Joining us today. I am Michael Feniger, Bank of America's Machinery, Engineering, and Construction Analyst. We are really excited today to host Caterpillar's management for a two-part series. This is a great time to check in with Caterpillar, a global bellwether of the industrial economy. The first part of the event will include a Q&A with Chairman and CEO, Jim Umpleby. The second part of the event will include a Q&A with Group President Denise Johnson, who runs the Resource Industries Division. Please stick around after the first session. I'm gonna hand it off to Ryan to provide some disclosures. He'll then hand it back to me, where we can then jump into Q&A with Jim. Over to you, Ryan. Great. Thanks a lot there, Mike. You know, during today's meeting, we'll make forward-looking statements which are subject to risks and uncertainties. We'll also make assumptions that could cause our actual results to be different from the information we've shared with you on this call. Please refer to our recent SEC filings and the forward-looking statements reminder in our releases for details on factors that individually or in aggregate, could cause our actual results to vary materially from our forecasts. A detailed discussion of the many factors we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. In today's meeting, we'll also refer to non-GAAP numbers. For reconciliation of any non-GAAP numbers to the appropriate U.S. GAAP numbers, please see the appendix of our earnings call slides. Additionally, please note that Caterpillar policy does not allow for meetings to be recorded with smartphones or other devices, unless specific approvals have been sought and granted prior to the beginning of the meeting. Lastly, we'll post the transcript on our website as soon as we can. With that, I'll turn it over to Mike. Thanks, Ryan. Technical difficulties with one of our camera feeds. We will be back to you as soon as possible once we get Mike back. Thank you. For that I, Jim, maybe we could just start over a little bit. You did join Caterpillar in the 1980s as an engineer. You have served as CEO since January 2017. Maybe let's just start off there, Jim. How has Caterpillar changed under your leadership compared to prior cycles? Well, thank you, Michael. It's great to be with you today, and I, you know, I really am proud of our team. I believe they've done a lot of great work over the last 6.5, 7 years or so. We did introduce a strategy, a new strategy for profitable growth back in 2017, and we laid out some targets that we said we would achieve. We laid out higher margins, operating margins, and free cash flow compared to our reference period. We chose, at that time, a reference period of between 2010 and 2016, and we said at different levels of revenue, we'll achieve higher operating margins and higher, more consistent free cash flow. That strategy was based on a few key elements. One is operational excellence, which is safety, quality, lean, and competitive and flexible cost structure. The other is services. Everything we do to support our customers after the initial sale. Expanded offerings, having the right product at the right price point to meet our customer needs. More recently, we've added sustainability, which I'm sure we'll talk about here later in, during our time, which represents an outstanding opportunity for future profitable growth. I must admit, we met with some skepticism when we put out those initial margin and free cash flow targets, and we did achieve them in 2017, 2018, and 2019. Even in 2020, when COVID hit, and we had a 22% decrease in our top line, we still achieved our margin target and produced $3 billion of free cash flow that year. Between 2017 and 2022, except for that one year I mentioned, 2020, where we achieved $3 billion of cash flow, we've achieved $5 billion-$6 billion in free cash flow, which again, very proud of the team. I would argue that our strategy has paid off, and it showed up in our results in terms of both higher margins and higher free cash flow. If you like, I can talk about each of the elements of the strategy a bit, if you'd like me to, or I'll let you ask your next question. Jim, maybe just to follow up there. Caterpillar revenue this year, based on consensus estimates, is closing in on that prior peak revenue observed in the last decade, yet unit volumes are clearly below that period. Just to help provide context, how far below are unit volumes from that prior peak? What areas of portfolio have fully recovered? What areas of portfolio still have room to really recover, that are still below those peak levels a decade ago? I think the best way to look at it is really look at each of the markets that we serve, we're a fairly diverse business, so you can't just look at construction, you really have to look at everything. Let me just quickly run through the various markets that we serve. I'll start with construction. That's the most well known and the one that most people focus on. About 25% of Construction Industries' sales and revenues is based on non-residential. Residential is 25%. What did I say? Excuse me, sorry. 25% is residential, 75% is non-residential. That, that 25% that is residential, as we said during our first quarter results, is still improving. The growth rate moderated a bit, but it's still getting better. The 75% that's non-residential is quite strong. We. There's a lot of things happening there. Lot of strength in North America with the various pieces of legislation that have passed, the IRA, the IIJA, and the CHIPS Act. We're seeing a lot of strong construction in the Middle East. Places like Saudi Arabia are very strong. Construction, again, a lot of things to be positive about there. The one negative on construction is in China, and we have talked about the fact that we expected China to be weaker this year. It's been a bit weaker than we expected. What we've typically said in the past is that China represents 5%-10% of our total sales and revenues. This year, it'll be below that in 2023. Moving on to Energy & Transportation, a lot of strength there, starting with power generation. You know, as you probably know, we sell a lot of generator sets for data centers, and data center are very, very strong, being driven by everything moving to the cloud, AI, and all the rest. A lot of strength there still, and we haven't seen any sign of that slowing down. Oil and gas is still strong also, both for our Cat branded products that are used in gas, in recip gas compression, well servicing. A lot of things we can talk about there, things we're doing to help our customers reduce their carbon footprint as they produce oil and gas, and Solar gas turbines, quite strong as well. You know, Caterpillar plays across a large portion of the natural gas value chain. Engines used for drilling, our recip engines, drive recip compressors for gas gathering, big player in well servicing and, of course, Solar. If you stop and think about the fact that all those LNG plants that are being constructed need to be fed with natural gas, we're a big player in that as well. In our industrial engine business, that's it, the loose engines that we sell, that business is quite healthy as well. In Resource Industries, you know, what we've been talking about for quite some time is a gradual increase in mining activity. That's certainly the way it's played out. If we think about the energy transition, it creates tremendous opportunities for us. You know, the average electric vehicle takes 6x as many minerals as an internal combustion engine car, and everybody has a different opinion as to how quickly the energy transition will occur. Pick your time frame, it really doesn't matter. There's no way around the energy transition not requiring a significant increase in commodities, and of course, our mining customers use our products to produce those commodities. If we look at the individual markets that we serve, most of them are quite strong. Yep. Fair enough, Jim. Just on the cycle-to-cycle discussion, when investors look at consensus, your revenue is approaching that prior peak a decade ago, like we were discussing, but your EPS is gonna be 80%- 90% higher than that period on a similar revenue number. What specifically would you attribute to that cycle-over-cycle improvement in terms of cost savings, maybe divesting some lower margin business lines, pricing power? How does that position Caterpillar going into that next cycle? It really is. There isn't one reason. We've worked on a whole variety of things, and our team's been very focused on this. I mentioned earlier, operational excellence, which is again, includes that competitive and flexible cost structure. We've worked very hard to remove structural costs from the business, and that's certainly been a contributor to our financial performance. We also utilize what's called the Operation and Execution model, or O&E model, which has allowed us to really have a better understanding at a much more granular level by product, by market, by application, where we were creating shareholder value and where we weren't. By having that more granular understanding, it's allowed us to shine a light on those underperforming products and businesses and challenge our leaders to improve those, the profitability of those products. In most cases, that occurred. In some cases, we concluded that it would make more sense to exit those products to, and we've done some of that as well. It's really a combination of those things. Even more importantly, the O&E model allows us to invest more resources in those areas that represent the best opportunities for future profitable growth. A great example of that is services. You know, we've invested a lot in services, and as you know, we probably know we have a goal to double services by 2026, and we're very pleased at our progress there. We've gone from $14 billion in 2016 to $22 billion last year, and we've told investors that we're increasingly confident in our ability to meet that goal. Services done right, it's good for the customer, it's good for the, for our Caterpillar dealer, and it's good for us. Always try find w ays to add more value, to prevent unplanned downtime, to increase