Cummins Reports Third Quarter 2023 Results

November 2, 2023

• Third quarter revenues of $8.4 billion; GAAP¹Net Income of $656 million
• EBITDA in the third quarter was 14.6 percent of sales; Diluted EPS of $4.59
• Third quarter results include $26 million, or $0.14 per diluted share, of costs related to the separation of Atmus Filtration Technologies Inc.
• Third quarter net cash provided by operating activities was a record $1.5 billion
• The company is raising its full year 2023 revenue guidance to be up 18 to 21 percent; an increase from previous guidance of up 15 to 20 percent
• EBITDA is now expected to be in the range of 15.2 to 15.4 percent; narrowing the range of the previous guidance of 15.0 to 15.7 percent

COLUMBUS, IND., November 02, 2023— Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2023.

Third quarter revenues of $8.4 billion increased 15 percent from the same quarter in 2022. Sales in North America increased 16 percent and international revenues increased 13 percent due to the addition of Meritor and strong demand across most global markets. The third quarter of 2022 included two months of consolidated operations for Meritor following the completion of the acquisition on August 3, 2022.

“We delivered solid profitability and record operating cash flow in the third quarter,” said Jennifer Rumsey, Chair and CEO. “While full year revenues are at the high end of our expectations, we are seeing signs of moderating demand in some markets and are taking steps to reduce costs and position the company for success in 2024. I am deeply appreciative of our Cummins employees, who continue to innovate for our customers and demonstrate the flexibility required to meet global demand.”

Net income attributable to Cummins in the third quarter was $656 million, or $4.59 per diluted share compared to $400 million, or $2.82 per diluted share in 2022. Results included costs associated with the separation of Atmus of $26 million, or $0.14 per diluted share, in the third quarter of 2023, and $16 million in the third quarter of 2022. The third quarter of 2022 also included $77 million of acquisition, integration and inventory valuation adjustments related to Meritor. The tax rate in the third quarter was 21.4 percent including $5 million, or $0.03 per diluted share, of favorable discrete tax items, compared to $57 million of unfavorable discrete tax items a year ago.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter were $1.2 billion, or 14.6 percent of sales, compared to $884 million, or 12.1 percent of sales, a year ago. EBITDA for the third quarter of 2023 included the costs related to the separation of Atmus and the third quarter of 2022 EBITDA included costs related to the separation of Atmus and costs related to the acquisition and integration of Meritor as noted above. The third quarter of 2022 also included a one-time employee recognition bonus with a cost impact of $56 million.

Operating cash flow for the third quarter of 2023 was a record inflow of $1.5 billion, compared to $382 million in the third quarter of 2022, as we continue to focus on working capital management within the business.

2023 Outlook:

Based on its current forecast, Cummins is raising its full year 2023 revenue guidance to be up 18 to 21 percent due to strong demand across most markets, especially North America. EBITDA is expected to be in the range of 15.2 to 15.4 percent of sales, narrowing the range of the previous guidance of 15.0 to 15.7 percent of sales.

The outlook above assumes the inclusion of Atmus for the entirety of 2023, but excludes any costs or benefits associated with the planned separation of Atmus. Our forecast also excludes the impact of broader cost reduction activities that are expected in the fourth quarter. Within the Components Segment, Cummins expects revenues of the Meritor business for 2023 to be between $4.7 billion to $4.9 billion, consistent with prior guidance. EBITDA is expected to be in the range of 10.5 to 11.0 percent of sales, narrowing the range of the previous guidance of 10.3 to 11.0 percent.

The company plans to continue to generate strong operating cash flow and returns for shareholders and is committed to our long-term strategic goal of returning 50 percent of operating cash flow back to shareholders. In the near term, we will focus on reinvesting for profitable growth, increasing dividends and reducing debt.

“2023 will be another record year for revenue growth, however we are seeing some signs of slowing activity and are expecting lower demand in the fourth quarter. Our leadership team is experienced in managing through periods of economic uncertainty and will continue to make the decisions that ensure we drive cost improvements and maintain a strong financial position. We’ve announced several major partnerships this quarter as we continue to advance our Destination Zero strategy and remain committed to investing in future growth,” said Rumsey.

