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Yahoo
15-05-2025
- Business
- Yahoo
Q1 2025 M-Tron Industries Inc Earnings Call
Linda Biles; EVP of Finance; M-Tron Industries Inc Cameron Pforr; Interim CEO; M-Tron Industries Inc Anja Soderstrom; Analyst; Sidoti & Company Operator Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the M-tron earnings call for Q1 2025. (Operator Instructions)I would now like to turn the call over to Linda Biles, M-tron's EVP of Finance. Please go ahead. Linda Biles Good morning, everyone. Thank you for joining our 2025 M-tron Q1 earnings call. Please note that this call will be recorded, and we will make the recording available on our website, shortly after the call. Yesterday afternoon, we released our earnings for the first fiscal quarter of getting underway, we are required to advise you that the following discussion should be taken in conjunction with our most recent financial statements and notes is contained within our 2024 10-K, which was filed on March 27, 2025, with the discussion may contain forward-looking statements with the meaning of 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements contain known and unknown risks and uncertainties, which are detailed in our SEC the company believes that the forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there are no assurances that the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking company undertakes no obligation to publicly update or revise any forward-looking statement, whether as the result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future that, I will now turn the call over to our Interim CEO, Cameron Pforr. Cameron Pforr Yeah. Good morning, everyone, and thank you, Linda. First of all, I want to thank all of our shareholders and interested parties for attending our first quarter FY25 earnings call and your interest in the company. We're pleased to discuss our strong start to the fiscal 2025 fiscal year and our outlook going forward. As a reminder, M-tron designs and manufactures highly engineered RF solutions, including electronic components and subassemblies used to control the frequency and timing of signals and electronic a global company, the three manufacturing sites in the United States and India. The company's primary markets include defense and aerospace, commercial avionics, industrials, and space. We are pleased to report that the company continued to perform well with continued strength in M-tron sales and good financial performance for Q1 fiscal year 2025. Our revenues continue to be driven by defense-related orders and we also saw some growth in the commercial avionics market, something we believe bodes well for the future recovery of that are pleased to see Boeing resolve its labor dispute early in the year and expect orders from the major airframe manufacturers to pick up throughout the year. With consistent operating performance, we have been able to continue to make strategic investments in research and development and continue to increase the market profile of the of that effort was the recent rebranding of the company as M-tron updates to our logo, our website and sales materials as well as the initiation of advertising in some of the leading publications for our sector and also enhanced lead generation activity. We also continue to make investments in our production facilities, and we've seen good initial results in a program that I mentioned, I think, on the last call to deploy greater automation on the factory floor to improve looks like we have gotten through some of the choppiness in the defense market caused by some of the conflicting messaging from the administration on the defense budget. We have, at M-tron have seen no disruption to our business. and expect to continue the company's revenue growth throughout the continuing resolution passed and signed in mid-March 2025, extended government funding through the end of the federal fiscal year and largely preserved the defense spending as it was actually increasing the defense budget by, I guess, a relatively small amount, $6 administration is now proposing increasing the defense budget for this fiscal year by $150 billion through a reconciliation process and also substantially increasing procurement spending in the federal FY 2026 budget. Many of the areas targeted for investment such as next-gen aircraft, shipbuilding, loitering and precision guided munitions, border security and the Golden Dome anti-aircraft, anti-missile defense, all require a significant amount of RF subsystems and components, highlighting the continued growing need for M-tron importance of filters and oscillators has only increased as the electromagnets spectrum has become a more contested part of the battle space. And communications explaining systems and commanders and combatant remain subject to electronic countermeasures, such as jamming and interference. We believe that we are well positioned to continue to perform well with the anticipated changes in military procurement Linda, would you mind giving our audience the highlights of our fiscal year Q1 performance? Linda Biles Yeah. Total revenues for first quarter were $12.7 million, a 13.8% increase over the $11.2 million of revenue in the same period last year. The revenue increase in the period primarily due to strong defense program product and solution shipments. Gross margins for the first quarter of 2025 were 42.5%, a 20 basis point decrease over the 42.7% gross margins in Q1 at ' decrease is primarily due to additional manufacturing costs with the initial production runs of several new products. In addition, we saw the initial impact this quarter of duly initiated federal tariffs on imports of foreign sourced materials and partially finished income was $1.6 million or $0.56 per diluted share in the first quarter of 2025 compared with $1.5 million or $0.53 per diluted share in the first quarter of increase in revenues discussed above was partially offset by higher manufacturing cost of sales consistent with the growth in revenues and the introduction of new products as well as higher engineering, selling and administrative expenses related to continued research and development investments higher sales commissions from an increase in revenues and an increase in administrative expenses consistent with the overall growth of the EBITDA was $2.5 million in the first quarter of 2025 compared with $2.3 million in the first quarter of 2024. The increase was primarily due to higher revenues resulting in higher income. Backlog was $55.5 million as of March 31, 2025, compared to $47.2 million as of December 31, 2024, and $46.1 million as of March 31, increase in backlog reflects several large defense and avionics orders received during the quarter and the continued broad demand for our products. In early February '25, for example, we publicly announced one large order supporting shipboard systems for over $10 million that was expected to have been received in fiscal year 2024. I'd now like to turn the call back over to Cameron. Cameron Pforr Yeah. Thank you, Linda. So in March 2025, M-tron saw the initial impact of the recently announced federal tariffs on the import of goods and materials from outside the United States. And while M-tron is a United States-based manufacturer with a great degree of vertical integration, something we pride ourselves on. We do import some materials from Japan, China, South Korea and a very small amount from we also performed some finishing work at our facility in Noida, India. It's difficult to predict the long-term impact of this trade policy on our financial performance as it changes regularly. We are working with many of our defense customers on acting parts of the federal acquisition regulations which potentially exempt materials received for defense production from entry addition, we continue, as always, to analyze our supply chain in order to make sure that we have redundancy of suppliers where possible and can source from reliable suppliers at the best price as possible. To date, we have seen no impact from tariffs on demand for our products. Also, I wanted to highlight the recent distribution of warrants. On April 25, 2025, the company distributed a dividend of warrants, the stockholders of record as of March 10, warrants are listed on the New York Stock -- NYSE American Exchange under the ticker, MPTIWS. The warrants may be listed on certain financial websites under the ticker MPTIWT or a similar nomenclature. Pursuant to the warrant agreement, the warrants contain the following terms, which I'll summarize, and we're happy to answer questions about this five warrants are exercisable to purchase one share of common stock, the exercise price is $47.50 per share. The warrants are exercisable at the earlier of 30 days prior to the maturity date of April 25, 2028. Or on the date when the average volume weighted average price of the