productivity.... and all the rest. To answer your question, there wasn't one silver bullet. There's a lot of great hard work by the Caterpillar team around the world to improve our financial results. Makes sense, Jim. Cat is reporting some of the strongest pricing in its history. Investors believe that most of that pricing is due to inflation. Is there a change going forward in terms of how Cat views pricing in some of its markets? For example, if we look at resources and energy, are barriers to entry higher there that could underpin stronger pricing? Do you see any inflection point where customers are paying up to replace their fleet with certain features or technology? We make pricing decisions based on a whole variety of factors. Obviously, we look at input costs, that's one factor, but we also look very closely at the competitive situation that exists in each of the diverse markets that we serve. Certainly, we're investing very heavily in technology, and the goal is to provide more value to our customers. If in fact we can make our customers more productive, they can produce more material in a certain period of time, they can reduce their carbon footprint. It's a whole variety of things that we do to add more value, and if we do add more value, oftentimes we can get price for that. Again, it all starts with a win for the customer. Just to follow up with that, Jim, I mean, pricing will inevitably moderate. There's a view that inflation is coming down, yet can remain sticky. Just do you see that relationship of price versus cost? Cat's ability to price above its cost, is that potentially structurally higher going forward, especially in a world that is underinvested in infrastructure, metals, and energy? Well, as we said in our first quarter call, we do expect price to continue to be favorable. Although throughout the year, although the absolute dollar value of the year-over-year price increase will moderate as we lap the price increases that we put through in 2022. Having said that, again, certainly, cost is one element that goes into price, but we also look at the competitive situation. We look at value. We're investing in technology, and so there isn't a one-size-fits-all answer to that question. It really comes down to product by product, market by market, investing in the technology, and again, most importantly, making our customers more successful and providing more value to them. Fair enough, Jim. Since Cat reported, I mean, macro environment is becoming as uncertain as ever. You know, rates are higher, copper and oil are lower. Are you sensing customers pausing, or do you sense customers are still willing to really invest through some of this uncertainty following years of that underinvestment? Again, we have a diverse set of customers around the world, certainly, many of our customers are continuing to buy product. We're still in a situation where we are supply chain constrained for some products. Some are large engines that serve both data centers and oil and gas. That certainly continues to be a challenge. Many of our customers wish they could get more of our building construction products out of us. That's part of the Construction Industries. Again, earth movement's another one where we wish we could meet higher demand. It all depends on, again, the customer and the segment. You mentioned some commodities like copper and iron ore and oil. Most of those prices, certainly those prices are supportive of reinvestment. If you look at mining, there's some positives there in terms of the age of the fleet is relatively high. The number of parked trucks is relatively low, and those are positive things, and utilization is quite high as well. Those are some of the things that we look at to try to determine what's happening in the marketplace. Again, you layer on top of that, the energy transition, which I mentioned before, there's no way around it if you believe 50% of the EV projections from the automobile companies, then a lot more commodities will need to be produced. Again, every customer is different. They'll make a decision based on their individual situation. They'll look at where they're investing capital, what their plans are for that year, all the choices they have, and they'll make their own decisions. Again, as I said, as we look at our end markets, we feel good about most of them, and business is quite strong. Thanks, Jim. Following up on that, I mean, inventory is very topical right now. At times, the market only views inventories as binary. You're either in restocking mode or destocking mode. As the CEO, how are you evaluating inventories at Caterpillar today and at its dealer network? Is there a middle path between restocking and destocking, where Cat and the channel can manage to take out some inventories in certain areas without observing a big impact to profitability? Start with by talking about dealer inventory, and certainly dealers are independent businesses, and they make their own decisions about their inventory. We can make suggestions to them. We have conversations with them. We have a new S&OP process where we really work hard to have good conversations, but at the end of the day, dealers are independent businesses that make their own decisions. As we sit here today, there are certain cases where I know there are products where our dealers wish they had more inventory, and I mentioned a couple of those earlier. Some of our building construction products and in earthmoving as well. There's just not enough. In certain areas, there is enough, and one of those would be excavators, and part of that's due to the downturn that we talked about in China. Again, there's enough excavator inventory. There's not enough of other products. I do believe, again, it's not, it's not binary, all or nothing. This is a situation where product by product, dealer by dealer, they'll make a decision based on what they see coming from their customers. We do again, we are more involved than we have in the process. You know, one of the positive things is that we, our units are connected, so we have a sense of utilization rates. We have a sense of what's happening. We also have, of course, have direct conversations with our customers and have a sense of what's going on globally. We, we take that information and have conversations with the dealers. In terms of Caterpillar inventory, we're not running as lean as I would like us to run, quite frankly, and a lot of that's due to the supply chain challenges we have. You know, although there has been some improvement by the macro level and supply chains, there are areas that are still quite challenging. We still, you know, we still deal with chip shortages in some places. I've already talked about our large engines. That's mostly not a function of our capacity, but our ability to get components from our suppliers. Again, it's a mixed bag here. I know with some products, dealers wish they had more inventory. Some they have enough. Jim, I'm just curious, like, going forward, after we've gone through this pandemic and supply constraints, to your point on inventories, I mean, do you see the channel running with a little bit more inventory than it did pre-COVID because of the supply constraints that we had? You know, maybe it's a lesson learned after the pandemic. Curious just how you think that channel looks going forward now. Well, in terms of Cat inventory, as I mentioned, we're not as lean as we would like to be. Of course, you know, if you go back before 2020, before the pandemic, you know, we could count on with a high degree of certainty that when a supplier committed, they would have a part on a certain day, that it would be there. We all learned a new word during COVID, the decommit word, where a supplier would call us and say, "I'm sorry, I know we promised to get you that component 2 weeks from today, but our supplier just decommitted to us for a whole or that," maybe that's because their supplier decommitted to them. You know, I would like to think that over time, that we'll be able to reduce Cat inventory for the amount of product that we're producing to improve our turns, to get back to a situation that we were pre-COVID. We're not there yet, and we have more inventory than we'd like. It's not sitting in finished goods, typically. It's work in process. You know, we made a decision that, you know, one of the examples we've given before is you know, you build a machine, you don't have mirrors. Let's say there's a mirror, there was a mirror shortage at one time. What do you do about that? We built the machines, we put them in a parking lot, the mirrors came in, we put the mirrors on, and we shipped the product. That creates in a situation, you know, more inventory than you would like. It's not exactly a classic lean, but again, we're looking forward to getting back to being leaner over time as the supply chain conditions continue to improve. We're not out of the woods yet. It's still an issue. It's even still an issue with chips. I think on the higher end, people talk a lot about a glut of chips, but on the chips that we use, which are very similar to the chips that automobile manufacturers use, it's still an issue for us. Interesting. Jim, you formerly ran Solar Turbines. This is one of the highest marginal business units, yet I sense a lack of investor awareness around this business. How should investors think of Solar within the E&T segment in Caterpillar today? How is this business different from most other business products in terms of services, distribution, and resiliency? What are really the drivers there for Solar? All right. I won't comment on the margins in that business, so that those are your statements, not mine, but I will talk about the business as well. It is a direct end-to-end business. You know, Solar designs their own products, builds their own products, distributes it and services it through their own network. It is a direct business, and it's low volume, highly engineered machine products. Instead of building, you know, thousands or tens of thousands of something, this is 100, 150, 200. It's a much lower volume. Solar has a highly developed customer, you know, services business. You