Cummins (CMI) 2 Nov 232023 Q3 Earnings call transcript

Greetings, and welcome to the Cummins Inc.

Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chris Clulow, Vice President of Investor Relations. Thank you, Chris.

begin. may You

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

available be all under will answer questions the teleconference. We to

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

Our slide Exchange and on most Form in of quarterly subsequently such the our of uncertainty is actual projected Commission, because a those filed number filed disclosure from particularly and available in XX-K of annual risks the and with the uncertainties. our could future [indiscernible] report regarding XX-Q. on differ section forward-looking any risks materially recently information statements in filings Securities such statement deck, forward-looking and and results No Form the reports

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

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

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

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

demonstrate to and battery and cell supply and accelerate manufacture the the September joined manufacturing electric by highlight States. events the and strategy. chain commercial our cells the continued first with will The that On details Daimler technology and along United a EV performance, in execution applications, I'm X, of from United Bus Before Truck clean third PACCAR, getting major Energy joint for few jobs production planned creating venture quarter highly of into our Accelera excited sector. to States forces vehicles cell localize the the the industrial in in desirable growing battery battery Cummins,

factory key investment customers as billion partners to accelerate partnership long-standing solution by the while and an United the the the XX-gigawatt be is to in hour expected our Total this to States. begin opportunity advancing partners industry XXXX. of a and technology X in for transition to investment share with collectively in to with energy range billion expected see production $X the $X We for

meet addition In Netherlands. October, and their Cummins in a manufacturing for emission products. and Emission is of low help one natural completed acquisition Warman, commercial in This we Cummins acquisition future Columbus, and plants will related current and its one X Indiana to business vehicle ensure Solutions Faurecia the activities, demand

to Cummins customers its are achieve and heavy-duty to in announced that natural Lastly, with XXX gas gas decarbonization goals. Cascadia our Freightliner with several announced engine further enable their working collaborations natural Cummins Freightliner XXXN our trucks. the they new offer

company greenhouse oxides without Inc. XXXN natural reductions largest and gas new tested full announced truckload successfully performance. engine, Transportation, using the nitrous Knight has and that in to gas in renewable California, Southern Cummins Cummins compromising realize Also, industry's

be application. the XXXN, gas will the heavy-duty designed for The North natural launch truck America on-highway to which in first XXXX, is in engine specifically

on to starting the of and markets, with of XXXX before international quarter largest our Now third cover the overall some our I moving performance markets. key will on company comment North for America

increase products regions. compared and were be Revenues most billion, for for addition the of demand Meritor Demand an of to many our quarter the markets markets. $X.X strong strong across key our XX% and by the of across and to of XXXX, global quarter driven continued third

included reminder, August of the quarter XXXX. a consolidated the of the Meritor As third following of for acquisition X XXXX months completion on operations X,

was EBITDA a or compared XX.X% billion ago. $X.X million or to year XX.X% $XXX

$XX of results Filtration compares the to costs Filtration costs to include adjustments This Third third related valuation which quarter costs XXXX separation business. quarter to business. to the and results, inventory the related related of of the and of acquisition, $XX $XX included the million of million separation of XXXX integration million Meritor

items, of those delivered and improvement quarter EBITDA benefits pricing from and research in XXXX, an inflation and selling, volume expenses represented higher the XXXX of percentage as increased we third Excluding XX.X% development of the exceeded administrative in costs. XX.X%

invest will segments. million. Third $XX the of included quarter we to of Accelera onetime also increased and the particularly XXXX and in in future, and that recognition products as for create us the in a Research Components in bonus technologies continue the expense third quarter employee Engine, advantages development

cash $X.X business. the third in million the $XXX capital of compared record XXXX third quarter billion focus on our flow working quarter management we within a for to XXXX to In addition, operating continue of was the the inflow as of

quarter, achieve driving and forward. for our on focus to am for costs this I generation result will we operational leaders of focus their down moving employees continue in the and strong record efforts to cash and proud

to billion revenues grew driven quarter our third Meritor North in strong of year, America the addition to $X.X markets. in by XX% last demand and compared Our core

X% heavy-duty was sales from last our up XX,XXX, for XX% XX,XXX the while were in unit demand year, Industry reflecting strong our products. from production of heavy-duty units, up quarter trucks levels, XXXX third

units from of sales Industry production XXXX up in was were the an unit trucks XX,XXX quarter levels of medium-duty of increase XX,XXX, from XX% third XXXX. while our XXXX, X%

Stellantis quarter engines pickups ramp of their We XXXX, the levels. in for shipped XXXX with XX,XXX use in flat to third

decreased driven America X%, the by in primarily by North in inventory construction customers Engine sales high to channel.