Recent Highlights:

• Accelera™ by Cummins, Daimler Trucks & Buses, PACCAR and EVE Energy announced in September a joint venture to accelerate and localize battery cell production and the battery supply chain in the United States. The planned joint venture will manufacture battery cells for electric commercial vehicles and industrial applications. Total investment by the partners is expected to be in the range of $2-3 billion for the 21-gigawatt hour (GWh) factory with production expected to begin in 2027.
• On October 2^ndCummins completed its acquisition of two Faurecia commercial vehicle manufacturing plants and their related activities, one in Columbus, Indiana (U.S.) and one in Roermond, Netherlands. The acquisition provides an opportunity for the Cummins Emission Solutions business to ensure continued access to the technology and facilities it needs to meet current and future demand for low-emissions products and to ensure continuity for both the employees and customers of the acquired manufacturing facilities.
• The company announced several collaborations that further enable our customers to achieve their decarbonization goals. During the third quarter, Freightliner announced they are partnering with Cummins to offer the new Cummins X15N natural gas engine in its heavy-duty Freightliner Cascadia trucks. Also, Cummins Inc. and Knight Transportation, Inc. announced that the industry’s largest full truckload company has successfully tested Cummins’ new X15N engine in Southern California, using renewable natural gas to realize reductions in nitrous oxides and greenhouse gas without compromising performance. The X15N, which will launch in North America in 2024, is the first natural gas engine to be designed specifically for heavy-duty and on-highway truck applications.
• Cummins received several prestigious honors during the quarter, including earning the number four spot on Forbes’ sixth annual ranking of America’s Best Employers for Women, up from last year’s ranking at number 26. Also, Cummins was named Employer of the Year by Diesel Progress, named a Best Place to Work for Disability Inclusion for the third year in a row, and received a 2023 Energy Management Insight Award from the Clean Energy Ministerial.
• Cummins increased its quarterly common stock cash dividend from $1.57 to $1.68 per share. The company has increased the quarterly dividend to shareholders for 14 consecutive years.

¹ Generally Accepted Accounting Principles in the U.S.

Third quarter 2023 detail (all comparisons to same period in 2022):

Components Segment

• Sales – $3.2 billion, up 20 percent
• Segment EBITDA – $441 million, or 13.6 percent of sales, which includes $20 million of costs related to the separation of Atmus compared to $297 million, or 11.0 percent of sales in the prior year, which included $10 million of costs related to the separation of Atmus. The third quarter of 2022 also included $77 million of acquisition, integration and inventory valuation adjustments related to Meritor.
• Revenues in North America increased by 21 percent and international sales increased by 19 percent due to an additional month of Meritor operations and increased global demand.

Engine Segment

• Sales – $2.9 billion, up 5 percent
• Segment EBITDA – $395 million, or 13.5 percent of sales, compared to $362 million or 13.0 percent of sales
• On-highway revenues increased 8 percent driven by strong demand in the North American truck market and pricing actions.
• Sales increased 5 percent in North America and grew 7 percent in international markets due to an increase in global demand.

Distribution Segment

• Sales – $2.5 billion, up 13 percent
• Segment EBITDA – $306 million, or 12.1 percent of sales, compared to $225 million, or 10.0 percent of sales
• Revenues in North America increased 14 percent and international sales increased by 11 percent.
• Higher revenues were driven by increased demand for whole goods, especially power generation products, and pricing actions.

Power Systems Segment

• Sales – $1.4 billion, up 7 percent
• Segment EBITDA – $234 million, or 16.2 percent of sales, compared to $193 million, or 14.3 percent of sales
• Power generation revenues increased 15 percent driven by increased global demand and pricing actions. Industrial revenues decreased 2 percent due to lower mining aftermarket parts demand.

Accelera Segment

• Sales – $103 million, up 106 percent
• Segment EBITDA loss – $114 million
• Revenues increased due to higher demand for battery electric systems, increased electrolyzer installations, and the additions of the Siemens Commercial Vehicle business and electric powertrain portion of the Meritor business.
• Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles are contributing to EBITDA losses. The company continues to make investments to support our customers through the energy transition and deliver future profitable growth.

About Cummins Inc.

Cummins Inc., a global power leader, is a corporation of complementary business segments that design, manufacture, distribute and service a broad portfolio of power solutions. The company’s products range from diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, electric powertrains, hydrogen production and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 73,600 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves its customers online, through a network of company-owned and independent distributor locations, and through thousands of dealer locations worldwide and earned about $2.2 billion on sales of $28.1 billion in 2022. See how Cummins is powering a world that’s always on by accessing news releases and more information at https://www.cummins.com/always-on.