know, we worked very hard to build that up over the years. Because turbomachinery tends to run 24 hours a day, 7 days a week, because customers put so much value on uptime, minimizing unplanned downtimes, it's really created an opportunity for us to, again, make our customers more successful, also it's been good for Solar. Just about all the turbomachinery that we've shipped in the last 20 years or so are connected, we use AI to help prevent failures. It's gotten quite sophisticated. We also have things like fleet managers, who actually will go and sit within a customer's operation to help them maximize availability, minimize downtime. Oftentimes, you go into some of our customer facilities, you can't tell who works for Solar and who works for the customer because they're all working together as a team. It's not a birth right. Solar has to create more value for their customers every single day. That's what they have to do. They work very hard to do that. You know, it's a great business, one that we're very glad we're in. Again, as we think about the dynamics today, particularly around natural gas, you know, business is quite strong. A lot of natural gas compression going on in the U.S. Also we've seen a pickup, Solar has seen a pickup in International business and even offshore platforms again, offshore facilities. Oil and gas has been strong and their business is doing well. Jim, there's a big theme in the U.S. right now with these mega projects being announced, infrastructure, reshoring, manufacturing. You know, as the CEO, how do you view these mega projects and these themes, LNG, EV plants, semiconductor facilities, driving your portfolio? Do you see it adding a step function to your growth profile longer term? Certainly a positive for us. I talked earlier about nonresidential construction representing 75% of Construction Industries. You know, the whether it's the CHIPS Act, the IIJA, the IRA, excuse me, the CHIPS Act, those all create opportunities for us. I've already seen some of that manifest itself into in the money that's being spent by the states in infrastructure. As you know, a lot of those projects, the permitting takes a long time, so we expect that to play out over time. Certainly, the investment in LNG facilities, and again, not just the facility itself, but the pipeline and all the work that has to happen in particularly in onshore oil and gas in the U.S. to feed those LNG facilities is, I believe, a long-term positive for us as well. There's construction activity associated, again, with the energy transition. All the, you know, high tension lines that have to be built, the wind turbines, the charging stations. If you think about some of these projects, like a big battery plant as an example. If you go to one of those big battery plants or a big chip plant, you'll see hundred, literally hundreds of pieces of construction equipment at that, those big mega sites putting that together. That's a positive thing for us. Again, as I mentioned earlier, non-residential is quite strong, and we're quite bullish about what we see coming in. A lot of that is, in fact, underpinned by some of the legislation in the U.S. As I mentioned as well, places like Saudi Arabia, a lot of infrastructure work going on there as well. Construction is quite strong. Jim, just because of the concerns around higher rates, tightening lending standards, the headlines on commercial real estate and offices, just help us kinda understand how we should think about maybe some of those headwinds. You also talked a lot about the strength you're seeing on non-res with infrastructure and some of these mega projects. How should we think of sizing up that those headwinds that are starting to creep up, that we're seeing in the headlines? Yeah, commercial real estate is quite small. We said in one of our investor calls that it represents less than 1% of Construction Industries in North America. That's 1% of 1 geography in 1 segment. There's a lot of headlines written about commercial real estate as it relates to Caterpillar, and in reality, it doesn't move the needle for us. Certainly, as we think about tighter lending standards, stop and think about the customers that we serve. Firstly, in oil and gas. Oil and gas customers, I mean, Chevron, ExxonMobil, ConocoPhillips, they certainly have capital to buy our equipment. It's obviously not a problem. There are power generation customers, Microsoft, AWS, all the rest, not an issue for them. The, the construction customers that are underpinned by the projects that we have, going on, again, is quite positive as well. Smaller customers could potentially be impacted by some of the pullbacks in the commercial banks, but one of the positive things there is we have Cat Financial. The Cat Financial is very conservatively run. We, they match duration risk. They are, like a bank, are dependent upon deposits for funding, and we use the equipment as collateral for the loans that we make. What we're able to do then is and everything's connected, so we know where the units are. We don't see it as a major issue in our business for the reasons that I've outlined. Perfect, Jim. Look, a majority of the engines that drive Caterpillar machines are diesel. You've made some investments and launched products that are alternatives, and your customers have very ambitious zero emission goals. What are the areas of the portfolio that you see the most pull for those alternatives? How do you see this playing out over time? Does this change the parts and service stream for Caterpillar or how Caterpillar prices these type of future technologies? There was a lot of technologies going in. Let me just talk a bit about autonomy, then I'll talk a bit about alternative drivetrains. One of the things that we're quite excited about, and you're probably gonna ask Denise about, is our autonomous solution. I'll let her do most of the talking there, but we are very, very excited about that solution. You know, we've had customers say that they get up to 30% more productivity than the best man site. Of course, think about a mining customer operating 24 hours a day, 7 days a week, producing product. If they can get 30% more productivity, and obviously they need to do it safely and environmentally responsibly, that is a real game changer. I'd argue that we're, our customers are, in fact, voting with their dollars, and we believe that we're doing very well in the autonomy space. In terms of alternate drivetrains, let's say batteries and machines, most of the interest right now is from our large mining customers. A lot of those big mining customers are really working hard to reduce their Scope 1 and Scope 2 emissions, and we're very committed to help them with that. We had a demonstration last November that, where we demonstrated a fully loaded mining truck, you know, operating in diesel performance up a grade on the flat. It's a prototype, and we have a ways to go, but we're quite excited about that. One of the things that requires is not just changes to the product itself, the truck itself, but the actual mine site. One of the things that we believe gives us a competitive advantage is our Energy & Transportation portfolio. A fully loaded mining truck, the battery will degrade in about 90 minutes. We have to find a way to dynamically charge that mining truck as it moves around the mine. Through our Energy & Transportation portfolio, we make reciproCating engines with big gas turbines, and those recip engines and gas turbines can burn a whole variety of fuels, whether it's natural gas or hydrogen blends or biofuels, and all the rest. We believe that gives us a great opportunity, not just to sell the truck, but also to help our customers through this energy transition. We're turning our Tucson Proving Ground outside of in Arizona, we plan to turn that into kind of a mine of the future to show customers how this can be done. That's where most of the interest is. There is also some interest in Northern Europe, places like Norway and a few other government-funded projects in places like Holland, where they're interested in battery-powered machines, and we are investing in battery-powered machines. We had four prototypes that we showed to customers in March, I believe it was, in Las Vegas at CONEXPO. Our strategy is to continue to invest in our diesel-powered fleet and a battery-powered fleet, and our customers will decide which one they want to buy. My sense is it's gonna take quite some time before there's a significant percentage of battery-powered machines that our customers decide to purchase. Part of it is just being realistic about the applications. It's one thing if it's in city center, you can say, let's say New York, or let's say, you know, the city of New York were to outlaw all diesel engines and automobiles and construction equipment and everything else. You could very much see a situation where a battery-powered piece of construction equipment that's working in the city can be charged overnight, and that's very feasible. For non-residential, for big infrastructure projects in remote areas, it's pretty tough. Think about building a highway or a dam or some other place, and there's no grid. You've got the situation of, all right, you've got battery-powered machines, and the machine goes down, 2:00 in the afternoon, what do you do? Do you fire up another diesel genset to do a fast charge, which doesn't make any sense. The reason you put batteries in is to avoid the diesel engine. Do you have an extra machine which doubles the customer's capital cost? Do you try to change batteries, which is not so easy to do in a big, heavy piece of machinery? Do you try to transport the product to some central location for charge? It's not easy. My sense, and plus, think about the geographic diversity of the markets that we serve. I think that the rate of adoption of batteries will vary not only by application, but also by geographic area. What happens, let's say, in Norway, and what happens in other parts of the world or even in remote areas, like what happens in New York, what happens in the middle of Nebraska, in the middle of nowhere, is probably going to be different. Again, we believe that this is