center XX% data supply eased by and power and constraints North generation demand in Revenues modestly. improved America as industrial increased

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

in Third including $X.X compared quarter recover ventures, joint a to an as weak XX% of quarter to continue XXXX. markets were third of China, very billion, increase revenues

in medium- demand China XXX,XXX an units, heavy-duty and for XX% Industry trucks was year. increase last of from

and ventures, of were XX,XXX, Our including sales units, joint an XX%. increase

were units China, XX%. increase our at In we in light-duty an joint while of markets XX,XXX, levels increase from sold, XXXX XX% saw of units ventures, including XXX,XXX

in The is to due demand a construction. units, third XX,XXX from decrease XX% activity quarter in in market for Industry decrease levels. size excavators was XXXX the of weaker

as and existing X,XXX were at flat declining new offset markets. the XXXX levels increased Our penetration with units, sold customers units

Sales nondata third China increased of by markets. X% driven improvement power in in generation the slight center primarily equipment in quarter,

Third joint were Industry by truck million, shipments production our quarter increased while ago. ventures, increased of including India, revenues increase from XX% $XXX year a an XX% the XX%. quarter in third

XX% changes. Power decreased to Generation quarter revenues second the of by emissions due regulation pre-buy ahead

outlook me up last including let on individual we on markets. provide be Now comments XXXX versus end full guidance to Based regions XXXX, some to our our revenue year XX% and for XX% forecast, are year. raising current

segment expect opening our aftermarket engine now our profitability guidance our are Systems in narrowing result offset be off-highway as of Components and segment, Power XX.X%. We full business a higher XX.X% range EBITDA in to and revenues higher year profitability We by markets. our to also in decreased

trucks forecast raising after for in to are a our to America units strong XXX,XXX quarter. We North in XXX,XXX heavy-duty be third XXXX

guidance current fourth in quarter. Our production past industry lower the

days our working production are being While shortages, view orders rates and our component remain fewer quarter. limiting relatively strong, OEM inventory for the management, truck to

XXXX year In XXX,XXX of maintaining North to XX% size America medium-duty truck market, full units, X% market from up we XXX,XXX are XXXX. to guidance

and supply limited across industry to continues base, to increase we to the to due production While plants global supply improving through other work constraints. continue be rebalancing chain production our our

expected pickup Consistent with our volume XXXX. units shipments to XXXX, for engine North our in be in to in guidance, levels with trucks XXX,XXX are XXX,XXX prior line America

Additionally, our conditions. to for North driven we construction channel to inventory by flat, high America softening maintain and down be market guidance XX%

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

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

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

In joint ventures, India, in we prior be to XXXX, project total revenue, up including with forecast. our consistent approximately X%

for mining X% prior high up to global remain flat demand strong our consistent to markets engines trucks industry year. XXXX. expected with horsepower Sales for We be are flat up to of to major project expect in our We guide. to be the XX%,

expected to guide, to center Revenues by increase in the prior power our data the the in mission-critical are XX%, improvement XX% performance with generation markets with strong markets. driven primarily global consistent and

guidance expected $XXX loss $XXX XXXX. year For million full to Accelera, to $XXX we expect maintain million the EBITDA be of of million also million and for $XXX our sales to

for to $X.X the by Components, XX%. EBITDA in contributed the XX.X% billion, revenues be expects Within billion to is of XXXX to to and expected $X.X business range Meritor be Cummins

on to range and are guidance In EBITDA up sales from XX% summary, guidance XX.X% narrowing to raising we our our of XX% XX.X%.

the for in revenue the guidance full quarter. implies fourth weaker Our year

weak remained quarter lower management and some across rate. fourth several aftermarket softening are continued demand supply markets, in strong production the truck a driving America outlook North many in constraints demand, China, in run factors the continued markets inventory impacting efforts of industry While the

as voluntary and in forecasted of voluntary year, business, in have costs. for we in revenues, lower are next a parts particularly we into administrative offering costs regions actions costs view business to our order select the employees. move we eligible and exempt selling In our program initiated separation of In retirement lower to reduce and

continue monitor action will for future. our and invest closely the markets to while for our continuing to assess need further We end

$XXX of we the During million the to form returned shareholders quarter, in dividends.

to Our long-term cash flow shareholders. return to is operating approximately XX% strategic of goal

execution driving flow strong second quarter, ongoing quarter the continued from record the operating into the third despite operating environment. our cash challenges of The XXXX in

future. changing opportunities to who a us capable we ahead, forward navigate the exciting look help have strong, team will we and successfully As an leadership

also my announce on was will be of X effective to I several year. pleased team, Today, January promotions next which leadership