VWAP or M-tron's common stock is greater than or equal to $52 per share for the prior 30 consecutive trading days. we call this the accelerated trigger or early warrants expire at the earlier of April 25, 2028, that they run to full maturity or 30 calendar days following M-tron public announcement of the date of the accelerated trigger being triggered. And warrant holders exercising their full allotment of warrants comply to subscribe for any and all shares of common stock issuable pursuant to any outstanding but unexercised is called the oversubscription feature, and it's included on your warrant agreement. Further information on the warrants is available in a fact, found on our Intron investor website, which is Just to highlight some of the strategic activity, we do continue to execute on our strategy of moving into more program business, which now makes up the vast majority of our aerospace and defense are involved, for example, in over 40 programs of record, it's a very significant amount. Defense and aerospace has been an amazing market in the past several years, and it does remain one with plenty of room for us to grow. We seek to maintain close relationships with our customers and be their first line resource for them as they plan upgrades to current systems or compete for the design of new systems to meet government program the same can be said in our other sectors like avionics and industrials. We have also ramped up our pursuit of complementary acquisitions and strategic partnership opportunities in both the RF component and subsystem space, as well as some tangential subsystem and solution companies that focus on the same are focused on finding deals that will be accretive for shareholders and help both companies strengthen their financial performance and customer base. Strengthening the US defense industrial base is one of the goals of the administration's trade policy and current budget focus. They've actually dedicated budget dollars to the strengthening of the defense industrial base in the anticipated increase in this year's defense a US-based advanced manufacturing capabilities support our joint forces is more important than ever before and we thank our employees for their dedication to their jobs and the mission. We also thank our dedicated customers to their continued business and the trust they place an M-tron and our people.M-tron plays its critical role in defense of our nation, providing US sourced, highly engineered components for many US and allied military programs. Before I open the floor to questions, I wanted to mention that we will be holding our annual meeting on June 10, 2025, at 10:00 AM in the morning at the Harvard Club in New York City. The meeting will be open to all shareholders of the company's common addition, we will hold an investor presentation and question-and-answer session before the annual meeting and information for both of these events will be posted on our investor website. For those interested in attending in person, you'll need to get a QR code from our IR site to pass through the Harvard Club can you please open the lines and allow the first question? Operator (Operator Instructions)Anja Soderstrom, Sidoti. Anja Soderstrom So in terms of your gross margins, that was a bit muted due to the ramping of new programs. How do -- how is that going to sort of develop? And with those new large contract wins, are we going to see that being a ramp for a longer period of time? Or will it pick up pretty quickly? Cameron Pforr Yeah. Good question, Anja. And thank you for joining. So the gross margins were impacted by really three factors. One was just product mix. We had less products being shipped for two of our long-term missile programs, which have very -- relatively high margins. And that is expected to return very shortly. That part of the mix was going to increase in Q2 throughout the rest of the year due to some of the orders we received in thing I mentioned earlier was that we did ship some new products. And whenever you're working on new products, the first couple of runs are a little bit less efficient than when all the have been worked out in the process. And you're running at a higher yield. So we ship some new space products, which require rigorous testing and they've been successful, but the first couple of runs of those take more labor than you would hope to use also, we shipped a new type of oscillator in the quarter that's used in EW and RADAR, which I think is great for the long-term prospects of the company. And I think that those yields will improve over time. So I do expect the yields to improve and the margins to improve throughout the year. We also did see some impact to the had a little bit less than $100,000 of tariff charges in March, and it's kind of difficult to predict how much we should anticipate receiving there for the rest of the year. And we hope that a lot of the progress that's been made over the past couple of weeks, reducing the tariffs will have a positive impact there. So I do anticipate this to go up in the rest half of the For those new programs that you shipped in the space and the oscillators, are they higher than the average?Yes, they will be a very strong margin product that they're just early developed. Anja Soderstrom Okay. And then in terms of the tariffs, you're not able to pass that on at all or? Cameron Pforr Yeah. We do have the capability on our contracts to pass that on. The reality is that in the market, there are a lot of mistakes being made in terms of how the tariffs are applied and then also the whole thought of passing on tariffs to vendors is relatively new, and I do anticipate a fair amount of pushback, although I think ultimately, many customers will pay for their we're really hoping that we can work through the tariff situation in the short term. But we do have in our contracts, the ability to pass on taxes and tariffs and so I think over time, this will work out, but there will be some disruption in the industry in terms of cost for the short term. Anja Soderstrom And then also, these large contracts you've been winning and congrats on those. Are they also higher-margin programs then? Cameron Pforr They are. And they were actually some of the programs that I mentioned. We didn't ship a lot over Q1, which did impact our margins. Return to that... Anja Soderstrom And then what does the pipeline look like for other large deals like that? Cameron Pforr We actually have a pretty strong pipeline for the year. So we don't really talk about bookings per se and give numbers on that, but we've had two very strong quarters of bookings and we do have a lot of large programs that we think we'll be announcing over the next quarter or both missile programs as well as some in the avionics space. And then in the back half of the year, we're working on some really significant drone bookings and programs, which I think will be exciting for the company. Operator At this time, there are no further questions. I would now like to turn the call back over to Cameron Pforr for closing remarks. Please go ahead. Cameron Pforr Okay. Well, thank you, operator. I appreciate you helping us manage the call. and I'm going to like to thank everybody for participating today. And if there are no further questions, please have a great you want to follow up after the call after you kind of read the transcripts or you've had a chance to kind of go through the earnings release in more detail, feel free to contact us at ir@ and we will respond in kind. So thank you again. Operator Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.
Yahoo
12-05-2025
- Business
- Yahoo
Legacy Housing Corporation Reports First Quarter 2025 Financial Results
