Cummins Inc.

Greetings, and welcome to the Q3 2025 Cummins Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nick Ahrens, Executive Director of Investor Relations. Thank you, sir. You may begin.

Thank you, Maria. Good morning, everyone, and welcome to our teleconference today to discuss Cummins results for the third quarter of 2025. Participating with me today are Jennifer Rumsey, our chair and chief executive officer, and Mark Smith, our chief financial officer. We will all be available to answer questions at the end of the teleconference. Before we start, please note that some of the information that you will hear or be given today will consist of forward-looking statements within the meaning of the Security Exchange Act of 1934. Such statements express our forecasts, expectations, hopes, beliefs, and intentions on strategies regarding the future. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of risks and uncertainties. More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck in our filings with the Security and Exchange Commission, particularly the risk factors and section of the most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. During the course of this call, we will be discussing certain non-GAAP financial measures, and we will refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website within the investor relations section at Cummins.com. With that out of the way, I will turn you over to our chair and CEO, Jennifer Rumsey, to kick us off.

Thank you, Nick. Good morning, everyone. I'll start with a summary of our third quarter accomplishments and financial results. Then I will discuss our sales and end market trends by region. Finally, I'll provide an update on how we are navigating the evolving trade and policy landscapes, along with our market outlook for the remainder of the year. Mark will then take you through more details of our third quarter financial performance. Before getting into the details of our results, I want to take a moment to highlight a few major accomplishments from the third quarter. In September, we announced a collaboration with Komatsu to develop hybrid powertrains for surface haulage heavy mining equipment. This joint development effort will leverage the breadth and scale of Komatsu's and Cummins' global capabilities to enable the acceleration of optimized hybrid solutions for mining. Retrofit hybrid solutions hold the potential to help mining customers accelerate their decarbonization journey today while lowering the cost of operations of their installed fleet assets. We are excited about this opportunity to bridge current operational needs with future low-carbon goals to support our customers' sustainability efforts. Additionally, our latest 15-liter engine delivered standout results during this quarter's Run on Less Messy Middle event hosted by the North America Council for Freight Efficiency. Three of the 13 participating fleets ran the new X-15N natural gas engine through some of the most demanding duty cycles of the demonstration, showcasing its ability to deliver true heavy-duty performance while unlocking the cost and emissions benefits of natural gas. At the same event, our X15 diesel led in fuel economy and operational efficiency, reinforcing its position as a benchmark for dependable high performance power. These results highlight the growing adoption of common technologies and the tangible value customers are experiencing from our advanced powertrain solutions, all produced here in the US. Now I will comment on the overall company performance for the third quarter of 2025 and cover some of our key markets. Sales for the third quarter were $8.3 billion, a decrease of 2% compared to the third quarter of 2024. Lower sales were primarily driven by weaker North America heavy and medium-duty truck demand, with unit volumes declining 40% from a year ago, which was largely offset by continued strength in our global power generation markets, higher light-duty truck volumes, and favorable pricing. EBITDA was $1.2 billion, or 14.3%, compared to $1.4 billion, or 16.4%, a year ago. Third quarter 2025 results included $240 million of non-cash charges related to our electrolyzer business within the Accelera segment, reflecting lower demand expectations due to reduced U.S. government incentives and slower market development internationally. Excluding those charges, EBITDA was $1.4 billion, or 17.2% of sales, an increase of 80 basis points from a year ago, as the benefits of higher power generation and light-duty truck volume, pricing, operational efficiencies, and lower compensation expenses more than offset declines in North American truck volumes and the unfavorable impact from tariffs. We did increase the proportion of tariff costs recovered through pricing and other mitigation actions in the third quarter compared to the second quarter. However, the magnitude of total tariff costs increased from Q2 as expected, and the net impact to Cummins was negative year over year. Our third quarter revenues in North America decreased 4% compared to 2024. Industry production of heavy-duty trucks in the third quarter was 46,000 units, down 34% from 2024 levels, while our heavy-duty unit sales were 16,000, down 38% from a year ago. Industry production of medium-duty trucks was 20,000 units in the third quarter of 2025, a decrease