First, business, role Vice as Srikanth work we this newly In Padmanabhan, currently and energy Engine of President in that priorities. of of an President Vice will company the take operate improvements and President and Executive created ensure the Operations. of important transition operational our drive define Srikanth President through our be will how a will role, a and on success

worked than as in his Throughout powertrain at of to pushed net and a regions to boundaries the Cummins future. innovation the zero has of position across many Cummins the choice more years consistently and of XX transition customer-focused businesses leading Cummins, supplier Srikanth

result and lead to choice this is a work. is people-driven and the leader perfect Srikanth

Customer when role his of he Strategic currently On-Highway and the Vice President Brett new assume business, and business will replacing Engine Second, Merritt, role. President takes Srikanth Relations Vice of the of President Engine

more million On-highway to XXXX leading Brett XX more spent business excited than Cummins. and Brett industry of our and partner Brett lead vehicle The at XX segment. the XX business I'm years commercial is key to automotive the engines spent to than from trusted in customers, engines XXX,XXX has and and X.X this last experienced growing in an year. and a many leader past for

head our President of Satterthwaite, Fetch, replacing of been currently interim DBU. President Vice acting has Distribution of Tony Bonnie Vice President the role assume Chain, and of who business, will Supply Global as

supply and includes organization, makes Cummins her supply of Caterpillar, manufacturing management, for team her global led qualified in for chain years [indiscernible] Cummins, XX chain XX Her and newer years HR Bonnie, Cummins led including performance. coming supply and experience, who to at uniquely DBU more previously before general role. chain this leadership led the has where including than she

run I'm this leverage excited for to to her experience broad her segment.

strong This demand needs thanking our our navigating our to it's change to the is chain customer to an employees products, continued relationships one. I want strengthening for challenges. meet to also levels of supply a respond and exciting our end work period tirelessly quality and company, who Cummins by by continue ensuring and customer

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

over me it let Now turn to Mark.

good Thank you, Jen, morning, and everyone.

Third Organic products. sales year generation sales on-highway ago. $X.X and X% up were total by XX% from XX%. of increase for North revenues XX%, power pricing addition the quarter America by Sales grew in strong revenues driven the demand XX% and and improved was increased billion, growth of a in Meritor. driven our international was

$XX million valuation acquisition EBITDA million was the of EBITDA inventory associated XXXX third and costs related of of XX.X% $XX separation or XX.X% of the planned of with to was billion costs of quarter $XXX $X.X the Meritor. Atmus. million or in planned million associated and integration for of the adjustments with quarter sales And including our the $XX sales, [indiscernible]. of

the was financial higher by by company XX.X% third to a and Underlying input The separation EBITDA driven rising the costs, Excluding costs associated compensation XX.X% stronger quarter cover overall to Atmus logistics variable ago. percentage costs favorable EBITDA was pricing adjustments, with partially higher offset and compared improved year performance. Meritor

employee we of quarter in third recognition addition, the a year, $XX million. last issued In totaling onetime bonus

comparison To in integration of the stats provide performance to to separation planned comments. guidance following acquisition clarity and acquisition Meritor related valuation with in the on the inventory excluding Atmus of and costs and my associated operational our

year X compared XXXX, acquisition operational year. a additional in the this in reminder, resulting Meritor last performance completed QX As August we to of month of in of

I'll into margin year. compared detail XX.X% $X.X billion was or go for XX.X% quarter $X.X of line or to Now by Gross item. the sales more billion last

pricing the compensation higher impact by partially and by bonus increased favorable margin costs onetime Gross logistics XXX the and employee last variable points, of by basis offset driven year, expenses.

higher XX.X% billion $X.X the new costs the across to or research were of company. both and primarily sales variable and driven engineering expenses admin XX.X% increase associated $XXX higher with compared with Selling, or million by compensation products

receipt from joint was $XXX previous than demand China, year, million, technology and which ventures the the operational fees of the boosted results. by Income million $XX higher slowly improving in driven

by in was driven investments. a $XX was a year $X lower ago, income foreign or than included of translation. losses income on million negative Other $XX other currency mark-to-market million million Also

the rate was million tax effective higher of interest Interest to our rates or $X.XX by expense diluted The third increased $XX on favorable quarter due XX.X%, $X share the per floating debt. million, primarily highest [indiscernible] portion discrete including rate in of items.

or All-in of $X.XX diluted net $XX or earnings for the quarter Atmus. was per $XXX the $X.XX diluted share costs with million share, of per million associated including separation

