration compares include costs the recovery of results, the quarter Russia, by business. separation include costs operations to business. second to $XX This Filtration

quarter activity, has XXXX, in than those our Excluding lower of a other XX.X% principally gross a delivered addition in SG&A margin XX.X% and due development EBITDA slight Meritor decline expenses. represented percentage to items, and we which second the currently of the from the percentage businesses increased XXXX, of

to and the compared chain dollars as exceeded higher EBITDA improved of the performance Meritor XXXX of in the of EBITDA to strong cost benefits and gross The half we of drove quarter. and increases. acquisition plans the second business quarter year recorded the administrative related selling during an pricing versus expenses the margin volumes, the accruals first our compensation the in supply prior as increase variable higher

quarter Components in we products will segments. in advantages to second development Accelera and particularly increased future, and that the as also the in continue technologies Engine, expenses the Research invest create and the in

more noted profitability In the EBITDA the that overall X.X% improvement are improvements was quarter, activities, through cost from to for billion $X.X inflation, results we operating cover year. driven in guidance persist material XX.X%. and previously, Meritor expect offset second by second of the improvement we XXXX. operational Meritor sales quarter of As financial half results and of included EBITDA our of first with showed performance in and to the cost the than which reduction margin pricing increases The

XX% trucks an from second were XX% XXXX. billion, heavy-duty demand addition Industry our XX,XXX of XXXX, while heavy-duty from grew Industry Our sales quarter production markets. XX% XX,XXX, the up core of and in trucks sales units second unit in $X.X second the in from XX,XXX was were XX,XXX, XX% by units, driven strong up XXXX medium-duty in revenues levels, of our XX% the was of Meritor levels, while America unit also quarter North XXXX. production XXXX quarter increase to of from up our

engines sales in the in and eased industrial Engine by North to shipped the RAM XXXX, by use America primarily demand to customers increased for as generation We XX,XXX in levels. of America power net Revenues flat in by improved XX% supply X%, positive center constraints data increased pricing. XXXX construction quarter pickups Stellantis the second modestly. driven with North chain and

most XXXX of revenues the the demand international increased Our a year ago, by markets. strong Meritor XX% second of quarter with in to compared across addition a and

impaired XX% ventures, in and an XXXX, other of of regions. quarter Shanghai China, COVID shutdowns in in revenues weak very including markets compared units, a heavy-duty was demand and Second quarter medium- an Industry and last was to as $X.X increase increase were recover from XX% began second to billion, for of China joint year. trucks by which XXX,XXX

the Our products partners were XX,XXX, meet units, launched joint to of and and within VI including an standard. XX% joint increase venture increased new sales due ventures, to our NS penetration

weaker China market XX,XXX, The decrease decrease light-duty demand the activity size to units increase excavators levels. up XX% is our market an ventures, of XXXX second construction. sold, and units, from a joint from XX%. of XX% XXXX in Industry The was the XX,XXX were was levels including in due XXX,XXX at units, while for quarter in

export driven improved domestic increase of X,XXX usage. with an expanded X%, relationships for and new units share customer Our sold by and units, were both

quarter, data generation Sales in decline in the China the a market. by in primarily second decreased X% center driven equipment of power

by X%. in while of generation were from an strong the including driven revenues Second Power our economic regulation by million, quarter truck demand $XXX increased quarter, quarter revenues XX% India, and increase year ago. shipments the joint of X%, Industry ventures, of activity by a second emissions in customer July increased change. X ahead increased XX% a production second

XX% the did year. XX.X%. regions business. end increased Systems in forecast, our to comments the now we months XXXX markets. than offset and profitability ago, Based three on outlook we in up stronger including We is EBITDA XX% expected expect be still maintaining revenue individual to revenue our me guidance let Power are and Accelera current on XXXX, Now versus provide XX% in to cost of full-year Distribution segments of some for our both last by and range

are XXX,XXX in We America trucks our to units maintaining be North XXXX. for heavy-duty in forecast XXX,XXX to

market by North we industry's the are production XXX,XXX America while XXX,XXX customer X% forecasts to size projecting be current our is remains to to ability end industry up demand previous strong medium-duty our XXXX. continue from an constraints increase our in guidance This the and collective truck quarter. the fourth chain truck XX,XXX Supply to units. units, lower to produce currently, limit market, XX% from In guidance

to produce ability heavy-duty, our demand. meet chain fully limit to Similar end constraints and supply customer continue to