going to take time to manifest itself. Either way, you know, the way we look at it, we're in good shape to win. One of the things there could be service opportunities around things like batteries, 'cause customers probably won't want to deal with batteries. That's the service opportunities. Unlike automobiles, we still have things that wear out. Think about, you know, machines that dig in the dirt. Well, things wear out. We have hydraulics. It's a bit of a different animal than it is an automobile, from a whole variety of perspectives, including that one. Jim, just to follow- up, you mentioned on the service opportunity. I mean, in 2022, Cat reported $22 billion of services. It was nearly 40% of your machinery ME&T revenue. I believe you have a target of $26 billion, which you launched that target. How do you feel you're trending towards that target? Where's still some low-hanging fruit here for Cat on the parts and services opportunity? Certainly, as I mentioned earlier, we're increasingly confident in our ability to make that target. I wouldn't call the fruit low hanging, but it's still there. We have to climb up a bit higher to get it, but we think there's a great organic opportunity to continue to grow services. We know that there's still a number of customers that choose not to buy their parts and service from a Cat dealer, and a lot of those are smaller customers. Our dealers do an outstanding job servicing our big customers, big construction customers, big oil and gas customers, big mining customers. Oftentimes small customers, let's say a small contractor that has a dozen or so machines, don't get the same kind of attention as a large customer would be. We're investing heavily in our digital capabilities. e-commerce sales are increasing quite rapidly. We're pleased at that. We've developed what's called Cat Central, an app that goes on your phone where, you know, again, unit, a machine ships out of the factory, got a serialized QR code. Customer can scan that QR code. We know who they are. They know, using their phone, exactly what part they need to buy. It's very easier for them to do business with us, the dealer. Maybe they push a button, and they get, you know, they can do it themselves, get the part delivered, or they can push a button and get the dealer to come in and put the part in for them. We're investing a lot to help those small customers to do business with us and our dealers, and we believe that represents a substantial opportunity still to grow services. At the same time, we're looking at new services all the time as well. Again, I use my Solar Turbines example. You know, we've been at it, at it for a long time at Solar, maybe 20 years, and we're still finding new ways to increase services to our customers to make them more successful. The value proposition for a large mining truck or a gas turbine and a small skid steer certainly are different, but there are things that, again, there's a continuum there of different kinds of products and services that we can sell to make our customers more successful. Thanks, Jim. You know, in the first quarter, you generated, you know, $1.4 billion in free cash flow. Your balance sheet is very secure, I'm gonna argue it's underleveraged to a point. Your free cash flow is strong. Do you see Cat potentially adding another vertical to its end markets over time? Are there any markets or services Cat's in today that it wasn't in a few years ago, that you'd really like to expand and grow? Well, firstly, we as I mentioned earlier, we do believe we have some outstanding opportunities to grow organically, whether it's through services, whether it's through the energy transition and the additional products that we'll need to sell to satisfy commodity demand. One of the things I haven't talked about is distributed generation. You know, as more renewables are added to the grid, that creates grid instability issues, which creates a need for smaller increments of power generation, whether they be gas turbine-driven or reciproCating engine-driven, to be added throughout the grid. We're already starting to see some of that play out, and we think that'll be a bigger issue over time. Of course, as I mentioned earlier, our engines and gas turbines can burn a whole variety of fuels, whether it's a hydrogen blend, natural gas, or all the rest. We think that's a big organic growth opportunity because, again, we have the basic products. We're still, we're always tweaking our ability to burn different kinds of fuels, and we're tweaking the product, but the product is basically there. It's not a new vertical, if you will, but it represents, we think, an outstanding growth opportunity. Having said that, we're always open to new ideas. We're always open to M&A. We're not elephant hunting by any means, but we're open. You know, we've made a number of smaller acquisitions, whether it be to fill out our product line or to add technology, which have been very helpful. You know, we purchased SPM, we're oil and gas, a couple of two, three years ago, and our timing was good on that one. I believe, if I remember correctly, while we were negotiating the deal, oil prices went negative. The timing of that deal was pretty good, and again, we're very glad we have it. That's added a whole new level of capability to our ability to help our well servicing customers. Again, plenty of organic opportunities, but we're open to other things as well. You know, I'm really glad that we had a conservative balance sheet when COVID hit. A lot of other CEOs I know, of some industrial companies, were worried about making payroll, and I slept very well. I didn't know it was gonna happen, but I know we could make payroll. Having a strong balance sheet is not always a bad thing. Jim, maybe just to continue on the balance sheet discussion. You recently raised your dividend 8%. Your CapEx actually remains below its levels a decade ago, below the peak. How do you feel about Cat's reinvestment needs in terms of CapEx and R&D? Where's most of this free cash flow that Cat is generating now and in the coming years likely to go? Well, it's gonna go in a whole variety of areas. One of the things that we talked about in our Investor Day is a higher level of investment in what we call ACE, which is autonomy, automation, electrifiCation, digital. Again, we're investing in ACE, and we told investors we're gonna invest a higher amount of that. We're also certainly very willing in making rifle shot investments in capacity where we need to, or we feel we have a constraint in capacity, we'll invest in that. It's very different than what we did in the past, where it was kind of a very broad shotgun approach to investing a lot of money in capital and new facilities. You know, we, for the most part, believe we have enough bricks-and-mortar to still grow quite a bit, but where we need to make rifle shot investments, we'll continue to do that. Some of that has to do with the supply chain as well, as we think about resiliency of supply chain. That, that'll require some investments. Where else are we investing? We're investing in our digital capabilities. We're investing in ways to increase services. We're investing in all the things that we feel we need to do to take advantage of those organic growth opportunities. Having said that, you know, we're, we're committed that we're gonna return essentially all free cash flow over time to shareholders through a combination of dividends and share repurchases. We've just had that 8% increase. Again, we did pause there during the COVID year, but again, we're very committed to rewarding our shareholders. Makes sense, Jim. The dealer network, as you touched on, is independent. Yet, how has that relationship between Cat and dealer network really evolved in recent years? Are you seeing a more open to dealer consolidation? Are you seeing any changes really, in terms of, like, lead times, compared to where we were a few years ago? Certainly we believe that our dealer network is a major competitive advantage for Caterpillar. We work very closely with our dealers. you know, I won't predict consolidation. So much depends upon individual dealer decisions and a lot of other factors. I'd argue in many ways, we're working more closely with our dealers than we ever have in terms of servicing our customers. I mentioned autonomy. Cat plays a big, direct role in that. you know, when we're dealing now with our power generation customers or our oil and gas customers, with many of the big customers that cut across multiple dealer territories, we are very much there with our dealers at the table, helping satisfy customer needs. Again, we've invested in a lot of tools like, we call it PIC, which is Parts Inventory Collaboration, which allows us to use AI to make targeted recommendations for our dealers for what kind of parts inventory they need to hold at different points in time. What parts, when, and where, to help service our customers, because, again, we now have connected assets. In many ways, we're working more closely than we ever had before. If you think about, again, servicing those small customers, thinking about all the things you want to do to capture those incremental part sales, that does require a new way of working together. The good news is that our economic interests with our dealers are very much aligned. You know, if we grow service business, it's again, done right. It's good for the customer, it's good for the Cat dealer, and it's good for Caterpillar. Jim, maybe just to follow- up with the dealer network. You know, we hear a lot about rental penetration in the U.S. I'm just curious, what is Cat's view on rental? How do you equip your dealers to serve, you know, maybe that growing area? Does rental story need to change the way Cat kind of services that market? We do believe that rental represents a very good opportunity for growth, and in recognition of that, we established a new division January first of this year, led by one of our very experienced executives to lead rental. Of course, Caterpillar doesn't have a rental business, our dealers have a rental business. We have some dealers that are very sophisticated and have been very good at rental