All-in per and or of year $XX million Atmus million with acquisition the included acquisition share, last in and of $XXX of the net $XX third were associated the associated $X.XX separation planned costs which quarter diluted integration with million costs Meritor. earnings of of

focus earnings company, the inflow All-in operating billion for record and driven of focus operating flow were solid pleased year, continued and by management. Generating $X.X a key strong in quarterly cash $X.X area last remains than working third on the flow we a quarter. progress with higher the was cash billion, capital

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

Cummins a guidance in Guidance the As for benefit reduction any separation any year full to cost and impact reminder, the of a activities of within the and Atmus excludes Meritor quarter. Atmus. costs includes XXXX of of fourth operations also related excludes

the America. to from to mentioned, Jen guidance revenue we're by driven demand As strong for XX%, XX% up our company North raising previous guidance in of our slightly XX%, to XX%

segments. narrowing to are to be our XX% to range compared to also most previous is ranges XX.X% of the EBITDA EBITDA And XX.X%. business for our now expected we XX.X% of

improvement billion, line EBITDA year an the was significant $XXX year, XX% $X.X Back third EBITDA the expectations. from with $X.X revenue was million of increased increase sales, revenues our XX.X%. of while Cummins from $XXX segment quarter in Meritor EBITDA and a was -- billion, last dollars Meritor XX%. million to and were prior million. in Components with $XXX or

expect of XX% XX.X% of range revenue the to increase Segment, with previous previous to Components revenues to guidance now in XX.X% XXXX XX.X% a we our to the XX.X%. our to total compared X% increase range EBITDA For XX%, from

prior be the of of revenues billion, expected XX.X% individual to XX.X% to Components, in get consistent are be as Within compared end XX%. is previous XX% the $X.X range with Meritor of small expected guidance. year. the $X.X to to to forecast EBITDA of Lots in the to billion to segment guidance closer our changes we

$X.X XX% were quarter driven an of employee by Engine the onetime impact the segment, third a to operational ago. increase compared For of the XXXX the XX.X% bonus year improvements X% EBITDA year. in in revenues billion, and prior from

project and slight EBITDA due prior continuing projection guide Engine revenues weaker business decrease will consistent the XXXX, XX.X%, our to of from a in the and with softening in XX.X% range X% for some off-highway In to XX.X% revenues some markets. demand increase XX.X% a we our previous in and X% of our aftermarket to to

XX% segment, $X.X and impact onetime of of as of EBITDA higher bonus XX% year driven In year. revenues the pricing a billion, last percent year. than stronger a employee Distribution ago, by the sales were to compared the to volumes, XX.X% and improved last sales increased

revenues distribution XX.X% and XX% XX%, narrowing EBITDA with range to consistent the expected to be to prior We expect guidance XX.X%. up to

an pricing, performance. the of continuing improving quarters higher activities last by XX.X%, Power Systems and reduction increase EBITDA a increased of operational continuing all cost XX.X% In business, volumes, X%. margins the have X of contributed billion, were trend revenues improving $X.X from to And to driven

the to up XX%. range previous up our expect to we of consistent guidance. of be expected raising XX.X% we're prior XX.X% the projection X% in to And to from XXXX, XX.X%, XX%, to with revenues be In EBITDA the

delivery, the North more the for in addition electric Siemens and electrolyzer $XXX demand battery than of million, market electric driven project the American Vehicle doubled powertrain to revenues systems school Commercial business. by the business of Medical bus higher portion Seller

$XXX segment continue Our the will growth. strong in EBITDA million future of loss to support

for losses with Our of the in top guidance million of million range unchanged $XXX $XXX and million [indiscernible] net and $XXX the revenues the line to million. line bottom to $XXX

is in rate items. discrete approximately any to tax for XX% the effective excluding be Our XXXX, year expected

investments Our to $X.X . is to be expected outlook range in capital billion for of and $X.X billion the unchanged

through focus returning shareholders continue on to drive profitable will reduction investments and debt cash We fund to this to that cash year. deploying growth, dividend

summary, record We'll continue quarter profitability strong in on In and delivering focus drive flow. to sales, working investing and operating solid technologies and delivered the will the that growth. cash margins strong third products we managing capital in future

As signs expected of softening industrial production are some in days with lower to demand revenues we quarter, to weaker indicated parts. combined profitability. and last the demand we fourth These, contribute aftermarket see quarter and less in

for costs, steps outlined, some the markets as initiated Have further need assess the end we'll and closely to actions. monitor to our Jennifer and continue

XXXX priorities dividend as the Our for in reduce debt. increase reinvest allocation, for said, capital growth, and I've to