The able base, versus improvement to our America However, was plant construction global through the other in have the XX%. improved forecast the flat previous in the to outlook. production, efforts down for our outlook to across we to two medium-duty North is expected our resulting up increase been now supply to offset in rebalancing flat guidance our be of decreases by improve markets. XX%

our decline expected X Secondly, to XXXX. prior to line the Brazil in for market guidance of as Consistent in be shipments XX%, trucks our Volume North expected a be to $XXX,XXX levels guidance, pickup from XX% down with Euro XX% to our is XX% engine are to prior truck standards. down with to equivalent America in adjusts $XXX,XXX emission XXXX.

content XXXX, XX% off including approximately and guidance. levels consistent demand share in joint driven coming we to XX% in better increase growth, a demand and improvement light-duty in market a truck in In project XXXX, the increases. medium-duty We revenue, heavy and project low total the China, ventures, to XX% to with the XX% prior improvement truck volumes by XX%

ramping pace natural the in launching of natural since are launched we of natural performance share end to our cost been up approximately products, gas market heavy-duty our the in North which the in natural Despite XX-liter the strong the market, fuel to including XXXX. engine, in we continuing to our Due XXXX. is truck gas by be product we reception expected gas powered China, launched the strong gas look to has XX-liter XXXX. America heavy-duty differential, forward XX% of the China slow we new the market, short customer In in see for in the and with engine time recovery

We with with consistent and construction XX%, tepid flat in be expect prior guidance, down to line activity. overall weaker China the to economy volumes

approximately on-highway our ventures, X% project joint we X%, improvement power generation XXXX, forecast In including up be from India, previous revenue, in stronger propelled to by of an sales. about total and

We for Sales industry down year. X% X% up to high demand markets to to trucks remain XXXX. flat of to global expect flat for XX%, improvement mining from in expected to our of up be to engines are the X%. project up our be an strong major guidance We power previous horse

of guidance a driven Revenues in to global markets. XX% increase in expected power data improvement XX% generation markets XX%, increase, XX% and now previous construction the to from are non-residential up to by center our

For Accelera, to to with we guidance. million million, expect previous $XXX $XXX be full-year sales our consistent

As near-term electrolyzer noted to in market the expanding on highlights, demand. focus capacity the momentum with continues growing our to gain meet my

up the field, scale and the serve to to develop our costs we projected than are electrolyzer support in As year. originally opportunity, for products customers higher the our continue running

a an by prior have Accelera million Within expected EBITDA $XXX be of $X.X million $XXX range billion, EBITDA to loss sales, our $X.X of expected XX.X% of $XXX components, to we versus for prior to for contributed to Cummins to XX% XXXX As consistent Meritor million. revenues result, revised $XXX our guidance guidance of to expects XXXX million for to is with billion the business the be guidance. in and

investing Should XX% off in first our EBITDA to XX% up will our our bringing half while global Cummins XX% while summary, revenues to produced returning and growth, delivering a we record strong strong cash of new to Demand to we customers, economic record core most to in and slow, in is a markets to customers strong, for position keep maintaining shareholders. coming and remain we guidance of of sales economic technologies indicators. our are where XX.X%. momentum continue EBITDA future In closely monitor very

Our implies weaker full-year of year. half the the for in guidance revenue second the

the Brazil a markets, heavy-duty American production North the outlook truck an and are in several revenues lowered previously expect factors in the manage the some first China America North to second demand versus expected expenses the the the below our the mentioned in we decrease half weaker the of fourth operating of second quarter half In the of rate. lower driving decrease forecasted year, view While in remained and strong half, construction quarter in second run truck levels.

operating During XX% the our of dividends, $XXX long-term quarter, to cash form the in approximately return with returned we million plan to shareholders to of flow shareholders. our consistent

increase quarter X% we share, second, in XXXX a and dividend. sales announced challenges which consecutive have we in the first to the end, XXth environment. the execution increased in strong quarterly operating per from $X.XX our record quarter resulting into ongoing continued $X.XX the after despite Shortly the The strong dividend year from in of the profitability

I needs levels demand and who meet our relationships supply Cummins respond continue by ensuring employees want quality to continued to customer chain the our to thank products, strengthening tirelessly strong navigating work and constraints. to customer

delivering in Our growth, results performance, on our investing sustainable industry focus to solutions operational strong and shareholders. cash returning our reflect bringing our to future decarbonize

to me let over Mark. Now turn it

Mark Smith

Thank you, Jen, and good morning, everyone.

increased a were a international and increased XX% from Sales quarter year record $X.X in Second XX% North up billion, revenues sales ago. America XX%.

