00:00Jen, let's start right there with what we were just talking about with Mike McGlone, the degree to which this
00:04is weighing on consumers, weighing on companies as well.
00:06And how have you seen that manifest in the companies with whom you deal?
00:10Well, first, it's great to be here today. As you noted, we announced our first quarter earnings yesterday.
00:16We had a strong quarter revenue, a little bit higher than a quarter ago.
00:20And we were able to raise our guidance for the year because we're really seeing strong demand coming in in
00:25our power generation business, which is really seeing multi-year strength in the role that we play in providing backup
00:31power for data center customers.
00:32We're also seeing a recovery in the truck portion of our business.
00:36Now, that business was very low last year, and we're starting to see customers ordering multi-month increased truck orders
00:43going in, better spot rates.
00:46And so certainly we're watching what's happening with energy prices.
00:49But right now we're seeing that portion of our business really starting to come back.
00:53Jen, you said you've doubled capacity for your 95 liter engine.
00:58Will you do more on that? And when will we know?
01:02Yeah, so we've really been focused over the last several years in our power systems business and investing in new
01:08products and capacity to support the power generation portion of that business.
01:13And we're serving a variety of applications, really mission critical applications, including data centers.
01:19And that part of our business has been really strong.
01:22So as you said, we doubled capacity of our 95 liter engine.
01:26We make that engine, by the way, in our Seymour engine plant, which is just down the road from where
01:31I am here this morning at our headquarters in Columbus, Indiana.
01:34And we've been making other investments in our plants.
01:37The demand for our PowerGen products remains very strong.
01:41And so we are looking at some additional investments that we may be able to make within our footprint that
01:46we have today and excited to share more about that in our upcoming analyst day.
01:51Let's talk a bit more about data centers and the demand that we've seen.
01:54It's certainly been a through line over the course of this morning in our conversations that we've been having about
01:57the big AI providers and the chip companies that buffet them.
02:01Talk a bit about the durability of that demand for data centers.
02:05It's a huge part of your business now.
02:07And I'm curious how you see that growing here in the quarters ahead.
02:11Yeah.
02:12So, you know, it is a meaningful part of our business.
02:14It impacts both the power systems business as well as our distribution business, which is outputting and installing these gensets
02:21for data center customers and really servicing and supporting those customers in the field.
02:27And that part of our business has been growing a lot.
02:30Still, for this year, we're projecting to be about $5 billion in revenue for data center customers, full channel.
02:39And that's out of a Cummins overall revenue that will be in the range of $37 to $38 billion, just
02:44to give you a sense of that.
02:45Bottom line, the demand is really strong there, right?
02:48These customers are investing in data centers around the world.
02:51In particular, we're seeing a lot of demand here in the U.S.
02:54And also across our global business, we're seeing growing demand in China and Asia Pacific, long-term plans that we're
03:02working with customers on as they invest in data centers for the future.
03:05And I think this will continue to be an area of growth for us.
03:08Yeah, your China quarter was particularly strong, Jen.
03:12Can you tell us a little bit more about where exactly you have exposure in China and the difference when
03:19it comes to things like demand drivers, customer mix types of projects versus the U.S.?
03:25Yeah, so interestingly, Cummins celebrated our 50th year in China last year.
03:29So we have a long history in the China market for the market there.
03:33Our strategy around the world is we primarily make and sell in the markets where our business is, where our
03:40customers are.
03:41So we're in the truck market in China.
03:43We're on off-highway in China.
03:44And some of those customers are exporting into other markets around the world.
03:48And then, as I said, PowerGen, the real growth in our business in China came from that dramatic growth we
03:54saw in PowerGeneration and data center customers in China and AsiaPAC that we supply out of our facilities there in
04:03China and some other facilities around the world.
04:06So we're seeing real strength and multi-year growth in the U.S., and now we're starting to see that
04:10strengthen in China as well.
04:12Pull us back here to the U.S., and there are these EPA greenhouse gas regulations that were scheduled to
04:17go into effect next year.
04:18I guess there's some ambiguity surrounding when they'll come into effect.
04:21And I'm curious sort of how you're navigating that level of uncertainty, how you're thinking about those prospective regulations at
04:27this point in time.