BEDFORD, Texas, May 12, 2025 (GLOBE NEWSWIRE) -- Legacy Housing Corporation ('Legacy' or the 'Company,' NASDAQ: LEGH) today announced its financial results for the first quarter ended March 31, 2025. Financial Highlights Net revenue for the first quarter of 2025 was $35.7 million, a decrease of 17.5% from the first quarter of 2024. Income from operations for the first quarter of 2025 was $11.6 million, a decrease of 30.8% from the first quarter of 2024. Net income for the first quarter of 2025 was $10.3 million, a decrease of 32.1% from the first quarter of 2024. Basic earnings per share for the first quarter of 2025 was $0.43, a decrease of 30.6% from the first quarter of 2024. Book value per share1 for the first quarter of 2025 was $20.87, an increase of 13.1% from the first quarter of 2024. Duncan Bates, President and Chief Executive Officer, stated: 'Inventory finance sales were ahead of our expectations, but first quarter results were negatively impacted by lower-than-expected shipments to communities during the quarter. Recently, we simplified our product offering, introduced a new financing solution for community owners, and added industry veterans to our team in key manufacturing and retail positions. During the first quarter, Legacy's book value topped $500 million for the first time in the Company's history. I am excited about the changes and remain optimistic about the year.' This shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Company's securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. Conference Call Information Management will host a conference call to discuss the results at 10:00 AM Central Time on Tuesday, May 13, 2025. To access the conference call, please pre-register using this link. Registrants will receive confirmation with dial-in details. About Legacy Housing Corporation Legacy builds, sells, and finances manufactured homes and "tiny houses" that are distributed through a network of independent retailers and company-owned stores. The Company also sells directly to manufactured housing communities. Legacy is one of the largest producers of manufactured homes in the United States. With current operations focused primarily in the southern United States, we offer our customers an array of quality homes ranging in size from approximately 395 to 2,667 square feet consisting of 1 to 5 bedrooms, with 1 to 3 1/2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000. Forward Looking Statements This press release contains forward-looking statements within the meaning of the Securities and Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. As a result, our actual results or performance may differ materially from anticipated results or performance. Legacy undertakes no obligation to update any such forward-looking statements after the date hereof, except as required by law. Investors should not place any reliance on any such forward-looking statements. Investor Inquiries:Duncan Bates, (817) 799-4837duncanbates@ Media Inquiries:Kira Hovancik, (817) 799-4905pr@ 1 Book value per share is a non-GAAP financial measure, and we define book value per share as total stockholders' equity divided by basic weighted-average common shares in to access your portfolio
Associated Press
10-02-2025
- Business
- Associated Press
RETRANSMISSION: Fast Finance Pay Corp Announces Fiscal Year 2024 Results
NEW YORK CITY, NY / ACCESS Newswire / February 10, 2025 / Fast Finance Pay Corp. (OTC PINK:FFPPD) today announced its financial results for the fiscal year ended December 31, 2024. Ole Jensen, CEO, President and Chairman of Fast Finance Pay Corp. stated, 'All of our business units were successful throughout the entire year despite the challenging market environment due to high interest rates and uncertainty in some sectors. We saw continued increases in revenues, as well as gross and net profits. Looking ahead, we continue to focus on executing and navigating difficult macroeconomic conditions and believe our past investments strengthened our operations and will optimize the business for the near future.' Results for the Fiscal Year Ended December 31, 2024 Revenues for the twelve months ended December 31, 2024 were $10.4 million, an increase of 130% from $4.5 million in the same period of 2023. Gross profit was $4.5 million, compared to $1.8 million in the same period of 2023. Net profit was $568 thousand, as compared to $244 thousand in the same period of 2023. 'We feel we are better positioned than we have been in the past to realize significant positive gains and long-term growth and profitability. We recently announced a reverse stock split that strengthened our capital structure which we believe will allow us to uplist onto a major stock exchange and continue to expand our business and deliver top and bottom-line results that will increase shareholder value,' concluded Mr. Jensen. About Fast Finance Pay Corp. Fast Finance Pay Corp. is a gateway provider and nascent Fintech, Fast Finance Pay Corp offers a flexible payment platform to assist e-merchants with their online ventures. It allows e-merchants to process all popular payment methods with just one partner, instead of installing a multitude of 'payment plugins'. Services contains the mobile 'free-mailer' e-mail and end-to-end secure, encrypted, instant messaging service. is a free email provider with news, comparison portal and numerous other free services. With this service, we are building an active user interface that is used to connect people all over the world on one platform. With we released a completely free and absolutely secure Messenger-Service on the market: private and secure messaging with a military level of encryption. Via end-to-end-encryption based on the blockchain-technology, provides secure communication with chat, video calls, and cloud storage. For additional information, visit Forward-looking statements This news release may contain forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 (as amended) and section 21e of the Securities and Exchange Act of 1934 (as amended). Those statements include the intent, belief or current expectations of the Company and its management team. Forward-looking statements are projections of events, revenues, income, future economics, research, development, reformulation, product performance or management's plans and objectives for future operations. Some or all the events or results anticipated by these forward-looking statements may not occur. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements because of various factors. Accomplishing the strategy described herein is significantly dependent upon numerous factors, many that are not in management's control.
Associated Press
10-02-2025
- Business
- Associated Press
Fast Finance Pay Corp Announces Fiscal Year 2024 Results
NEW YORK CITY, NY / ACCESS Newswire / February 10, 2025 / Fast Finance Pay Corp. (OTC PINK:FFPP) today announced its financial results for the fiscal year ended December 31, 2024. Ole Jensen, CEO, President and Chairman of Fast Finance Pay Corp. stated, 'All of our business units were successful throughout the entire year despite the challenging market environment due to high interest rates and uncertainty in some sectors. We saw continued increases in revenues, as well as gross and net profits. Looking ahead, we continue to focus on executing and navigating difficult macroeconomic conditions and believe our past investments strengthened our operations and will optimize the business for the near future.' Results for the Fiscal Year Ended December 31, 2024 Revenues for the twelve months ended December 31, 2024 were $10.4 million, an increase of 130% from $4.5 million in the same period of 2023. Gross profit was $4.5 million, compared to $1.8 million in the same period of 2023. Net profit was $568 thousand, as compared to $244 thousand in the same period of 2023. 'We feel we are better positioned than we have been in the past to realize significant positive gains and long-term growth and profitability. We recently announced a reverse stock split that strengthened our capital structure which we believe will allow us to uplist onto a major stock exchange and continue to expand our business and deliver top and bottom-line results that will increase shareholder value,' concluded Mr. Jensen. About Fast Finance Pay Corp. Fast Finance Pay Corp. is a gateway provider and nascent Fintech, Fast Finance Pay Corp offers a flexible payment platform to assist e-merchants with their online ventures. It allows e-merchants to process all popular payment methods with just one partner, instead of installing a multitude of 'payment plugins'. Services contains the mobile 'free-mailer' e-mail and end-to-end secure, encrypted, instant messaging service. is a free email provider with news, comparison portal and numerous other free services. With this service, we are building an active user interface that is used to connect people all over the world on one platform. With we released a completely free and absolutely secure Messenger-Service on the market: private and secure messaging with a military level of encryption. Via end-to-end-encryption based on the blockchain-technology, provides secure communication with chat, video calls, and cloud storage. For additional information, visit Forward-looking statements This news release may contain forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 (as amended) and section 21e of the Securities and Exchange Act of 1934 (as amended). Those statements include the intent, belief or current expectations of the Company and its management team. Forward-looking statements are projections of events, revenues, income, future economics, research, development, reformulation, product performance or management's plans and objectives for future operations. Some or all the events or results anticipated by these forward-looking statements may not occur. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements because of various factors. Accomplishing the strategy described herein is significantly dependent upon numerous factors, many that are not in management's control.
