Cummins Inc. · NYSE:CMI
Cummins — Q4 2023 Earnings Presentation
61 slides from Cummins's earnings presentation, Feb 6, 2024
Slide 1: Fourth Quarter 2023 Earnings Teleconference
Fourth Quarter 2023 Earnings Teleconference February 6, 2024
Slide 2: Contents
CONTENTS 2023 Summary Q4 2023 Summary 2024 Guidance Q4 2023 Supplemental Information Appendix 2
Slide 3: Disclosure Regarding Forward-Looking Statements
Disclosure Regarding Forward-Looking Statements Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, e
Slide 4: 2023 Summary
2023 Summary
Slide 5: 2023 Summary
2023 Summary • Full year revenues of $34.1 billion • GAAP1 Net Income of $735 million and Diluted EPS of $5.15 ◦ Net income of $2.8 billion and Diluted EPS of $19.69 excluding cost related to the agreement to settle with U.S. regulators, cost related to the separation of the Filtration business, and
Slide 6: Selected Financial Data - Full Year
Cummins Inc. Selected Financial Data - Full Year $ MILLIONS 2023 2022 Sales 34,065 28,074 Gross Margin (% of Sales)1 24.3% 24.0% SAR (% of Sales)2 13.9% 13.8% EBITDA3 5,195 3,991 EBITDA (% of Sales)3 15.3% 14.2% Net Income attributable to Cummins Inc.4 2,810 2,317 Net Income (% of Sales)4 8.2% 8.3%
Slide 7: 2023 Net Sales and EBITDA by Segment
2023 Net Sales and EBITDA by Segment Components Engine Distribution Power Accelera Intersegment Total $ MILLIONS Systems Eliminations Year ended December 31, 2023 Net Sales 13,409 11,684 10,249 5,673 354 (7,304) 34,065 Sales growth vs 2022 38% 7% 15% 13% 79% 8% 21% EBITDA1 1,927 1,642 1,209 836 (443
Slide 8: 2023 EBITDA Detail
2023 EBITDA Detail Components Engine Distribution Power Accelera CMI Segment Segment Segment Systems Segment Eliminations $ MILLIONS Segment Reported EBITDA 3,017 1,840 1,630 1,209 836 (443) (2,055) Reported EBITDA included costs related to the agreement to settle (2,036) (2,036) with U.S. regulator
Slide 9: 2023 EPS Detail
2023 EPS Detail EPS Reported EPS $ 5.15 Reported EPS included costs related to the agreement to settle with U.S. $ (13.78) regulators Reported EPS included costs related to $ (0.54) the separation of the Filtration business Reported EPS included costs related to employee voluntary retirement and $ (
Slide 10: Q4 2023 Summary
Q4 2023 Summary
Slide 11: Q4 2023 Summary
Q4 2023 Summary • Fourth quarter revenues of $8.5 billion • GAAP1 Net Loss of $1,431 million and Diluted EPS of $(10.01) ◦ Net income of $592 million and Diluted EPS of $4.14 excluding the cost related to the agreement to settle with U.S. regulators, the cost related to the separation of the Filtrat
Slide 12: Selected Financial Data - Quarter
Cummins Inc. Selected Financial Data - Quarter $ MILLIONS Q4 2023 Q4 2022 Sales 8,543 7,770 Gross Margin (% of Sales)1 23.7% 23.4% SAR (% of Sales)2 14.2% 13.6% EBITDA3 1,233 1,124 EBITDA (% of Sales)3 14.4% 14.5% Net Income attributable to Cummins Inc.4 592 646 Net Income (% of Sales)4 6.9% 8.3% Di
Slide 13: Q4 2023 Net Sales and EBITDA by Segment
Q4 2023 Net Sales and EBITDA by Segment Components Engine Distribution Power Accelera Intersegment Total $ MILLIONS Systems Eliminations Three months ended December 31, 2023 Net Sales 3,191 2,779 2,713 1,429 81 (1,650) 8,543 Sales growth vs 2022 3% 5% 17% 8% 8% (2)% 10% 1 EBITDA 443 365 269 182 (121
Slide 14: Q4 2023 EBITDA Detail
Q4 2023 EBITDA Detail Components Engine Distribution Power Accelera CMI Segment Segment Segment Systems Segment Eliminations $ MILLIONS Segment Reported EBITDA (878) 406 353 269 182 (121) (1,967) Reported EBITDA included costs related to the agreement to settle (2,036) (2,036) with U.S. regulators R
Slide 15: Q4 2023 EPS Detail
Q4 2023 EPS Detail EPS Reported EPS $ (10.01) Reported EPS included costs related to the agreement to settle with U.S. $ (13.76) regulators Reported EPS included costs related to $ (0.17) the separation of the Filtration business Reported EPS included costs related to employee voluntary retirement a
Slide 16: 2024 Guidance
2024 Guidance
Slide 17: Guidance for 2024 Consolidated Results
