Cummins(CMI) - 2024 Q1 - Quarterly Results

Q1 2024 Financial & Operational Highlights Cummins reported a slight revenue decrease in Q1 2024, but GAAP Net Income surged due to the Atmus separation, leading to raised full-year profitability guidance and strategic advancements in energy transition Financial Performance Summary In Q1 2024, Cummins reported a slight revenue decrease, while GAAP Net Income and EBITDA significantly increased, primarily driven by the Atmus separation gain Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $8.4 billion | $8.5 billion | -1% | | GAAP Net Income | $2.0 billion | $790 million | +153% | | Diluted EPS | $14.03 | $5.55 | +153% | | EBITDA | $2.6 billion | $1.4 billion | +86% | | EBITDA Margin | 30.6% | 16.1% | +14.5 p.p. | - First quarter results were significantly impacted by two special items: a net gain of $1.3 billion ($9.08 per diluted share) from the Atmus separation and $29 million ($0.15 per diluted share) in restructuring expenses[2] - The effective tax rate for the quarter was unusually low at 8.7%, primarily due to the nontaxable nature of the gain on the Atmus separation[2][71] 2024 Full Year Outlook Cummins raised its full-year 2024 profitability guidance, increasing the EBITDA margin forecast while maintaining revenue guidance post-Atmus separation due to strong demand Updated Full Year 2024 Guidance (Post-Atmus Separation) | Metric | Previous Guidance (with Atmus) | Updated Guidance (without Atmus) | | :--- | :--- | :--- | | Revenue | Down 2% to 5% | Down 2% to 5% | | EBITDA | 14.4% to 15.4% | 14.5% to 15.5% | - The revenue guidance remains unchanged despite the Atmus separation due to continued strong global demand for Cummins' products and services, though the company anticipates slowing demand in some key markets during the second half of the year[4][5] Key Operational & Strategic Developments Cummins finalized the Atmus separation, launched new fuel-agnostic platforms, and announced a joint venture for advanced battery cell manufacturing, advancing its energy transition strategy - Finalized the separation of Atmus Filtration Technologies Inc. through a share exchange offer, retaining no outstanding shares[5] - Introduced the Cummins HELM™ fuel-agnostic platforms and announced the next-generation diesel X15 in North America, compliant with 2027 EPA and CARB regulations[6] - Accelera™ by Cummins, along with partners, selected Marshall County, Mississippi, for a new 21-gigawatt hour (GWh) advanced battery cell manufacturing plant, expected to begin production in 2027[16] - Introduced four new generator sets in the CentumTM Series, specifically engineered for critical applications like data centers and healthcare facilities[44] Segment Performance This section details the Q1 2024 financial performance across Cummins' Components, Engine, Distribution, Power Systems, and Accelera segments, highlighting revenue and EBITDA trends Components Segment The Components segment experienced a 6% sales decrease to $3.3 billion due to lower demand in North America and international markets, with EBITDA margin slightly contracting Components Segment Q1 Performance | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $3.3 billion | $3.6 billion | -6% | | Segment EBITDA | $473 million | $507 million | -7% | | EBITDA Margin | 14.2% | 14.3% | -0.1 p.p. | - The decline in revenue was attributed to a 5% decrease in North America and an 8% decrease in international sales, primarily due to lower demand in China and Europe[46] Engine Segment The Engine segment's sales decreased by 2% to $2.9 billion, as growth in North American medium-duty trucks was offset by declines in international markets, leading to a margin contraction Engine Segment Q1 Performance | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $2.9 billion | $3.0 billion | -2% | | Segment EBITDA | $414 million | $457 million | -9% | | EBITDA Margin | 14.1% | 15.3% | -1.2 p.p. | - Growth in North American medium-duty truck demand was offset by lower demand in China and Europe, leading to an overall sales decline[47] Distribution Segment The Distribution segment achieved a 5% sales increase to $2.5 billion, driven by international and North American demand for power generation products, despite a decrease in EBITDA margin Distribution Segment Q1 Performance | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $2.5 billion | $2.4 billion | +5% | | Segment EBITDA | $294 million | $335 million | -12% | | EBITDA Margin | 11.6% | 13.9% | -2.3 p.p. | - Revenue growth was driven by a 14% increase in international sales and a 2% increase in North America, spurred by demand for power generation products[20] Power Systems Segment The Power Systems segment saw a 3% sales increase to $1.4 billion, primarily from strong power generation demand in data centers, offsetting industrial revenue declines and improving EBITDA margin Power Systems Segment Q1 Performance | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $1.4 billion | $1.3 billion | +3% | | Segment EBITDA | $237 million | $219 million | +8% | | EBITDA Margin | 17.1% | 16.3% | +0.8 p.p. | - Strong global demand, especially from the data center market, drove an 11% increase in power generation revenues, partially offset by an 8% decrease in industrial revenues from