for a long period of time, and we have some dealers that have not been quite as focused on it and aren't quite as good. Our role in this process is to work with our dealers to help them get better at rental, develop new processes, practices, and all the rest. If you look at North America as an example, the Caterpillar dealer rental stores combined, it's quite significant, the sum of those businesses, those dealer businesses. Again, we're excited about that opportunity, and we're putting more resources into that. Fair enough, Jim. How should investors on the line view Cat's ability to manage a recession whenever that may play out? I mean, there was a great financial crisis in 2009, but really since then, there was a mining downturn, an oil and gas downturn. Obviously, we had COVID. Is there any rule of thumb that investors should be thinking about in terms of Cat sensitivity going to the next recession, whenever that may play out? Well, I mentioned a couple of things. One is, I'd keep in mind 2020, when we lost 22% of our top line and still produced $3 billion of free cash flow, which many would have not had viewed possible until we did it. I'll start with that. Secondly, I think it's important to think about, as we started the call, Michael, I talked about the strength of our end markets. I talked about, you know, the infrastructure bills that have passed, the strength of oil and gas, the strength of power generation and data centers, the energy transition, the commodity that we produce. As I look at the strength of our end markets, I feel very good about what we're heading into. I won't. I didn't use the R word, you did. If there is a recession, that can, in fact, manifest itself in very many different ways into the consumer recession, how does it affect us? As we look at our specific markets that we serve, as we sit here today, we feel quite good. You know, we told investors in our first quarter call, based on the strength of our first quarter results and what we see in the RN markets, we expect 2023 to be an even better year than we had previously anticipated, both in the top and the bottom line. Okay, Jim. Yeah, I was gonna say, we've got probably time for one more, one more, point or question. Jim, maybe just to wrap up, since you've been at Caterpillar since 1980s, I'm curious, if you look at your three segments, do you see a barriers to entry higher? Do you see consolidation needed in construction? Many view your Resource business to you having a high market share and a higher barriers to entry. I'm just curious, when you look at those three segments, if you feel like barriers to entry are now higher than where they were even a few years ago. No, I won't talk about barriers to entry, but I will talk about competitive advantages. We invest in technologies in other areas to try to pull away from the competition, to maintain our competitive advantage by providing more value to our customers. We believe certainly our dealer network is a competitive advantage, and that has taken us decades to build. I look at our technology like our autonomous solutions. I look at our the ability that we have the fact that we have an Energy & Transportation portfolio to support our mining customers as they go through the energy transition. The fact that we have both, you know, gas turbines and recip engines that can burn a whole variety of fuels. Our product portfolio, I would argue, provides us the depth of that product portfolio, competitive advantages as well. I think it's pretty tough for somebody to match all the capabilities that we have. As you know, my predecessor used to say, I'd much rather be us than the competition." I really do believe that. Perfect. Jim, maybe that's the best way to wrap it up. Everyone on the line, please stick around. In another 5 minutes, we'll be having another Q&A with Denise Johnson. Appreciate it. Thank you, Jim. Thank you, Michael. Take care. Most mines today run off of human decision-making, and it is possible to run an operation effectively and efficiently with experienced people and limited technology. Employees are trained to run and maintain equipment to achieve your site's goals. Experienced operators monitor and plan ahead, down to the cycle for when it's time to fill up their fuel tanks. Maintenance crews know how to proactively plan for downtime, to perform required work or address service needs. Today, your mining operations are focused on driving more efficiency, achieving targeted production levels, managing the safety and well-being of your people, all while meeting market demands for the commodities you produce. Now, the energy transition is here, and your company is making commitments to a more sustainable future. Seasoned personnel are being asked to accomplish their same tasks and achieve their same KPIs using electric equipment they've never before experienced. In an electrified landscape, everything on site becomes more interdependent. Today, your team is refueling machines every 12- 24 hours. Tomorrow, you'll be monitoring energy management down to the minutes, determining the ideal time to recharge each machine. To be successful, the mindset of the future must operate as an integrated and well-orchestrated system. More than ever before, you need a solution that's capable of holistically managing and optimizing your operations and able to instantly adapt to changes. Fuel stations must be replaced with battery chargers and dynamic energy transfer solutions, capable of delivering energy to your equipment without interrupting production. From using energy to travel to the truck's assigned load zone, navigating through the mine, and charging your machines as they travel uphill, watching the battery drain and refill in real time, dumping a load, and then making a stop at a stationary charger for a quick charge versus sitting in a queue at the shovel. This is the smart mine site of the future, a cohesive site management system that can be customized to meet your needs. Together, with you, we can develop an integrated system through simulation and optimization that will help propel your operations into the future. One that includes fleet management, autonomy, energy transfer, and energy storage solutions. At Caterpillar, we are ready for the challenges and opportunities of the energy transition, and we are ready to work together with you to build a better, more sustainable world. Welcome back, everyone. I'm Michael Feniger, Bank of America's analyst, covering Machinery, Engineering, and Construction. For our second session of the day, we are lucky to have with us Group President Denise Johnson, who runs Caterpillar's Resource Industries segment. For those that are not aware, Resource Industries is a segment that includes Caterpillar's famous mining trucks, among other product lines and customers. This is a great time to check in with Denise, given trends around mining, commodities, CapEx, electrification, technology, and inflation. I think, Denise, the best way for us to start is maybe to look in the past to frame how we should think about the future. We look at 2012, the peak of the last cycle, Resources revenue was around $20 billion, compared to $12 billion in 2022. Cat has restructured that business over the decade. What is different today about Resource Industries compared to that last cycle in terms of product lines, commodity exposure, percent of services, and aftermarket? Michael, I appreciate the opportunity to be with you today. I would start by saying, you know, Resource Industries is a leaner, probably more integrated organization than it was in 2012. We've had a very big focus on leaning our operations, consolidating our footprint, and we focused using the O&E model to really improve the overall health of the portfolio. As a result of that, we've exited and restructured underperforming product lines, things like longwall and room and pillar mining, which is primarily an underground coal asset. We've also exited other areas like material handlers and track drills. Really looking at the portfolio, looking at where we have competitive advantage, where there are, you know, pools to be able to take advantage of and really focusing in on our investments. We've also taken the opportunity to grow and invest in such areas like autonomy. Jim talked quite a bit about that. You know, it's been a great opportunity to invest in those products and services that really provide the greatest value for customers. I would say from a commodity exposure, I think the business today is really better positioned to capitalize on, you know, the opportunities that are presented by electrification, more now so than in 2012. We certainly have seen big growth in demand for our products and commodities like copper and nickel, cobalt, and lithium. We've also taken that opportunity to invest in applications that really play well in those commodities. We also have invested in our quarry and aggregates and heavy construction product lines, and those are some of the most robust and highest performing assets, that are leveraged in construction, so a lot of work there. In addition to that, from a technology perspective, we've invested in things like fleet management, asset health, safety technology, and then broadly, as I indicated, the automation portfolio. I would say, though, the biggest thing that is different from 2012 to today is our heavy focus on services and aftermarket growth. While we were focused on it in the past, because our machines operate in some of the most challenging and rugged environments, you know, 24 hours a day, 7 days a week, we've really taken the opportunity to expand our service offerings and solutions for customers. you know, things like ensuring that we have solutions for life guarantees that can be leveraged. We have taken the opportunity to make sure that we have inventory that's loCated at a customer site, so they immediately can replace a component. We've leveraged technology and all of that to make that very seamless for our customers. From a competitive advantage perspective, I would say we're very well positioned for the future and much healthier than we have been in the past. We're very proud of the turnaround