Guidance for 2024 Consolidated Results ITEM FULL YEAR GUIDANCE Consolidated Revenue Down 2% to 5% Earnings from JVs Down 5% to 15% EBITDA Margin 14.4% to 15.4% Depreciation & Amortization $1,020 to $1,070 M 1 Effective Tax Rate 24.0% Capital Expenditures $1.2 to $1.3 B Global Pension Funding $67 M I
Slide 18: Guidance for 2024 Segment Results
Guidance for 2024 Segment Results ITEM COMPONENTS ENGINE DISTRIBUTION POWER SYSTEMS ACCELERA Consolidated Down 2% to 7% Down 2% to 7% Down 3% to Up 2% Down 3% to Up 2% $450M to $500M Revenue Growth 2024 EBITDA Margins 13.9% to 14.9% 12.5% to 13.5% 11.4% to 12.4% 15.2% to 16.2% ($430M) to ($400M) (%
Slide 19: Key On-Highway Engine Markets - 2024
Key On-Highway Engine Markets - 2024 2024 Market Size KEY MARKET Forecast Vs. 2023 Heavy Duty Truck - North America 245K - 265K units Down 10% to 15% Class 8, Group 2 - Production Medium Duty Truck - North America 140K - 150K units Down 5% to Flat Class 6-7, and Class 8 Group 1 - Production Heavy &
Slide 20: 2024 Guidance
Cummins Inc. 1 2 2024 Guidance Sales Down 2% to 5% EBITDA 14.4% to 15.4% 1 2022 EBITDA excludes $111 million of net cost related to the indefinite suspension of operations in Russia, $81 million of cost related to the separation of the Filtration business, and including $115 million of Meritor acqui
Slide 21: Q4 2023 Supplemental Information
Q4 2023 Supplemental Information
Slide 22: Components Segment Selected Financial Data
Components Segment Selected Financial Data • Sales increased 3% driven by pricing $ MILLIONS Q4 2023 Q4 2022 CHANGE actions and strong demand in the global truck market. Sales 3,191 3,095 3% • The increase in EBITDA margin is primarily due to pricing realization and EBITDA1 443 390 14% improved Meri
Slide 23: Engine Segment Selected Financial Data
Engine Segment Selected Financial Data • Sales increased 5% driven by $ MILLIONS Q4 2023 Q4 2022 CHANGE pricing actions and strong demand in the global truck Sales 2,779 2,638 5% market. • EBITDA margin decreased as a EBITDA1 365 362 1% result of lower aftermarket demand and higher EBITDA1 13.1% 13.
Slide 24: Engine Segment - Sales by Market
Engine Segment - Sales by Market • On-highway revenue increase $ MILLIONS Q4 2023 Q4 2022 CHANGE driven by strong demand in North American truck market Heavy-Duty Truck 1,052 966 9% and reduced supply chain Medium-Duty Truck & 894 869 3% constraints for Light-Duty Bus Automotive versus Q4 2022. Ligh
Slide 25: Distribution Segment Selected Financial Data
Distribution Segment Selected Financial Data • Sales increased 17% driven by strong $ MILLIONS Q4 2023 Q4 2022 CHANGE demand for power generation products. Sales 2,713 2,320 17% • EBITDA margin decreased primarily EBITDA 269 256 5% as a result of higher compensation costs. EBITDA 9.9% 11.0% (% of Sa
Slide 26: Power Systems Segment Selected Financial Data
Power Systems Segment Selected Financial Data • Sales increased 8% due to stronger $ MILLIONS Q4 2023 Q4 2022 CHANGE global demand for power generation products, partly offset by lower industrial revenues. Sales 1,429 1,321 8% • EBITDA margin decreased as a result EBITDA 182 185 (2)% of lower afterm
Slide 27: Accelera Segment Selected Financial Data
Accelera Segment Selected Financial Data • Sales increased due to higher demand for battery electric systems $ MILLIONS Q4 2023 Q4 2022 CHANGE and the addition of the Siemens Commercial Vehicle business. Sales 81 75 8% • EBITDA losses were $121 million as we continue to invest in the EBITDA (121) (9
Slide 28: Joint Venture Income - Full Year
Joint Venture Income - Full Year $ MILLIONS 2023 2022 Components 97 71 Engine1 251 191 Distribution 97 77 Power Systems 53 43 Accelera (15) (2) Total JV Income 483 380 1 2022 JV Income excludes $28 million of impairment and $3 million of royalty charges due to the indefinite suspension of operations
Slide 29: Joint Venture Income - Quarter
Joint Venture Income - Quarter $ MILLIONS Q4 2023 Q4 2022 Components 26 17 Engine 53 33 Distribution 27 20 Power Systems 11 12 Accelera (4) 6 Total JV Income 113 88 29
Slide 30: Cash Flow - Quarter