X% of $XXX million. third through reduced of In $XXX dividend with dividend, in debt quarterly July, for consecutive the in we announced And have a we plans consistent million, the Furthermore, we growth. by year further our year. the by increase our reduced debt the XXth quarter, a end October,

your for today. you interest Thank

it Chris. back Now over me let turn to

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

our ready rejoin please first an have for we're queue. question, the Operator, you additional question. If

from question Jerry is with Our Goldman Revich first Sachs.

and Jennifer, Daimler. the venture with PACCAR joint on congratulations

about, that on what's opportunity battery eAxles, to just forward can bundle for availability systems? expand could batteries a comments. of this it you management source love would the on to look with offering customers? within Just and is your the EVs, broader talk use to initially? in is means terms what there globally just product Cummins we that As we U.S. strictly for your focused if plant plan And Or the

Yes.

little So bit a Jay, doing we're what color I'll to add more this partnership. with

partnership this battery cell on manufacturing. is I As said, really focused

we into packs, investing and be with our solution production powertrains integrated the U.S. battery eAxles, components think have together the motors, cells need other inverters, design what vehicles So applications. commercial powertrain. key we And of and is to really going and on partners a to focusing been battery for previously cell electrified the saw winning for and bring industrial

The North the that Cummins to also domestic So market. be U.S. this really targeted cells, into produce. go in battery trucks will offering here the will America for supplied and packs battery think to do a Daimler that we cell their having really PACCAR at will the and will market. is

around NMC. the also the chemistry again, continue technology, a going and be to these this, including together, to which, minerals vehicle is we world LFP focused lower think better cost, and cell here, of packs winning commercial be on And and chemistries, can less this that we will for source one offer But LSP on chemistry, dependency safety. is to harder battery durability, some improve battery

for stay opportunity good launching to X those these and as with really partners we're also connected us electrified closely So powertrains.

offer battery packs to as U.S. through well. our Our cell intent and industrial is that to the in vehicle here applications commercial other

third had super. Engine for And year. question can you Okay. range and outcomes? the about versus higher midpoint is segment, thinking in the cut, profitability solid that pretty production taking seems like on Or down just shorter-term just quarter. broader, It's midpoint of rate potential fourth reduced versus in The maybe margin quarter a Can big the China folks end about the quarter is that Mark, step you at ask a the JV? just implied talk a I performance the the significant

the related to China. I fact to production consistent It Yes, surprise, what days. we're industry that which for it's we've a but not heavy-duty truck, isn't think the that's lower less is with a kind related couple been of quarters. That's have forecast for projecting of to going

headline and the course to the aftermarket, I the through I particularly of now are from sense trying companies like XXXX with the of rate a and to No engine everybody But rightsize. year, give at is The trying gone than decline don't, fourth you of inventory business of is parts think rationalizing a of quarter looking the because customers ourselves, within that's business. underlying down the rate inventory. to thing decline demand quarter, revenues engine through keep are that's the running related to we've the the some just XX%. between about the in up Jerry, levels really first less many changed period doubt, in

of we've each it. time slipping looked been kind at that's So

the that's one the lower But think don't even I inventory trend. production the it's adjustments. changing revenues quarter, one are yes, lower it's that combined bit tougher. the the just do. So foretelling reason holding up it's think that's means for I the fourth that, absorption initiate going only the though to with that, be And mostly reasons, we've earlier. days, a to we the why not decided actions little of discussed

successful precipitous like feel or our not decline in We have don't decline We're it's a prudent a a a off areas, slight some leveling best in all. visible revenues we clearly to but at continue chances predicting both XXXX. being with year reduction the of the our the that cash very cost leave actions, do should focus flow debt reduction us on in and

add, doesn't business, our JV change One does Jerry. is license difference QX but a timing. step is because for QX engine and quick our down income between to fees It it of overall guide

happened down about steps had third we a points for quarter from business that engine margin in the basis to QX lot that QX. So XX of

helps. that hopefully, So

Evercore. from David Our with next Raso is question

of any on little lift the And maybe insight How decisions. margins a 'XX what that being is cost-out is? you horizon what give the see broadly. across curious, more us I'm on if a, the let's in expand you're that 'XX machinery in maybe we seeing than to margins related to can say, heavier a maybe and space much

any is of Just cost magnitude 'XX 'XX? in outs you're be out what helpful. would the to obviously, sense curious sort seeing how much what of is versus really structural it And playing