Yahoo
05-02-2025
- Business
- Yahoo
Q4 2024 Cummins Inc Earnings Call
Christopher Clulow; Vice President - Investor Relations; Cummins Inc Jennifer Rumsey; Chairman of the Board, President, Chief Executive Officer; Cummins Inc Mark Smith; Chief Financial Officer, Vice President; Cummins Inc Angel Castillo; Analyst; Morgan Stanley & Co. LLC Stephen Volkmann; Analyst; Jefferies Jerry Revich; Analyst; Goldman Sachs & Company, Inc. Tim Thein; Analyst; Raymond James Kyle Menges; Analyst; Citi Jamie Cook; Analyst; Truist Securities David Raso; Analyst; Evercore ISI Avi Jaroslawicz; Analyst; UBS Rob Wertheimer; Analyst; Melius Research LLC Tami Zakaria; Analyst; JPMorgan Operator Greetings, and welcome to the Cummins Inc., Q4 2024 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. Joining us today are Chair and CEO, Jennifer Rumsey; Vice President and CFO, Mark Smith; and Chris Clulow, Vice President, Investor Relations. It's now my pleasure to introduce your host, Chris Clulow. Please go ahead, sir. Christopher Clulow Thank you, Kevin. Good morning, everyone, and welcome to our teleconference today to discuss Cummins' results for the fourth quarter and full year of 2024. 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 Securities and 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 and our filings with the Securities and Exchange Commission, particularly the Risk Factors section of our 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 With that out of the way, I'll turn you over to our Chair and CEO, Jennifer Rumsey, to start us off. Jennifer Rumsey Thank you, Chris. Good morning. I'll start with a summary of 2024, discuss our fourth quarter and full year results and finish with a discussion of our outlook for 2025. Mark will then take you through more details of our fourth quarter and full year financial performance and our forecast for this year. As I reflect back on 2024, I am pleased to share that we delivered strong financial results with records in several parts of the business while also making significant progress in the execution of our Destination Zero strategy. I am incredibly proud of what Cummins and our employees accomplished for our stakeholders, and I feel energized about the opportunities ahead for us as we continue to demonstrate our relentless focus on advancing our strategy and executing our financial commitments as we lead the energy transition. It continues to be clear that our multi-solution Destination Zero strategy that leverages advancements and solutions from both our core and Accelera by Cummins businesses will continue to position us to succeed. We demonstrated this in 2024 as we further strengthened our position through evolving our portfolio and expanding and establishing relationships with new and long-standing key stakeholders and partners. Most notably for our core business in 2024, we introduced the Cummins HELM engine platform. Applied across Cummins' legendary B, X10, and X15 Series engine portfolios, the HELM platforms provide customers with the option to choose the fuel type, either advanced diesel or alternate fuels like natural gas and hydrogen, that best suits their business needs and offers the power and performance customers expect while also reducing emissions. Cummins began full production of the X15N natural gas engine at the Jamestown engine plant earlier this year. And we are actively engaged with some of North America's largest and most demanding heavy-duty fleets as they look to reduce their carbon footprint. Additionally, in our core business, we introduced 4 new generator sets to the award-winning Centum series, 2 each powered by Cummins' QSK50 and QSK78 engines. In response to high market demand, these new models have been engineered specifically for the most critical applications such as data centers. In order to further raise our capacity to meet rising power generation demand, we also intend to invest $200 million across our U.S., England, and India manufacturing sites. As you will see in our full year financial performance details and 2025 guidance, we are excited about the continued impressive performance and growth potential for our Power Systems business. Cummins also successfully completed the separation of our Filtration business, Atmus Filtration Technologies. Cummins will continue its focus on advancing innovative power solutions while Atmus is now well positioned to pursue its own plans for profitable growth. The separation of Atmus resulted in the tax-free exchange of shares, which reduced Cummins' shares outstanding by approximately $5.6 million in the first quarter. In our Accelera business, we completed the formation of our joint venture, Amplify Cell Technologies with Daimler Trucks & Buses, PACCAR, and EVE Energy to localize battery cell production and the battery cell supply chain in the United States. This strategic collaboration will advance zero emissions technology for electric commercial vehicles and industrial applications. Amplify began construction this year of a 21-gigawatt hour factory in Mississippi with potential for future expansion as demand grows and is targeting start of production in 2027. Lastly, as we navigate this long and messy transition for our customers, we remain committed to pacing and refocusing our investments on the most promising paths as the adoption of zero-emission solutions slows in some regions around the world. As you can see in our fourth quarter results, we recorded charges related to the reorganization of our Accelera business segment as we underwent a strategic review to streamline the business while also ensuring we are set up for long-term success. We remain committed to Accelera and its mission, and this business continues to play an important role in our Destination Zero strategy. Now I will comment on overall company performance for the fourth quarter of 2024 and cover some of our key markets. Demand for our products remained strong across many of our key markets and regions, offsetting the softening in the North America heavy-duty truck market. Revenues for the quarter totaled $8.4 billion, a decrease of 1% compared to 2023 as lower North America heavy-duty and pickup truck volumes and the reduction in sales from the separation of Atmus were partially offset by continued high demand in our global power generation markets, stronger aftermarket, and North America medium-duty truck volumes as well as improved pricing. EBITDA was $1 billion or 12.1% compared to a loss of $878 million or negative 10.3% a year ago. Fourth quarter 2024 results included $312 million of charges related to the strategic reorganization of our Accelera business segment. This compares to the fourth quarter 2023 results, which included $2 billion of costs related to the agreement to resolve U.S. regulatory claims, $42 million of costs related to our voluntary retirement and separation programs, and $33 million of costs related to the separation of the Atmus business. Excluding those items, EBITDA was $1.3 billion or 15.8% compared to $1.2 billion or 14.4% a year ago. EBITDA and gross margin dollars improved compared to the fourth quarter of 2023 as the benefits of higher power generation volume, pricing and operational efficiency more than exceeded lower North America truck volumes and the separation of Atmus. 2024 revenues were a record $34.1 billion, essentially flat with 2023 despite the decline in North America heavy-duty truck demand in the second half of the year and reduction of sales from the Atmus separation. EBITDA was a record $6.3 billion or 18.6% of sales compared to $3 billion or 8.9% of sales in 2023. 2024 results include a gain, net of transaction costs and other expenses, of $1.3 billion related to the Atmus divestiture, $312 million of charges related to the Accelera reorganization, and $29 million of first quarter restructuring expenses. This compares to the 2023 results that included $2 billion of costs related to the agreement to resolve U.S. regulatory claims, $100 million of costs related to the separation of Atmus, and $42 million of costs related to the voluntary retirement and separation programs. Excluding those items, EBITDA was a record $5.4 billion or 15.7% of sales for 2024 compared to $5.2 billion or 15.3% of sales for 2023 as the benefits of higher power generation volumes, pricing and operational efficiency more than exceeded lower second half North America truck volumes and the reduction in margin from the Atmus separation. EBITDA dollars were a record in Power Systems, Distribution, and Engine segments. Our Power Systems business, in particular, finished 2024 with a record full year EBITDA of 18.4% of sales, up from 14.7% in 2023. I'm very pleased with the performance across our core business segments, and you will see from our guidance that we are excited to continue to build on this momentum. Now let me provide our overall outlook for 2025 and then comment on individual regions and end markets. We are forecasting total company revenues for 2025 to be down 2% to up 3% compared to 2024, and EBITDA to be 16.2% to 17.2% of sales, up from 15.7% in 2024. While we expect weaker first half demand in our North America on-highway truck markets, we expect many of our markets, particularly power generation to remain strong throughout the year. Industry production for heavy-duty trucks in North America is projected to be 260,000 to 290,000 units in 2025, flat to down 10% year-over-year. We anticipate weaker first half demand. And while we do expect a prebuy in