in the portfolio. Denise, just to follow- up on the question, when we think of revenue still 30%, 35% below that 2012 peak, how far are units down versus that last peak? Yeah, I would say, you know, it depends on the particular product line, because every product line, you know, has a different life cycle timeline as well as, you know, There was a lot of investment in overcapacity in the 2012 timeframe. I would say there certainly is a lot of room to still grow. You know, we are not nearly at the cycle from a volume perspective that we were in 2012. We have aging fleets. Those fleets need to be replaced. The assets are being run very high. We watch the utilization rates, how many parked assets we have. All of those indicators would indicate that, you know, that we're gonna be getting some additional demand. I would say on top of that, as Jim indicated, there's total upside with the total addressable market increasing, the energy transition, driving additional commodity requirements, the infrastructure growth that's required, as well as what I talked about for replacement demand, and then the technology that we provide, really allowing customers to perform at higher levels. I think from a competitive perspective, you know, we can get more share of what's out there as well. Huge opportunities for us for the future. Denise, when we look at Q1 results, your division reported a 22% operating margin on about $3.4 billion of revenue. When we look over a decade ago, your division was reporting basically the same margin, 22%, 23%, yet needed $5.1 billion of revenue to get there. Cat is clearly more profitable on a lower revenue number. What are some of the factors kind of driving that? As revenues recover over the next few years, where can operating margin really go? Yeah, I mean, I would say, you know, first of all, I spoke to what we have done to really get the portfolio within Resource Industries, leaner, more flexible, and certainly investing in the right, the right parts of the portfolio. You know, that has allowed us to take our cost structure down considerably and, at the same time, focus our investments in the areas where the best opportunity is. You know, that divesting of some of the underperforming businesses, the opportunity to lean up our operations and be more, you know, be more effective and more efficient. The investment that we've made in technology also provides additional opportunity for us. You know, now, instead of selling a piece of equipment, we're able to sell an entire site solution, and that makes a win so much more powerful. You know, a lot of mining companies now are actually tendering out for a complete site. The technology is so integrated and because the assets work together, you know, in unison, almost like a factory, they're, you know, they're awarding sites and entire sites to or to OEMs. That, you know, if you have a competitive advantage on top of that, and you have the full line of portfolio available, it puts you in a unique position. You know, as we talk about electrification, and I'm sure we'll go into that whole idea that our Energy & Transportation even allows us to be even more effective with a site solution. You know, whether it be a standby genset, whether that be a battery, a storage solution, whether that be a microgrid, that really provides an even bigger opportunity for the future. We're super excited about that. I guess I would use one example of a recent win where exactly that happened. We last year Escondida, which is BHP's copper mine in Chile, was awarded to us, and, you know, that was over 10 years, over 160 trucks, and then there's support equipment also with that. That's autonomy. That is, you know, introduction of the traditional diesel electric truck. In addition to that, there's dynamic trolley charging. Finally, as the evolution goes and the, at the end of that 10-year timeframe, it's the introduction of battery electric mining equipment. You know, really being able to capture not only the 10 years of transition that's taking place, but all of the assets, the services, and then the technology that goes with that has been a big win. It's really a game changer when you think about how we operate and really work with customers today versus the more transactional way we worked in the past. Denise, maybe just to follow up on that. You know, your business unit is reporting some of the strongest pricing in Caterpillar today. You know, how much of this pricing strength is just passing along those higher input costs, and how much of the pricing strength is coming to the competitive advantage that you outlined? You know, what is the normal pricing range investors should kind of expect for resources on a through-cycle basis? I mean, that's a tough question to answer because clearly, as you know, as Jim indicated, we always want to take advantage of any competitive advantage that we have that, where it's offering value for the customer. It's tough to predict what's gonna happen with inflation and input costs. Clearly, we price for that. At the same time, we're really focused on outcomes for customers, helping them to be successful. If we can do that in a way that, you know, if they have to pay a little bit more for an equipment or service from Caterpillar, but that combined equipment and service offering lowers their costs or increase their productivity greatly, it more than pays for itself. It's all about, you know, really delivering on the customer's needs and where their pain points are, and helping them to find solutions that really makes, you know. The pricing just comes along with it, but if you focus on that, the rest is obviously a positive upside. You know, since you guys reported Q1, the volatility in the macro backdrop has only intensified. We've seen some lower iron ore, lower copper prices. Just, are you seeing any change in tone in order rates with customers? Are you seeing customers willing to kind of invest after maybe going to bare bones CapEx levels over recent years? You know, it's interesting, Jim has said this consistently: you know, we see our mining customers being very capital disciplines. You know, there's a lot of things happening in the mining industry today. There's a lot of consolidation, M&A. We have very high quoting activity that's going on right now, certainly, we are expecting a very, very strong 2023. You know, business is lumpy. There's some quarters where orders are down, and other times they're very high. You know, we're seeing a pretty steady improvement overall in what we would consider both short- and long-term outlook for mining. It certainly isn't a big inflection point by any means, but we see the demand just continuing to go. Denise, we are observing to what you alluded to, some M&A discussions or headlines in the mining space. Does this have any impact on capital allocation or CapEx for the miners? It can. I think a lot of it depends on what they're doing and what assets they're acquiring, and what the state of those assets are. I think it's really just more of a distraction of, you know, really wanting to see what they need to do with those new assets and making decisions that take time to be very thorough about. I don't see it as anything where it's a diversion necessarily, as much as it is that they want to study and make sure they're making the right investments at the right time. Fair enough. Denise, there's a big focus right now on the market, on inventories. We discussed this with Jim in our earlier session, but can you specifically discuss inventory management within Resources? How does it typically work from the OEM to the dealer to the customer in terms of order allocation? Is there any excess in the channel that you're picking up? What are lead times now versus the typical cycle? Yeah, you know, I think first of all, as a reminder, our dealers are independent businesses. They do make their own decisions about and control their own inventory. We do have a very robust collaboration process with them. You know, I would say in general, you think about mining customers, big mining assets. Dealers don't want to hold big assets on their books for any longer than they need to. They have to be very confident and either have a sale in hand or be very confident it's coming before they're going to order this large equipment. As part of that collaboration, we do, you know, work closely with dealers. We look at what the trends are, what we think the win rate is going to be, how far it needs to travel, when their customer requires it. Remember, some of the inventory in Resource Industries is actually just transit inventory. It's held in dealer inventory once it leaves our dock, or in some cases, it's halfway across the ocean, but then it goes into dealer inventory, and they need to commission, they need to assemble it and get it running, before it leaves their books. Some of it is just the process of working through the delivery, which creates inventory for Caterpillar, or the dealer. On the heavy construction and quarry and aggregate side, there is some dealer stocking, but they're very closely looking at, you know, the demand at the end of the line, and I would say much more disciplined today than ever before in ensuring they're not going to hold too much inventory. Be ready for a sale if it comes. It's, it is definitely a balance. Fair enough. Just going back to the commodity discussion, iron ore and coal were really big drivers in that last peak in 2012. What's the most important commodity for Caterpillar today and going forward? How do some of these other metals that are part of decarbonization efforts impact the outlook for machinery demand? For example, are lithium mines, machinery intensive and a growth opportunity going forward? Well, I would say to the last question, absolutely. It depends. There's a number of forms of lithium mining, but we've just signed a number of contracts with lithium miners that are starting up some greenfields. I would say absolutely, it's opportunity. If you look at it on a volume basis, the biggest outlook for growth is in copper, and copper mines are usually deep pit, not always, but, you know, require a lot of assets. Some of our recent big