I'll anything. David, and can wants then to he Mark start Yes, if add add

and leveled our said, as of continuing some opportunity many softening off-highway. performance And and profitability aftermarket, we focus drifting see in some costs we a and are of markets seeing So using have our further to as that down ongoing markets, to the improvement business on off. take We're out. markets of we

of if still provide into as We're go heavy-duty is medium-duty at you you we Today, look half into the truck very truck to XXXX. not is and strong year. continues generation quite strong. say to I what a lot of we So go see as for strength year. guidance going will and the look first Power next backlog

take precipitous continue in And cost-cutting drop then to to it's monitor and situation. further off, wise here seeing do think we continue so action, of if some actions take any but would we we're we that. QX not to to need the course, And

give you the cost the about the assessment call quarterly next on earnings a impact. we'll the And fuller and both benefit

kind Of the course, clearer don't a There view going what next things. or the is But what we're to out what of take-up momentum that of in got actions, we've more announcing in quarter then today hopefully, assessment be the full year some exact next is and of when we'll know other in is markets the voluntary so and smaller we be actions detail other lay facilities around year. our holistic going forward. will

JV comment to quarter engine on fourth appreciate That's XQ, about margin. the will I'm I fourth helpful. Maybe you you highlighted quarter. by a in how XQ can confused lower the the impact comment little And a benefit Chris' income, the something. parts in educate but me impact that

well, But strong the on obviously, which, when parts as seems quarter margins a fourth it has lot like components see for components. implying you're I of business, then a

at would for fourth and aftermarket, educate even is parts quarter, parts least [indiscernible]. you really on is you step-up having one more appears think can difference division a hit the in getting me why on components, division the the so So in margins

size in bigger of the the significantly the of size parts business than the business The aftermarket Components. in is engine business the

Sure.

down strong. just like pretty I margins component one step doing maybe seems up. and right, think quarter the step math And but difference one it fourth implied the I'm

I Yes, stable. think pretty it's

we're the the seeing I right now. between dynamics that's X businesses just different think

of a lower of Frankly, volumes that are and for those that that both outlined market the in the to revenues those Well, segments focus constraints building reasons are for America, heavy-duty I and expect QX prevent in supply segments. combination our anticipating reduction medium- continuing inventory on truck OEMs for to here. demand, and impact to QX we there's see both full of from North

There differing customer short some period, can term given be demand David. engines Components for in and any

the longer medium Components multiple a But I correlate are parts in directly parts all or not the main think you're side. business. the pretty in should our the that seeing over well. more pressure sourced That's engine this bit case, from on right we're quarters [indiscernible]. It's on run

Our Melius next question is from Rob Research. Wertheimer with

the channel that just destock is sense way you're through as you any makes all if way carry I'm inventory people half One how just mentioned have to sense. that, on that the curious if have Parts the through. much two. have I you and

if If that to. just you're quantify able you potential

It's destocking say a tend Systems clearly fourth to would the side more what hard is quarter. see the on Power year almost we little to say every into

to a in to and leveled on ramp on was cycle And wrestle finding the the job as off. seeing and the we're on-highway inventory We the and and is supply sustained think then utilization that -- engine the rebuilds, focus trying And we the through chain. to more a oil the newbuilds, of prioritizing engine are was say been we that some particularly gas mode, do seems parts side, on management. better Everybody I would of has the a first-fit lower I of up there build the approach. some started through slice OEM part catch-up Rob. now in side, But truck that have market supply, multi-quarter

we're -- towards It the now. that right feels bottom like it's of getting

what's truck always the Of of on depends what's course, the economic utilization. and that environment level underlying

have if trend I say think parts we're today, So QX? ask lower a clear were significantly in to me on I'd no. you to do

last step So this the is it the that strongest X feels the been in with has we have like information right. quarters

of your if you some. And I true be lot an there, maybe trucks in what been you different Perfect. end in in in on your recovery? of weak then or very the I you high-level power have on whether of China. can your give all of maybe it's kind whether Or in just of industrials. mode, of bigger question picture a gen? just China, recovery view ask the if going It's just bottomed dynamics what's that's could for a economy parts mean business overview in kind see to fleet Maybe markets obviously give of wonder

Yes.

