Caterpillar, Inc.

Welcome to the third quarter 2026 Caterpillar Earnings Conference call. Please be advised that today's conference is being recorded. All lines have been placed on mute to prevent any background noise. Following the speaker's remarks, we will have a question and answer session. If you would like to ask a question, please press star then one on your telephone keypad. To withdraw your question, please press star then one again. I would now like to hand the conference over to your speaker today, Alex Kapper. Thank you. Please go ahead.

Thank you, Audra. Good morning, everyone, and welcome to Caterpillar's third quarter of 2026 earnings call. I'm Alex Kapper, Vice President of Investor Relations. Joining me today are Joe Creed, Chairman and CEO, Kyle Epley, Chief Financial Officer, Stephanie Boffman, Senior Vice President of the Global Finance Services Division, and Ryan Coleman, Senior Director of IR. During our call, we'll be discussing third quarter earnings release we issued earlier today. You can find our slides, the news release, and a webcast recap at investors.caterpillar.com under Events and Presentations. The content of this call is protected by U.S. and international copyright law. Any rebroadcast, retransmission, reproduction, or distribution of all or part of this content without Caterpillar's prior written permission is prohibited. Moving to slide two. During our call today, we'll make forward-looking statements which are subject to risks and uncertainties. will also make assumptions that could cause our actual results to be different than the information we're sharing with you on this call. Please refer to our recent SEC filings and the forward-looking statements reminder in the news release for details on factors that individually or in aggregate could cause our actual results to vary materially from our forecast. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. On today's call, we'll also refer to non-GAAP numbers. For any reconciliation of any non-GAAP numbers to the appropriate U.S. GAAP numbers, please see the appendix of the earnings call slides. For today's agenda, Joe will begin by sharing his perspectives about our results, and he'll highlight key initiatives across our segments. Then he'll discuss our full year outlook and insights about our end markets. Kyle will provide a detailed overview of results and share key assumptions looking forward. We'll conclude by taking your questions. Now let's advance to slide three and turn the call over to Joe Creed.

All right. Good morning and thanks, Alex. I appreciate everyone joining us today. Our third quarter results reflect the durability of our end markets with our highest sales quarter ever, strong order rates, and a record backlog. Our team continues to execute our strategic priorities in a dynamic environment, positioning us for a strong year. Sales and revenues were $20.7 billion, up 17% versus the prior year. We delivered adjusted profit per share of $7.20, an increase of 45% versus last year. Strong order rates across all three of our primary segments drove backlog to a record $78 billion. That's an increase of approximately $38 billion, or 96% from the third quarter last year, and marks the fourth consecutive quarter of sequential backlog growth in all three of our primary segments. The quarter demonstrated the team's ability to execute in a high-growth environment. Specifically, our power and energy team continued to increase production of large reciprocating engines and turbines while simultaneously expanding capacity to meet demand. The team is effectively managing the operational challenges that come with this rapid growth. Bringing additional capacity online is still the top pacing factor for growth in power and energy, so working diligently to execute our plans and meet our customers' needs. As I mentioned, sales and revenues were $20.7 billion, and they were in line with our expectations. The increase from the prior year was primarily driven by strong growth in sales volume and favorable price realization in all three of our primary segments. Third quarter adjusted operating profit margin was 20.6%. Excluding IEPA tariff recoveries, adjusted operating profit margin was in line with our expectations. In the third quarter, we generated MP&E free cash flow of $3.8 billion and deployed $2 billion to shareholders through share repurchases and dividends. Now I'll review third quarter retail statistics. In power and energy, sales to users grew a robust 36%. Power generation grew 75%, driven by continued very strong demand for turbines and large reciprocating engines used in data center applications. Sales users in oil and gas increased 5% and were driven by turbines and turbine-related services. Industrial sales users were down due to softness in the EME region. Now for construction industries. We have one of the broadest ranges of products, technology, and services to support customers, whether they prefer to own, lease, or rent equipment. Combined with healthy construction activity, our unique position has allowed us to outpace the industry throughout the year. In the third quarter, total sales to users increased 20%, marking the seventh consecutive quarter of year-over-year growth. In North America, sales to users grew a robust 27%, in line with expectations. Dealer rental revenue in North America continued to grow, driving increased investment in their equipment fleets.