Cash Flow - Quarter $ MILLIONS Q4 2023 Q4 2022 Operating Cash Flow 1,459 817 Capital Expenditures 519 463 Working Capital Measure 7,000 6,553 Working Capital Measure 20.5% 21.1% (% of Net Sales) Total Debt to Capital % 40.3% 44.1% Net Debt to Capital % 23.8% 29.6% 30
Slide 31: Appendix
Appendix
Slide 32: Cummins Inc. - 2023 Revenue by Segment
Cummins Inc. • Strong product portfolio and 2023 Revenue by Segment global partners • Macro growth trends play to Cummins' strengths • Disciplined investment for growth • Demonstrated technology leadership 2023 Results Sales: $34.1 billion EBITDA1: $5.2 billion EBITDA%1: 15.3% 1 Excluding $2.036 bil
Slide 33: Cummins Inc. - Revenue by Marketing Territory
Cummins Inc. • Capitalizing on global 2023 Revenue by Marketing Territory emissions regulations • Strong geographic diversification and leadership across multiple end-markets • Global distribution network with presence in approximately 190 countries and territories 33
Slide 34: Cummins - Joint Venture Sales Unconsolidated
Cummins - Joint Venture Sales Unconsolidated 2023 Revenue * Rest of world 34
Slide 35: Components Segment - Overview
Components Segment - Overview • Leading supplier of axles, brakes, 2023 Revenue by Business and aftertreatment products for commercial vehicle applications • Largest worldwide supplier of turbochargers from 3.8L to 25L for commercial applications • World's leading supplier of filtration, coolant and
Slide 36: Components Segment - Sales Mix
Components Segment - Sales Mix 2023 Revenue $13.4 billion 36
Slide 37: Components Segment - Historical Performance
Components Segment - Historical Performance 1 2 2024 Guidance Sales Down 2% to 7% EBITDA 13.9% to 14.9% 1 2022 EBITDA excludes $28 million of cost related to the separation of the Filtration business, $4 million of net cost related to the indefinite suspension of operations in Russia, and including
Slide 38: Components Segment - Joint Venture Sales Unconsolidated
Components Segment - Joint Venture Sales Unconsolidated 2023 Revenue 38
Slide 39: Engine Segment - Overview
Engine Segment - Overview • Diesel and natural gas engines from 2023 Revenue by Product 2.8L to 15L and 48 hp to 715 hp • Long-term engine supply agreements with key customers to stabilize pricing and to jointly engineer better integrated vehicles to market • Leading market share in multiple end-mar
Slide 40: Engine Segment - Sales Mix
Engine Segment - Sales Mix 2023 Revenue $11.7 billion 40
Slide 41: Engine Segment - Historical Performance
Engine Segment - Historical Performance 1 1 2 2024 Guidance Sales Down 2% to 7% EBITDA 12.5% to 13.5% 1 2022 EBITDA excluding $33 million of net cost related to the indefinite suspension of operations in Russia 2 2023 EBITDA excluding $12 million of cost related to employee voluntary retirement and
Slide 42: Engine Segment - Joint Venture Sales Unconsolidated
Engine Segment - Joint Venture Sales Unconsolidated 2023 Revenue 42
Slide 43: Distribution Segment - Overview
Distribution Segment - Overview • Provide aftermarket support and 2023 Revenue by Product increase solution-based revenue • Increasing network capabilities in emerging markets to capture profitable growth 2023 Results Sales: $10.2 billion EBITDA: $1.2 billion EBITDA%: 11.8% 43
Slide 44: Distribution Segment - Sales Mix
Distribution Segment - Sales Mix • Key enabler for Cummins growth • Benefiting from increased population of products in the field 2023 Revenue $10.2 billion 44
Slide 45: Distribution Segment - Historical Performance
Distribution Segment - Historical Performance 1 1 2024 Guidance Sales Down 3% to Up 2% EBITDA 11.4% to 12.4% 1 2022 EBITDA excludes $55 million of cost related to the indefinite suspension of operations in Russia. 45
Slide 46: Distribution Segment - Joint Venture Sales Unconsolidated
Distribution Segment - Joint Venture Sales Unconsolidated 2023 Revenue * Rest of World 46
Slide 47: Power Systems Segment - Overview
Power Systems Segment - Overview • Global provider of power generation 2023 Revenue by Product systems, components and services from 2kW to 3.5 Megawatts (MW) • Leading supplier of alternators from 7.5kVA to 11,200kVA • Leading market share in multiple geographies 2023 Results Sales: $5.7 billion EB