So mean continued by the activity lockdowns China to to when has COVID compared weakness. were We've over improvements we be I XXXX impacted more extreme weak economic heavily pretty seen at there. market, when they look even XXXX in

of come engines improvement. the you've for cost in change gas We've strong an of between some over emissions because there. natural natural delta We've seen on-highway market. gas So through demand diesel and seen kind heavy-duty the the

the recovery content, and impact with we'll investments in so continued I And recovery change, that more have And there, that our continuing see think if continue and business. increase our will product to we positively made, we the penetration. emissions economy so think the to we've

this So we'll government start does watch drive stimulus but relatively and been economic year. and to momentum positive see if the weak it's the activity, any of

in here, a it but JV how you you has we have been about than crept we since our was worse to like It's weak but tough. sense, it give thought, good gives right, sense of there's production. Again, upside Hopefully, up of there, from just not Yes. months, the a visibility the it's just summer. some in in don't a I that. was talking I that but July to know we mean lowest decade, but like don't

that's it hopefully, Yes, the wait to year. impact moving but that the more bond that next won't infrastructure we're I RMB encouraging We'll billion think growth X planned, drives see quarter, that's up. government fourth see and in

Our next JPMorgan. from Tami Zakaria question with is

the wanted you're out when at quarter seems about just growth guide, we I the of look fourth Power came basis to strong it is well. So almost But Margins as Sales sequentially. like XXX guiding business. step really Systems points a strong. ask to down

wanted there get what's just this to we for sense So to that? of conservatism? Is something the Or that for need fourth aware quarter segment? driving of be is a the

Right.

really well. performing So the they've good is been news

and be think that's trend. the that's expect -- underlying, I we continuing that a to So

industrial or QX, business really down the purchase new, I that pricing underlying not the negative side factor. quarter. parts see, every there demand main structure. That's -- but with major of the that's particularly typically, main Otherwise, the probably and factor customers the changes As There's mentioned happens to typically the no earlier, in strong. the we is fourth dropped that cost of that the

R&D it. X years? the the have R&D of stepped couple spend. Got think helpful. question And that? up And color The That's on next years last in say, very we the is over should spend How next spend, notably. about any let's that

investment think position a well noted as of Cummins the future. Tami, we that period for R&D will Yes, increased you in

when bringing through position a 'XX we're customer now engine are particular, 'XX, capital these the to leading will us and through investments, in energy new have making to us and frame So transition. the those we platforms, R&D launch major products also business and fuel-agnostic time new

We've demand our components. as the our up we as investment also for in product Accelera electrolyzer the in the volume electrolyzers see investments well been ramp growing business increasing for electrified as and

continuing So and improving And the through come line. continue that's then really the seeing that in can you're so to underlying we're areas on make to investments. R&D other really what in performance efficiency necessary we R&D focus

why that's big and continue had And the push on do Yes. a SG&A that. we've to

So well, gross margin. on

flow So these we're a these of for is to. is grow our these percent simple improving the which remain platforms, the formula engineering renewal investment, -- contributing business of we in to terms. sales. the we've important the bottom for working levels as it's for see dollar our expected years, keep And like the engine grow That's a being platforms in major grow But while up. and are CapEx next going to that It's margins, also the We'd cash little couple come future. new cash. The to got range yes, can line yet. higher higher of a

Citi. next is Tim from Thein with Our question

question sort first terms can what from large in give giving can revenue for visibility really you you 'XX. and guidance, that long backlog perspective, you engines exit But of times given about not a looking of of you're where visibility help of lead of The would know we have exit just is something And about I'm just on that you historically And kind rebuild Cummins. Power just Systems. the isn't with have into talked curious the visibility to I any you year expect kind think to just terms you speak business? with in just -- the that again, but the XX maybe year in you

on visibility, the you're more pressure course, just And severe downturn, year. are in going half moderation lead but of on-highway right, not into Yes, orders through side participants -- because underlying we're demand. visibility is there the more of seeing truck and we're that next anticipating but great I think the the Tim, Certainly, a first we've got long some expecting market generally, times heavy-duty year.

as and more is So Distribution, headwinds heavily revenue you components expect we side. aftermarket-driven. would very engines know, the on

stable. economy, certainly, some then the Power absent through in massive crush of first So half the into second some Systems, the the should of and year And that half very the strong be more visibility year.

dramatic a seen this shift time. haven't at We in in trajectory point

seen markets I the have in is markets, oil kind continuing in industrial bit its and Systems small gas, Mark inverse. of softening us that's said, as relatively the Power a of and we're which a mean to, for Yes. market to we watch little

has that softened And bit. a little so

And of center strong for expect market Gen, then I you a year. this our we're lot in and data positioned see well continued in And Power business, there. the growth demand

well distribution And margin that multi-period that on expansion serve forward. it's trends encouraging both going us Power and now are Systems

Yes.

and lot you. Okay. apples your terms on-highway but of the listening them, parts have of I want here but and I commentary a parts don't oranges, bit year. mentioned it's to And you what discussion probably to the the do of I And for they just think from customer of think down then again, -- the beginning What from in largest a kind know business their business. the the there know is you for do you -- own XX%, think of outlook you again, speak for just