weaker oil and gas markets[48] Accelera Segment The Accelera segment's sales grew 9% to $93 million due to electrolyzer installations, but continued heavy investments in zero-emission technologies resulted in a wider EBITDA loss Accelera Segment Q1 Performance | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $93 million | $85 million | +9% | | Segment EBITDA | ($101 million) | ($94 million) | - | - EBITDA losses are a result of significant ongoing investments in the development of electric powertrains, fuel cells, and electrolyzers to support customers through the energy transition[9] Consolidated Financial Statements (Unaudited) This section presents Cummins' unaudited condensed consolidated statements for Q1 2024, including net income, balance sheet, and cash flow, reflecting the financial impact of the Atmus divestiture Condensed Consolidated Statements of Net Income The Q1 2024 income statement shows net sales of $8.403 billion, with a significant $1.387 billion 'Other income, net' from the Atmus divestiture driving consolidated net income to $2.028 billion Q1 2024 Income Statement Highlights (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | NET SALES | $8,403 | $8,453 | | GROSS MARGIN | $2,041 | $2,029 | | OPERATING INCOME | $923 | $1,026 | | OTHER INCOME, NET | $1,387 | $90 | | INCOME BEFORE INCOME TAXES | $2,221 | $1,029 | | NET INCOME ATTRIBUTABLE TO CUMMINS INC. | $1,993 | $790 | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $31.8 billion, total liabilities $21.7 billion, and total equity $10.1 billion, reflecting a slight decrease in assets and liabilities from year-end 2023 Balance Sheet Summary (in millions) | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $15,620 | $15,198 | | Total assets | $31,827 | $32,005 | | Total current liabilities | $11,686 | $12,903 | | Total liabilities | $21,726 | $22,101 | | Total equity | $10,101 | $9,904 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities decreased to $276 million in Q1 2024, with net cash used in investing activities at $406 million, and cash and cash equivalents ending at $2.541 billion Q1 2024 Cash Flow Summary (in millions) | Cash Flow Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $276 | $495 | | Net cash used in investing activities | ($406) | ($228) | | Net cash provided by (used in) financing activities | $499 | ($363) | | Net increase (decrease) in cash | $362 | ($121) | | Cash and cash equivalents at end of period | $2,541 | $1,980 | Supplementary Financial Information This section provides detailed segment data, footnotes on the Atmus divestiture's financial impact, and reconciliations of non-GAAP measures to offer a comprehensive view of Cummins' financial performance Segment Information & Footnotes This section details segment sales and EBITDA, noting a $1.3 billion gain from the Atmus divestiture recorded as 'other income', and projects a 24.0% full-year 2024 effective tax rate - A gain of approximately $1.3 billion related to the Atmus divestiture was recognized and recorded in 'other income' in the Condensed Consolidated Statements of Net Income[36] - The expected effective tax rate for the full year 2024 is approximately 24.0%, excluding any discrete items[37] - Equity, royalty, and interest income from investees totaled $123 million for the quarter, up from $119 million in the prior year[61] Reconciliation of Non-GAAP Measures Cummins provides reconciliations showing adjusted EBITDA of $1.303 billion and adjusted net income of $724 million for Q1 2024, excluding the Atmus gain and restructuring expenses Reconciliation of Net Income to EBITDA (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income attributable to Cummins Inc. | $1,993 | $790 | | EBITDA (GAAP) | $2,572 | $1,361 | | Less: Gain on Atmus divestiture | ($1,333) | - | | Add: Atmus divestiture costs | $35 | $18 | | Add: Restructuring actions | $29 | - | | EBITDA, excluding special items (Non-GAAP) | $1,303 | $1,379 | Reconciliation of Net Income & EPS (in millions, except per share) | Line Item | Net Income | Diluted EPS | | :--- | :--- | :--- | | Attributable to Cummins Inc. (GAAP) | $1,993 | $14.03 | | Less: Atmus gain & costs, net of tax | ($1,291) | ($9.08) | | Add: Restructuring actions, net of tax | $22 | $0.15 | | Excluding special items (Non-GAAP) | $724 | $5.10 | Detailed Segment Sales Data This section offers a granular breakdown of sales within each segment, highlighting key contributors like Axles and brakes in Components, Heavy-duty truck in Engine, and Power generation in Power Systems Q1 2024 Components Segment Sales by Business (in millions) | Business | Q1 2024 Sales | | :--- | :--- | | Axles and brakes | $1,232 | | Emission solutions | $971 | | Engine components | $544 | | Atmus | $353 | | Automated transmissions | $165 | | Software and electronics | $67 | Q1 2024 Engine Segment Sales by Market (in millions) | Market | Q1 2024 Sales | | :--- | :--- | | Heavy-duty truck | $1,059 | | Medium-duty truck and bus | $995 | | Light-duty automotive | $438 | | Off-highway | $436 | Q1 2024 Distribution & Power Systems Sales (in millions) | Segment / Product Line | Q1 2024 Sales | | :--- | :--- | | Distribution | | | Parts | $1,001 | | Power generation | $707 | | Power Systems | | | Power generation | $853 | | Industrial | $420 |