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 - 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]