the second half of the year, the uncertainty on the exact timing and extent is driving our wider guidance range. In the medium-duty truck market, we expect the market size to be 140,000 to 155,000 units, down 5% to 15% compared to 2024, primarily driven by weaker-than-expected recent net orders and a depleting backlog. Our engine shipments for pickup trucks in North America are expected to be 130,000 to 140,000 in 2025, flat to up 5% year-over-year. In China, we project total revenue, including joint ventures, to increase 5% in 2025. We are projecting a range of down 5% to up 10% in heavy- and medium-duty truck demand in China. While export demand is expected to decline slightly, we are hopeful that the recent NS4 scrapping policy and other stimulus actions may lead to domestic demand growth. We have not, however, seen a meaningful recovery thus far. While there is still uncertainty around the China truck market for 2025, we expect strength in other markets, particularly power generation, where demand is expected to remain high as data center momentum continues. In India, we project total revenue, including joint venture to increase 10% in 2024, primarily driven by stronger power generation demand. We expect industry demand for trucks to be down 5% to up 5% for the year. For global construction, we expect flat to down 10% year-over-year, primarily driven by weak property investment and shrinking export demand in China. We project our major global high horsepower markets to remain strong in 2025. Revenues in global power generation markets are expected to increase 5% to 15%, driven by continued high demand in the data center market. Sales of mining engines are expected to be down 5% to up 5%. For aftermarket, we expect revenue improvement with a range of flat to an increase of 5% for 2025. In Accelera, we expect full year sales to be $400 million to $450 million compared to $414 million in 2024. In summary, 2024 was a record year for revenues, net income, EBITDA, and earnings per share. In 2025, we anticipate that demand will be slightly weaker in the North America on-highway truck markets, particularly in the first half of the year but offset by continued strength in the power generation market and resiliency in our Distribution business, given our strong aftermarket presence. Despite a relatively flat revenue forecast, we are expecting to improve profitability and cash flow. We remain committed to our multi-solution approach that is proving to be the right strategy for our customers, for the environment, and for the continued growth of Cummins while also returning cash to investors. Now let me turn it over to Mark, who will discuss our financial results in more detail. Mark Smith Thank you, Jen, and good morning, everyone. We delivered strong operational results in the fourth quarter, which resulted in revenue achieving the top end of our prior guidance and EBITDA margins exceeding our projections. 2024 was a record year for revenues, EBITDA, and earnings per share, reflecting the strong demand for our products and the strong hard work of our employees. Now let me go into more details on Q4 and the full year performance. There were some notable non-routine transactions in '24 and 2023, and I'll quantify those and describe our underlying results to give a better understanding of the performance from regular operations. Fourth quarter reported revenues were $8.4 billion, and EBITDA was $1 billion or 12.1% of sales. As Jen mentioned, we underwent a strategic review of our Accelera segment, which resulted in charges of $312 million, of which $305 million were noncash. Excluding this charge, we delivered EBITDA of $1.3 billion or 15.8% of sales. In the fourth quarter of '23, we reported sales of $8.4 billion and an EBITDA loss of $878 million. Excluding the regulatory settlement, Atmus separation costs, and voluntary retirement and separation program costs in Q4 2023, EBITDA was positive $1.2 billion or 14.4%. I know that's a lot to digest. In summary, on an underlying basis, EBITDA improved by 140 basis points on slightly lower sales, excluding those charges I just described. Fourth quarter revenues decreased by 1% from a year ago as organic growth was more than offset by the reduction in sales driven by the separation of Atmus. Sales in North America were flat while international revenues decreased 3%. Foreign currency movements negatively impacted sales by less than 1%. The EBITDA improvement of 140 basis points was primarily due to higher power generation volumes, pricing and operational efficiency, partially offset by lower North America truck volumes and the separation of Atmus. Now let me summarize some of the impacts by line item in the income statement. Gross margin was $2.1 billion or 25.4% of sales compared to $2 billion or 23.7% last year. The improved margins were driven by stronger power generation aftermarket demand, favorable pricing, particularly in Power Systems and Distribution and improved operational efficiency. Selling, administrative, and research expenses were $1.1 billion or 13.6% of sales compared to $1.2 billion or 14.2% last year due to lower research and development costs. Joint venture income of $87 million decreased $26 million primarily driven by lower technology fees from some of our international partnerships and costs incurred in the ramp-up of the Amplify Cell Technology battery joint venture here in the U.S., which was formed in the second quarter of '24. Other income was negative $25 million, a decrease of $75 million from a year ago, primarily driven by mark-to-market losses on investments related to company-owned life insurance. Interest expense was $89 million, a decrease of $3 million from a prior year, driven by lower weighted average interest rates. The all-in effective tax rate in the fourth quarter was 32.8%, principally due to nondeductible costs related to the Accelera reorganization. All in, net earnings for the quarter were $418 million or $3.02 per diluted share, which includes $312 million or $2.14 per diluted share of Accelera reorganization charges. Excluding the Accelera charges, EPS was $5.16 a diluted share. Operating cash flow was an inflow of $1.4 billion, just $37 million lower than the level we saw in the first quarter last year. For the full year 2024, revenues were a record $34.1 billion, slightly above a year ago and reflecting 4% growth if we exclude Atmus from both 2023 and '24. EBITDA in '24 was $6.3 billion or 18.6%. Excluding the gain in costs associated with the separation of Atmus, the Accelera charge in the fourth quarter, and first quarter restructuring expenses, EBITDA in 2024 was $5.4 billion or 15.7%. 2023 EBITDA was $3 billion or $5.2 billion and 15.3% excluding the regulatory settlement, Atmus separation costs, and voluntary retirement and separation programs. The increase in EBITDA percent was primarily driven by higher power generation volumes, pricing and operational efficiencies, more than offsetting the impact of lower North American heavy-duty truck volumes and the reduction in margin from the Atmus separation. All-in net earnings were $3.9 billion or $28.37 per diluted share compared to $735 million or $5.15 per diluted share a year ago. 2024 results included the gain related to the separation of Atmus, net of transaction costs and other expenses of $1.3 billion or $9.28 per diluted share, charges related to Accelera reorganization of $2.12 per diluted share, and first quarter restructuring costs of $0.16 per diluted share. Capital expenditures in 2024 were $1.2 billion, flat compared to 2023 as we continue to invest in the new products and capabilities to drive growth, particularly related to the HELM platforms within our core business in North America. Our long-term goal is to deliver at least 50% of operating cash flow to shareholders. And over the past 5 years, we've returned 54% in the form of share repurchase and dividends even while we absorbed the significant acquisition in the form of Meritor. In 2024, we focused our capital allocation on organic investments, dividend growth, and returning $969 million to shareholders via the cash dividend and debt reduction. We also reduced our shares outstanding by approximately 5.6 million shares from the tax-free Atmus separation share exchange. I will now summarize the 2024 results for the operating segments and provide guidance for 2025. And thankfully for you and for me, I'm going to exclude all those nonroutine items in the following pages, and thanks for staying with me as I work through that. For the Engine segment 2024 revenues were a record $11.7 billion or up $28 million compared to last year. EBITDA was 14.1% of sales, flat compared to a year ago. In 2025, we project revenues for the Engine business will be down 2% to up 3% due to expected weakness in the North American truck market, particularly in the first half of the year, slightly offset by improved demand in pickup and some international markets. 2024 EBITDA is expected to improve with projections in the range of 14.2% to 15.2%. Components segment revenues were $11.7 billion in 2024, 13% lower than the prior year, and EBITDA was 13.8% of sales compared to 14.4% in '23. There were a lot of work done to improve existing operations but that was offset in the year-over-year comparisons due to the separation of Atmus. For 2025, we expect total revenue for the Components business to range from down 5% to flat as 2024 included Atmus in the first quarter through March 18. EBITDA margins are expected to be between 13.8% and 14.8%. In the Distribution segment, revenues increased 11% in '24 compared to 2023 and were a record $11.4 billion. EBITDA was 12.1% compared to 11.8% a year ago, driven by higher power generation volumes and pricing. We expect 2025 distribution revenues to increase 2% to 7% and EBITDA margins to be in the range of 12% to 13%. In the Power Systems segment, revenues were a record $6.4 billion, up 13% over 2023 driven primarily by power generation demand, especially data center applications. EBITDA was 18.4% or 370 basis points higher than 2023, driven by stronger volume, favorable pricing, and a continued focus on operational performance and cost reduction. In 2025, we expect Power Systems revenues to be at 2% to 7% and EBITDA to improve again and be in the range of 19% to 20%. Accelera revenues increased to $414 million in 2024 with a net operating loss of $452 million as we lowered costs in existing operations, partially offset by additional losses in the Amplify cell joint venture as it advances its operations. In 2025, we anticipate revenues to be in the range of $400 million to $450 million and net losses to reduce to $385 million to $415 million as we continue to make targeted investments aligned with market demand whilst reducing cost. We currently project 2025 company revenues to be down 2% to 3%. Company EBITDA margins are projected to be approximately 16.2% to 17.2% compared to an equivalent 15.7% in 2024. Our effective tax rate this year is expected to be 24.5%, excluding any discrete items. Capital investments will be in the range of $1.4 billion to $1.5 billion as we continue to make critical investments to support future growth. To summarize, we delivered record sales and profitability in 2024, including strong results in the second half of the year even as demand in the North American heavy-duty truck market declined. Cash generation has been and will continue to be a focus as we enter 2025, enabling us to continue investing in new products for new and existing markets, returning cash to shareholders, and maintaining a strong balance sheet. Last May, we laid out our updated financial targets through 2030. Our strong performance in 2024 represented encouraging progress towards those targets. And despite a relatively flat revenue forecast and expected weakness in North American heavy-duty truck, we expect to further improve profitability and cash flow in 2025. Thanks for joining us today, and let me turn it back over to Chris. Christopher Clulow Thank you, Mark. (Event Instructions) Operator, we're ready for our first question. Operator (Operator Instructions) Angel Castillo, Morgan Stanley. Angel Castillo Congrats on another strong quarter here. Just wanted to unpack the power generation guide of 5% to 15% a little bit more. Could you just split that out between kind of price and volume? And then maybe just tying into that, I think you mentioned a new investment of $200 million in power gen. Can you just talk about maybe what's entailed in that? I thought, I guess there was already an expansion of doubling capacity so what is kind of the incremental being done? Jennifer Rumsey Yes. So as you said, we're currently in the midst of a $200 million investment across our plants in and Minnesota, U.K., and India to ramp up capacity to meet what is a growing demand for power generation products. And so you're seeing in that guide and expectation that we have been able to take up capacity. We're continuing to look at strategic pricing and where we can bring value to the customer so you've got some price in there as well. But really, it's about capacity ramp-up and continued sales of larger engines. In the power generation and data center market, it's really the 50 to 60 liter, the 78 and the 95 liters so these are large engines as we're able to bring more capacity online in our supply chain and our plants, you see that flowing through in revenue. And we expect that trend to continue over time. And so we're tracking on plan or even slightly ahead of plan to double our capacity by end of this year and looking forward to being able to meet what is a really strong demand from those customers. Angel Castillo That's very helpful. And then maybe as a follow-up, just on separate on the trucks. Can you just give us your latest thoughts on EPA27? It sounds like you're still assuming some prebuy in the second half. But just given, I guess, what we've seen from the administration so far, any thoughts on the likelihood of any kind of challenges to the EPA27 rule? Jennifer Rumsey Yes, our current view is that we expect the EPA27 regulations will stay in place. Many companies, including us, have been investing over multiple years in those products to bring those products to market, and we're looking forward to having a nationwide standard again in 27. And with that, we are still anticipating some -- both economic recovery and prebuy happening in the North America trucking market that helped bring higher revenue in the second half this year and into next year. We do anticipate there'll be more discussion and potential challenge over the greenhouse gas regulations that we see out into the 2030 and beyond time frame. Operator Stephen Volkmann, Jefferies. Stephen Volkmann Maybe starting off, can you just talk a little bit more about the Accelera restructuring? And how have you changed the focus of that business? And what are you doing less of or more of or just some color around that? Jennifer Rumsey Yes, I'll start and then Mark can add if he wants to share more detail. But really, this business has all along been about remaining agile and investing as we see technology advancing and markets starting to move in these zero emissions technologies. And we formed it through a number of acquisitions as well. So what that meant was we had kind of a distributed footprint and investment coming from those different acquisitions, and so we really looked at where we see market moving. We expect that battery electric vehicles will be important in some of our commercial vehicle and industrial applications, and we feel well positioned with the battery cell joint venture and some of the wins that we have with customers as that market develops so we're continuing to invest there. We're continuing to invest but pace investment in electrolyzers as we've seen some slowing in customer demand and uncertainty around incentives there, and then being selective in fuel cells and some of the other technologies where adoption continues to push out. But we think we're well positioned. Frankly, the slower and messier this goes, my view is the better it is strategically for Cummins. And so we're positioning ourselves in the places where we see that market and technology beginning to increase. Stephen Volkmann Okay, good. Sorry, I thought Mark was going to add something. Can I ask... Mark Smith (inaudible) Stephen Volkmann Well, you've been talking a lot as it is. Hopefully, you'll be doing less of that this year on all these adjustments. Can I just follow up -- can I follow up on the HELM platform? Do you have targets relative to the types of unit volumes you might expect either on the nat gas side or on any of the other engine -- sorry, any of the other fuel options that you can use with that platform? Jennifer Rumsey We've got -- the rate of -- the beauty of the HELM platform is it's got that fuel flexibility. And so the reality is we're still going to sell a lot of the diesel version of that, and it will be a higher efficiency version, which means lower CO2 and lower fuel costs for our customers. We've set a goal of getting to 8% on the natural gas version of that. We're starting to see customers adopt. PACCAR has launched it. Daimler Trucks will launch that 15-liter natural gas this year. Fleets are testing it. I was with a big customer last week. They're finishing their field testing. They feel good about the product, and they're looking to start to increase penetration, but it really depends on diesel fuel prices and regulation and customer CO2 goals. And so it's hard to give specific numbers on the rate of natural gas or hydrogen adoption because of that dependency on infrastructure cost and regulation. Operator Jerry Revich, Goldman Sachs. Jerry Revich In Power Systems, you had a really excellent 30% year-over-year growth in revenue per unit in the quarter, so the ramp in the supply base was progressing nicely. I'm wondering if you could just update us on how much more throughput you expect to get out of the supply base in 2025 for those large products. And I appreciate there could be a wide range of outcomes but would love to get your updated views on that. Jennifer Rumsey Well, I think it's important to remember that the revenue growth, in particular, for 2024 was also about launching those new Centum products, so we're seeing new products coming online that serve the market in addition to ramping up capacity. And for this year, it really is focused on continuing to max out our capacity capability that we have when we're making the investment and more capacity across that range of products. And the team has done a really phenomenal job of doing that, improving operating efficiency, working with the supply base to try to get as much out of what we have. But there's some major investments that need to happen by the end of this year to really get to the full doubling of capacity. Mark Smith Unfortunately, Jerry, units are not a great indicator just because the size of the generator set we've been selling