Cummins Reports Strong Second Quarter 2024 Results

• Record second quarter revenues of $8.8 billion; GAAP¹ Net Income of $726 million
• EBITDA in the second quarter was 15.3% of sales; Diluted EPS of $5.26
• Full year revenues are expected to range from down 3% to flat; an improvement from prior guidance of down 2% to 5%.
• EBITDA is now expected to be in the range of 15.0% to 15.5%; an increase from previous guidance of 14.5% to 15.5%.

Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2024.

“We achieved record quarterly sales and solid profitability in the second quarter, led by significant improvement in our Power Systems business,” said Jennifer Rumsey, Chair and CEO of Cummins. “As we shared during our Analyst Day in May, our Destination Zero strategy is the right strategy for growing our business and meeting our customers’ needs today and in the future. We continue to deliver innovative technologies for our customers, execute on our financial commitments, and strengthen our position in key markets. I want to thank our talented employees for their continued efforts to drive business results and make Cummins more competitive across the globe.”

Second quarter revenues of $8.8 billion increased 2% from the same quarter in 2023. Sales in North America increased 4% while international revenues decreased 2%.

Net income attributable to Cummins in the second quarter was $726 million, or $5.26 per diluted share, compared to $720 million, or $5.05 per diluted share, in 2023. The second quarter of 2023 included costs related to the separation of Atmus of $23 million, or $0.13 per diluted share. The tax rate in the second quarter was 23.0% including $9 million, or $0.07 per diluted share, of favorable discrete tax items.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $1.3 billion, or 15.3% of sales, compared to $1.3 billion, or 15.1% of sales, a year ago. EBITDA for the second quarter of 2023 included the costs related to the separation of Atmus noted above.

2024 Outlook:

Based on its current forecast, Cummins is raising its full-year 2024 revenue guidance to be down 3% to flat, due to stronger than expected demand across several markets, especially in North America on-highway and power generation. EBITDA is expected to be in the range of 15.0% to 15.5%, raising the midpoint and narrowing the range of the previous guidance of 14.5% to 15.5%.

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

“We have raised our expectations on revenue and profitability for 2024 due to continued demand for Cummins’ products and services. We still expect slowing demand in the North America heavy-duty truck market in the second half of the year,” said Rumsey. “Despite the lower outlook for the second half, Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders.”

Second Quarter 2024 Highlights:

• Cummins announced an increase in the quarterly common stock cash dividend from $1.68 to $1.82 per share. The company has increased the quarterly dividend to shareholders for 15 consecutive years.

• Accelera™ by Cummins, Daimler Trucks & Buses and PACCAR completed the formation of their joint venture, now known as Amplify Cell Technologies, to localize battery cell production and the battery supply chain in the United States. This strategic collaboration will advance zero-emissions technology for electric commercial vehicles and industrial applications. Amplify began construction of a 21-gigawatt hour (GWh) factory in Marshall County, Miss., with potential for further expansion as demand grows. The factory is expected to create more than 2,000 U.S. manufacturing jobs and is targeting the start of production in 2027.

• Cummins and Isuzu announced the launch of a new 6.7-liter engine designed for use in Isuzu’s new medium-duty truck lineup. The “Isuzu DB6A” will power on-highway truck applications built for the Japanese market and will be available for the Asia Pacific markets and other global markets later this year. Cummins also announced plans to launch a battery electric powertrain for Isuzu’s F-series in North America. Availability of the medium-duty truck is expected in 2026 and will include Accelera’s next generation lithium iron phosphate (LFP) battery technology.

• Cummins hosted its biennial Analyst Day and shared plans to raise its long-term financial expectations, relative to its prior Analyst Day, and deliver increasing returns to shareholders.

• For the third consecutive year, Morgan Stanley Capital International (MSCI) awarded Cummins a AAA rating – the highest in the industry – for the ability to manage the most significant environmental, social and governance risks and opportunities relative to peers.