by a driven balance improved the end pricing of sales XX% and demand Our Meritor. our strong in with products addition increase for organic growth driven sales globally, of was market XX%, rate by

impacted was X% with million benefit the suspended billion in was EBITDA quarter, million of related of sales overall. EBITDA of $XX second with in $XX of associated our fluctuations billion planned and costs the sales Atmus. Foreign XX% to planned including separation Atmus. of as the a million $XX $X.X of costs associated currency reserves by the for quarter operations of XX.X% adjustment our we including $X.X negatively of separation one-time or Russia sales, or the XXXX

of Excluding was variable the Atmus year spending. SG&A second development largely Meritor, line Russia and from ago, the was quarter costs, and by of dilutive our costs ago. EBITDA the Lower higher XX.X% XX.X% to percent year impact up which impact primarily EBITDA compared higher showed in compensation year the a driven in in separation this

To planned provide excluding following impacts performance clarity the and guidance comparison separation Atmus and on operational Russia with and to in costs the the of from comments. associated my

to line XX.X% quarter margin billion last look or or for of $X.X $X.X more billion detail by compared the let's item. in Now year. Gross XX.X% was sales

of higher XX variable As and expenses. a points the basis sales, and benefits offset of higher the Meritor improved percent of pricing as the gross decreased by margin were impact by dilutive acquisition compensation volumes

Our Cummins full-year. and expectations the with in Meritor in our line business continued improvement quarter performing to for second show the is

In of second our businesses expansion quarter. delivered the in margin most gross fact,

or of development higher Selling, we addition variable new XX.X% admin year. compared research and expenses billion invest synergies, last expenses products $XXX to higher and support by growth. the increase of to were of capabilities The the Meritor, driven sales XX.X% or $X.X in continue net realized million as future to compensation, in profitable was costs

largely repeat million slow in Income from a our of our a joint ventures In was underpin to which an unqualified last we $XXX change from losses plans, second ago. benefit this year, million, due was on mark-to-market year in demand million those of $XX incurred quarter year China. income $XX a up from income. million, million improvement investments other recovery that $XX Other did not ago the explains and in the year, $XX

to XX.X%, and associated last the the also All lower million interest share acquisition of second year, financing $XX items. the quarter cash $X.XX compared quarter by diluted year an million $XXX sales. in including per million million to due quarter of than increased operating $X.XX $XXX capital costs tax million, or or The due second all-in rising effective $XXX diluted were share with rates. of or ago. higher working to net $XXX discrete related in rate inflow All-in the $X.XX higher flow per unfavorable tax earnings was a was to expense primarily the for Interest $X million Meritor

for now comment guidance performance XXXX. and segment on I will our

consolidated in and Meritor results the Atmus will the the of XXXX and impact a reminder, business. and exclude costs As of our the for includes assumes the Segment that filtration included the related full-year. of results benefits be guidance operations guidance to separation

of in which $XXX million XX%. or the was sales decline XX.X% $X.X revenue increase million from Components XX.X% business, big addition the with percent and to dollars decreased the million, of of Meritor the the billion $X.X was and billion, the $XXX driver growing EBITDA. in EBITDA from growth both percent of dollars in an $XXX sales to EBITDA EBITDA XX.X%, added

XX% XX.X%, of the For XX.X% Within segment, revenues components, we in billion margins in of to between previous XX%, revenues and XX% in guidance. range to XX.X% between to increase and range $X.X expect with $X.X line expected are previous with and Meritor XXXX EBITDA to guidance. Components our the billion EBITDA and be the our consistent

from spending development linked stronger revenues of of costs second was ago. segment, due quarter increase overall the EBITDA year-over-year. X% variable Cummins higher to billion, year an XX.X% in the compensation and In to Engine $X compared to XX.X% higher a performance XXXX were

project and year distribution range a a XX% be to in now sales the with segment, from increasing engine up EBITDA a of and record business to XX.X% X% guidance. XX will range margin EBITDA to the XXXX, revenues our in the to and up XX.X% from revenues XX.X% expansion In prior of XX.X% to points, basis the the expected a to of increased to X% for track as In to unchanged revenues year ago. this We expect margins in percent compared increase sales from ago we prior be $X.X Distribution record increased business. X% our XX.X%, XXXX to billion. XX% XX% extending of XX.X% outlook EBITDA year

In of record increased a $X.X XX%. increase Systems EBITDA the Power were segment, billion, and XX% by revenues an

improved higher from of power XX.X% by to As volumes a sales, generation XX.X% percent and pricing. rose of revenue, driven EBITDA

earnings for this Power expansion past the business, margin more see yielded and We potential the over have clear and an has growth results year, the going of forward. Systems intense focus improving much on we

to quarter this of business. have taken drive to power In revenues costs the XX.X% projected Systems long-term with an actions improvement from earnings our be seek we XX%, be for we second increase X% previous associated XX%, $XX now last for of our up to to million XXXX, as further an expect we that outlook. transform points Results the X% is of of Power to from basis increase to forecast. EBITDA XX include

powertrain $XX business. doubled the million, to market battery than additions Meritor the more business driven commercial revenues demand American and Accelera Siemens of bus North higher vehicle by electric in the of school for systems and electric portion