is going up. The average selling price has gone up a lot over and above pricing, just the size of the set that we're selling. So the revenue has outgrown the units significant. Jerry Revich Nice problem to have. And separately on the China truck market, as you mentioned in the prepared remarks, there is some optimism in the market about potentially stronger demand. Can you just calibrate us, I believe, including the JV and wholly-owned business, China truck profits are maybe 10% of total company profits at this point. And given we're at the trough of the cycle, is it fair to think about pretty attractive incremental margins if demand does indeed surprise the upside? Mark Smith Yes on the latter. I mean, China in total, maybe on a more normal run rate would be in the range of 15% to 20% of our earnings. And yes, on-highway would typically be more than half of that so you're in the ballpark, Jerry, yes. And there's no massive structural investments going on there in the current year. So if we get more volume, we'd expect to convert that into more profits. There's also just some lumpiness around tech fees and other things. But I think the underlying operational business is well set as it's done in prior cycles when demand improves, we see that. And I think that just reinforces how well the Engine business and Components did in '24. Not just did we have weakening heavy-duty truck in the second half of the year but we had weaker China throughout the year. So hopefully, at some point, confident China is going to turn. We don't have a lot of visibility into that right now. Hopefully, that's another leg to come. Operator Tim Thein, Raymond James. Tim Thein Maybe I'll ask 1 to start on components, Mark. Just as you think about the margin outlook for '25 on kind of flat to down revenues, a pretty nice improvement. I'm wondering how much of that is -- is it maybe a benefit from kind of lapping the Atmus spin or separation? Or is there -- obviously, there's more to it than that. So maybe just a line or 2 in terms of what you're projecting there for Components. Mark Smith I think when you look across the company, we've done a lot on cost reduction. It hasn't been enormous in any given quarter, but we've been working at it really since the fourth quarter of 2023 when we announced voluntary separation package. We did a lot of work internally during 2024 to look at how we weighted the amount of resources we put between lines of business, functions, regional structures. And a lot of this work has paid off in terms of improving our cost structure and focus. And so yes, the Components business is going to benefit from some of that. We're not breaking it out separately but what was formerly known as Meritor, Drivetrain, and Braking Systems business, results have continued to improve their underlying. So I think there are a number of things. We are working incredibly hard on a flattish revenue environment to drive cost and efficiency where we can. Tim Thein Okay. And then Mark, on the Accelera, just in light of the restructuring and given what's -- how the global backdrop is changing or has changed, the expectation to get that business to EBITDA breakeven by '27, is that still in the cards or you're thinking that maybe is a tougher one to hit? Mark Smith Yes. I think overall, relative to our 2030 targets for the total company, we feel like we've had a really good start in 2024 and on track. And we're doing a bit better on the core business and headwinds have come more frequently and more severely to Accelera. So we are committed to significant loss reduction. But right now, we are not on track towards that breakeven, but we do feel we're very much on track for the overall company targets. And that's really the reason why we took more pronounced actions or the Accelera team did in the fourth quarter, recognizing that we're not going to get enormous help from demand here in the near term, Tim. So we're managing what we can and in the context of overall company results, we feel confident, but we are not, right now, on track to get to breakeven as we sit here today. Operator Kyle Menges, Citi. Kyle Menges I was hoping if you could just comment on how you're thinking about R&D spend in 2025 versus 2024, maybe more specifically within Engine and Components. And then just beyond 2025, how you're kind of thinking about that and how we should be thinking. Mark Smith Yes, good question. So I think beyond 2025 is where we should see more momentum to the downside on Engine expense. We did see some improvement through the year in the Engine business. We've got a lot of new product launches, both in Engines and Components in 2025. But after we get through those launches and through 2027, that's definitely part of our margin expansion story in those 2 businesses, but not a dramatic shift this year, some puts and takes between Engines and Components. Kyle Menges That's helpful. And then just could you comment a little bit on how you're thinking about the parts outlook for 2025? Mark Smith Yes, Parts held up pretty well, in fact, pretty a little bit better than expected in the fourth quarter across our businesses, and so we think in the range of flat to up 5%. Probably some pricing baked in there. So yes, growing in line with the economy, I would say, at least on par with the economy with what we know today. Operator Jamie Cook, Truist Securities. Jamie Cook Nice quarter. I guess similar question that Tim asked on, I think it was the Components business. Just the margins mark in Power Systems are very good despite sort of what I would call a muted top line forecast. So is that just pricing in some of the new products? And then I guess, how do you think about margin targets relative to the ones you just gave us, I guess, last year? Is it looking conservative? And then my second question obviously, lots of puts and takes around tariffs and who knows what happens. But are there any changes in your -- how your terms and conditions or contracts with your customers that if we do get into an environment where tariffs and that causes price increases, that we're able to absorb costs or increase price more frequently relative to last time within Engines, I guess? Mark Smith Great. So yes, Power Systems doing well. I think continuing to focus on supply chain efficient output. They did a great job last year so I don't want to sound like we're dissatisfied. Quite the opposite, very impressed, but still think there's more to come on raising volume, raising productivity, and a little bit on pricing Power Systems. So all of those things contribute towards raising the margin guidance for the year and quite a bit above the fourth quarter levels. And I guess if we really had a robust U.S. economy, we could see growth in some of the smaller generator sets. We have high market share in some of the consumer segments that are particularly robust. So I guess that -- we don't see signs of that, but if we want to get on to the bullish side and saw more strength in the U.S. economy, that could be another leg to help. On tariffs, by and large, our strategy is to make most of our products in the market in which they're sold. But of course, we do have a global supply chain and we -- of course, nobody knows exactly what the tariff situation is going to be. But to the extent that we do incur them, then we think it's important that the market feels those and we'll look to pass those on. Let's hope that's not significant for everybody involved. But really, we're just focused on controlling what we can control. And I think, yes, we've got secular tailwinds in Power Systems, but the biggest driver is being able to scale growth effectively and pushing out cost. And then you don't see it on the inside but the work we've done inside to try and simplify our structure, improve the speed of decision-making, all of those things help and have helped kind of raise the bar in 2024. Operator David Raso, Evercore. David Raso I'm trying to better understand the margin expansion in Engines and really, for that matter, of Components. First, the D&A, the growth in the D&A, is that mostly in Engines or Components? It's just the margin improvement is impressive but I'm just wondering it drives it down a little bit because there's more D&A than it is operational, but (inaudible) Mark Smith Well, there is an increase in D&A because that's where we're investing most of the capital in North America, particularly in the Engine business over the last couple of years. David Raso So of the [100] D&A increase, is it [50] Engines, [25] Components? Just some sense so I can get a better sense of the underlying operation. Mark Smith Yes, I mean, it won't be significantly in distribution. Power Systems, whilst we're increasing investment is still modest relative to those 2 segments. And so on an incremental basis, most of it is going to go through Engines and Components, a little bit in corporate, which ends up mostly in Engines and Components, yes. David Raso Okay, that's helpful. And then even with that, it looks like there still is some slight operating, let's say, non-D&A margin improvement in Engines. What's driving that? Is it a little bit of mix? Is it -- I'm just trying to think about maybe the new medium engines you're outperforming the market. How to think about those margins versus heavy? Because it's all wrapped in the idea of trying to figure out where do you think Engine margins are as we sort of move out of '25 and people start to pontificate about earnings power in '26 