04:29Yeah, first, we're really excited about the new products that we're bringing to market.
04:32They're tied to the EPA 27 regulations, but these are our new helm engine platforms that will be market-leading
04:39platforms,
04:40improving efficiency for our customers, and enabling them to use alternate fuels over time.
04:46So we actually have a natural gas version of the 15-liter engine.
04:49That's the one that goes in semi-trucks already available in the market here today.
04:53We'll be launching the diesel version of that next year.
04:56Let me just say our people have been really incredible in a period of time when there's been a lot
05:00of change and uncertainty, including regulations.
05:03And we're making multi-year investments in these products.
05:06We're really staying focused on how do we make sure we meet our customer needs and launch a great product
05:11into the market.
05:12And then we partner closely with the EPA as they're trying to think through how do they want to change
05:16regulations to reduce some of the cost burden to customers
05:20and really try to make sure we get those out as quickly as possible.
05:23It's tough, though, right, when so much is still up in the air.
05:25What are your expectations for regulations that might come into effect through the end of this year?
05:30And how are you changing your strategy to cope with all of this?
05:34Yeah, so we do believe in the EPA, as has said, that they plan to move forward with the NOx
05:39regulation in next year with some modifications.
05:42We believe changes in how they'll manage emissions warranty and emissions useful life expectations that will help to reduce the
05:50cost burden,
05:51the initial cost burden to customers.
05:52So they're finding a nice balance of how they're going to do that.
05:56We've had a lot of conversations.
05:57We did make the decision to delay the launch of one of our platforms, the B-series platform, until the
06:04beginning of 2028.
06:05We've communicated that with the EPA.
06:08And that engine in particular serves a wide variety of applications.
06:12And so with this late uncertainty, really making sure we have a chance to work with all of these different
06:17customers
06:17and different applications and have a robust integration and launch is important to us.
06:22And so we're excited about the new product and really just looking forward to the finalization of the rules and
06:28what we believe is coming.
06:29Jen, we're looking at this anticipated recovery of the North American trucking market.
06:33And I'm curious, as you, I'm sure, look ahead to that with great enthusiasm, what risks are out there?
06:38What could derail the move toward that that a lot of folks are expecting?
06:43Yeah, I mean, you know, the biggest risk that we've navigated in the last year has really been uncertainty,
06:50regulatory uncertainty, tariff policy changes that have just caused our customers to wait and hold back in orderings.
06:57We do see an increase in spot rates, so their businesses are improving.
07:01We see multi-month increased order rates.
07:04And the fleet out there is aging, right?
07:06They need to buy these newer trucks.
07:08They're going to be more efficient and really help their business.
07:11So them having the cash and the ability to make that investment in new trucks is important.
07:17Uncertainty, you know, as well as potential disruption in supply chain as suppliers try to ramp up to meet that
07:24elevated demand,
07:25you know, in a world where there's disruption happening.
07:27I think those are the greatest risks for us and for everyone.
07:31But, again, we've, you know, we've got a lot of dual sourcing strategy,
07:34a really strong team that's been navigating many challenges over the last few years.
07:39So I'm really confident that we'll be able to meet the demand that our customers have.
07:43What about labor availability and heightened material costs, Jen?
07:48Is that having an impact?
07:50Yeah, we're in the process of adding some shifts back into our plans to support increased demand.
07:56So in Rocky Mountain, North Carolina, where we make that medium-duty engine plant,
08:00we're adding a third shift right now, really working to try to make sure that we can bring people back
08:06in.
08:06And part of our strategy is really to work with the communities to try to make sure we've got a
08:10pipeline of talent
08:11and make Cummins an attractive place for people to work.
08:14So we're managing through that.
08:16You know, we're managing through tariffs and potential inflation costs
08:21and just working to make sure that we run our business as efficiently and effectively as possible.
08:26And, you know, in some cases with tariffs, we've had to pass some of that pricing on to our customers.
08:31But overall, the products are performing well,
08:34and our customers are very pleased with how we're navigating all of this.
08:37And we're managing through theå»ºè¨ that takes place for people to work with because of the sustainable
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