Our future EBITDA in to invest to loss support product $XXX we as infrastructure growth. and continue was capabilities million the strong

$XXX be is to successfully of revenues anticipate to in meet of ramp $XXX previous million the $XXX our we losses as And in XXXX, resources to expected of growing those dedicated be range an now to electrolyzer demand. million, million million, from in $XX outlook. loss the $XXX million range and In the unchanged of up level to we increase increase

XX% As Jen to up previous is XX% revenues be We outlook EBITDA with from to expected to the company year and in margins range unchanged. mentioned, of XX.X%. for guidance full-year the our XX% maintain our last and

to $X.X to any to Our rate excluding effective focus investments our XX% In tax continue reinvest deploying consistent billion, the reduce Capital in discrete we to be cash will dividend business, of is with expected the items. $X.X range in XXXX, prior in grow debt. will and billion XXXX, approximately outlook. be our

that the products our margins delivered and technologies reducing to margins second solid the business. second Meritor, investing the In levels the improvements gross lead our us quarter same, in performance of in our with half in the position carbon remains of key feature driving business, being of in record delivering of inventory strong XXXX the incremental improvement we focus lower core the technologies. and summary, a parts year, the most in In in in profitability

you progress today. solid and continue the imply half will operating accordingly. second the guidance strategy. for executing your of interest second below manage to expenses delivered lower good levels quarter We and make our second Our in revenues quarter our does Thank in year, we

let turn over back Now me it to Chris.

Chris Clulow

limit of Mark. Thank you a Out question one I the yourself related call, others consideration on you, to ask would to follow-up. and that

question, please the queue. rejoin you If an additional have

for Operator, question. first our we ready are

Operator

now we We time, will are begin. a to this ready At question-and-answer [Operator session. conduct Instructions]

Our Cook Suisse. first question of from Credit Jamie comes

Your line is open.

Jamie Cook

lower. little margin, understand I’m weaker questions. high morning. Hi, and JV there, investment your to They the back there’s I really in some two just good the I the understand. One, guess margins and as half thought. but first engine well compensation trying were income versus were than half I in was a

how So us And just side to longer-term? engine investment about, does the required in can margin? weigh over continue you what’s the on, on what’s to going like, help understand that think engine the margin and on

know – second And then your XXXX with to question, I want my close I guide know customers. Jen, you XXXX, picture. you’re just bigger for very to but don’t

given of the So could that out getting more industry you’re out little there, see forecasts cautious are XXXX, look that [indiscernible] Thank as you that more you are a markets this which some in declines? after markets you. we

Mark Smith

on first Thank support the question, we’ve all future Jamie. Yes, continued in growth. numbers. recently, I’ll is meet level the additional this really Engine Okay. business engineering, emissions to that we’ve the continued raised the Two, are profitable won go inflation that the to there to three some business, the costs. face you. drive so with it’s business, One, and themes material really in and more investment

pricing We’re we’ve experience also in positive, continued to some increase material net costs. but

then and lowering when and of the internal half. half in our second the which year half ago plan time company the investment our we weaken, factor And the our than to in also then typical second as lower trued compensation a we describe second exceeding increased are is we’re a second half and It we’ll from our JV compares in year. incentive were is the results an the weaker them. JV quarter the earnings you in the it And happens – a China earnings mentioned, for to having up the accruals issue. first yes, really which the year, that business expecting is of time the But issues performance quarter, across really, as to then a

Jennifer Rumsey

and months in very electrolyzer the increase to of to of demand. the my demand terms and And interest in in I capacity say we’ve be what I in space, Cummins our seeing our North and the America conversations And would of the market, products some what even – in second And is and a in positive the that to plants Jamie, on recent performance your we’re have for strong. products. question, in conversations continued have customers, made with to continues in medium-duty lot noted shifts particular that global medium-duty meet space, there’s in

So strong there’s in market. business. we’re really that And still demand cyclical

to little We’re seen, indications do cycle going business, cyclical a little markets, certain softening used bit in the heavy-duty being gentle aftermarket, and markets construction this guidance we little bit be days in across a a some to implies more lower. likely down particular, think quarter, lower a is some I a our in bit typically than what but we’ve anticipated see fourth in

softer significantly, first half really in growing half. the China, not second And versus seasonally

our of So sure market guide the about make places while prioritizing performing. that we’re the just our And reflects peak to managing down the – feel and to revenue year. I SG&A the and and going spending QX headcount actions good how for to and half be outlook taking yes, second quite we’re also still think need we’re future is invest we’re the we for discretionary we

Jamie Cook

you. Thank

Mark Smith

Jamie. Thanks

Operator

with Sachs. comes Goldman Your question from next Jerry Revich

is open. line Your

Jerry Revich

Yes. Hi. morning, everyone. Good

Mark Smith

Jerry. Hey,

Jerry Revich

fuel technologies. customers from just Jennifer. alternative wondering about talk seeing in that Hi. could you I’m your interest if the you’re

moving other in structure. what Over internal from America engine customers the And regulatory side? seeing add specifically XX-liter Thanks. positive could I’m the the in based would that wondering quarter, visibility other if on given your a just North that essentially of interest the you the comments pieces, on or the have course RIN on you’re for combustion hydrogen talk any for product. the EPA on about in mandate you landfill we the changes gas,

Jennifer Rumsey

Yes, product, Jerry. seeing alternate call Thanks, natural I China. in as great. in fuels and that bridge the noted, you I growth in what we’re growing interest engines, there’s of gas Yes, these think some technologies,

here. launch We’re going to that

which they’ll to looking trying in some success out to markets and engines see – those figure that play expect hydrogen we’re a market role. in where we’ve developing We at and

It’s build out slow going required. because of infrastructure that’s the

the products, And really right have focused so on to we’re the right investing at but time.

still that EPA so ‘XX, few alignment to now lot which happened thing this the a you’re in was for of in diesel And quarter car see the regulation One next is a going the progress key to with and real demand positive. years.

to the could on nationwide a and where zero bridge and focus infrastructure applications start solutions then these and adopt exists. solution places we and emission to of So some

Jerry Revich

I components, were Super. your in the a And touch different parts EBITDA about between Mark, sequentially piece and can given business performing? all XQ, of how just margins the Can ask talk within are up versus different Meritor the just you Atmus. XQ portfolio

Mark Smith

Yes.

business, that change but well. in the think results quarter. I performing from Meritor stepped impact, they’re mix has clearly, all an Obviously, the in first the up

in general, call strong performance to about change. I just So shortly. was would the the don’t to earnings biggest that going portfolio. are trends want say thing I probably own talk across Atmus. They’re to that But their have

Jerry Revich

try. I Thanks. thought I’d

Mark Smith

Jerry. you, Thank

Operator

Thein next Citigroup. Your Tim comes from with question

is Your line open.

Tim Thein

Good you. Thank morning.

power you through of The the there curious an on I’m anything update could first order one within is systems. give as guessing some if boards. just I’m that maybe walk on note the a at lot you the of were markets, is a the And of if yet, second the upside. revenue end first. you step slight look there growth, to the revisions down half from

So capacity individual terms the has issue any is markets. some there in of just of, curious, end or that changes been I’m a

curious, your Just that. thoughts on

Mark Smith

the Tim, question. it’s Mark. Thanks Hey, for

started order on really the where rates coming surprising down. market interest has demand weakening to side, of think been months change, where consumer particularly isn’t a very we’ve quarter the not overall drift this a RV they only presence, board market that’s been for with that strong some the few new I to started the are market – a which got

would I with some the only that’s So change. one momentum say

And trend gas, in clear are right. now. right different is this mean, at would backlog time. The then opinions I one you’re and oil us seeing different I That’s the there points through say year.

So we’re I it’s RV. outside But would watching stable closely. of everything say,

Jennifer Rumsey

supply a Yes. we able do, to that been year. thing in the lot And had challenges last of we’ve business

produce is through heard in revised the a really to see revise at mining year board And for able the center data been we’ve little you level. half, first a the – demand, center us demand next up order through we market. We out So particular strong better bit. data

So of was we’re little of market. stabilized really But Mark And is in year. a it from of that where other noted, in seeing the situation strength parts there as softening markets. then it’s bit those last parts

Mark Smith

we’ve then, up. course, keep pleased step that taken And boosting up in year. my with that more to then profitability the in last we’re performance And comments heard you of the over yet actions

very pleased the business. with So that momentum we’re in

Tim Thein

Yes.

Okay, – then and good. just distribution. And on

and an worth of So of if with can kind it early earlier in business but But on a little color associated – been a sales and maybe of to maybe your So mentioned just stepped was and there mid-XX% at just distribution that there some as you back what had parts in be good bit you aftermarket warning mix that, percentage out, I is activity. signal? headwind terms area the calling down. imagine of Jen, kind – look maybe that? more typically on to, the tying a comments

Jennifer Rumsey

customers high was give mean, couldn’t levels aftermarket at the I buy what because trucks. we happening I'll incredibly there new color were was is, No,

longer that trucks using were demand. more drove aftermarket they So

some margin – bit, it’s demand our And has still say. we I business it would your very And we’ve favorable us very, down believe healthy see aftermarket healthy. that is what seen seeing the some inventory perspective happening. from but it’s overall to being healthy is so point, little We a but come a one, the adjustment still still aftermarket for we’re very

Tim Thein

it. Got

Mark Smith

say, off A Tim. than bit more leveling signs, it’s would I accelerating,

Tim Thein

Thanks okay. Yes, the for time.