with the prebuy in the Engine division. Mark Smith Yes, I think those are all really important questions and will be big contributors to the long-term performance. In the near term, I think we'll continue to expect to do well in the aftermarket side, of which the Engine business is our biggest single driver. So that's probably where there's still some pricing opportunity into 2025. And then yes, the engineering starts coming down enormously, but I think we've come down off the peak there, Components probably going up a little bit. But those would be the main drivers. And as you can see, we haven't factored a lot in from China yet so really, it's cost control and aftermarket in the near term. Operator Avi Jaroslawicz, UBS. Avi Jaroslawicz I guess in terms of your guidance for the market outlook for North America heavy-duty trucks this year, it sounds like if, for whatever reason, (inaudible) do materialize this year that you'd expect retail demand may be still to be negative in the second half. So I guess, one, am I interpreting that correctly? And can you just discuss how you're thinking about it? Jennifer Rumsey Yes. I mean, I think if you look at the underlying performance in the heavy-duty market, spot rates dropped early in '23, so truckload carriers have really had challenges now for 2 years, and I think there's a very real chance that we'll see improvement in that over the course of this year, just depending on what the underlying economy and interest rates do. So there's some potential upside in the second half for that in addition to this prebuy phenomenon that we would anticipate would lead to a stronger second half versus first half. The range is quite wide because how high that goes is really dependent on the prebuy and when that starts. Avi Jaroslawicz Got it, okay. And then in terms of medium-duty, just breaking down kind of market share gains versus market growth for 2024. How did those net against each other? And then in terms of your sales guidance for this year within Engines, are we thinking about further share gains this year or not as much? Mark Smith I think really, I think we're talking about following the market in 2025. There's been a long track record of significant market share gains in that market. Our engine is clearly the leader in that market and there were some share gains. But going forwards, it's very much primarily going to be truck in the market, but there can be some modest changes around that from where we are now. Jennifer Rumsey (inaudible) down for the year, reflective of what we've seen in order made in backlog (inaudible) Mark Smith Yes. It's industry -- the industry orders, we will feel that, yes. Jennifer Rumsey From a product perspective, we continue to feel really positive about how our product is performing in the market and our position across medium- and heavy-duty. Operator Rob Wertheimer, Melius Research. Rob Wertheimer I had 2 questions around Power Systems, if I may. And 1 is, as this data center market continues to develop, historically at least, I suppose, selling an engine is one thing and then servicing is another. And if you have backup power, it doesn't get turned on that much and it's not as profitable. But obviously, there's a high uptime, high criticality kind of operations. Do you see any opportunity to change that profit algorithm such that you'll be making more recurring revenue or otherwise on that massive build-out of engines that you're going to do? And then secondly, if I can just wrap it in. You've had excellent results in Power Systems. I'm not sure if all of it's really this surge in data center or maybe the stuff you've touched on a couple of times on the call already, operational improvements. I wonder if you could just expand on how you've made that business better. Jennifer Rumsey Sure. So first on the data center market, so with power generation and data centers, we have engine, gen sets, and then a good portion of that business also flows through the distribution business. So the strong performance you see in the distribution business last year and the outlook is reflecting the strength in power generation as well as aftermarket. But as you noted, they don't, today, run a lot for backup power. So typically, Parts revenue is relatively low as we look at shortage of power availability and how do you meet power demand in the U.S. and around the world. There's a potential for some shift in that. And so strategically, we're considering how we think about our role in that, which was part of the discussion on micro-grids and what we do there today. But today, still very much heavily backup power and because of the high reliability demand for those applications. In terms of the Power Systems performance, we undertook now, 2 years ago, focused effort to really look at operating performance structure, how we made sure we were investing in the right products and getting returns on the investments we were making for our customers and working through some of the supply challenges that have built up through the pandemic and then the rebound in the market after that. And so that really has come together at exactly the time when this data center trend has also happened. And so we really had strong underlying operating structure and performance in the business that we continue to drive improvement in as we're also taking up volumes. And so both of those are contributing to really the remarkable profitability improvement that you've seen in Power Systems. Mark Smith Just to add, Rob, the distribution, of course, adds that extra slice of revenue on data centers. And in fact, it's fundamental to winning and supporting this data center business around the world. I think that's one of the strengths we have and a few others have. And that's why you see that the market demand is concentrated amongst a couple of large engine manufacturers like us because of that service capability. But just to underline what you said, Rob, and your intuition, it would be very wrong to attribute Power Systems improvement just to data centers. That's a journey that's still got legs left but tied -- the performance level has been elevated across that segment, including in the alternator business, which supplies across -- really across that supply chain. So we're incredibly pleased with the way that business has improved. Operator Tami Zakaria, JPMorgan. Tami Zakaria So the distribution segment guide, the 2% to 7%, it seems quite healthy. Given the underlying truck market outlook, are you able to comment on the core distribution outlook versus the power generation-related services? The reason I ask, if power generation demand holds at these levels, it seems like distribution could see another double-digit growth year in 2025. So any comments there would be helpful. Mark Smith Yes. I think you're typically seeing Parts growth maybe slightly above the rate of economic growth. And then in this cycle, you're right, the power generation demand in data centers and in some other applications has really provided that extra leg. So I would say in the short run, yes, power gen will be the main swing factor. I would say that some of the other segments, mining, oil and gas, if we look beyond this year, we'd expect to see more growth in the future. There's not enormous momentum in those businesses, but they're also important end markets for distribution. One of the reasons that we like distribution, it generates a lot of cash. It's less volatile than other parts of the business and have that really strong aftermarket piece, which doesn't get the extraordinary growth rates that underpins the kind of year-to-year level of performance. So yes, distribution is doing well. And hopefully, the global economy strengthens and then all of our businesses will do well. Tami Zakaria Got it. That's very helpful. And then 1 follow-up question on that comment that you expect some prebuy in the back half but the timing is uncertain. I'm curious what prebuy lift is embedded in the current heavy-duty and medium-duty outlook for North America? I'm just trying to understand what the market could look like, let's see, if there is no prebuy. Mark Smith There are so many factors at play but that's one of the factors we believe can help. We're going to start off at a fairly modest level in the first quarter. Although orders here yet in the fourth quarter of '24 were a little better than expected, I would say, but it's really, we're anticipating that strength in the second half to come somewhat from demand ahead of the regulations and understanding of how flexible the supply chain is for that industry. Again, I think we've all got fairly consistent views of the market at this point and we'll see how it plays out. A big factor, of course, is going to be the strength of the U.S. economy and spot rates and freight activity. All these factors weigh in. The main thing to know is we've got a stronger second half in heavy-duty truck built into our forecasts. Q1, yes, is going to probably be the low point of the year with what we expect right now. The question is, will we get the improvement in the second half? Operator We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments. Christopher Clulow Thank you, everyone, for joining our teleconference today. That concludes the question-and-answer session. As always, the Investor Relations team will be available for questions after the call. Thank you. Operator Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today. Sign in to access your portfolio