• In July, Accelera was awarded $75 million for zero-emissions manufacturing from the Department of Energy to convert approximately 360,000 sq. ft. of existing manufacturing space at our Columbus (Indiana) Engine Plant for zero-emissions components and electric powertrain systems. The $75 million grant is the largest federal grant ever awarded solely to Cummins and is part of the appropriations related to the Inflation Reduction Act.

¹ Generally Accepted Accounting Principles in the U.S.

Second quarter 2024 detail (all comparisons to same period in 2023):

Components Segment

• Sales - $3.0 billion, down 13%
• Segment EBITDA - $406 million, or 13.6% of sales compared to $486 million, or 14.2% of sales, which included the Atmus business and $18 million of costs related to the separation of Atmus
• Revenues in North America decreased by 10% and international sales decreased by 17% primarily due to the separation of Atmus and lower demand in China and Europe.

Engine Segment

• Sales - $3.2 billion, up 5%
• Segment EBITDA - $445 million, or 14.1% of sales, compared to $425 million, or 14.2% of sales
• Revenues increased 7% in North America and increased 2% in international markets due to strong demand in the North American medium-duty truck market and pricing actions.

Distribution Segment

• Sales - $2.8 billion, up 9%
• Segment EBITDA - $314 million, or 11.1% of sales, compared to $299 million, or 11.5% of sales
• Revenues in North America increased 6% and international sales increased by 16% driven by increased demand for power generation products and pricing actions.

Power Systems Segment

• Sales - $1.6 billion, up 9%
• Segment EBITDA - $301 million, or 18.9% of sales, compared to $201 million, or 13.8% of sales
• Power generation revenues increased 16% driven by increased global demand, particularly for the data center market. Industrial revenues increased 2% primarily due to strong mining demand more than offsetting weaker demand in oil and gas markets.

Accelera Segment

• Sales - $111 million, up 31%
• Segment EBITDA loss - $117 million
• Revenues increased due to increased electrolyzer installations.
• 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.

About Cummins Inc.

Cummins Inc., a global power solutions leader, is comprised of five business segments – Components, Engine, Distribution, Power Systems and Accelera by Cummins – supported by our global manufacturing and extensive service and support network, skilled workforce and vast technological expertise. Cummins is committed to its Destination Zero strategy, which is grounded in the company’s commitment to sustainability and helping its customers successfully navigate the energy transition with its broad portfolio of products. The products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including, aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, hydrogen production technologies and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 75,500 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 $735 million on sales of $34.1 billion in 2023. See how Cummins is powering a world that's always on by accessing news releases and more information at https://www.cummins.com/.

Forward-looking disclosure statement

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, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward-looking statements include, without limitation, statements relating to our plans and expectations for our revenues, EBITDA and the Settlement Agreements to resolve regulatory proceedings regarding our emissions certification and compliance process for certain engines primarily used in pick-up truck applications in the U.S. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: any adverse consequences resulting from entering into the Settlement Agreements, including required additional mitigation projects, adverse reputational impacts and potential resulting legal actions; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world; evolving environmental and climate change legislation and regulatory initiatives; changes in international, national and regional trade laws, regulations and policies; changes in taxation; global legal and ethical compliance costs and risks; future bans or limitations on the use of diesel-powered products; failure to successfully integrate and / or failure to fully realize all of the anticipated benefits of the acquisition of Meritor, Inc.; raw material, transportation and labor price fluctuations and supply shortages; aligning our capacity and production with our demand; the actions of, and income from, joint ventures and other investees that we do not directly control; large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, or change in control; product recalls; variability in material and commodity costs; the development of new technologies that reduce demand for our current products and services; lower than expected acceptance of new or existing products or services; product liability claims; our sales mix of products; climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; increasing interest rates; challenging markets for talent and ability to attract, develop and retain key personnel; exposure to potential security breaches or other disruptions to our information technology environment and data security; political, economic and other risks from operations in numerous countries including political, economic and social uncertainty and the evolving globalization of our business; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; failure to meet environmental, social and governance (ESG) expectations or standards, or achieve our ESG goals; labor relations or work stoppages; foreign currency exchange rate changes; the performance of our pension plan assets and volatility of discount rates; the price and availability of energy; continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and other risks detailed from time to time in our SEC filings, including particularly in the Risk Factors section of our 2023 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.