Mark Smith

you. Thank

Operator

comes Your with Evercore from next ISI. Raso question David

open. line Your is

David Raso

production truck The color sense comments you. to your that a you quarter. in your think the already of in been much for into that magnitude? XXXX? how thank give this us the of Can about pricing little on by And fourth conversations more perspective Hi, for sort laid How dovetailing versus customers? about out is

Mark Smith

it’s the of say, a all, quarter periods. would of I So because holiday shorter first just

going in we current outside It got I would of we’re from this be year that our towards David. That’s the and coming the think is customers what And and the doesn’t not The instance shorter that’s build change. We’ve this building end rest our not order lower embedded year. had then, what are really not I assumption, so for yes, momentum what has of guidance industry in at characterize sentiment point at as year? the the That’s of what’s I the that rest we’ve the start quarter. hearing get rate time. to QX, question how specific. is think a the is that of

David Raso

to Nothing you what to days. less trying I do out. change? tone was a That’s with figure production Have heard

fourth Just truly Hey, so taking make quarter being line to we understand… in rates sure we’re down or daily your I’m it the communicated. trying view. just just

Jennifer Rumsey

this imagine, you as It’s one. debating And a are we can tricky a lot.

in causing nature that see I typically softer is down is us as quarter. aftermarket that an uncertainty just economic and the some our little quarter. the There’s cyclical that So see said, the indication from in we’re the we typical bit fourth fourth anticipate going a more to to markets market days in softening perspective in an

look And start going that a down next bit. little market as to to size year we is come the to

As I can. producing high it at a right level softer our it’s Jamestown – much would is they think just said, typically but now. I very than We it’s as – cycle as we a see,

Mark Smith

Yes.

issue It’s of at activity market We’re not David. the year. just the some assumption signal to here, the trying about Cummins end specific

David Raso

That’s pricing? fine. question And the on

Mark Smith

I that, repeat sorry. pick don’t you Can David, up. it I think

David Raso

but and after XXXX costs trying people much, your to be figure know increases. or strong a might just down pricing? back engine just could very you want so trying sense think The just conversations And take XX to if give get for of last agreements, to see pricing, I are as to months provide you’re price is conversations the and having supply truck for but I I on have price some you – out, your on perspective there you able some early

Jennifer Rumsey

pressure we’re well. been we’ll balance that stabilized. is look, Yes, seeing, which continue – we’ve the launch to year next cost products to goal with new as the some And then our is price

that customers, conversations but continue those to will have dramatic to So us there. really allow with nothing

David Raso

Thank much. very Okay. you

Mark Smith

Thanks, David.

Operator

comes Research. Your with next Rob Melius from question Wertheimer

Your is line open.

Robert Wertheimer

the also share and maybe and just on market had on developments. truck your generally question then a mix market Hi, and price I

little and control still really actually had do So a success on engine. the buy it? I Cummins the mechanically, there? maybe, a the Engine choose curious about margin bit in price you effect, OEMs some catch Is when they come of way that to good OEMs prices walks a truck that truck, the just one is have OEM the price gone up. up the think as truck of first in either in And would I’m engine, increased customer have right? have to margin to truck engine making So, and or retail, at the you be guess, don’t

Jennifer Rumsey

end pricing Correct. control happens the We that the to customer. don’t

and agreements We adjustments And and last solutions long-term typically OEM. don’t those price long-term fundamentally our metal and over with to have but the them pricing customer. we some market options the the to adjustments follow and we inflationary engine powertrain done with agreements few have years, that end we dictate

product with offered end goal powertrain to the goal others is our of the our a to to have create product through to performance Our work market. customers for compared in the

Mark Smith

We big price made away years influence in ago. from shift retail a XX

Robert Wertheimer

think I a big clear. just No, And Okay. then that’s part...

Jennifer Rumsey

in big fuel course, of say, customer the a and heavy-duty to going factor was as economy. I choices space,

Robert Wertheimer

it. Got

get how Second one shifts is Cummins. through to flows up North it and in trying date on to mix American truck just for

I out, for your the share/mix up vocational/day share just in in sort haul haul long share market vocational, if guess affects about of how your Cummins? in than quite long I’m mix market and truck market those comes to come cab trying is guess medium-duty negative and which just think So are declines truck or in medium-duty share the up. evolving your you not? high? market higher trying So I I’m market to in So,

Mark Smith

in heavy of difference. much fleets, it’s have where market Yes. share That’s overall the those deeper, of the is the kind I has Rob, it’s got whilst stronger, say our it’s duty that’s strong. up would than a last larger than question, larger those relationships. to – to Medium-duty, do the main main within the in all heavy-duty right? share things the we’ve we years we angle stronger because itself and – with higher different very mean, couple fleets gone the over overall with delta your And then I tend

a heavy been competitive. been going support the theme really that’s So in more up shared getting effective, as trend that’s individual and been into helping That’s been has as there’s trend larger medium. But a us. and fleets in are we’re splitting take more becoming

Robert Wertheimer

you. Thank Perfect.

Operator

Your next with from JPMorgan. Tami question comes Zakaria

Your line is open.

Tami Zakaria

Hi, good morning.

you for us can update So, the year? price realization your price and on assumptions cost

Mark Smith

on pricing. about be yes, Well, be at costs, X.X% we’ll about plus inflation. And we’ll X.XX% X.X% to on

Tami Zakaria

was understand, Got it. the power on just for guide I’m systems, but segment was distribution both your full-year full-year And the to trying guide, and unchanged. guide raised sales

bridge So can you help that? me

Mark Smith

don’t Yes, why really go? Chris, – well, we you

Chris Clulow

Yes.

So, in but guide it did we’re yes, as We now, it at systems at change the what looking overall given want is to Tami, revenue the and we you’re point. towards the distributions. to change the trend of looked that we this would the overall, probably at raise right. higher right not end didn’t in elected we power just guide, And uncertainty markets

Tami Zakaria

you Okay Thank much. got it. so

Mark Smith

I Brazil other not and the Those it’s areas. improving. construction parts, or dramatically though, going are construction, go the – three truck different, were not it’s out. two key then think way And that themes are say leveling would I but the in

Tami Zakaria

you. Thank Got it.

Operator

Fisher Your with question next UBS. Steven from comes

Your line is open.

Steven Fisher

a wanted sense Thanks. business too truck again. and market at that all. I if on for not confident XXXX about getting XXXX that follow-up increasingly messaging might the guys Good the thinking of to morning. you be the much just downturn, were have I

a or macro So trend thinking it changed, in more something like, just it that And at or really of, the at that’s all? is thinking mentioned thinking, all? your changed was catalyst is changed has gotten aftermarket not sort that you for different

Jennifer Rumsey

– Yes, I see it idea going and notably hasn’t from really thinking we’re the changed to this that don’t before cycle. a that gentle

downturn that and really it’s market, on dependent some happens, anticipating in And some out. So, things dramatic and that of these what happening. broader that, plays not how economic the really

Mark Smith

the for And just QX, not. days the production us is we confidence, is the part the that seen correct of which in the the it in are because it’s of for forecast right, think erosion some tells then of remainder customer if lower Part is in there haven’t orders. year, it number math of the which industry of is quarter. I just just a history

into the and Just period we to is, holiday clear, slow have to ramp December be if there a tend fade bigger a up.

at into as of year. built guidance just That’s that the we – the that. we our So start simple

Jennifer Rumsey

is places and strong, year across layered and really structural you’ve that where that. Systems focus quarter-over-quarter. seen expecting continued on the our has you’re operating gross to performance base meantime, seeing But margin to Meritor The the right? downturn managing And been business start some been margin the the business this what then things Power look improving doing within at costs, in to improve business, the think we’re the going as continue we’re is see some to that, now has improve do gross to us has we time we’re business

Steven Fisher

bit the might that your still are for in chance upside And trend any like sounds half you outlook of second whether Okay. it potential weaker How China. a part there’s about stimulus that? And of there? out for is come thinking

Jennifer Rumsey

few this improve point, economy. they continuing there’s to – stable try Yes. in well, it was, want we’re to stimulus. and that assume no to think At recognizes a to fiscally the the ago, weeks want a There They I do meeting, responsible the government way.

that half. that as would and seasonality between China stimulus improvement a And much our if not pretty playing there’s we’re of off so assuming low and XXXX anticipated very impact some typical well. half And stimulus. that comes we impacts first demand in out is outlook second as

Mark Smith

right Yes, guidance to but size seem would of source I now. upside our say that most just likely the

Steven Fisher

Got it. Thank you very much.

Mark Smith

worried I’m it. about

much right there it and Just now. looking is sign of more for

Steven Fisher

Thanks. Right. Makes sense.

Operator

Your next Elkott question comes TD with Cowen. from Matt

open. is line Your

Matthew Elkott

emerging EBITDA wondering are I expect Accelera you costs new timeline? Good there or that was XXXX, still you. Thank guys morning. could neutral by structural if change needed any and that investments for

Jennifer Rumsey

Yes.

and of revenue outlook big there sure now, have the in supply that year that this we’ve investment towards the enable still with confident increased to be right on A saw us chain product and making – in do as we we are continue electrolyzer piece focused backlog EBITDA right we is the strategy is XXXX. this the the you the neutral continue got growth We to on to with in to – really that. comments the we work place

Matthew Elkott

is construction of end Jennifer, And outlook Okay. non-residential America? a markets Can tempered and public North are just the year, you one somewhat construction some question tempered here part for the construction for The driving the outlook latter in on about data strong. side. centers the of sector, kind more strong of talk

Jennifer Rumsey

Yes.

and there’s where market centers for construction that to So remains outlook data show would and down and that market So, other of definitely strong There’s things. right? up power infrastructure data and construction, with is us – we’re market our rising generation investment for flat, and of the parts strong. U.S. construction interest segments data rates seeing center

Mark Smith

of fleet of the a issue construction lot like replenishment of timing what’s just engines Part of a for is of it the ordering been equipment.

that the is leveled it doesn’t see going. out, So right kind we’ll again, mean now. And necessarily demand on just of us is it’s where

Matthew Elkott

market, center Does you any in does or data construction all most your for show of up the – the it’s of guys, any to of exposure in construction it business…

Mark Smith

Power That’s in Systems segment. our

Jennifer Rumsey

gensets construction and data the significant us. is Yes, it’s that mean, backup systems. actual that they very not for drives power a for revenue us for these The buy center I itself… huge large factor factor for power

Mark Smith

the It’s hard for the us sometimes to rental. construct selling track where to we’re exactly OEMs –

Matthew Elkott

so That you Thank makes sense. much.

Mark Smith

Thank you.

Chris Clulow

Thanks, Matt.

Operator

Kaye Your next Oppenheimer. from comes question with Noah

is line open. Your

Noah Kaye

Hi, thanks for taking the question.

Accelera expand if million. $XX investment to and about wanted on this could increased I spend year the Just

and a right. mentioned operating couple is expense, really right? you it’s think to product an electrolyzer production get It times I of

you color changes of ones put in last maybe the a mainly engineering you’ve obviously, resources? little this you to even this us year? spend policy Maybe and some get ready context the you needed some is can what ramp? over give come So And can to felt through, industry that significant of on on seen the you for

Jennifer Rumsey

in not expenses much up industry policy demand, we’re forecasted. and customer of the support shifts, we it higher that as and or cost than the optimism is and The outlook and Yes. previously the engineering of as costs growing drive running capital had Yes. scaling operating higher changes that as plants product in the

Noah Kaye

Okay.

That’s of kind EV, there’s expectations? to So contribution? North America, mean, the engineering. that would to as adoption, margin The book sure in tracking which make customer the I guidance. right. product just But of more understand, no support weighted helpful. business versus business, mixed is of towards we expected well understand All delivering current of is We as hear on sort love I change EV to the your that revenue particularly indicators where side is think

Mark Smith

Right.

for the demand point looking on work we’re done have those concentrated waves I really with, would even improving margins so the time. team of side, margins markets. So has been The yes, good mostly increasing leadership in say next Accelera demand, in no, EV albeit margins today demand is the definitely this improving. Yes, modest, there. the but relatively on our bus improving our at have been

out the the not And It’s building we’re It the run. that’s Yes, still long just bit now. some, aren’t We’re demand ready. yet, of to investment be multiple but to ones shipping is the on that capability. going making history just demand. in going sure There in that The keeps making pays new many sure electrolyzers, we’re shows right? off up up. electrolyzers, a field that going issue times

Jennifer Rumsey

Yes.

couple market that a the develops. watch on there’s of how this, – things we a Here’s

So flows being when but are it defined. flows still electrolyzer there’s the money that side, and government of on how actual the investments, details

So timing of a of impact a some is on that. bit that

then market build is of cities you’ve the in a got exactly powertrain, incentives there’s uncertainty corporations lot where out. electrified to electrify infrastructure the how still and want to that And and bus that beyond on have going

uncertainty So say to of exact pace I more there’s that. drive that, a but regulations on would the of going to start of that’s lot

Noah Kaye

see Appreciate Thanks much. it. the to investments. you Good so making

Jennifer Rumsey

Thank you.

Mark Smith

Noah. Thanks, Yes.

Operator

turn call no to Clulow are like there for remarks. questions. any the I’d back to time, Chris this closing At further

Chris Clulow

teleconference continued today. very Thanks concludes That participating for and for your our much. Great. interest. Thank you all

after Investor day. As for the Relations a good call. will available questions always, be team the Have

Operator

earnings Thank call. today’s participation. everyone, concludes Incorporated of second quarter wonderful Have rest Cummins for day. you, your a This conference your

Cummins (CMI) 3 Aug 232023 Q2 Earnings call transcript