wins have been in copper, you know, that certainly is upside. We see nickel and, you know, platinum, palladium, all of the, you know, I would say, more rare metals seeing a lot of growth. Even in coal, and I know we don't talk a lot about coal, and, you know, the outlook for coal for the long term, perhaps as a mix of energy, is going to be down, but it's not going away anytime soon, and we have, you know, we have opportunity there as well. You know, we want to serve all customer end groups and, you know, take advantage of this growth that the industry is seeing, and we do see it continuing. Denise, our Mining Analyst flagged to us that Newmont has gone out of its way to talk about the success of its partnership with Caterpillar. Can you first talk about some of the results of that partnership? What are some of the savings achieved at the mine? More broadly, you know, what is automation driving for Caterpillar, and what's it driving for its customers in terms of productivity? Yeah, Newmont is, you know, a customer that has been a long, loyal customer to Caterpillar. You know, back in 2021, we developed a strategic alliance with Newmont, and it was really to deliver more from the perspective of automation, connectivity, in addition to helping them through the energy transition and improving their end-to-end mining system. It really is about creating and working with them, like we do other customers as well, to improve their outcomes. Do it in a way that leverages technology more holistically across all of Newmont. You know, Newmont has a lot of underground and surface mines. They just are going through an acquisition of another mining company based primarily out of Australia, but it's global. They're also, you know, increasing their scope as well. We're looking forward to continuing that alliance and moving that forward. As far as the results, we're seeing, you know, it's mine site by mine site. One of the things that we've talked to them about is setting strategic targets by mine site. What is the KPI that's success for them? What improvement are we trying to drive? Let's all collectively, our dealers, Caterpillar, as well as Newmont, go after hitting those targets. That really has allowed us to align around targets and really see some good results. There's a lot in motion and a lot of technology being installed in many of Newmont's mines. They are also one of our early learner, battery electric sites for both underground and for surface. We're excited about that, collaboration as well. There's some of these technology features. Are you seeing other mines adopt it? Is it just the larger mines, or are you seeing other smaller, medium-sized mines being able to adopt and change their fleet to, you know, drive some of these features? Just following up on the Newmont discussion, I mean, I've always thought of Caterpillar as more surface open-pit mining, yet you mentioned underground. Is that somewhere we could see more market share for Caterpillar over time? Yes. I mean, I would say, to answer the last question first, absolutely, there's opportunity. Certainly, a lot of mines that, from a surface perspective, are starting to go underground because ore grades are declining, and some of those richer assets, if you will, are in underground space. One of the things that we're doing with our underground portfolio, because underground mining has a unique value prop to go completely zero emissions, right? Because of the ventilation requirements, the cost for that, we see our portfolio in that space being, you know, both a diesel, either electric or mechanical, or an underground, battery electric, and we see big opportunity there, for that. As far as, the beginning of your question, I would say, you know, I think the value that we can drive with customers around helping them solve their biggest issues is really the biggest focus, and it has allowed us to have the biggest competitive advantage. Many other mining OEMs are working on the same kinds of technology, but we have a breadth that allows you to go from a very, very small mine, and even our autonomy solution now can be scaled down to, you know, something like, 12 trucks and still make sense financially. We're taking that solution into Heavy Construction, and Quarry with Luck Stone is who our development partner is. They have a mine in a quarry rather, in Virginia, we're gonna scale a lot of that technology solution so that we can start to begin to cover autonomously in a mine that only has 4 or 5 assets. Now, you have to look at different sensors, you have to look at a different infrastructure from a technology perspective, but it really allows that whole addressable market from a technology outcome perspective to grow immensely. That's a really exciting opportunity to be able to do. I do think it's something that we are uniquely positioned to do as well. Just on this topic, I know we discussed Newmont in detail, but just more broadly, how is Cat helping customers with those zero emission targets? Do you think miners are leaning more into rebuilds and potentially waiting for those products before more aggressively replacing those fleets? Yeah, I think it depends on the mine site, the age of the assets, you know, how far they are from a mine closure. There's some that, yes, they are extending life, kind of waiting to see if the technology is going to develop and be ready in time. Certainly, that's one thing that I really appreciate about Caterpillar products is our products are built to be rebuilt, and many of them are rebuilt 2x or 3x or 4x. You know, whether they buy a new asset, which we love them to do, or they extend the life of the existing asset, you know, we win, and we're helping our customers, you know, make the right choice for themselves. It very much depends on the mine site, where they're at, and whether they wanna wait or whether they wanna dip their toe in early. We have a lot of mining companies, especially some of the big ones, that wanna be the leaders in energy. There's others that wanna, you know, wait and see how it develops, and certainly, it's more than just the mining equipment, right? You're talking about the whole infrastructure of the mine site. The energy required now that you have electrified machines, you know, can double or triple versus, you know, a non mine site that doesn't have electrified assets. You've got to think about how much more energy you need to bring in, and if you're going zero emissions and, you know, you're going into renewables, if you're. you know, you wanna be completely with Scope 1 and Scope 2 net zero. You've got, there's a lot of investment that's required, and it takes time for that to develop. One of the unique things we're doing is we've got this early learner program, and with that, you know, we have agreements with 7 mining companies, and we're starting to put machines into those into various mines, and all of them are different kind of coverage. Some are, you know, high altitude, others are deep pit, some are long haul and cold and hot, so that we can validate our solutions. That gives us a unique opportunity to be agile. We'll learn as we, as we go. It is something that the mining customers are really liking because they're learning not only about the assets and the technology and potentially all the infrastructure that's gonna be required, they're gonna get some practice early on so that it's not wait until it's available in production, and then you have to be ready. It's really an exciting place for development and change over the next few years. Denise, just on the electrification timeline, I know you had some of your biggest customers to Arizona. Just, can you refresh us when we should expect some of these launches over the coming years? What's kind of the timeline we should be looking for for some of this product rollout? Yeah, we're doing, you know, early learners, as I indicated, so those will be the first in those seven sites in 2024. Between 2025 and 2026, there'll be pilots. We really need to understand the interaction of the assets with one another. One of the things that we're learning is as you deploy energy, you know, this broad new energy, requiring things to charge, you're gonna charge them, you know, dynamically, you're gonna charge them statically, and how they interact together is going to be very important, which is why that layer of autonomy becomes so important. We'll put the pilots in that 25 timeframe, we'll also put a layer of automation on that so that we can really validate our solution in advance of our official launch. In the 27, 28 timeframe is when you'll start to see the first production units roll out. We are focusing on 4 truck models in addition to underground solutions. We'll have both surface and underground solutions for truck models starting in 2027 with the first truck model. The underground, we actually already have launched, and it's in production for the R1700s and shortly to follow with the 50-ton truck as well. Denise, with some of these automation features, when I think of Caterpillar as a dealer, does it change how you price and value these technologies with customers? Could we be looking at an annuity stream at some point, or is it really just making sure we price it accordingly at the price of sale, at the point of sale? Yeah, no, I, you know, I think as we think about technology, we really think about technology as an enabler. I go back to the whole point of winning the site. Depending on how you divide up how that site is gonna operate, it gives you more levers from the perspective of being able to win that deal. From, you know, I think about service, I think about the product, the services, and the technology all together. We do have, you know, hardware and software, and there is an annual a recurring revenue model as well, and that's really required because of the investment that we're continuing to make in the technology. There's a lot of R&D that goes into the software that's developed, and we do, you know, about two updates per year. With automation, they're always bringing in new features, trying to find ways to, you know, reduce the cycle time. There's site-specific work there, and then there's an overall software layer that goes more broadly. That reinvestment is really required. I would say absolutely, it's an opportunity. The way we look at it is, it's a way for us to solve customer issues in a way that's holistic and is very differentiated from, you know, piecemealing it or having the mining company or construction company, having to do that own integration themselves. It's a lot of technical knowledge that is required in order to do that. Maybe, Denise, we just shift to the aggregates and quarry side. I believe it's a sizable portion of the Resource segment. How's that business trending today? Where is it relative to last cycle? Are there different drivers there to focus on relative to mining? Can some of these autonomous features in mining at some point be applied to these business lines as well? I would say, you know, the heavy construction quarry and aggregate sector is not the major, not the predominant side of the portfolio, but it is significant. I would say from a growth perspective, we are seeing great growth. These are things like articulated trucks, large wheel loaders, the small end of the tractor portfolio within the RI portfolio. Even some of our smaller drills. It, you know, it's holistic, and it provides infrastructure to be built around the world. When you think about some of the comments that Jim made with regard to infrastructure investment that's taking place in developed markets, but also in developing markets, there's a big potential for future growth. If you scale some of the technology solutions using perhaps a, using a fundamental software that allows you to do that, holistically and affordably, then, you know, you've got an opportunity to really take that market to the next level as far as performance, and that is what we're doing today. Great. You talked a lot about the fleet age. What is the optimal age for a mining fleet? You know, can miners continue just extending their fleet with rebuilds and keeping it at this old age? Is it better longer- term for Cat to just keep harvesting this large installed base with parts and services, creating a more steady earning stream for the business over time? No, it's a great question. I think we're continuing to be. We continue to watch it very closely because, you know, we, if you would've asked me even five years ago, what is the usable life of our assets, for instance, trucks, I would say 10- 11 years. We have some of our trucks today that almost are approaching 20 years, and they're running 24/7. When you think about how many rebuild cycles that is, it's really impressive. We want to solve our customers' problems with new assets, and we'd love to continue to see them do rebuilds. I think the thing that's gonna change for the future is going to be the integration of technology. When you think about an asset that's 20 years old, and you think about the core operating system, if you will, the brains that are in that asset, they're not easy to update. It'd be like taking your old computer and having to rewire, you know, all the circuit boards that are inside it. Doesn't really make economic sense, and it certainly isn't very feasible. As you start to want to have more capability with the existing assets and be able to have more features, then that really drives you to buying something new. We certainly look forward to the opportunity to help with any transition that's taking place. A lot of. We see a lot of customers rebuilding some assets, bringing in new learning on that, and deciding how they want to transition those fleets. Sometimes in the past, you would have seen the whole fleet begin to transition with one decision, and not have that mix. We're starting to see you know, a little bit more of a, an and strategy versus it's flip it all out at the same time. Denise, when we think of last year, a lot of projects got hit with big inflationary cost drivers. I'm just curious how you're seeing your customers adapt to this inflation environment. We're starting to see some inflation easing in some areas. Do you think that could help greenlight some projects? How do you kind of see the greenfield versus brownfield trend going forward? You know, we have many of our customers that are really looking at the long- term because, you know, when you think about a greenfield, that's not a quick decision to make. You have to have permitting, you have to have a lot of, you know, a lot of investigation on that ore and understanding that ore body. These are usually long in the planned long, and it usually takes board approval because these are significant investments that they're making. I would say the short-term inflationary decisions, if they're planning to do all this, and they have made plans to open a new mine, a little bit of inflation isn't going to change their minds. You know, they're making those decisions for the long-term growth of their business. What I find interesting are assets that previously had been retired or mine life that it assumed to be shorter, and watching miners go in and reassess that based on not only commodity price, but also on, you know, the efficiency at which they're able to recover the minerals, and they actually have extended those. You know, where they thought they only had 5 years, now it's 15. We see a lot of that activity actually extending the life, which makes decision, Well, should I buy new? Should I, you know, should I continue to rebuild? even more difficult or challenging. Everyone is trying to get the most they can out of the assets they have, be very disciplined in their approach, and balance, you know, fleet replacements and investments in technology with investments in their fixed plants and other, you know, other needs. You know, we actually have some, especially with our quarry customers, which I think is really interesting, some business models where we can, you know, help them with that, with a what they call a job site solution or a mining performance solution model, where, you know, we're kind of managing, helping to manage, the life of those assets for them. There's a lot of new services that we're providing in that space, which also can help them, you know, make decisions that are most beneficial for themselves. Thanks, Denise. I'm just curious, what is missing, in your view, in Cat's Resource Industries portfolio? Is there anything upstream or downstream, or even tech-driven, that could really help the portfolio grow even further? How are you kind of looking at the overall portfolio, upstream and downstream, surface or underground, where maybe you see there's opportunities to either do it organically or M&A? Yeah, we are looking for opportunities for M&A. We've done some in the technology space. We've recently purchased an underground mine tech, technology, which allows, since you don't, you can't have GPS underground, you know, you'd be able to see where the assets are at all times. That was one acquisition that we did to really help expand our underground portfolio and make us more competitive. It's a small M&A example, but it's an M&A example. We've done quite a bit in the area of automation. We've done some work with drills and really drill technology so that we can sense the ore and automate those drills much more effectively. Most of the investments we've done recently have been built on technology that allow us to serve the customer in a way that adds value, upstream and downstream. I think we'll continue to explore that. Certainly, we see opportunity for growth with that technology, but in the way that it provides additional solutions for customers that they can't integrate themselves. As far as the iron portfolio itself, you know, we have been very careful to look at the portfolio and ensure that we have the right assets that we think are going to be leveraged for the future. I don't see any big holes in the hard iron portfolio that we have today. It's really the technology space that I think we can continue to explore. Denise, maybe just last question as we wrap this up. I've always thought that mines wanted to have mixed fleets. Are you starting to see a pivot, and you kind of touched on this a little earlier, where they want a one-stop shop solution? Is that a potential trend we could see in the coming years? Yeah, you know, think about having a mixed fleet and what that requires. If you think about having service parts, I have to have the knowledge and I have to have the right technicians that understand all the nuances of what it takes to service and maintain that equipment. In addition to that, you know, you have to deal with different companies because you have, you know, a dealer on one side and an OEM on the other, and you're having to constantly navigate the different personalities of that. How do you layer technology on top of that, you know, isn't always interoperable? I think it's a combination of. You know, having one provider that is one person, one company, and companies, when you're talking about dealer, that's accountable to help you deliver your results, and, you know, in a holistic way. Again, it's going back to operating not at a unit level of a machine, but if, you know, you have some really great performing assets and some not-performing assets, that site's not going to run well. It really adds complexity to a miner when they have mixed fleets, and it adds cost, in my opinion. Oftentimes, they don't have choices, right? When you think about 2011, 2012, you know, everyone was, you know, the delivery times were way outpacing what OEMs could deliver, so they really basically had to take what they got. That's, I think, really the advent of what happened with, when demand, you know, really outpaced supply, you got mixed fleets as a result. Now that, you know, we are in a position to deliver a complete site, I think you're going to see more of that happen over time. Perfect. Thank you, Denise. I want to thank Caterpillar. I want to thank Jim and Denise for their time today. Anyone on the line that wants replay information or the transcript, please reach out to me and Ryan at Caterpillar, and we'll be sure to provide you the details. Thanks, everyone, for joining us, and thanks again, Denise, for your time. Thank you.