X% down least yes, they're invariability I dynamics. align but like in some presumably, driving a X%. between of the their you that businesses impacted come don't versus experience What you by think or know is that same I perfectly, OEMs? to of the the And lot do at think

that. how beyond curious Just

things right? have destocking, it's we gone -- have obviously, levels that know deep. had -- channel like up from of parts I been as customers think we Generally, there's have returns We've all and our

Yes.

of see. to dynamics it's X the think constraints I important because through would very note than supply different previously you cycle, this really what

some to constraints, our So demand was customers strong. the of parts. the with for really And aftermarket get challenging supply it was

frankly, to an on inventory there the on of in focus And resulted of up building overbuild buffer so gaps try was against constraints and to inventory. those focus, addressing a lot a that

demand back some this eased So service. that's has levels to now drop-off that of challenges inventory in have getting been focus, actual those a a driven beyond supply and just appropriate the aftermarket

demand build the meet then same holding see would limited markets that first-fit true see for than that to is up And you and industry resulting we've constraints longer typically have to demand continue happening solid and and supply the in see on you the had first-fit ability that our trucks.

America And should of in will well noticeably Tim, parts for inevitably so markets share the gone then all clearly, up kind purchased North step this correction if I the Cummins. market period, in through from be our on-highway noise just that back has that go

correction but provide in margin this period. influences, was color time extra think not market explain I to that just to long-term just short-term think what trends. I just trying this I a

Our is next question Fisher from with UBS. Steven

pricing into about can that OEM be independent the visibility at to have Just or to guess curious extent you how engine going be? on on-highway is your how dependent point what XXXX. to forward of I customers your this much pricing going pricing

continuing and price were where to with seen cost costs year, new coming -- through. we've we previously, pricing have and focus we're inflationary as product launches favorable Yes, we've we on shared this

but course, expect seeing continue So we'll of slowing we're some to working to in And positive in we're have price/cost continue that. maintain some market, ratio. to to that the of pricing

you'll for share we year, be Right. next dynamic. I'm we'll, when sure happy to give about again, price We'll out ask then us cost. the And

it for applications demand XXXX. broader Sure. management? sort cited a the in Yes. can just you adjustments little outlook? And expand your question or the on maybe then inventory and is engine a there sort demand Is about just talk you construction bit the inventory comments think North setup for construction there on of but America, view think near-term how global can you you of is I of

part demand. doesn't of in construction off the engine seeing think That a North mean shift dramatic in it and markets fleets, So a in America age America, be right? X biggest Europe. necessarily I can North both of China The drop construction we're activity.

pace the Europe like of economic feels it growth generally, think in slowing. I is

I sector has equipment in hasn't construction but financial construction the surprised some. where some yet kick say, we But that In of markets, into China, a tire China, of still next even year, Steve, of the the would bit going fallen picture land come we kind clear figure to out overall trails for next it to it that of given demand some little all down in no yes, the in year. us got further do, health

Our final with Oppenheimer. Kaye Noah question from will be

to coming next indicated You year. some testing around market the XXX and favorable

strongest more that your of the for a product. hearing indicators bit for gains the So where just get extent to there, would demand expectations and little of sort love demand this to you're share a on be driver of could which color the

Yes.

here the North it's launch regulatory next you performing me product end requirements and in say, X will in of a America here customers And We'll testing we'll through well So U.S. version natural next and have we'll offered year, here now only course, heard the of of product as China. have North XXX in that, have America. seeing the gas heavy-duty we that are interested OEMs. in our availability meeting

environmental that where more. with infrastructure, goals adopt for gas natural cost even associated they've will opportunity course, got us some solution start to of as creates that or So benefits operating customers

for some opportunity there's sure. So there

us Any capacity? at in And catch-up terms activity. then on electrolyzer And a you change to you're the love noticed update out there? on of we'd Anything the and quoting the think I get in during where trajectory building can backlog you Okay. quarter?

with growing. Yes. to we've have manufacturing previously Really, U.S. backlog Europe, up the in on about the trajectory continuing here talked same building and capacity

a the Light with the course electrolyzer Power in year. of this are over XX-megawatt commissioning and We of process Florida

ramp we continue described So another delivering and previously. as big this project to year, we that up we're that business

floor the any further Thank are Clulow like Chris at questions closing no over remarks. this time. for you. There back to I'd to hand

that Thank as questions your the you much Thank may available be very you. for Relations interest any And have. and will Investor you further always, team answer calls today. for

concludes This today's conference.

disconnect for may at your You lines time. your participation. you Thank this