of 51%, while our unit sales were 17,000, down 55% from 2024. We shipped 40,000 engines to Stellantis for use in the RAM pickups in the third quarter of 2025, up 44% from 2024 levels, driven by a ramp-up of model year 25 product, which was launched earlier this year. Revenues for North America power generation equipment increased 27%, driven by continued strength and data center demand. Our international revenues increased by 2% in the third quarter of 2025 compared to a year ago. Third quarter revenues in China, including joint ventures, were $1.7 billion, up 16% from a very weak quarter last year, as stronger unit demand was partially offset by unfavorable product mix and weaker part sales. Industry demand for medium and heavy-duty trucks in China was 311,000 units, an increase of 50% from last year. Our sales in units, including joint ventures, were 41,000, an increase of 35%. The increase in the China market size was primarily due to higher-than-expected domestic demand driven by NS4 scrapping incentives. Industry demand for excavators in China in the third quarter was 54,000 units, an increase of 22% from 2024 levels. Our units sold, including joint ventures, were 9,000, an increase of 18%. The increase in the China market size is primarily driven by domestic rural development and small infrastructure projects, as well as strong export demand. Sales of power generation equipment in China increased 26% in the third quarter due to accelerating data center demand. Third quarter revenues in India, including joint venture, were $713 million, an increase of 3% from a year ago. as stronger demand across markets was partially offset by depreciation of the rupee against the dollar. Industry truck production increased 6% from 2024, while our shipments increased 8%, driven primarily by domestic demand recovery, as well as a pre-buy in advance of the potential goods and service tax rate changes. Power generation revenues increased 41% in the third quarter, driven by strong data center demand. To summarize, we achieved strong results led by record performance in our power systems and distribution segments, which were offset by sharp declines in the North America heavy and medium-duty truck demand, which negatively impacted our engine and components businesses. We expect the near-term weakness in North America on-highway truck markets to persist at least through the end of this year. Across all North America on-highway applications, We anticipate unit shipments declining approximately 15% from third quarter levels, with most of the reduction expected in light and heavy duty trucks. This reflects some normalization in light duty trucks after strong Q3 ramp up in the new model production, along with fewer production days in the quarter and continued weakness in heavy duty trucks. While we believe Q4 on highway engine production could mark the bottom of this cycle, the pace of recovery in these markets will depend on broader economic sentiment and the clarity of trade and regulatory policies. While near-term challenges remain in our shorter cycle markets, we continue to see strong demand for power generation equipment beyond this year. The global trade and policy landscapes remain dynamic, presenting ongoing challenges across our industry. As anticipated, tariff costs increased in the third quarter. We are nearing full recovery for those tariffs announced prior to the third quarter and are currently assessing any incremental impacts from the more recent announcements, including the medium and heavy duty vehicle section 232 proclamation. We believe overall we are well positioned to support our customers and keep the U.S. economy moving with our long established strategy of making products in the U.S. for the U.S. market. Rising geopolitical tensions could also pose risks to semiconductor supply and other products that utilize rare earth minerals, potentially impacting our supply chain and broader industry production. So far this year, we have not experienced significant disruptions to our production, and we are actively monitoring this evolving situation and taking steps to mitigate risk where we can. The reduction of government incentives in the U.S. to support the adoption of green hydrogen, along with slower than expected market development in some international markets, has contributed to significantly lower demand for our electrolyzer products. As a result, we are undergoing a strategic review of our electrolyzer business to assess the best path forward, and there may be further charges as we respond to a very weak demand outlook. 2025 has presented significant challenges for our industry, as I've outlined, requiring us to focus even more on cost containment and risk mitigation than we had anticipated at the start of the year. Our experienced leadership team and dedicated employees have worked tirelessly to navigate these dynamics and also capitalize on the growing demand for power generation equipment and significantly improve company performance cycle over cycle. Looking ahead, we are hopeful that global trade policy will stabilize and that the administration's review of the 2027 EPA regulations will conclude in the coming months. This clarity will be critical for our industry and will support our plan to reinstate guidance for 2026 in February. Now, let me turn it over to Mark.