Slide 48: Power Systems Segment - Sales Mix
Power Systems Segment - Sales Mix 2023 Revenue $5.7 billion 48
Slide 49: Power Systems Segment - Historical Performance
Power Systems Segment - Historical Performance 1 1 2024 Guidance Sales Down 3% to Up 2% EBITDA 15.2% to 16.2% 1 2022 EBITDA excludes $19 million of net cost related to the indefinite suspension of operations in Russia. 49
Slide 50: Power Systems Segment - Joint Venture Sales Unconsolidated
Power Systems Segment - Joint Venture Sales Unconsolidated 2023 Revenue 50
Slide 51: Emerging Market Sales - India
Emerging Market Sales - India1 • Present in India for over 50 years • Market leadership • Strong OEM relationships • Expanding our markets 51 1 Consolidated & JV sales with eliminations
Slide 52: Emerging Market Sales - China
Emerging Market Sales - China1 • Present in China for over 40 years • Broad product portfolio for On and Off Highway • Strong OEM partners • Growth from new products and tightening emission standards 1 Consolidated & JV sales with eliminations 52
Slide 53: Non-GAAP Reconciliation - EBITDA
Non-GAAP Reconciliation - EBITDA Three Months Ended In Millions 31-Dec-23 31-Dec-22 Net (loss) income attributable to Cummins Inc. $ (1,431) $ 631 Net (loss) income attributable to noncontrolling interests 38 13 Consolidated net income (1,393) 644 Income tax expense 163 134 Income before taxes (1,23
Slide 54: Non-GAAP Reconciliation - EBITDA (LTM)
Non-GAAP Reconciliation - EBITDA (LTM) Last Twelve Months Ended In Millions 31-Dec-23 31-Dec-22 Net income attributable to Cummins Inc. $ 735 $ 2,151 Net income attributable to noncontrolling interests 105 32 Consolidated net income 840 2,183 Income tax expense 786 636 Income before taxes 1,626 2,81
Slide 55: Non-GAAP Reconciliation - Working Capital
Non-GAAP Reconciliation - Working Capital Three Months Ended In Millions 31-Dec-23 31-Dec-22 Accounts and notes receivable, net $ 5,583 $ 5,202 Inventories 5,677 5,603 Accounts Payable - (principally trade) (4,260) (4,252) Working capital measure $ 7,000 $ 6,553 Annualized Working capital measure (%
Slide 56: Non-GAAP Reconciliation - Working Capital
Non-GAAP Reconciliation - Working Capital Years Ended In Millions 31-Dec-23 31-Dec-22 Accounts and notes receivable, net $ 5,583 $ 5,202 Inventories 5,677 5,603 Accounts Payable - (principally trade) (4,260) (4,252) Working capital measure $ 7,000 $ 6,553 Working capital measure (% of Net Sales) 20.
Slide 57: Non-GAAP Reconciliation - Net Assets
Non-GAAP Reconciliation - Net Assets In Millions 31-Dec-23 31-Dec-22 Total Assets $ 32,005 $ 30,299 Less: Deferred debt costs 4 4 Less: Deferred tax assets 1,082 625 Less: Pension and other postretirement benefit adjustments excluded 307 832 from net assets Less: Liabilities deducted in arriving at
Slide 58: Non-GAAP Reconciliation - Invested Capital for ROIC Calculation
Non-GAAP Reconciliation - Invested Capital Used for Return on Invested Capital Calculation In Millions 31-Dec-23 31-Dec-22 Total Equity $ 9,904 $ 9,967 Less: Defined benefit postretirement plans (848) (427) Equity used for return on invested capital calculation 10,752 10,394 Loans payable 280 210 Co
Slide 59: Non-GAAP Reconciliation - NOPAT for ROIC Calculation
Non-GAAP Reconciliation - Net Operating Profit After Taxes Used for Return on Invested Capital Calculation Last Twelve Months Ended In Millions 31-Dec-23 31-Dec-22 Net income attributable to Cummins Inc. $ 735 $ 2,151 Net income attributable to noncontrolling interests 105 32 Consolidated net income
Slide 60: Net Debt to Capital Reconciliation
Net Debt to Capital Reconciliation In Millions 31-Dec-23 31-Dec-22 Total Debt (A) $ 6,696 $ 7,855 Total Equity (B) 9,904 9,967 Total Capital (C) = (A+B) 16,600 17,822 Total Cash, Cash Equivalents & Marketable Securities (D) 2,741 2,573 Net Debt (E) = (A-D) $ 3,955 $ 5,282 Total Debt to Capital % (A/
Slide 61: Thank you for your interest
Thank you for your interest For additional information: Chris Clulow – Vice President of Investor Relations (812) 377-3121 | Investor.Relations@cummins.com www.investor.cummins.com