Presentation of Non-GAAP Financial Information

EBITDA is a non-GAAP measure used in this release and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release, except for forward-looking measures of EBITDA where a reconciliation to the corresponding GAAP measures is not available due to the variability, complexity and limited visibility of the non-cash items that are excluded from the non-GAAP outlook measure. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBITDA is a measure used internally to assess the performance of the operating units.

Webcast information

Cummins management will host a teleconference to discuss these results today at 10 a.m. EDT. This teleconference will be webcast and available on the Investor Relations section of the Cummins website at www.cummins.com. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.

CUMMINS INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

REORGANIZATION WITHIN CERTAIN SEGMENTS

Beginning in the second quarter of 2024, we realigned certain businesses within our Components segment to be consistent with how our segment manager now monitors performance. We reorganized the businesses to combine the engine components and software and electronics businesses into the newly formed components and software business. We also renamed our axles and brakes business to “drivetrain and braking systems.” We began reporting results for these changes within our Components segment effective April 1, 2024, and reflected these changes in the historical periods presented. The changes had no impact on our consolidated results. The adjusted prior period balances for the newly combined engine components and software business are shown below:

Components Segment

External sales in 2024, 2023 and 2022 for our Components segment by business, as adjusted, were as follows:

Consolidated sales in 2024, 2023, and 2022 for our Components segment by business, as adjusted, are presented in the segment sales data section below.

CUMMINS INC. AND SUBSIDIARIES

SELECT FOOTNOTE DATA

(Unaudited)

EQUITY, ROYALTY AND INTEREST INCOME FROM INVESTEES

Equity, royalty and interest income from investees included in our Condensed Consolidated Statements of Net Income for the reporting periods was as follows:

INCOME TAXES

Our effective tax rate for 2024 is expected to approximate 24.0 percent, excluding any discrete items that may arise.

Our effective tax rates for the three and six month periods ended June 30, 2024, were 23.0 percent and 13.1 percent, respectively. Our effective tax rates for the three and six months ended June 30, 2023, were 22.3 percent and 22.0 percent, respectively.

The three months ended June 30, 2024, contained favorable discrete tax items of $9 million, or $0.07 per share, primarily due to share-based compensation tax benefits.

The six months ended June 30, 2024, contained favorable discrete tax items primarily due to the $1.3 billion non-taxable gain on the Atmus split-off. Other discrete tax items were $30 million, or $0.21 per share, primarily due to adjustments related to audit settlements and share-based compensation benefits.

The three months ended June 30, 2023, contained net unfavorable discrete tax items of $3 million, or $0.02 per share.

The six months ended June 30, 2023, contained net discrete tax items of zero, as the result of offsetting amounts for the first two quarters, primarily due to share-based compensation tax benefits and other discrete items.

CUMMINS INC. AND SUBSIDIARIES

FINANCIAL MEASURES THAT SUPPLEMENT GAAP

(Unaudited)

Reconciliation of Non GAAP measures - Earnings before interest, income taxes, depreciation and amortization and noncontrolling interests (EBITDA)

We believe EBITDA is a useful measure of our operating performance as it assists investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. We believe EBITDA excluding special items is a useful measure of our operating performance without regard to the impact of the gain recognized and costs associated with the divestiture of Atmus and restructuring actions. This statement excludes forward looking measures of EBITDA where a reconciliation to the corresponding accounting principles generally accepted in the United States (GAAP) measures is not available due to the variability, complexity and limited visibility of non-cash items that are excluded from the non-GAAP outlook measure.

EBITDA is not in accordance with, or an alternative for, GAAP and may not be consistent with measures used by other companies. It should be considered supplemental data; however, the amounts included in the EBITDA calculation are derived from amounts included in the Condensed Consolidated Statements of Net Income. Below is a reconciliation of net income attributable to Cummins Inc. to EBITDA for each of the applicable periods: