Financial Data and Key Metrics Changes - Sales and revenues increased by 10% to $17.6 billion, marking an all-time record for a single quarter [4][17] - Adjusted operating profit margin was 17.5%, slightly above expectations despite tariff impacts [5][20] - ME&T free cash flow generated was $3.2 billion, with $1.1 billion deployed to shareholders through dividends and share repurchases [4][28] - Full year 2025 sales and revenues are now expected to be higher than previously anticipated, resulting in modest growth versus 2024 [9][29] Business Line Data and Key Metrics Changes - Construction Industries sales increased by 7% to $6.8 billion, with a profit of $1.4 billion, a 7% decrease year-over-year [22][23] - Resource Industries sales increased by 2% to $3.1 billion, with a profit decrease of 19% to $499 million [24] - Energy and Transportation sales rose by 17% to $8.4 billion, with profits increasing by 17% to $1.7 billion [25][26] - Financial Products revenues were approximately $1.1 billion, a 4% increase, but segment profit decreased by 2% to $241 million [27] Market Data and Key Metrics Changes - North America saw an 11% increase in sales, driven by growth in both residential and non-residential construction [6] - EAME region experienced growth primarily due to Africa and the Middle East, while Asia Pacific saw a decline [6][12] - Latin America increased but was slightly lower than anticipated [6] Company Strategy and Development Direction - The company is focused on managing the impact of tariffs and is continuously evaluating options to reduce their effects [10][30] - There is a strong emphasis on long-term profitable growth, supported by a record backlog and robust order rates [9][37] - The company is optimistic about the demand for power generation driven by data center growth related to cloud computing and generative AI [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in managing tariff impacts over time and expects to maintain strong sales growth in the fourth quarter [9][10] - The outlook for 2025 is positive, with expectations for modest sales growth and improved operating profit margins [29][30] - Management noted that customer financial health remains strong, with low past dues and a healthy retail credit application increase [27] Other Important Information - The backlog increased by $2.4 billion to a record $39.8 billion, driven by strong orders in Energy and Transportation [4][8] - The net impact of incremental tariffs for the full year is expected to be between $1.6 billion and $1.75 billion [9][30] Q&A Session Summary Question: Can you discuss the backlog growth driven by power generation and data center applications? - Management highlighted excitement about the prime power opportunity with data centers and noted healthy ordering activity [49][50] Question: What are the factors affecting price realization and margins in Energy and Transportation? - Management indicated that E&T is in a better position due to strong demand and regular price increases, despite tariff impacts [53][54] Question: How do you view the acceleration in sales to end users across segments? - Management attributed the acceleration to effective merchandising programs and strong order momentum, particularly in North America [65][66] Question: What are the expectations for pricing and tariffs in 2026? - Management stated that tariffs will remain a headwind, but they are optimistic about demand and backlog positioning for future growth [62][63] Question: Can you comment on the contribution of Construction Industries and Resource Industries to backlog growth? - Management noted that the sequential backlog growth primarily came from Energy and Transportation, with strong order activity across all segments [88]

Financial Data and Key Metrics Changes - Sales and revenues decreased by 1% year-over-year to $16.6 billion, primarily due to unfavorable price realization, partially offset by higher sales volume and financial products revenue growth [28][30] - Adjusted operating profit was $2.9 billion, with an adjusted operating profit margin of 17.6%, both exceeding expectations [29][32] - Adjusted profit per share was $4.72, down from $5.99 in the previous year [29] Business Line Data and Key Metrics Changes - **Construction Industries**: Sales decreased by 7% to $6.2 billion, with a profit of $1.2 billion, a 29% decrease year-over-year [33][35] - **Resource Industries**: Sales decreased by 4% to $3.1 billion, with a profit of $537 million, a 25% decrease year-over-year [37] - **Energy and Transportation**: Sales increased by 7% to $7.8 billion, with a profit of $1.6 billion, a 4% increase year-over-year [39] Market Data and Key Metrics Changes - In North America, sales to users increased by 3%, driven by growth in residential and nonresidential construction [11] - EAME region saw sales growth primarily due to Africa and the Middle East, while Europe experienced weakness [11] - Asia Pacific sales slightly declined, with China being flat compared to the previous year [12] Company Strategy and Development Direction - The company is optimistic about top-line expectations, driven by strong order rates and backlog growth across all segments [15][24] - The company plans to implement longer-term actions to mitigate tariff impacts once there is sufficient certainty [15][19] - Focus on maintaining a strong balance sheet and liquidity while deploying capital to shareholders through dividends and share repurchases [43][44] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains dynamic, with tariffs expected to be a significant headwind to profitability in 2025 [8][15] - The company anticipates moderate sales growth in the third quarter, driven by higher volumes across all segments [50] - Full-year sales and revenues are expected to increase slightly compared to 2024, with adjusted operating profit margins anticipated to be in the bottom half of the target range due to tariffs [19][47] Other Important Information - The backlog increased by $2.5 billion to a record level of $37.5 billion, driven by strong order rates across all segments [8][14] - Free cash flow for the quarter was approximately $2.4 billion, with expectations for full-year free cash flow to be around the middle of the $5 billion to $10 billion target range [42][48] Q&A Session Summary Question: How is the company planning to mitigate tariff headwinds in the medium to long term? - Management indicated that all options are on the table, including changing sourcing and pricing strategies, but more clarity is needed before making decisions [59][63] Question: Can the backlog be repriced to improve margins? - Management confirmed that there is flexibility on pricing in the backlog, and they will evaluate pricing strategies as they move into the second half of the year [70][72] Question: What is the impact of capacity additions on sales and margins in the Energy and Transportation segment? - Management noted that capacity investments are improving throughput, and they expect to see incremental sales and margin improvements as capacity comes online [80][82] Question: What are the key tariff-related uncertainties to watch for? - Management highlighted that ongoing negotiations and investigations could impact tariffs, and the situation remains fluid [96] Question: How does the company view inventory levels and dealer decisions? - Management explained that dealer inventory decisions are independent, and they expect machines to be flat for the year based on order rates [100][101]

Financial Data and Key Metrics Changes - For Q1 2025, sales and revenues decreased by 10% year-over-year to $14.2 billion, primarily due to lower sales volume and unfavorable price realization [10][30] - Adjusted operating profit was $2.6 billion with an adjusted operating profit margin of 18.3%, slightly better than expectations [11][30] - Adjusted profit per share was $4.25, down from $5.60 in the previous year [31] Business Line Data and Key Metrics Changes - Construction Industries sales decreased by 19% to $5.2 billion, with a profit of $1 billion, a 42% decrease year-over-year [34][36] - Resource Industries sales decreased by 10% to $2.9 billion, with a profit of $599 million, an 18% decrease [38] - Energy and Transportation sales decreased by 2% to $6.6 billion, with a profit of $1.3 billion, a slight increase of 1% [40] Market Data and Key Metrics Changes - In North America, sales to users were slightly higher than the prior year, driven by residential construction [12] - Sales to users in Latin America continued to grow at a higher rate than anticipated [13] - Sales to users in Asia Pacific declined in line with expectations, while sales in Africa and the Middle East showed better-than-expected performance [12][13] Company Strategy and Development Direction - The company is focused on long-term profitable growth through disciplined execution of its strategy and leveraging its diverse end markets [8] - Strong order rates led to a record backlog growth of $5 billion, indicating robust demand across segments [8][15] - The company is evaluating a range of longer-term mitigation actions in response to tariff impacts, emphasizing the need for clarity in the tariff environment [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the full year, expecting sales and revenues to be flat in a pre-tariff scenario [22][45] - The potential impact of tariffs is estimated to be a cost headwind of $250 million to $350 million for Q2 2025 [19][51] - The company remains confident in its ability to navigate the evolving economic conditions and maintain strong performance [20][55] Other Important Information - The company deployed $4.3 billion to shareholders through share repurchases and dividends in Q1 2025 [16][44] - The company maintains a strong balance sheet with ample liquidity, including $3.6 billion in cash [44] Q&A Session Summary Question: Cost headwind of $250 million to $350 million in Q2 - Management is evaluating short-term cost reductions and overhead cuts, while also considering longer-term mitigation actions [57][58] Question: Construction industry dynamics and dealer inventory - Management noted that better-than-expected sales to users have resulted in minimal dealer inventory build, indicating positive customer sentiment [68][70] Question: Tariff impact and pricing strategy - Management clarified that not all tariffs will impact the full quarter and that they are exploring mitigation strategies [74][76] Question: Pricing within Construction and Resource Industries - Management indicated that pricing decisions will depend on market conditions and competitive positioning, with no immediate price increases assumed [80][82] Question: Backlog pricing protection - Management confirmed that there is flexibility in pricing for the backlog, and they have not seen evidence of widespread pre-buying [90][91]